Document:

alks_Ex_10-3

		
			Exhibit 10.3
		

		
			 
		

		
			LICENSE AGREEMENT
		

		
			 
		

		
			This Agreement is made as of the 21 day February of 1996, between MEDISORB TECHNOLOGIES INTERNATIONAL L.P., a Delaware limited partnership (hereinafter "Medisorb") and JANSSEN PHARMACEUTICA INTERNATIONAL, a division of Cilag International AG, a Swiss business corporation ("Janssen").
		

		
			 
		

		
			WHEREAS, the parties have entered into a certain Development Agreement, dated December 23, 1993 (the "Development Agreement"), for the development of a Product (as described below); and
		

		
			 
		

		
			WHEREAS, Janssen has an option under the Development Agreement to enter into this License Agreement for the Medisorb technology required to make, use and sell the Product, which option Janssen has elected to exercise; and
		

		
			 
		

		
			WHEREAS, the parties believe that it is in their mutual best interest for Medisorb to license to Janssen on an exclusive basis in the Territory, Medisorb Patents and Technical Information within the Field, upon the terms and conditions set forth herein;
		

		
			 
		

		
			NOW, IT IS HEREBY AGREED AS FOLLOWS:
		

		
			 
		

			
	
			
				 (1)
			Definitions:  The following terms shall have the meanings ascribed to them herein, unless the context otherwise requires:

		
			 
		

		
			(a)    "Affiliate" shall mean any company controlling, controlled by, or under common control with a party by ownership, directly or indirectly, of fifty percent (50%) or more of the total ownership or by the power to control the policies and actions of such company.
		

		
			 
		

		
			(b)    "Development Program" shall mean the development activities conducted by the parties pursuant to the Development Agreement.
		

		
			 
		

		
			(c)    "Field" shall mean the treatment of psychosis in humans. In this regard, psychosis shall include, but not be limited to, schizophrenia and related disorders, manic-depressive disorders, behavioral disturbances in dementia including for the avoidance doubt behavioral disturbances related to Alzheimer’s disease.
		

		
			 
		

		
			(d)    "Improvements" shall mean any improvements or developments to or of the Patents and Technical Information in the Field which Medisorb may acquire, discover, invent, originate, make, conceive or have a right to, in whole or in part, during the term of this Agreement, whether or not such improvement or development is patentable.
		

		
			 
		

		
			(e)    "International Registration Dossier" ("IRF") shall mean the Product registration file compiled by Janssen Pharmaceutica N.V., Beerse, Belgium on behalf of Janssen, the contents and format being such that it can be submitted as such to national health authorities or be used as a basis for a national application for marketing authorization for the Products in the specific format required by such national health authorities.
		

		
			 
		

		
			 
		

		
			 
		

		
			

		 

 

			

					

						Janssen-Medisorb

					

					

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(f)    "Medisorb Polymers" shall mean bioresorbable aliphatic polyesters based on glycolide, lactide, caprolactone and combinations of such polymers, which are manufactured by Medisorb and utilized in Product(s) licensed under this Agreement.
		

		
			 
		

		
			(g)    "Net Sales" shall mean the gross amounts received from sales of Products during a calendar quarter to third parties by Janssen, its Sublicensees or any Affiliate of either, less any: (i) applicable sales taxes; (ii) cash trade or quantity discounts; (iii) amounts repaid or credited by reason of rejections or return of goods; or (iv) freight, postage and duties paid for. No deduction from the gross sales price shall be made for any item of cost incurred by the seller in its own operations incident to the manufacture, sale or shipment of the product sold. For purposes hereof, Net Sales shall not include sales of a Product from Janssen or an Affiliate of Janssen to any Affiliate or Sublicensee of either; it being intended that Net Sales shall only include sales to unrelated third-parties.
		

		
			 
		

		
			(h)    "Patents" shall mean (i) any and all existing issued patents and patent applications or parts thereof which describe and claim a depot formulation of Risperidone, or any chemical analogues of Risperidone with similar physiological activity, based on polymers of lactic and glycolic acids and the production and use thereof; (ii) any other patents and patent applications filed by or on behalf of Medisorb, or under which Medisorb has the rights to grant licenses, which are needed to practice the inventions; and (iii) any reissues, extensions, substitutions, confirmations, registrations, revalidations, additions, continuations, continuations-in-part, or divisions of or to any of the foregoing which are granted hereafter or any additional protection certificate granted with respect thereto.
		

		
			 
		

		
			(i)    "Product(s)" shall mean any and all depot formulations of Risperidone (R 64766), or any chemical analogues of Risperidone with similar physiological activity, based on polymers of lactic and glycolic acids which are designed to deliver Risperidone (R 64766), or any of its chemical analogues, over an extended period.
		

		
			 
		

		
			(j)    "Sublicensees" shall mean any company or companies, other than Janssen's Affiliates, sublicensed by Janssen.
		

		
			 
		

		
			(k)    "Technical Information" shall mean all unpatented information, know-how, practical experience, procedures, methodology, specifications, formulae and data whether or not the same shall be patentable which have been heretofore developed or acquired by Medisorb prior to the date of this Agreement and which are necessary in order to use, manufacture or sell Products in the Field.
		

		
			 
		

		
			(l)    "Territory" shall mean worldwide with the exception of the United States, its Territories, Protectorates, Commonwealths, and all other political subdivisions of the United States.
		

		
			 
		

		
			
		

		 

 

			

					

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				 (2)
			License Grant

		
			 
		

		
			(a)    Medisorb hereby grants to Janssen in the Territory an exclusive license under the Patents and Technical Information existing prior to the effective date of this Agreement, with the right to grant sublicenses thereunder, for all purposes within the Field to practice and use the Patents and Technical Information, including the rights to manufacture and have manufactured, to use and have used, and to sell and have sold Products. Medisorb exclusively retains all rights under the Patents and Technical Information outside the Field and for use other than in Products. The right to grant sublicenses granted hereunder is exclusive to Janssen and shall not extend to Janssen Affiliates or Sublicensees.
		

		
			 
		

		
			(b)    Medisorb shall offer to Janssen for incorporation into this License Agreement on reasonable terms and conditions, Medisorb Improvements in the Field which, if incorporated into Janssen's then current commercial Product(s), would: (i) result in significant changes in either the specifications for such Product(s) or the processes for producing such Product(s), and (ii) would reasonably be expected to result in enhanced market value and/or profitability of such Product(s).  Examples of such Improvements would include: (i) the development by Medisorb of a non-aqueous injection vehicle which offers significant advantages with respect to ease of administration and (ii) the development by Medisorb of technology enabling significantly extended (e.g. 2-4 weeks) duration of delivery of the active agent from a single administration.  It is the parties' understanding that the effect of any such license amendment would, in general, be either an extension of the term of this Agreement for a mutually agreed period or a marginal increase in the then current royalty rate.  All other Medisorb Improvements shall be made available to Janssen for its use without further agreement.  Proprietary rights to Improvements jointly developed by Medisorb and Janssen shall be governed by the terms of Section 5(c) of this Agreement.
		

		
			 
		

		
			(c)    In the event that at any time during the term of this Agreement Medisorb is unable for any reason whatsoever to supply the Medisorb Polymers required by Janssen for use in Products, then the license granted under paragraph 2(a) above shall be expanded to include the Medisorb Technology required to make and use the Medisorb Polymers.
		

		
			 
		

			
	
			
				 (3)
			Royalties:

		
			 
		

		
			(a)    Janssen shall pay or cause to be paid to Medisorb a running royalty with respect to all Products sold to customers by Janssen, its Affiliates and Sublicensees, payable quarter-annually in arrears within sixty (60) days following the end of each three (3) month period ending on March 31, June 30, September 30 or December 31 in any year during the term hereof, as follows:  (i) 2.5% of the Net Sales of each unit of Product sold during the preceding calendar quarter during the term hereof, if such unit of Product was manufactured by Medisorb pursuant to a written contract for the supply of Product; or (ii) 5.0% of the Net Sales of each unit of Product sold during the preceding calendar quarter during the term hereof, if such unit of Product was not manufactured by Medisorb pursuant to a written contract for the supply of Product. Any
		

		
			 
		

		
			
		

		
			

		 

 

			

					

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withholding or other tax that Janssen or any of its Affiliates are required by statute to withhold and pay on behalf of Medisorb with respect to the royalties payable to Medisorb under this Agreement shall be deducted from said royalties and paid contemporaneously with the remittance to Medisorb; provided, however, that in regard to any tax so deducted Janssen shall furnish Medisorb with proper evidence of the taxes paid on its behalf.
		

		
			 
		

		
			(b)    In the event that, in a country where Product is not claimed in a valid Patent, a similar product obtains a market share greater than 20% of the total market revenues for Products and similar products in such country, the parties agree to meet and negotiate in good faith an appropriate reduction in the royalty rate then in effect. In no event shall a reduction in royalty rates pursuant to this section result in royalty rates less than fifty-percent (50%) of the rates specified under Section 3(a)(i) and 3(a)(ii) of this Agreement. For the purposes of this section, "similar product" shall mean a generic version of the Product(s) where: (i) the active agent is risperidone, or a chemical analogue thereof and (ii) the excipient is comprised of lactic and/or glycolic acids. In the event that patent protection for Product(s) becomes available subsequent to a royalty reduction pursuant to this section, the parties agree to (i) reinstitute the royalty otherwise applicable, and (ii) in the event that any recovery is obtained for prior infringement of the subsequently issued patent, the parties will first apply such recoveries to reimbursing Medisorb for royalties it would otherwise have received.
		

		
			 
		

		
			(c)    Janssen shall keep complete and adequate records with respect to the proceeds of Products on which it has to pay royalties payable hereunder for at least two (2) years after expiry of the year they concern. Medisorb shall have the right to have such records of Janssen inspected and examined, at Medisorb's expense, for the purpose of determining the correctness of royalty payments made hereunder.
		

		
			 
		

		
			Such inspection shall be made by an independent, certified public accountant to whom Janssen shall have no reasonable objection.  Such accountant shall not disclose to Medisorb any information other than that necessary to verify the accuracy of the reports and payments made pursuant to this Agreement.  It is understood that such examination with respect to any quarterly accounting period shall take place not later than two (2) years following the expiration of said period.  Not more than one examination per year shall take place.
		

		
			 
		

		
			Based upon the verification of such reports and whenever there is reasonable doubt about the accuracy of the sales of Product realized by an Affiliate or sublicensee, Medisorb may reasonably request Janssen to audit the books of such Affiliate or such sublicensee in accordance with any applicable contractual provision, in order to confirm the accuracy of such reports.
		

		
			 
		

			
	
			
				 (4)
			Production of Product/Technology Transfer:

		
			 
		

		
			(a)    Janssen shall use its reasonable efforts to commercialize and market Product, or to have the same commercialized and marketed.
		

		
			 
		

		
			
		

		
			

		 

 

			

					

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(b)    In the event that Janssen determines to manufacture Product itself or have Product manufactured by a third party, Medisorb shall transfer to Janssen all relevant Technical Information, and provide such technical assistance, upon mutually agreed terms and conditions, as is required by Janssen in order to enable the manufacture of Product by Janssen or its designated third party manufacturer. However, with respect to such third party manufacturers, except as limited by a written Product manufacturing agreement between Janssen and Medisorb, Medisorb will have a right of first refusal as to the manufacture and supply to Janssen of all Product(s), and component bioabsorbable polymers utilized in such Product(s). Medisorb will have a period of thirty (30) days following written notice from Janssen of terms it is offering to, or prepared to accept from, a third party manufacturer to notify Janssen of its intention to exercise its right of first refusal to supply Product and/or component bioabsorbable polymers thereof to Janssen, its Affiliates and Licensees on terms no less favorable to Janssen than those offered by such third party manufacturer.  Such third party manufacturer cannot be an in-kind competitor to Medisorb and must be reasonably acceptable to Medisorb with respect to confidential protection of Medisorb's Technical Information.  In the event that at any time during the term of this Agreement Medisorb is unable for any reason whatsoever to supply the Medisorb Polymers required by Janssen for use in Products, then the right of first refusal under this paragraph  respecting the supply of the component bioabsorbable polymers shall be eliminated.  For the purposes of this section, an "in-kind" competitor shall mean any organization which regularly engages in the contract development and/or contract manufacture of injectable controlled release drug delivery systems comprising a polymeric excipient based on lactic and/or glycolic acids and/or other closely related monomers.  This Section 4(b) specifically supercedes Section 7(B) of the Development Agreement, which Section 7(B) shall be of no further force or effect.
		

		
			 
		

		
			(c)    The right of first refusal granted to Medisorb pursuant to Section 4(b) above shall be contingent upon: (i) Medisorb and Janssen reaching an agreement concerning the financing, scheduling and construction in Europe of a Medisorb manufacturing facility within twelve (12) months of the date first above written or the initiation of Phase III human clinical trials, whichever is later, and (ii) prior to the qualification of Medisorb's European manufacturing facility, Medisorb using reasonable efforts to supply from its United States manufacturing facilities all of Janssen's commercial requirements for Product pursuant to the Product Supply Agreement anticipated by Section 7(A) of the
		

		
			Development Agreement.
		

		
			 
		

			
	
			
				 (5)
			Proprietary Rights

		
			 
		

		
			(a)    Medisorb will retain title to and ownership of all technology (including, without limitation, all patents, inventions, and data relating thereto) relating to absorbable polymers, controlled release of active agents, and/or manufacturing methods or processes relating to such polymers and the controlled delivery systems for active agents based on such polymers previously owned by Medisorb or developed by Medisorb as a result of the Development Program or otherwise. Medisorb will pay its own costs and expenses in connection with the protection of any such technology, including all patent application and maintenance costs and Janssen agrees to provide Medisorb with any necessary utility information.
		

		
			 
		

		
			
		

		
			

		 

 

			

					

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Medisorb shall inform Janssen of any patent application it wishes to file to protect proprietary rights defined in Article 5, resulting from either the Development Program or the preliminary Development Program and shall forward a copy of any such patent application to Janssen at least one month prior to filing.
		

		
			 
		

		
			Medisorb shall consider any suggestions made by Janssen for amplifying such application and shall accordingly amend the application where in Medisorb's opinion it is appropriate.
		

		
			 
		

		
			Nine months after the first filing, Medisorb shall propose a list of countries in which it intends to file foreign equivalents. Janssen shall be given the opportunity to propose further countries to be added to the list. In case the adding of some or all of these further countries is unacceptable to Medisorb, Janssen shall have the right to file patent applications in those countries, in Medisorb's name and at Janssen expense. Medisorb shall assist in the transfer of rights for the latter patent applications and shall provide all information necessary to file and prosecute such patent applications.
		

		
			 
		

		
			Medisorb shall not abandon part or whole of any of the patents or patent applications without having first consulted Janssen, which shall have the right to further pursue any patents or patent applications which Medisorb wishes to abandon, or parts thereof, in its own name and at its own expense.
		

		
			 
		

		
			(b)    Janssen and/or its Affiliate will retain title to and ownership of all technology (including, without limitation, all patents, inventions, and data relating thereto) relating to Risperidone or any chemical analogues of Risperidone with similar physiological activity previously owned by Janssen and/or its Affiliate or developed by Janssen as a result of this Agreement or otherwise. Janssen and/or its Affiliate will pay its own costs and expenses in connection with the protection of any such technology, including all patent application and maintenance costs and Medisorb agrees to provide Janssen with any necessary utility information.
		

		
			 
		

		
			(c)    Any inventions, other than those falling under either section 5(a) or 5(b) hereof, having an inventorship jointly between at least one employee of Janssen or an Affiliate of Janssen and one employee of Medisorb or an Affiliate of Medisorb shall be jointly-owned by Janssen and Medisorb. Each party will cooperate fully in the filing and prosecution of such patent applications.
		

		
			 
		

		
			Janssen and Medisorb shall agree on which of both shall be responsible for the filing, prosecution and maintenance of any such joint patent applications and patents (hereinafter referred to as the "Responsible Party"). In principle, the party having contributed the most to the invention to be protected shall be the responsible party, unless agreed upon differently. Upon mutual consent, the responsible party may select an agent for drafting, filing and prosecuting a joint application. However, both parties shall agree who shall be the agent and to what extent this agent shall be used.
		

		
			 
		

		
			
		

		
			

		 

 

			

					

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The Responsible Party shall consult the other party when drafting any new jointly owned patent application. The final draft shall be forwarded to the other party at least one month prior to filing to give the opportunity to make final comments.
		

		
			 
		

		
			The Responsible Party shall propose a list of countries in which it intends to file such patent applications. The other party shall be given the opportunity to propose further countries to be added to the list. In case the adding of some or all of these further countries is unacceptable to the Responsible Party, the other party shall have the right to file patent applications in those countries, in its own name and at its own expense. The Responsible Party shall assist in the transfer of rights for the latter patent applications and shall provide all information necessary to file and prosecute such patent applications.
		

		
			 
		

		
			The Responsible Party shall not abandon part or whole of any of the patents or patent applications without having first consulted the other party, which shall have the right to further pursue any patents or patent applications which the responsible party wishes to abandon, or parts thereof, in its own name and at its own expense.
		

		
			 
		

		
			All out-of-pocket costs made in relation to joint patent applications and patents shall be shared equally by Janssen and Medisorb. A statement of costs shall be made up on a quarterly basis and invoiced to the other party.
		

		
			 
		

		
			Medisorb shall grant to Janssen an exclusive fully-paid up royalty free license with the right to sublicense to make, have made, use and sell under any such patents or patent applications for the duration of the patents, any continuations, continuations in part, divisions, patents of addition, reissues, renewals or extensions thereof or any supplementary protection  certificates granted with respect thereto, in respect of any claims concerning the application of Risperidone or any chemical analogues of Risperidone with similar physiological activity. However, nothing contained in this paragraph shall obviate Janssen's obligation to pay royalties under Section 3 hereof with respect to any Products developed hereunder.
		

		
			 
		

		
			Janssen shall grant to Medisorb an exclusive fully paid-up royalty free license with the right to sublicense to make, have made, use and sell under any such patents or patent applications for the duration of the patents, any continuations, continuations in part, divisions, patents of addition, reissues, renewals or extensions thereof or any supplementary protection certificates granted with respect thereto, in respect of any claims concerning the application of bioabsorbable polymers in the field of human and/or veterinary medicine.
		

		
			 
		

		
			(d)    In addition, each party will retain exclusive title to its respective confidential information in accordance with the provisions of Article 9 below.
		

		
			 
		

			
	
			
				 (6)
			Patent Infringement

		
			 
		

		
			(a)    In the event that either party becomes aware that any third party is infringing any patents included within the Patents in any country or countries, the party becoming
		

		
			 
		

		
			
		

		
			

		 

 

			

					

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aware of such infringement shall promptly give notice of such infringement to the other party. Any possible action against such alleged infringement of the Patents will be carried out by either or both of the parties in accordance with the provisions specified hereinafter in paragraphs (b), (c), (d) and (e).
		

		
			 
		

		
			(b)    Whenever it would concern a patent or patent application falling within the definition of Patents and of which Medisorb retains full title and ownership pursuant to Article 5 a), Medisorb shall use all reasonable efforts to take action against such infringement in its own name, at its own expense and on its own behalf.
		

		
			 
		

		
			If Medisorb fails to take action against such infringement, or if Medisorb does not use reasonable efforts in carrying out such action after commencement thereof, within thirty (30) days after the notice referred to in paragraph (a) above or after having become aware of such infringement, Janssen shall be entitled at its own discretion and at its own expense, to take immediate action against such infringement in its own name, at its own expense and on its own behalf. If Janssen commences or assumes such action, Janssen may credit up to fifty percent (50%) of any royalty otherwise due to Medisorb for sales in such country or countries against the amount of the expenses and costs of such action, including without limitation, attorney fees actually incurred by Janssen.  The amount of expenses so deducted shall be paid to Medisorb out of the recoveries, if any, received by Janssen as a result of such action.  Except for such repayment of royalties deducted, Janssen shall be entitled to retain all recoveries therefrom.
		

		
			 
		

		
			In no event shall Medisorb settle with such infringing third party in the Field without the prior written consent of Janssen.
		

		
			 
		

		
			(c)    Whenever it would concern a patent or patent application falling within the definition of Patents and of which Janssen retains full title and ownership pursuant to Article 5 B), Janssen shall have the right but not the obligation to take action against such infringement in its own name, at its own cost and on its own behalf. If Janssen fails to take action against such infringement, or if Janssen does not use reasonable efforts in carrying out such action after commencement thereof, within thirty (30) days after the notice referred to in paragraph (a) above or after having become aware of such infringement, Medisorb shall be entitled at its own discretion and at its own expense, to take action against such infringement. Medisorb shall be entitled to retain all recoveries, if any, therefrom.
		

		
			 
		

		
			(d)    Whenever it would concern a patent or patent application falling within the definition of Patents and of which Janssen and Medisorb jointly retain full title and ownership pursuant to Article 5 (c), and whenever in such case the infringing product would be a drug product falling within the definition of the Field, Janssen shall have the right but not the obligation to take action against such infringement in its own name, at its own cost and on its own behalf. If Janssen fails to take action against such infringement, or if Janssen does not use reasonable efforts in carrying out such action after commencement thereof, within thirty (30) days after the notice referred to in paragraph (a) above or after having become aware of such infringement, Medisorb shall be entitled at its own discretion and at its own expense, to take action against such
		

		
			 
		

		
			
		

		
			

		 

 

			

					

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infringement, it being understood that Janssen will have a continuing right to take over any such action at its own expense and shall pay to Medisorb from any recoveries Janssen receives (i) Medisorb's expenses and (ii) from any sums remaining after deduction of Medisorb's and Janssen's expenses, an amount proportionate to Medisorb's expenses in relation to Janssen's expenses.
		

		
			 
		

		
			Whenever it would concern a patent or patent application falling within the definition of Patents and of which Janssen and Medisorb jointly retain full title and ownership pursuant to Article 5 (c), and whenever in such case the infringing product would be a drug product falling outside the definition of the Field, Medisorb shall have the right but not the obligation to take action against such infringement in its own name, at its own cost and on its own behalf.  If Medisorb fails to take action against such infringement, or if Medisorb does not use reasonable efforts in carrying out such action after commencement thereof, within thirty (30) days after the notice referred to in paragraph (a) above or after having become aware of such infringement, Janssen shall be entitled at its own discretion and at its own expense, to take action against such infringement, it being understood that Medisorb will have a continuing right to take over any such action at its own expense.  If Janssen commences or assumes such action, Janssen may credit up to fifty percent (50%) of any royalty otherwise payable to Medisorb payable hereunder against the amount of the expenses and costs of such action, including without limitation, attorney fees actually incurred by Janssen.  The amount of expenses so deducted shall be paid to Medisorb out of the recoveries, if any, received by Janssen as a result of such action.  Except for such repayment of royalties deducted, Janssen shall be entitled to retain all recoveries therefrom.
		

		
			 
		

		
			(e)    Each party agrees to cooperate reasonably with the other party in such litigation, including making available to the other party records, information, and evidence relevant to the infringement of the Patent.
		

		
			 
		

			
	
			
				 (7)
			Third Party Intellectual Property Rights

		
			 
		

		
			(a)    Medisorb warrants that to the best of its current knowledge and belief the Products to be developed hereunder will not infringe the patent rights of any third party.
		

		
			 
		

		
			(b)    In the event that the manufacture, use or sale of the Product would constitute an infringement of the rights of a third party in a country because of the use of the Patents or Medisorb's know how, each party shall, as soon as it becomes aware of the same, notify the other thereof in writing, giving in the same notice full details known to it of the rights of such third party and the extent of any alleged infringement.  The parties shall after receipt of such notice meet to discuss the situation, and, to the extent necessary attempt to agree on a course of action in order to permit Janssen to practice the license granted hereunder.  Such course of action may include:  (a) modifying the Product or its manufacture so as to be noninfringing; (b) obtaining an appropriate license from such third party; or (c) fight the claimor suit.  In the event that within a short period of time, the parties fail to agree on an appropriate course of action Janssen may decide upon the course of action in the interest of the further development, manufacturing or commercialization of the Product.
		

		
			 
		

		
			
		

		
			

		 

 

			

					

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(c)    In the event that the parties cannot agree on modifying the Product or in the case that such modification would not be economically viable or regulatorily feasible, Janssen, whenever it relates to know how, whether patented or not, owned by Janssen in accordance with the provisions of Article 5 (b) and (c), or Medisorb, whenever it relates to know how, whether patented or not, owned by Medisorb in accordance with the provisions of Article 5 (a), will have the right to negotiate with such third party for such license.  Both parties hereto will in any event in good faith consult with each other with respect to such negotiations and the party negotiating such license as indicated above, will make every effort to minimize the amount of license fees and royalties payable thereunder.  In no event shall either party as a result of such settlement, grant a sublicense or cross license to the third party to settle the suit, without the prior written approval of the other party.  In the event that such negotiations result in a consummated agreement, any license fee and/or royalties to be paid thereunder shall be paid by the party responsible for the negotiations as indicated above, fifty percent (50%) of any license fees or royalties paid by Janssen under such license will be creditable against royalties due to Medisorb with respect to such country or countries.
		

		
			 
		

		
			(d)    In the event that either or both parties would further to such notification under Paragraph 7 (b) decide to defend such suit or claim in which a third party alleges that the manufacture, use or selling of the Product infringes said third party's patent in a country, Janssen shall have the right to apply up to fifty percent (50%) of the royalties due to Medisorb on the sales of the allegedly infringing Product against its litigation expenses.
		

		
			 
		

			
	
			
				 (8)
			Term:

		
			 
		

		
			(a)    Except as otherwise provided herein, this Agreement and the term of the license granted to Janssen hereunder shall commence on the date first written above and shall expire (i) upon expiration of the last to expire Patent in such country or (ii) fifteen (15) years after the date of the first commercial sale of Product in such country, whichever is later; provided, that in no event shall the license granted hereunder expire later than the twentieth anniversary of the first commercial sale of Product in any country with the exception of the following countries where the fifteen (15) year minimum shall pertain regardless: Canada, France, Germany, Italy, Japan, Spain and the United Kingdom. After expiration of the license granted to Janssen hereunder, Janssen shall retain a fully paid-up non-exclusive license to manufacture, use and sell Products in the Field in the Territory.
		

		
			 
		

		
			(b)    Medisorb may convert the exclusive license granted under this Agreement to non-exclusive if Janssen does not maintain the following minimum annual royalty payments to Medisorb:
		

		
			 
		

		
			(i)    With respect to the entire Territory, excluding Japan, the minimum royalty obligation will first apply to the twelve month period following the anniversary of the end of the ;month in which the Product was launched in the third major country. For the purpose of this Article only, major country shall mean France, Germany, United Kingdom or Italy.
		

		
			 
		

		
			
		

		
			

		 

 

			

					

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During the first twelve month period that such minimum royalty obligation is applicable, the minimum royalty amount to be paid by Janssen will be calculated by multiplying the applicable royalty rate by five percent of the actual aggregate net sales of other risperidone products during such twelve month period in the three major countries referred to above.
		

		
			 
		

		
			As from the subsequent twelve month period the minimum annual royalty amount to be paid by Janssen will be calculated by multiplying the applicable royalty rate by 5% of the aggregate net sales of other risperidone products during such period in all countries where Product has been launched and marketed for a period of minimally twelve months prior to the actual reference twelve month period; and
		

		
			 
		

		
			(ii)    In Japan the minimum royalty obligation will be first applied to the twelve month period following the anniversary of the end of the month in which the Product was launched. The minimum annual royalty amount to be paid by Janssen will be calculated by multiplying the applicable royalty rate by an amount representing 2% of the aggregate net sales of other risperidone products in Japan during such period.
		

		
			 
		

		
			Janssen shall have the right to make up any shortfall in minimum royalty payments from Product sales, both in Japan and in the rest of the Territory provided, such make-up payment is made at the same time and in the same manner as required for the underlying minimum royalty obligation.
		

		
			 
		

		
			Janssen may elect to have its exclusive rights converted into non-exclusive rights on a country by country basis.  As a consequence thereof, such country's other risperidone products sales will no longer be taken into account for calculating the above minimum royalty obligation.
		

		
			 
		

		
			(c)    In the event that either party shall enter or be put into voluntary or compulsory liquidation or have a receiver appointed or default in the observance or performance of its obligations under this Agreement and shall fail to remedy such default within ninety (90) days after the delivery of written notice from the other party, the other party shall be entitled upon giving written notice to terminate this Agreement.
		

		
			 
		

		
			(d)    Janssen may terminate this Agreement without cause upon 30 days prior written notice. Thereafter, Janssen shall have no further rights or privileges with respect to the use of Medisorb Technology in Products and Medisorb shall be under no further obligation of non-competition or exclusive dealing.
		

		
			 
		

		
			(e)    Any early termination of the Agreement shall be without prejudice to the rights of either party against the other accrued under this Agreement prior to termination.
		

		
			 
		

		
			(f)    Upon any termination of this Agreement, any remaining inventory of Product may be sold, provided all royalties otherwise due hereunder are paid with respect to such sales.
		

		
			 
		

		
			
		

		 

 

			

					

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				 (9)
			Confidentiality:

		
			 
		

		
			(a)    Each party agrees to keep confidential and to not use for any purpose other than as set forth herein all technical information and materials supplied by the other hereunder and any information a party may acquire about the other or its activities as a result of entering into this Agreement, provided that such obligation shall not apply to technical information or material which:  (i) was in the receiving party's possession without restriction prior to receipt from the other party or its Affiliates; (ii) was in the public domain at the time of receipt; (iii) becomes part of the public domain through no fault of the receiving party; (iv) shall be lawfully received from a third party with a right of further disclosure; (v) shall be required to be disclosed by law, by regulation or by the rules of any securities exchange.
		

		
			 
		

		
			(b)    Except as may be otherwise provided herein, the confidentiality obligations as set out in this Section shall continue so long as this Agreement remains in force and thereafter for a period of seven (7) years.
		

		
			 
		

		
			(c)    Janssen shall cause its Affiliates and Sublicensees to abide by the obligations of confidentiality with respect to unpublished information within the Patents and Technical Information.
		

		
			 
		

		
			(d)    Any confidential information relating to the subject matter of this Agreement imparted to the other party prior to the execution of this Agreement shall be considered to fall under the terms of this Agreement.
		

		
			 
		

			
	
			
				 (10)
			Disclaimer of Warranty: Medisorb makes no representations or warranties, express or implied, with respect to the Medisorb Patents and Technical Information licensed to Janssen hereunder, including without limitation any warranties of merchantability or fitness for a particular purpose.

		
			 
		

			
	
			
				 (11)
			Liability

		
			 
		

		
			(a)    Janssen agrees to indemnify, defend and hold harmless Medisorb from and against any liability, loss, damages and expenses (including reasonable attorney fees) Medisorb may suffer as the result of claims, demands, costs or judgments which may be made or instituted against Medisorb by reason of personal injury or damage to property arising out or caused by Janssen's promotion, use and sale of the Product, except where such liabilities claims, demands, costs or judgments are caused by Medisorb's  failure to provide Janssen with any information as specified in Section 12 (c) and Article 13.  Medisorb will notify Janssen as soon as it becomes aware of any such claim or action and agrees to give reasonable assistance in the investigation and defense of such claim or action it being understood that it shall allow Janssen to control the disposition of the same.
		

		
			 
		

		
			(b)    Medisorb agrees to indemnify, defend and hold harmless Janssen from and against any liability, loss, damages and expenses (including reasonable attorney fees) Janssen
		

		
			 
		

		
			
		

		
			

		 

 

			

					

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may suffer as the result of claims, demands, costs or judgments which may be made or instituted against Janssen by reason of personal injury or damage to property arising out or caused by Medisorb's  failure to provide Janssen with any information as specified in Section 12 (c) and Article 13.
		

		
			 
		

		
			(c)    In no event shall either party be liable for loss of profits, loss of goodwill or any consequential or incidental damages of any kind of the other party.
		

		
			 
		

			
	
			
				 (12)
			Product Information and Adverse Drug Events

		
			 
		

		
			(a)    As Janssen has superior knowledge of the end-use applications to which Products licensed hereunder will be put, Janssen is responsible for providing third parties with adequate information as to the medical profile of such Products. Janssen will provide Medisorb with copies of the IPID (International Product Information Document) and the IPPI (International Patient Package Insert), which are all part of the IRF for the Product. For the purpose of this Agreement IPID refers to the document that summarizes all medically relevant features of the Product, including the instructions for use meant to inform the medical profession, whereas the IPPI is a patient-oriented document, based upon the IPID that summarizes all relevant information on the Product in lay language. Janssen will keep Medisorb informed of any revisions or amendments in the IPID and IPPI of the Product.
		

		
			 
		

		
			(b)    Medisorb does not claim the expertise to judge whether Product(s) will perform acceptably in Janssen's application(s). Janssen is the sole judge as to whether Product(s) will perform acceptably in Janssen's application(s).  Janssen represents and warrants on an on-going basis during the term of this agreement that it has the capability to assess the suitability of Product(s) in Janssen's application(s) and agrees to conduct adequate testing to confirm the safety and efficacy of Products prior to commercialization.
		

		
			 
		

		
			(c)    Medisorb will provide to Janssen promptly after its discovery by Medisorb, any information in its possession which indicates adverse effects in humans associated with the Products, including the bioabsorbable polymeric components thereof, licensed hereunder. For the purpose of this Agreement "adverse event" shall mean an experience which is noxious and unintended and which occurs at doses normally used in man for the prophylaxis, diagnosis or therapy of a disease or for the modification of a physiological function and any report of an overdose.
		

		
			 
		

			
	
			
				 (13)
			Government Approvals

		
			 
		

		
			Janssen shall be responsible for conducting all necessary testing as well as determining what, if any, government approvals are required for the use and sale of Product licensed hereunder and shall comply with all such requirements prior to and following the sale or distribution of such Products.
		

		
			 
		

		
			
		

		
			

		 

 

			

					

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						Page 14

				
	

					

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Medisorb shall cooperate fully with Janssen in obtaining regulatory approvals for Product licensed hereunder and shall, at Janssen's request, provide appropriate regulatory authorities with any and all information concerning Medisorb's technology, Medisorb polymers and Medisorb's manufacturing process for such Product.
		

		
			 
		

		
			In this respect Medisorb undertakes that it has submitted or will as soon as possible submit a type IV Drug Master File to the FDA identifying Medisorb's method of manufacture, release specifications and testing methods used in the manufacture of its bioabsorbable polymers and a type I Drug Master File of Medisorb's manufacturing facilities where Product may be manufactured. Medisorb will authorize Janssen at its request to cross-reference any Medisorb Drug Master Files relating to the Medisorb Polymers.
		

		
			 
		

			
	
			
				 (14)
			Force Majeure:  Neither party shall be liable for its failure to perform any of its obligations hereunder if such failure is occasioned by a contingency beyond its reasonable control including, but not limited to, occurrences such as strikes or other labor disturbances, lock out, riot, war, default by a common carrier, fire, flood, storm, earthquake, other acts of God, inability to obtain raw materials, failure of plant facilities or government regulation, act or failure to act. Each party shall notify the other immediately upon occurrence or cessation of any such contingencies. If such contingency continues unabated for at least 180 consecutive days, either party shall have the right to terminate this Agreement without further obligation beyond those actually incurred prior to such termination.

		
			 
		

			
	
			
				 (15)
			Press Communications:  Neither party shall originate any publicity, news release or public announcement, written or oral relating to this Agreement, including its existence, without the prior written approval of the other party.

		
			 
		

			
	
			
				 (16)
			Notices:  Any legal notice required or permitted hereunder shall be considered properly given if in writing and sent by first class mail, certified mail or by telefacsimile to the party being notified at the respective address of such party as follows:

		
			 
		

		
			If to Medisorb:
		

		
			 
		

		
			Medisorb Technologies International L.P.
		

		
			6954 Cornell Road
		

		
			Cincinnati, OH 45242
		

		
			USA
		

		
			Facsimile: 513-489-2348
		

		
			 
		

		
			If to Janssen:
		

		
			 
		

		
			Janssen Pharmaceutica
		

		
			Kollerstrasse 38
		

		
			6300 Zug 6
		

		
			Switzerland
		

		
			Facsimile: 00-41-42449565
		

		
			 
		

		
			
		

		
			

		 

 

			

					

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Such notice shall be effective upon receipt or upon refusal to accept such notice. In any case, notice shall be presumed effective no later than five (5) days after such notice is sent.
		

		
			 
		

		
			Neither party shall originate any publicity, news release or public announcement, written or oral, relating to this Agreement, including its existence, without the written approval of the other party.
		

		
			 
		

			
	
			
				 (17)
			Assignment:  This Agreement shall not be assigned by either party without the prior written consent of the other party; provided, however, that assignment shall be permitted without such consent to any party, not less than 50% of the total interest of which owns, is owned by, or is under common control with the assigning party. In the event of any such permitted assignment the assignee shall be subject to and shall agree in writing to be bound by the terms and conditions of this Agreement.

		
			 
		

			
	
			
				 (18)
			Dispute Resolution:  The parties shall amicably discuss and negotiate any matters which arise under this Agreement and are not specifically set forth hereunder.  If any disputes arise under this Agreement, the parties shall use their best efforts to meet and resolve such disputes.  In the event that the parties are unable to resolve any such disputes, then both parties hereby agree to submit said disputes to the jurisdiction of the competent Courts of Zurich, Switzerland, and agree that any litigation in any way related to this Agreement shall be submitted to such Courts and that same shall be subject to Swiss law.

		
			 
		

			
	
			
				 (19)
			Severability:  In the event any one or more of the provisions of this Agreement should for any reason be held by any court or authority having jurisdiction over this Agreement or any of the parties hereto to be invalid, illegal or unenforceable such provision or provisions shall be validly reformed to as nearly approximate the intent of the parties as possible and, if unreformable; shall be divisible and deleted in such jurisdiction, elsewhere this Agreement shall not be affected.

		
			 
		

			
	
			
				 (20)
			Captions:  The captions of this Agreement are for convenience only, and shall not be deemed of any force or effect whatsoever in construing this Agreement.

		
			 
		

			
	
			
				 (21)
			Waiver:  The failure on the party of a party to exercise or enforce any right conferred upon it hereunder shall not be deemed to be a waiver of any such right, nor operate to bar the exercise or enforcement thereof at any time thereafter.

		
			 
		

			
	
			
				 (22)
			Survival:  The following Articles of this Agreement shall survive the termination or expiration of this Agreement:  5, 9, 10, 11, 15, 17, and 18.

		
			 
		

			
	
			
				 (23)
			Miscellaneous:  This Agreement may be executed by the parties hereto in counterparts, each of which when so executed and delivered shall be considered to be an original, but all such counterparts shall together constitute but one and the same instrument. This

		
			 
		

		
			
		

		
			

		 

 

			

					

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Agreement is the complete agreement of the parties and supersedes all previous understandings and agreements relating to the subject matter hereof.  Neither this Agreement nor any of the terms hereof may be terminated, amended, supplemented, waived or modified orally, but only by an instrument in writing signed by the party against whom enforcement of the termination, amendment, supplement, waiver or modification is sought.
		

		
			 
		

		
			IN WITNESS WHEREOF, the duly authorized representatives of the parties hereto have executed this Agreement as of the day and year first above written.
		

		
			 
		

		
			 
		

			
					
						 

					
						/s/

					
					
						 

					
					
						 

				
	
					
						JANSSEN PHARMACEUTICA INTERNATIONAL

					
					
						 

				
	
					
						A division of Cilag International AG

					
					
						 

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						 

				
	
					
						By:

					
					
						/s/ Erik Rombouts 

					
					
						 

				
	
					
						Name:

					
					
						Erik Rombouts

					
					
						 

				
	
					
						Title:

					
					
						Operations Director

					
					
						 

				
	
					
						Date:

					
					
						February 21, 1996

					
					
						 

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						 

				
	
					
						{Second Janssen Signatory}

					
					
						 

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						 

				
	
					
						By:

					
					
						/s/ Heinz Schmid

					
					
						 

				
	
					
						Name:

					
					
						Heinz Schmid

					
					
						 

				
	
					
						Title:

					
					
						General Manager

					
					
						 

				
	
					
						Date:

					
					
						February 21, 1996

					
					
						 

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						 

				
	
					
						MEDISORB TECHNOLOGIES INTERNATIONAL  L.P.

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						by:

					
					
						Medisorb Technologies

					
					
						 

				
	
					
						 

					
					
						International, Inc.,

					
					
						 

				
	
					
						 

					
					
						its General Partner

					
					
						 

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						 

				
	
					
						By:

					
					
						/s/ David R. Lohr

					
					
						 

				
	
					
						Name:

					
					
						David R. Lohr

					
					
						 

				
	
					
						Title:

					
					
						President

					
					
						 

				
	
					
						Date:

					
					
						January 31, 1996alks_Ex_10-4

		
			Exhibit 10.4
		

		
			 
		

		
			MANUFACTURING AND SUPPLY AGREEMENT
		

		
			 
		

		
			Entered into this 6th day of August 1997 (hereinafter "Effective Date") by and between
		

		
			 
		

		
			JPI PHARMACEUTICA INTERNATIONAL, a division of Cilag AG International Zug, a company duly organized and existing under the laws of Switzerland, having its principal office in CH-6300 Zug, Kollerstrasse 38, Switzerland (hereinafter referred to as "JPI")
		

		
			 
		

		
			and
		

		
			 
		

		
			JANSSEN PHARMACEUTICA Inc., 1125 Trenton-Harbourton Road, Titusville, NJ 08560, USA (hereinafter referred to as "JANSSEN US") (JPI and JANSSEN US collectively referred to herein as "JANSSEN")
		

		
			 
		

		
			and
		

		
			 
		

		
			Alkermes Controlled Therapeutics Inc. II, a company organized and existing under the laws of the Commonwealth of Pennsylvania, having its principal office at 64 Sidney Street, Cambridge, MA 02139-4136, U.S.A. ( hereinafter referred to as "ACT II").
		

		
			 
		

		
			WITNESSETH
		

		
			 
		

		
			WHEREAS, JPI and ACT II (as assignee of Medisorb Technologies International LP ("MTI")) have entered into an agreement dated December 23, 1993 for the development of a Risperidone depot formulation incorporating ACT II's proprietary technology concerning bioabsorbable polymer technologies as duly amended by the Second Amendment of March 8, 1997 (hereinafter "Development Agreement"); and
		

		
			 
		

		
			WHEREAS, JANSSEN and ACT II (an assignee of MTI) have entered into two License agreements dated February 21, 1996 granting JANSSEN certain exclusive rights with respect to the use of ACT II's proprietary technology in the development, manufacturing, promotion and sale of Risperidone depot formulations (hereinafter "License Agreements"); and
		

		
			 
		

		
			 
		

		
			 
		

		
			

		 

 

WHEREAS, further to the provisions of Article 4 (b) of the License Agreements, ACT II has a right of first refusal with respect to the manufacture of such Risperidone depot formulations and JANSSEN has further to such provision agreed to entrust the manufacturing of Products (as hereinafter defined) to ACT II under the terms and conditions set forth hereinafter.
		

		
			 
		

		
			ARTICLE 1 : DEFINITIONS
		

		
			 
		

		
			The following terms shall, for the purpose of this Agreement, have the following meaning unless the context clearly requires otherwise and the singular shall include the plural and vice versa:
		

		
			 
		

		
			1.1"Affiliate" shall mean any company controlling, controlled by, or under common control with a party by ownership, directly or indirectly, of fifty percent (50%) or more of the total ownership or by the power to control the policies and actions of such company.
		

		
			 
		

		
			1.2"Compound" shall mean the active ingredient risperidone.
		

		
			 
		

		
			1.3"Final Product" shall mean the final presentation form of the Product approved and marketed by Janssen, their Affiliates and licensees, ready for sale to the final customer.
		

		
			 
		

		
			1.4"Janssen GMP Manual" shall mean the Janssen Pharmaceutica GMP Policies Manual, a numbered copy of which has been provided to ACT II and which Manual, together with any possible amendment and/or addition is deemed to constitute an integral part of this Agreement.
		

		
			 
		

		
			1.5"Licensed Net Selling Price" shall mean the weighted average price offered by JANSSEN, their Affiliates or licensees in a given calendar year to independent third parties for the Final Product for sale in the Territory, less deductions for (i) transportation charges, including insurance; (ii) sales and excise taxes paid by JANSSEN, their Affiliates or licensees and any other governmental charges imposed upon the production, importation, use or sale of the Final Product; (iii) trade, cash and ordinary business discounts allowed and (iv) allowances or credits
		

		
			
		

		
			

		 

		

			-  2  -

		

 

 
		

		
			to customers on account of rejection or return of Final Product (v) and managed care rebates or allowances and mandatory price allowances imposed by governments.
		

		
			 
		

		
			If JANSSEN, its Affiliates or licensees sell Final Product in a country in such a manner that the net sales value of the same is not readily identifiable then the net sales determination for that country shall be whichever is the higher of (i) the fair market value of such Final Product or (ii) the proportion of the bundled price attributed to the Final Product by JANSSEN, its Affiliates or licensees whenever the Final Product is sold as part of a package of products or services.
		

		
			 
		

		
			For the purpose hereof "fair market value" shall mean, without limitation, the value of Final Products sold to similar third parties in similar quantities. If the fair market value can not be determined in any given country, the fair market value will be determined by the value of the Final Product sold to similar customers in countries with similar pricing and reimbursement structures and for similar quantities.
		

		
			 
		

		
			1.6"Manufacture, Manufacturing" shall mean all steps and operations involved in the production of Product, starting from Compound, including supply of the polymers or other critical excipients, pharmaceutical formation, packaging, in process and quality control and storage of Compound and Product, until delivery for shipment of the Product to JANSSEN US, JPI or their designee.
		

		
			 
		

		
			1.7"Manufacturing Fee" shall mean the fee to be paid by JPI and JANSSEN US to ACT II in consideration for the Manufacture of Products supplied to each of them in accordance with the terms hereof and which fee will be calculated as a percentage of the Licensed Net Selling Price per unit of Product in accordance with the mechanism set forth in Article 6.
		

		
			 
		

		
			1.8"Manufacturing Process" shall mean the process and environment required to Manufacture Product as described in regulatory filings.
		

		
			 
		

		
			1.9"Materials" shall mean all or any of the materials, except for Compound, required for the Manufacture of Product (including but not limited to inactive ingredients, diluents, excipients, vials, containers).
		

		
			 
		

		
			1.10"Product" shall mean a depot formulation of Risperidone, based on ACT II technologies utilizing polymers of lactic and glycolic acids which are designed to
		

		
			 
		

		
			
		

		
			

		 

		

			-  3  -

		

 

deliver Compound over an extended period, in appropriately labelled siliconized vials or any other immediate container agreed by both parties and as set forth in the Specifications.
		

		
			 
		

		
			1.11"Specifications" shall mean the agreed specifications of the Product, to be attached hereto as Exhibit A, including quality control tests to be performed by JANSSEN and a list of the methodologies to be used in performing those tests.
		

		
			 
		

		
			1.12"Territory" shall mean worldwide.
		

		
			 
		

		
			ARTICLE 2: PROGRAM OF COMMERCIAL MANUFACTURE AND SUPPLY OF PRODUCTS
		

		
			 
		

		
			2.1Subject to the terms and conditions of this Agreement, JANSSEN hereby appoints ACT II as their exclusive supplier of Product for their entire requirements in the Territory and ACT II agrees to Manufacture Product in its own premises for the exclusive purpose to supply Product to JANSSEN or their designee.
		

		
			 
		

		
			2.2ACT II will provide at its own cost and expense, all equipment and machinery for the Manufacture of the Product, except for those capital items owned by JANSSEN US and identified in Exhibit B attached hereto. ACT II will only use such equipment and machinery which complies with the Manufacturing Process and any other requirements, such as the DMF, agreed with JANSSEN. ACT II shall maintain such equipment and machinery in good condition and properly validated.
		

		
			 
		

		
			2.3In order to assist ACT II in its production planning, both parties will discuss and agree at the latest upon finalisation of the Phase III Clinical Trials in accordance with the Development Agreement on a rolling ordering and forecast mechanism (12-24 months) duly considering amongst others the required leadtimes to Manufacture the Product and to acquire the primary container or any other Material. In principle the first period of such rolling forecast will be considered a firm commitment, the other periods being indicative and non binding. Such forecast will be periodically updated at the moment of sending the orders for the next period.
		

		
			 
		

		
			
		

		
			

		 

		

			-  4  -

		

 

 
		

		
			To the extent required such a forecast mechanism may include a buffer mechanism providing for an upper and lower variation limit of the eventual orders against the latest forecast and a reasonable buffer mechanism in connection with required delivery dates and ordered quantities of Product.
		

		
			 
		

		
			The eventually agreed forecast mechanism ("hereinafter Forecast Mechanism") will be attached hereto as Exhibit E and will be used both by JPI and by JANSSEN US, it being understood that JANSSEN US and JPI may use a slightly different Forecast Mechanism format reflecting potential differences in the flow of goods.
		

		
			 
		

		
			2.4JPI and JANSSEN US will each, in accordance with the Forecast Mechanism, send firm orders to ACT II indicating the requirements for Products, together with the required delivery dates and destination, and shall at the same time advise ACT II of the estimated requirements for the following periods in accordance with the Forecast Mechanism. JPI and/or JANSSEN US will ship Compound to ACT II in quantities sufficient and with sufficient lead time to enable ACT II to Manufacture the ordered Products. Together with the batch(es) of Compound, JPI and/or JANSSEN US will send all required documents and certificates. The Compound shipped to ACT II will comply with agreed specifications to be attached hereto as Exhibit F. In order to insure an adequate supply of Compound, ACT II will provide inventory data for each batch of Product shipped to JANSSEN as well as quarterly summaries of inventory transactions.
		

		
			 
		

		
			2.5Upon receipt of the Compound, ACT II will inspect the batch(es) in accordance with to be agreed test procedures. Within thirty (30) business days following receipt of a shipment of Compound, ACT II shall inform JPI or JANSSEN US, depending on who was responsible for the shipment, in writing of any qualitative and/or quantitative shortcomings of the supplied Compound. In the event of a justifiable claim, JPI or JANSSEN US as the case may be shall replace or cause to have replaced such quantities of Compound in the shortest possible time and dispose of any defective batch(es) at its own expense.
		

		
			 
		

		
			Upon receipt (with sufficient lead time) and control of the Compound, ACT II will proceed with the Manufacture of the Products in accordance with the time schedule required to meet the requested delivery dates.
		

		
			 
		

		
			2.6All Product Manufactured by ACT II under this Agreement shall be manufactured and packed strictly in accordance with the Specifications and Manufacturing
		

		
			 
		

		
			
		

		
			

		 

		

			-  5  -

		

 

 
		

		
			Process and in accordance with the provisions of any applicable Drug Master File to which JANSSEN is granted access in accordance with the provisions of Article 5.3.
		

		
			 
		

		
			ACT II shall be responsible for obtaining Materials in such quantities as are necessary for the Manufacturing of the amounts of Product ordered by JANSSEN.
		

		
			 
		

		
			ACT II shall be responsible for the quality, purity, identity and potency of the Materials used and shall only buy and use such Materials in the Manufacturing of the Product, which strictly comply with the applicable quality requirements and Specifications.
		

		
			 
		

		
			ACT II shall not change the validated Manufacturing Process of the Product or use any different material in the processing thereof that may have an impact on any regulatory approval in connection with the Product without JANSSEN US' (in connection with the United States) and/or JPI's (in connection with the rest of the Territory) explicit prior written approval and shall give the assistance reasonably required by JANSSEN US or JPI in preparing the supplement to any regulatory approval in connection with any change previously approved by JANSSEN US or JPI.
		

		
			 
		

		
			2.7ACT II shall Manufacture Product in batches as specified in the Specifications and Manufacturing Process and within an agreed upon yield. To this end the initial percentage of average loss of Compound in the Manufacture of Product will be agreed upon separately by both parties upon finalization of the validation of the full scale Manufacturing Process of Product and will be attached as Exhibit G to this Agreement. JANSSEN and ACT II shall on a yearly basis review the average production-loss percentages with a view to making whatever adjustment which may, from time to time, be required. For any loss of Compound that ACT II may incur in the Manufacturing of Product exceeding the then applicable yield variance calculated on a yearly basis, ACT II shall pay JANSSEN a compensation of $10,000 USD per kilogram of Compound. For the purpose of such loss computations materials used in the Manufacture of control and retain samples, which are to be retained by ACT II, shall be excluded.
		

		
			 
		

		
			2.8To minimize the likelihood of a supply deficiency with respect to Products, by the end of Phase III clinical trials in the development of the Product in accordance with the Development Agreement, both parties shall discuss and agree on a Disaster Recovery and Back-Up plan to be prepared by ACT II. Such plan shall consider the possibility of (re)building (including validation and approval) a plant
		

		
			
		

		
			

		 

		

			-  6  -

		

 

 
		

		
			within an acceptable period of time (such period to be determined in common agreement) in case ACT II's current premises would be destroyed as well as transferring the Manufacture to a manufacturing facility of JANSSEN or any of their Affiliates or the facilities of a third party. Such third party will be an industry recognized reputable manufacturer having experience in making injectable pharmaceutical products.
		

		
			 
		

		
			2.9The parties hereto will at regular instances review the long term capacity of ACT II's plant taking into account the most current forecast of the Final Product with a view to determine the need to have additional manufacturing capacity, either at the existing facility of ACT II or in any other manufacturing facility and either with ACT II or any of its Affiliates or with JANSSEN or any of their Affiliates.
		

		
			 
		

		
			2.10The parties hereto acknowledge that after ACT II has supplied the Product for Phase III clinical trial and prior to the start of the commercial Manufacturing of the Product, ACT II's manufacturing facility for the Product should be kept in a manufacturing ready condition so as to minimize the risk of supply deficiencies at the moment of start up of the commercial Manufacturing. In order to do so ACT II will commit such resources and undertake such maintenance activities and training programs as agreed by both parties in a Manufacturing Readiness Plan. Such Manufacturing Readiness Plan will be attached to this Agreement as Exhibit H. In consideration of such manufacturing readiness activities, JANSSEN will pay a monthly fee to ACT II of $80,000 USD. ACT II will send monthly invoices to JPI or JANSSEN US in connection with such fees in accordance with timely provided instructions and JPI and/or JANSSEN US will pay such invoices within thirty days of invoice. 
		

		
			 
		

		
			The parties hereto will use good faith efforts to investigate the possibility to utilize ACT II's manufacturing facility for other manufacturing requirements of JANSSEN or any of their Affiliates during such interim period. To the extent any such project would be identified and agreed by the parties, the parties will in good faith negotiate an appropriate reduction of the monthly $80,000 USD fee payable by JANSSEN.
		

		
			 
		

		
			2.11The parties hereto agree that during the term of this Agreement, JANSSEN will order and purchase a minimum number of Product during any given calendar year starting on the first commercial launch of the Final Product (the year of first commercial launch to be calculated on a pro rata basis). Such minimum numbers
		

		
			 
		

		
			
		

		
			

		 

		

			-  7  -

		

 

 
		

		
			are expressed in kilograms of bulk Product (excluding for this purpose the vials) and are set forth in Exhibit C attached hereto. In the event that JANSSEN does not achieve the applicable minimum quantity of the Product to be Manufactured during a given calendar year, the parties hereto will in good faith renegotiate an adjusted Manufacturing Fee, duly considering the effect of the shortfall. In the event the parties can not agree an adjusted Manufacturing Fee, ACT II will be entitled to terminate this Agreement upon giving a one year prior notice. ACT II shall provide such commercially reasonable assistance and other information in order for JANSSEN to manufacture or have manufactured the Product after such one year notice period.
		

		
			 
		

		
			ARTICLE 3: QUALITY ASSURANCE - GMP COMPLIANCE
		

		
			 
		

		
			3.1ACT II will Manufacture the Product in accordance with them current Good Manufacturing Practices ("GMP") standards, including, but not limited to the requirements set forth in Janssen's GMP Manual, the requirements imposed by the Food and Drug Administration of the United States ("FDA"), the Japanese health authorities and EU GMP guidelines.
		

		
			 
		

		
			3.2ACT II shall perform in process and final quality control on Product. For each batch of Product, ACT II shall take a sample or samples as specified in the JANSSEN GMP Manual. Such sample(s) and records shall be retained in accordance with the provisions of the Janssen GMP Manual. 
		

		
			In addition ACT II will on an annual basis submit revalidation data to JANSSEN or their designee in compliance with the provisions of the Sterilization Policy in the Janssen GMP Manual.
		

		
			 
		

		
			3.3JANSSEN shall have the right, upon reasonable advance notice and during regular business hours, to send its quality control inspectors to inspect and audit the processes, facilities and equipment being used by ACT II in the Manufacturing of the Product and the polymers used in Product to assure compliance with Articles 2 and 3 of this Agreement as well as any applicable laws, rules and regulations, provided that such quality control inspectors shall be subject to the confidentiality provisions provided for in Article 7. Such inspection and audit shall be conducted at JPI's or JANSSEN US' (as the case may be) sole cost and expense and in a
		

		
			 
		

		
			
		

		
			

		 

		

			-  8  -

		

 

 
		

		
			manner so as to minimize disruption of ACT II’s business operations. The above audit right shall also extend to ACT II’s supplier of the siliconized vials.
		

		
			 
		

		
			ACT II shall or shall cause its suppliers of the siliconized vials or any other primary container to remedy, within the timelimits provided for in the GMP audit report or determined in accordance with the Janssen GMP Manual any deficiencies reported by such auditor in the audit report issued following any such audit and which deficiencies relate to GMP, Specifications, Manufacturing Process, applicable laws, rules and regulations including JANSSEN’s current quality control procedures, provided that, with respect to the latter, ACT II received an updated version prior to any such audit. ACT II and JANSSEN will reasonably collaborate with each other in order to insure that the manufacturer of the siliconized vials or any other primary container complies with applicable GMP rules (including the JANSSEN GMP Manual) and Specifications and Manufacturing Process. Such collaboration includes the possibility to organise joint audits or to have such GMP audit performed by JANSSEN. During such period, ACT II shall continuously use commercially reasonable efforts to remedy such deficiencies as promptly as possible. In the event that ACT II does not remedy any of such deficiencies within the above-referred timelimits, then JANSSEN shall be entitled to cover by Manufacturing themselves or to have a third party manufacture the Products. ACT II shall provide such commercially reasonable assistance and other information as shall be necessary in order for JANSSEN to manufacture itself or have a third party manufacture the related Products. In the event that JANSSEN uses a third party manufacturer for the Product pursuant to this Article, JANSSEN shall require such third party to be bound by the same confidentiality provisions as are contained in this Agreement.
		

		
			 
		

		
			3.4In the event ACT II receives a deficiency notice from the FDA or any other regulatory agency regarding its compliance with any applicable laws, rules and regulations regarding its Manufacture of the Product, ACT II shall promptly notify JPI and JANSSEN US.
		

		
			 
		

		
			ACT II shall use commercially reasonable effects to remedy such deficiencies as promptly as possible and in any event within the time period requested by the agency. In the event that ACT II does not remedy any of such deficiencies within the period provided for in the notice of the regulatory agency, then JANSSEN shall be entitled to manufacture or have manufactured the Products in accordance with the provisions of Article 3.3.
		

		
			 
		

		
			
		

		
			

		 

		

			-  9  -

		

 

3.5Upon reasonable request of JANSSEN US, JPI or any of their Affiliates, ACT II will enter into a separate Quality Assurance Agreement with JANSSEN US, JPI or any such Affiliate, which Quality Assurance Agreement will confirm the quality assurance provisions set forth in this Agreement and will clearly identify the respective responsibilities of the parties in the Manufacturing of the Product.
		

		
			 
		

		
			ARTICLE 4: SHIPMENT - RISK AND TITLE
		

		
			 
		

		
			4.1By the required delivery date, ACT II will ship the Products to JANSSEN or their designee in accordance with the ordering instructions as set forth in Article 2 hereof. Together with such shipment ACT II will send shipping documents and Certificates of Analysis of the batches shipped.
		

		
			Products shall be shipped using a carrier appointed by JANSSEN on the basis of FOB, port of shipment. The term “FOB” shall be interpreted in accordance with the latest INCOTERMS.
		

		
			 
		

		
			4.2Upon receipt of a batch of Product JPI, JANSSEN US or their designee shall perform or have performed an inspection of the batch documents and perform such test on the Product in accordance with procedures to be agreed upon. Should a batch of Product or the Manufacturing Process thereof fail to meet the established standards of quality as set forth in Article 3 or should the Product or the Manufacturing thereof not comply with the Specifications or Manufacturing Process, JPI or JANSSEN US, as the case may be, shall inform ACT II in writing of the alleged shortcomings within fifteen (15) business days after receiving such defect, specifying the nature of the defect and the batch number.
		

		
			 
		

		
			ACT II shall, at JPI’s or JANSSEN US’ option, depending who ordered the batch (i) re-process or replace in accordance with the Specifications and the Manufacture Process, at its own cost (which cost excludes the cost of the Compound), the whole or part of the deficient batch of Product so rejected, or, if the related Manufacturing Fee due by JPI or JANSSEN US in accordance with Article 6 was already paid, provide either (ii) a refund of the Manufacturing Fee paid in relation to the rejected batch(es) or (iii) issue a credit note for future orders for the full amount of the Manufacturing Fee paid in relation to the rejected batch(es) and shall destroy upon JPI’s or JANSSEN US’ instructions the rejected batch of Product which can not be corrected or improved. Furthermore, ACT II compensate or credit JPI or JANSSEN US $10,000 USD per kilogram of
		

		
			 
		

		
			
		

		
			

		 

		

			-  10  -

		

 

Compound for JPI’s or JANSSEN US’ cost for the Compound used in such deficient batch of Product. If JANSSEN US or JPI request the receipt of such $10,000 USD payment, such payment will be made within forty five (45) days date of invoice.
		

		
			 
		

		
			Both parties will make good faith efforts to resolve disagreements in connection with any such alleged shortcomings. In the event the in-house experts of the parties are unable to agree on any alleged shortcoming of the Product or the Manufacturing process thereof, then the parties will appoint an independent expert skilled in the art who will analyse samples of the alleged deficient batch and all process deviations. Both parties will supply such expert with copies of specifications, documents, test results etc., that the expert may reasonably require in connection with such analysis. The expert’s decision as to whether such batch has met the specifications shall be final and binding to the parties. The expenses of such expert shall be borne by the party whose contention is rejected by the expert.
		

		
			 
		

		
			4.3Title in the Compound and Product shall at any time remain with JPI or JANSSEN US, depending on which company ordered the Product, whereas title to the Material shall remain with ACT II until incorporation in the Product. Risk of loss and damage in relation to the Compound and the Product shall pass to ACT II upon delivery of the Compound at the ACT II premises and shall again pass to JPI and/or JANSSEN US upon delivery of the Product to the common carrier. ACT II shall provide adequate and safe storage for the Compound and Products while at its premises and shall have sufficient insurance coverage in connection with the above risk.
		

		
			 
		

		
			4.4ACT II represents and warrants that at the time of Manufacture all Product supplied hereunder shall be manufactured and supplied by ACT II in accordance with the Specifications and Manufacturing Process and in compliance with (i) this Agreement and (ii) any applicable law, rule or regulations.
		

		
			 
		

		
			EXCEPT FOR THE ABOVE WARRANTY, THERE ARE NO WARRANTIES OF MERCHANTIBILITY OR FITNESS FOR A PARTICULAR PURPOSE.
		

		
			 
		

		
			
		

		
			

		 

		

			-  11  -

		

 

ARTICLE 5: REGULATORY PROVISIONS
		

		
			 
		

		
			5.1JANSSEN and its Affiliates will be responsible for filing any regulatory approval application in connection with the Product and the Final Product, in their own name and at their own cost, all in accordance with the provisions of the Development Agreement and the License Agreement.
		

		
			 
		

		
			5.2ACT II will give reasonable regulatory support in connection with regulatory approvals filed by JANSSEN in relation to the Product and/or the Final Product and will do so free of charge. Amongst others, ACT II will prepare and maintain all the necessary supporting documentation requested by JANSSEN such as certificates or other administrative documents required for reference in any regulatory filing, in a format requested by JANSSEN. Notwithstanding the above, it is agreed that if any such request from JANSSEN or the health authorities in a given country entails extraordinary costs beyond the normal and ordinary regulatory support efforts in connection with the filing and maintenance of the regulatory approvals directed to the Product or Final Product, the parties will in good faith discuss and agree on a sharing mechanism with respect to such extraordinary costs related to such support activities in such country or countries.
		

		
			 
		

		
			5.3ACT II shall be responsible for obtaining and maintaining all necessary permits and approvals to Manufacture the Products and in general to perform its responsibilities as set forth in this Agreement.
		

		
			 
		

		
			Amongst others ACT II shall submit a Drug Master File (“DMF”) with the health authorities identifying ACT II’s method of manufacture, release specifications and testing methods used in the manufacture of the polymers and shall cause the supplier of the siliconized vials or any other primary container to do the same in relation to such vials or such other primary container. Similarly ACT II shall prepare and file an appropriate facility DMF with respect to the facilities where ACT II Manufactures the Product and the polymers. ACT II shall cause the supplier of the siliconized vials (or any other primary container) or any other Material used in the Manufacture of Product to do the same.
		

		
			 
		

		
			Upon request by JPI or JANSSEN US, ACT II agrees to provide JPI, JANSSEN US or their Affiliates or licensees with a Letter of Authorisation permitting the Health Authorities to refer to ACT II’s DMF in its review of JANSSEN’s or their Affiliates’ applications for Product manufactured by ACT II. ACT II shall cause
		

		
			 
		

		
			
		

		
			

		 

		

			-  12  -

		

 

the supplier of the siliconized vials (or any other primary container) or any other Material used in the Manufacture of Product to do the same.
		

		
			 
		

		
			A representative of JANSSEN will be entitled to review at ACT II’s facilities those parts of the polymer DMF and the appropriate facility DMF pertaining to the Manufacture of Product.
		

		
			 
		

		
			ACT II shall maintain its Manufacturing facilities, Manufacturing records and its DMF’s in such a manner as required to live up to the above obligation during the entire term of this Agreement.
		

		
			 
		

		
			JANSSEN shall not file with FDA or any other regulatory agency any changes with respect to the Manufacturing Process or Specifications without ACT II’s prior consent.
		

		
			 
		

		
			ACT II shall keep JANSSEN updated of any changes in the DMF related to the polymers and/or the appropriate facility DMF requested by the FDA or any other regulatory agency and Parties will discuss the same before any changes are implemented.
		

		
			 
		

		
			 
		

		
			5.4JANSSEN shall inform ACT II promptly (and whenever possible within 24 hours of receipt by JPI and/or JANSSEN US) of any information or request for information received from the FDA or any other regulatory agency relating to the NDA and/or registration of Product whenever such information or communication is related to ACT II technology. Parties shall promptly discuss such information and in the event that a reply is required to such formal question from the FDA or any other regulatory agency or any communication has to be made with respect to Product and related to ACT II technology, Parties will agree on the content of any communication before it is made.
		

		
			 
		

		
			5.5ACT II shall inform JANSSEN promptly (and whenever possible within 24 hours of receipt by ACT II) of any information or request for information received from the FDA or any other regulatory agency relating to ACT II technology whenever such information or communication is relevant to Product. It being understood that ACT II shall not disclose to JANSSEN any third party confidential information or trade secrets. Parties shall promptly discuss such information and in the event that a reply is required to such formal question from the FDA or any other regulatory agency or any communication has to be made that involves Product, Parties will agree on the content of such communication before it is made.
		

		
			 
		

		
			
		

		
			

		 

		

			-  13  -

		

 

ARTICLE 6: MANUFACTURING FEE
		

		
			 
		

		
			6.1In consideration of the manufacturing activities to be performed by ACT II hereunder, JPI and JANSSEN US will pay the Manufacturing Fee for the Products supplied to each of them. The Manufacturing Fee will be calculated as a certain percentage of the Licensed Net Selling Price. The actual percentage that shall apply with respect to a given calendar year will be determined in a function of the total volume of Products Manufactured by ACT II and invoiced to JANSSEN during such calendar year and will be calculated in accordance with the brackets set forth in Exhibit D attached hereto.
		

		
			 
		

		
			The actual Manufacturing Fee due during any given calendar year will be calculated as follows;
		

		
			 
		

		
			6.1.1The Manufacturing Fee for the initial batches of Product Manufactured and invoiced by ACT II prior to the expiration of the first calendar year following the first commercial launch of the Final Product shall be calculated as a percentage of the estimated weighted average price offered by JANSSEN, its Affiliates or licensees to independent unrelated third parties for the Final Product. Such weighted average price will be calculated by multiplying the forecasted net selling price of the Final Product (expressed in USD at the exchange rates then applied by JANSSEN in accordance with its normal accounting procedures) in each country of Territory where JANSSEN intends to launch the Final Product in the calendar year following the calendar year of the first commercial launch of the Final Product times the total number of units of the Final Product JANSSEN forecasts to sell in those countries during such period. The actual percentage to be paid as Manufacturing Fee in such period will be calculated on the basis of the total number of units of the Product ACT II is required to Manufacture and ship to JANSSEN during such period based on the forecast provided by JANSSEN in accordance with Article 2.3.
		

		
			 
		

		
			Within ten (10) business days following the end of every calendar quarter either party may request a recalculation of the then applicable Manufacturing Fee whenever there is a deviation of more than twenty five
		

		
			 
		

		
			
		

		
			

		 

		

			-  14  -

		

 

Percent (25%) in the total number of Products actually Manufactured and shipped by ACT II to JANSSEN during such quarter and the number of units forecasted by JANSSEN. The parties will at such moment recalculate and adjust the Manufacturing Fee based on (i) the revised supply forecast and (ii) the then current Licensed Net Selling Price.
		

		
			 
		

		
			In the month of January following such first full calendar year adjustment shall be made if there is deviation between (i) the estimated weighted average price and the actual Licensed Net Selling Price of the Final Product (expressed in USD at the exchange rates then applied by JANSSEN in accordance with its normal accounting procedures) and /or (ii) the total volume of units of Product actually Manufactured and invoiced by ACT II during such period.
		

		
			 
		

		
			Any corrective payment to be made resulting from such reconciliation will be paid by the party owing such a payment within forty five (45) days after such reconciliation and in accordance with the provisions of Article 6.4.
		

		
			 
		

		
			6.1.2The Manufacturing Fee for any calendar year following the initial period as specified under Article 6.1.1 above will be calculated on the basis of the forecasted (i) Licensed Net Selling Price (expressed in USD at the exchange rates then applied by JANSSEN in accordance with its normal accounting procedures) and (ii) the amount of Product expressed in units to be Manufactured and shipped by ACT II for such calendar year.
		

		
			 
		

		
			Within ten (10) business days following the end of every calendar quarter either party may request a recalculation of the then applicable Manufacturing Fee whenever there is a deviation of more than twenty five percent (25%) in the total number of Products actually Manufactured and shipped by ACT II during such quarter and the number of units forecasted by JANSSEN. The parties will at such moment recalculate and adjust the Manufacturing Fee for the remainder of the calendar year based on (i) the revised supply forecast and (ii) the then current Licensed Net Selling Price.
		

		
			 
		

		
			In the month of January following any calendar year adjustment shall be made if there is deviation between (i) the estimated weighted average price and the actual Licensed Net Selling Price of the Final Product (expressed in USD at the exchange rates then applied by JANSSEN in accordance with
		

		
			 
		

		
			
		

		
			

		 

		

			-  15  -

		

 

 
		

		
			its normal accounting procedures) and/or (ii) the total volume of units of Product actually Manufactured and invoiced by ACT II during such calendar year. Any corrective payment to be made resulting from such reconciliation will be paid by the party owing such a payment within forty five (45) days after such reconciliation and in accordance with the provisions of Article 6.4.
		

		
			 
		

		
			6.2JANSSEN will keep accurate records of the Licensed Net Selling Price with a view to determine the accuracy of the Manufacturing Fee calculation for a period of at least two (2) years after expiry of the year they concern. ACT II shall have the right to nominate an independent certified public accountant acceptable to and approved by JANSSEN US or JPI as the case may be who shall have access, on reasonable notice, to JPI's or JANSSEN US' records during reasonable business hours for the purpose of verifying the calculation of the Licensed Net Selling Price. This right may not be exercised more than once in any calendar year, and once a calendar year is audited it may not be reaudited, and said accountant shall disclose to ACT II information relating solely to the accuracy of the Licensed Net Selling Price calculation.
		

		
			 
		

		
			6.3ACT II shall invoice JPI or JANSSEN US for the Manufacturing Fee due with respect to each batch of Product supplied to each of them or their respective designee when shipped pursuant to Article 4. JPI and JANSSEN US shall be pay such invoice within forty-five (45) days after the date of the invoice.
		

		
			 
		

		
			6.4All payments required to be paid hereunder shall be made in United States Dollars by wire transfer of immediately available funds to the financial institution, account number, account party's name and wire transfer information designated in writing by ACT II to JPI and JANSSEN US as the place of payment.
		

		
			 
		

		
			6.5No party shall have the right to reduce, by set off, counterclaim, adjustment or otherwise, any amount owed by it to the other party pursuant to this Agreement, unless explicitly provided for otherwise.
		

		
			 
		

		
			ARTICLE 7: CONFIDENTIALITY
		

		
			 
		

		
			The parties refer to Article to the confidentiality provisions of Article 9 of the License Agreements which provisions are incorporated by reference herein.
		

		
			 
		

		
			
		

		
			

		 

		

			-  16  -

		

 

ARTICLE 8: RECALL
		

		
			 
		

		
			In the event of a Product recall ("Recall"), JPI or JANSSEN US, as the case may be, shall be responsible for the coordination of Recall activities. Where the Recall is caused by ACT II's negligence or willful misconduct or breach of this Agreement and without prejudice to the provisions of Article 10, ACT II agrees to pay the following costs and expenses of any Recall: (i) costs of retrieving the Product previously delivered to JPI's or JANSSEN US' agents or customers, (ii) costs and expenses that JPI and/or JANSSEN US is required to pay for reasonable notification, shipping and handling charges, provided JPI and/or JANSSEN US provides ACT II with supporting documentation of all such reimbursable costs and expenses, and (iii) cost of replacing Products that are unsalable as a result of the Recall. If the Recall is not primarily caused by ACT II's negligence, willful misconduct or breach, JPI and/or JANSSEN US shall pay all of the costs and expenses described above for such Recall.
		

		
			 
		

		
			ARTICLE 9: INDEMNIFICATIONS
		

		
			 
		

		
			9.1JANSSEN shall indemnify, defend and hold ACT II and its Affiliates, and each of their officers, directors, employees, agents and consultants (each an "ACT II Indemnitee") harmless from, against and in respect of any damages, claims made by third parties, losses, liabilities, charges, actions, suits, proceedings, penalties and reasonable costs and expenses (including without limitation reasonable attorneys' fees) (collectively, the "Losses"), arising out of or resulting from the use by or administration to any person of Product or Final Product of JPI, its Affiliates or licensees, except to the extent such Losses arose or resulted primarily from the failure of ACT II or its Affiliates to Manufacture Products in accordance with GMP, the Specifications and Manufacturing Process for such Product(s) or from ACT II's failure to comply with its obligations or covenants contained herein, so long as (i) the ACT II Indemnitee allows JANSSEN to participate in or, at JANSSEN's sole option but without any obligation, to conduct at JPI's expense the defense of a claim or action for which indemnification is sought under this Article 9.1. (provided that the ACT II Indemnitee may participate in such defense at its own expense), and (ii)
		

		
			 
		

		
			
		

		
			

		 

		

			-  17  -

		

 

neither party may compromise or settle such claim or action without the other party's prior written consent, which shall not be unreasonably withheld ; provided, however, that a ACT II Indemnitee shall not be indemnified under this Article 9.1 to the extent that actions taken or failed to have been taken by JANSSEN under the direction of, or at request of, the ACT II Indemnitee were the primary cause of the events giving rise to the ACT II Indemnitee's claim for indemnification.
		

		
			 
		

		
			9.2ACT II shall indemnify, defend and hold JANSSEN, their Affiliates and Licensees and each of their officers, directors, employees, agents and consultants (each a "JANSSEN Indemnitee") harmless from and against all Losses to the extent such losses arise out of or result from the failure of ACT II or its Affiliates to Manufacture the Product(s) in accordance with the Specifications and Manufacturing Process, or, its failure to comply with its obligations or covenants contained herein, unless such failure was the result of actions taken or failed to have been taken by the ACT II under the direction of, or at the request of JANSSEN. The JANSSEN Indemnitee shall allow ACT II to participate in, or, at ACT II's sole option, to conduct at ACT II's expense the defense of a claim or action for which indemnification is sought under this Article 9.2. (provided that the JANSSEN Indemnitee may participate in such defense at its own expense), and neither party shall compromise or settle such claim or action without the other party's prior written consent, which shall not be unreasonably withheld.
		

		
			 
		

		
			9.3In no event shall either party be liable for any consequential or indirect damages of the other party, including but not limited to lost profits.
		

		
			 
		

		
			9.4Both parties shall obtain, and shall maintain at all times during the term of this Agreement, an insurance policy or policies providing coverage against product liability claims related to the above indemnification.
		

		
			 
		

		
			ARTICLE 10: TERM AND TERMINATION
		

		
			 
		

		
			10.1The term of this Agreement shall be commensurate with the term of the License Agreements, unless sooner terminated as provided hereinafter.
		

		
			 
		

		
			
		

		
			

		 

		

			-  18  -

		

 

10.2This Agreement may be terminated:
		

		
			 
		

		
			10.2.1by mutual agreement of JANSSEN and ACT II in a writing signed by the parties;
		

		
			 
		

		
			10.2.2by written notice of JANSSEN or ACT II in the event of a material breach by the other party in the performance of any of its obligations hereunder, if the party not in default shall have given the defaulting party written notice specifying such default within 45 days after the occurrence of such breach and the defaulting party has not made substantial and diligent progress in remedying or correcting the default within 60 days after such notice is given, with such termination becoming effective at the end of such 60 days;
		

		
			 
		

		
			10.2.3by written notice of JANSSEN or ACT II in the event that the other party makes an assignment for the benefit of its creditors, files a petition under bankruptcy or insolvency laws, a receiver or custodian is appointed for such party's business, proceedings are instituted against such party under bankruptcy or insolvency laws that have not been stayed within 90 days, all or substantially all or such party's business or assets become subject to attachment, garnishment or other process, or such a party becomes unable to pay its obligations as they become due;
		

		
			 
		

		
			10.2.4by JANSSEN prior to any commercial Manufacturing upon giving thirty days prior written notice and following the commencement of the commercial manufacturing upon giving a six month prior written notice, provided that with respect to the latter the Agreement shall not be terminated by JANSSEN without cause during the first two calendar years following the commencement of the commercial Manufacturing, unless JANSSEN decides also to terminate the License Agreements;
		

		
			 
		

		
			
		

		
			

		 

		

			-  19  -

		

 

102.5by ACT II in accordance with the provisions of Articles 2.11
		

		
			 
		

		
			10.3Upon termination of this Agreement for any reason whatsoever ACT II will cease the Manufacturing of the Products. Termination of this Agreement shall not affect the rights and obligations of the parties accrued prior to the termination hereof. Notwithstanding the termination of this Agreement, the confidentiality provisions of Article 3.3, the obligations set forth in Articles 7, 8, 9, and 12.9 shall continue and survive the termination hereof.
		

		
			 
		

		
			ARTICLE: 11 FORCE MAJEURE
		

		
			 
		

		
			Each party shall be relieved of its obligations to the extent that fulfillment of such obligations shall be prevented by acts beyond the reasonable control of such party affected, including, without limitation, acts of God, fire, explosion, flood, drought, war, riot, sabotage, embargo, strikes or other labor trouble, prohibitions against imports or exports of Products, impossibility of obtaining or shortages in supply of raw materials, or compliance with any order or regulation of any government entity acting under color of right. If such cause continues unabated for a period of thirty (30) days, both parties will promptly meet to discuss the possibilities to overcome such case of Force Majeure and the potential implications on the further performance under this Agreement.
		

		
			 
		

		
			ARTICLE: 12 MISCELLANEOUS
		

		
			 
		

		
			12.1Status. Neither JANSSEN or ACT II shall make any representation or incur any obligation in the name of or in behalf of the other party, except as explicitly authorized hereunder. Nothing in this Agreement shall be deemed to establish a relationship of principal and agent between ACT II and JPI or JANSSEN US, nor any of their agents or employees for any purpose whatsoever. Nothing in this Agreement shall be deemed to constitute the parties as a partnership, association or other relationship.
		

		
			 
		

		
			
		

		
			

		 

		

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12.2Public Announcements. No public announcement with respect to the Product or the existence of this Agreement may be made by JANSSEN or ACT II without the prior written approval of the other party.
		

		
			 
		

		
			12.3Modifications. Any amendment or supplement to this Agreement shall be effective only if contained in a writing signed by each of the parties hereto.
		

		
			 
		

		
			12.4Assignments. Except as otherwise provided herein, this Agreement shall not be assignable by any party, without the other party's written consent, such consent not to be unreasonably withheld, except that such consent is not required in connection with the assignment of any parties’ obligations to an affiliate of such party;  provided,  however, that any such assignment shall not relieve the parties hereto from any obligations under this Agreement.
		

		
			 
		

		
			12.5Prior Agreements. The parties hereto acknowledge that this Agreement contains the entire agreement between the parties pertaining to the Manufacturing and supply of Product in Territory and terminates and supersedes all prior agreements, understandings, letters or other instruments whatsoever, whether written or oral, between the parties or any of their affiliates with respect to such matters.
		

		
			 
		

		
			12.6Waiver. No waiver by JANSSEN or ACT II of any breach of this Agreement will constitute a waiver of any subsequent breach, and no exercise by either JANSSEN or ACT II of any right of termination will constitute a waiver of any right for recovery of any monies then due it hereunder or any other right or remedy such a party may have at law, in equity or otherwise.
		

		
			 
		

		
			12.7Representations. Each party represents and warrants that it has the right to enter into this Agreement and that it is under no obligation to any third party, express or implied, conflicting with the terms and conditions of this Agreement.
		

		
			 
		

		
			
		

		
			

		 

		

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12.8Separability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this agreement where affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction.
		

		
			 
		

		
			12.9Governing Law; Dispute Resolution.
		

		
			 
		

		
			12.9.1In the event a dispute ("Dispute") arises between the parties arising out of or relating to this Agreement, the parties shall use all reasonable efforts to resolve the Dispute through direct discussions for a period of sixty (60) days, unless and to the extent this Agreement provides for other and shorter periods. The senior management of each party commits itself to respond to any such Dispute. Subsequent to such sixty (60) day period either party may, but shall not be required to resort to the binding arbitration procedures set out hereinafter in this Article 12.9.
		

		
			 
		

		
			12.9.2If the parties are unable after exerting all reasonable efforts to resolve a Dispute between the parties, the Dispute shall be resolved through binding arbitration pursuant to the Commercial Arbitration Rules of the American Arbitration Association in accordance with the following provisions:
		

		
			 
		

			
	
			
				 (a)
			

			
	
			
			If a Dispute arises between the parties, the place of arbitration shall be New York, New York.

		
			 
		

			
	
			
				 (b)
			

			
	
			
			To the extent the parties can not immediately agree on a single arbitrator, the arbitration shall be conducted by a panel of three neutral arbitrators ("Arbitrators"). One member shall be appointed by each party and the third member shall be appointed by the two arbitrators appointed by the parties. The parties will select an

		
			 
		

		
			
		

		
			

		 

		

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arbitrator within fifteen (15) business days following the demand for arbitration. The two arbitrators selected by the parties will appoint the third member within ten (10) days following their appointment.
		

		
			 
		

			
	
			
				 (c)
			

			
	
			
			The language to be used in the arbitration shall be English.

		
			 
		

			
	
			
				 (d)
			

			
	
			
			Any arbitrator selected by the parties may be of any nationality, and need not be a lawyer or hold any other professional status or membership but will be selected on the basis of his or her qualifications and expertise with respect to the matter under dispute.

		
			 
		

			
	
			
				 (e)
			

			
	
			
			The Arbitrators shall resolve the Dispute on the basis of a written record consisting of an initial and rebuttal submission by each party (together with documentary evidence (including affidavits) supporting the positions taken in such submissions); provided that the Arbitrators shall have the right to require the parties to make or participate in such other written or oral submissions, presentations, or examinations as the Arbitrators shall deem necessary for the proper resolution of such Dispute, all of which shall be made or submitted directly to the Arbitrators and shall become part of the record in the proceeding.

		
			 
		

			
	
			
				 (f)
			

			
	
			
			The specific pleading schedule for each proceeding shall be determined by the parties in consultation with the Arbitrators within fifteen business days after the date on which the Arbitration panel is constituted, but it shall in each case provide that the parties' respective initial submissions shall be filed simultaneously with the Arbitrators, as shall the parties' respective reply submissions.

		
			 
		

			
	
			
				 (g)
			

			
	
			
			Unless the parties otherwise agree at the time a particular Dispute is submitted for arbitration, the Arbitrators shall be required as a

		
			 
		

		
			
		

		
			

		 

		

			-  23  -

		

 

condition to their engagement to agree to render a decision within 30 days of the date on which the record in the proceeding is completed, but in no case more than 90 days after the date of the last hearing on the substantive issues.
		

		
			 
		

			
	
			
				 (h)
			

			
	
			
			The parties shall use reasonable efforts to schedule and make their submissions, and to take all other necessary actions in connection with the proceeding, at a time and in a manner which will permit the Arbitrators to render its decision in accordance with the schedule set forth herein.

		
			 
		

			
	
			
				 (i)
			

			
	
			
			All communications with the Arbitrators during the pendency of the proceeding shall be made in writing, with a copy thereof delivered simultaneously to the other party to the proceeding, or if made orally, made only in the presence of the other party to the proceeding or its representative. The existence of the Dispute and the related proceedings shall be kept confidential in accordance with the provisions of Article 7.

		
			 
		

			
	
			
				 (j)
			

			
	
			
			All decisions by the Arbitrators shall be done by majority vote. The arbitration award shall be rendered in writing and shall state the reasons for the award, and shall be final and binding upon the parties. In rendering their decision, the Arbitrators shall apply the substantive law of the state of New York, without regard to its conflict of law provisions, provided that the Arbitrators shall base their decision on the express terms and conditions of this Agreement.

		
			 
		

			
	
			
				 (k)
			

			
	
			
			The Arbitrators are empowered to award any remedy allowed by law, including money damages and to grant final or interlocutory relief. Notwithstanding the foregoing punitive or multiple damages may not

		
			 
		

		
			
		

		
			

		 

		

			-  24  -

		

 

be awarded and the express terms of this Agreement may not be altered.
		

		
			 
		

			
	
			
				 (l)
			

			
	
			
			Each party shall bear its own expenses and attorneys' fees in connection with the arbitration.

		
			 
		

		
			12.10Notices. Any notice required or permitted to be given under this Agreement shall be mailed by registered or certified air mail, postage prepaid, addressed to the party to be notified at its address stated below, or at such other address as may hereafter be furnished in writing to the notifying party or by telefax to the numbers set forth below or to such changed telefax numbers as may thereafter be furnished.
		

		
			If to ACT II:
		

		
			 
		

		
			Alkermes Controlled Therapeutics Inc. II
		

		
			64 Sidney Street
		

		
			Cambridge
		

		
			MA 02139-4136
		

		
			U.S.A.
		

		
			Telefax: +1-617-494-9263
		

		
			attention:  Chief Financial Officer
		

		
			 
		

		
			If to JANSSEN:
		

		
			 
		

		
			Janssen Pharmaceutica International, a division of Cilag AG
		

		
			International,
		

		
			CH-6300 Zug, Chollerstrasse 38,
		

		
			Switzerland
		

		
			Telefax: 041 748 3667
		

		
			 
		

		
			and
		

		
			 
		

		
			Janssen Pharmaceutica Inc.
		

		
			1125 Trenton-Harbourton Road
		

		
			Titusville
		

		
			NJ 08560
		

		
			U.S.A.
		

		
			Telefax:  +1-609-730-2323
		

		
			 
		

		
			Any such notice shall be deemed to have been received when it has been delivered in the ordinary course of post or received by telefax.
		

		
			 
		

		
			
		

		
			

		 

		

			-  25  -

		

 

IN WITNESS WHEREOF, JPI, JANSSEN US AND ACT II have caused this instrument to be executed by their respective duly authorized officers, the date of execution to relate back to the day and year last below written.
		

		
			 
		

			
					
						 

					
					
						 

					
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						    

					
					
						Alkermes Controlled Therapeutics, Inc. II

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						This 8th day of August 1997

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						/s/ J. Duncan Higgons

					
					
						 

					
					
						By

					
					
						/s/ Michael Landine

				
	
					
						(title)

					
					
						Vice President

					
					
						 

					
					
						(title)

					
					
						Vice President

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						JANSSEN PHARMACEUTICA

				
	
					
						 

					
					
						 

					
					
						INTERNATIONAL represented by

				
	
					
						 

					
					
						 

					
					
						CILAG AG INTERNATIONAL.

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						This 27th day of August 1997

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						/s/ illegible signature

					
					
						 

					
					
						By

					
					
						/s/ illegible signature

				
	
					
						(title)

					
					
						 

					
					
						 

					
					
						(title)

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						Janssen Pharmaceutica Inc.

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						This 3rd day of September 1997

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						By

					
					
						/s/ illegible signature

				
	
					
						(title)

					
					
						 

					
					
						 

					
					
						(title)

					
					
						President

				

		
			 
		

		
			

		 

		

			-  26  -

		

 

Exhibit A
		

		
			 
		

		
			Specifications
		

		
			
		

		
			

		 

		

			-  27  -

		

 

Exhibit B
		

		
			 
		

		
			Equipment : capital items
		

		
			
		

		
			

		 

		

			-  28  -

		

 

Exhibit C
		

		
			 
		

		
			Minimum Quantities
		

		
			 
		

			
					
						 

					
					
						 

				
	
					
						1st Calendar year

					
					
						60 kg of bulk Product (microspheres - excluding vials)

					
						(on a pro rata basis taking into account actual date of the first commercial launch of the Final Product)

				
	
					
						2nd Calendar year

					
					
						100 kg of bulk Product

				
	
					
						3rd Calendar year and any subsequent calendar year

					
					
						160 kg of bulk Product

				

		
			 
		

		
			
		

		
			

		 

		

			-  29  -

		

 

Exhibit D
		

		
			 
		

		
			Manufacturing Fee
		

		
			 
		

			
					
						 

					
					
						 

					
					
						 

					
					
						 

					
					
						 

					
					
						 

					
					
						 

					
					
						 

					
					
						 

					
					
						 

					
					
						 

					
					
						 

				
	
					
						Amount purchased
(vials)

					
					
						 

					
					
						% of Licensed

					
					
						 

					
					
						Amount purchased
(vials)

					
					
						 

					
					
						% of Licensed

					
					
						 

				
	
					
						From

					
					
						    

					
					
						To

					
					
						    

					
					
						Net Selling Price

					
					
						    

					
					
						From

					
					
						    

					
					
						To

					
					
						    

					
					
						Net Selling Price

					
					
						 

				
	
					
						263,000

					
					
						 

					
					
						399,999

					
					
						 

					
24.5 
					
					
						%  

					
					
						2,100,000

					
					
						 

					
					
						2,199,999

					
					
						 

					
8.8 
					
					
						%

				
	
					
						400,000

					
					
						 

					
					
						499,999

					
					
						 

					
19.5 
					
					
						%  

					
					
						2,200,000

					
					
						 

					
					
						2,299,999

					
					
						 

					
8.6 
					
					
						%

				
	
					
						500,000

					
					
						 

					
					
						599,999

					
					
						 

					
16.5 
					
					
						%  

					
					
						2,300,000

					
					
						 

					
					
						2,399,999

					
					
						 

					
8.5 
					
					
						%

				
	
					
						600,000

					
					
						 

					
					
						699,999

					
					
						 

					
14.0 
					
					
						%  

					
					
						2,400,000

					
					
						 

					
					
						2,499,999

					
					
						 

					
8.3 
					
					
						%

				
	
					
						700,000

					
					
						 

					
					
						799,999

					
					
						 

					
12.3 
					
					
						%  

					
					
						2,500,000

					
					
						 

					
					
						2,599,999

					
					
						 

					
8.2 
					
					
						%

				
	
					
						800,000

					
					
						 

					
					
						899,999

					
					
						 

					
12.0 
					
					
						%  

					
					
						2,600,000

					
					
						 

					
					
						2,699,999

					
					
						 

					
8.1 
					
					
						%

				
	
					
						900,000

					
					
						 

					
					
						999,999

					
					
						 

					
11.7 
					
					
						%  

					
					
						2,700,000

					
					
						 

					
					
						2,799,999

					
					
						 

					
8.0 
					
					
						%

				
	
					
						1,000,000

					
					
						 

					
					
						1,099,999

					
					
						 

					
11.4 
					
					
						%  

					
					
						2,800,000

					
					
						 

					
					
						2,899,999

					
					
						 

					
7.9 
					
					
						%

				
	
					
						1,100,000

					
					
						 

					
					
						1,199,999

					
					
						 

					
11.0 
					
					
						%  

					
					
						2,900,000

					
					
						 

					
					
						2,999,999

					
					
						 

					
7.8 
					
					
						%

				
	
					
						1,200,000

					
					
						 

					
					
						1,299,999

					
					
						 

					
10.7 
					
					
						%  

					
					
						3,000,000

					
					
						 

					
					
						3,099,999

					
					
						 

					
7.8 
					
					
						%

				
	
					
						1,300,000

					
					
						 

					
					
						1,399,999

					
					
						 

					
10.4 
					
					
						%  

					
					
						3,100,000

					
					
						 

					
					
						3,199,999

					
					
						 

					
7.7 
					
					
						%

				
	
					
						1,400,000

					
					
						 

					
					
						1,499,999

					
					
						 

					
10.1 
					
					
						%  

					
					
						3,200,000

					
					
						 

					
					
						3,299,999

					
					
						 

					
7.7 
					
					
						%

				
	
					
						1,500,000

					
					
						 

					
					
						1,599,999

					
					
						 

					
9.8 
					
					
						%  

					
					
						3,300,000

					
					
						 

					
					
						3,399,999

					
					
						 

					
7.6 
					
					
						%

				
	
					
						1,600,000

					
					
						 

					
					
						1,699,999

					
					
						 

					
9.7 
					
					
						%  

					
					
						3,400,000

					
					
						 

					
					
						3,499,999

					
					
						 

					
7.6 
					
					
						%

				
	
					
						1,700,000

					
					
						 

					
					
						1,799,999

					
					
						 

					
9.5 
					
					
						%  

					
					
						3,500,000

					
					
						 

					
					
						3,599,999

					
					
						 

					
7.5 
					
					
						%

				
	
					
						1,800,000

					
					
						 

					
					
						1,899,999

					
					
						 

					
9.3 
					
					
						%  

					
					
						3,600,000

					
					
						 

					
					
						3,699,999

					
					
						 

					
7.5 
					
					
						%

				
	
					
						1,900,000

					
					
						 

					
					
						1,999,999

					
					
						 

					
9.2 
					
					
						%  

					
					
						3,700,000

					
					
						 

					
					
						3,799,999

					
					
						 

					
7.5 
					
					
						%

				
	
					
						2,000,000

					
					
						 

					
					
						2,099,999

					
					
						 

					
9.0 
					
					
						%  

					
					
						3,800,000

					
					
						 

					
					
						3,899,999

					
					
						 

					
7.5 
					
					
						%

				
	
					
						 

					
					
						 

					
					
						 

					
					
						 

					
					
						 

					
					
						 

					
					
						3,900,000

					
					
						 

					
					
						4,000,000

					
					
						 

					
7.5 
					
					
						%

				

		
			 
		

		
			
		

		
			

		 

		

			-  30  -

		

 

Exhibit E
		

		
			 
		

		
			The Forecast Mechanism
		

		
			
		

		
			

		 

		

			-  31  -

		

 

Exhibit F
		

		
			 
		

		
			Specification of Compound
		

		
			
		

		
			

		 

		

			-  32  -

		

 

Exhibit G
		

		
			 
		

		
			Average Loss of Compounds further to Article 2.7
		

		
			
		

		
			

		 

		

			-  33  -

		

 

Exhibit H
		

		
			 
		

		
			Manufacturing Readiness Plan
		

		
			 
		

		 

		

			-  34  -

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00254-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00254-of-00352.parquet"}]]