Document:

Exhibit 10.4

 

CERTAIN MATERIAL (INDICATED BY [***]) HAS BEEN OMITTED FROM THIS DOCUMENT PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.  THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

TRANSITIONAL SUPPLY AGREEMENT

 

between

 

Janssen Ortho LLC,

 

Janssen Pharmaceuticals, Inc.

 

and

 

Depomed, Inc.

 

DATED AS OF April 2, 2015

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

 

THIS TRANSITIONAL SUPPLY AGREEMENT (this “Supply Agreement”) is made as of April 2, 2015 (the “Effective Date”) by and among Janssen Ortho LLC, a Delaware limited liability company located at Bo. Mamey, Carr. 933 Km 0., Gurabo, Puerto Rico 00778-9629, United States, Janssen Pharmaceuticals, Inc. (individually referred to as “Seller” and, together with Janssen Ortho LLC, “Manufacturer”), a Pennsylvania corporation located at 1125 Trenton-Harbourton Road, Titusville, NJ 08560 and Depomed, Inc. (the “Purchaser”), a California corporation located at 7999 Gateway Boulevard, Suite 300, Newark, CA 94560.  Manufacturer and Purchaser are individually referred to as a “Party” and collectively as the “Parties,” as the context may require.

 

RECITALS

 

WHEREAS:

 

(A)       Seller, an Affiliate of Janssen Ortho LLC, and Purchaser are parties to that certain Asset Purchase Agreement, dated as of January 15, 2015 (the “Asset Purchase Agreement”), pursuant to which, among other things, Seller agreed to sell, and Purchaser agreed to purchase, certain rights and assets related to the products containing the active pharmaceutical ingredient tapentadol as set forth in Appendix A (the “Products”), and Purchaser agreed to assume certain liabilities related to the Products, in the United States;

 

(B)       Pursuant to Section 6.07 of the Asset Purchase Agreement, Purchaser and Seller (or its Affiliate) agreed to enter into a transitional supply agreement, on the terms set forth in Exhibit D to the Asset Purchase Agreement, pursuant to which Seller (or its Affiliate) will manufacture and supply Purchaser’s requirements of Products for distribution and sale in the United States until Purchaser has sufficient capacity and capability to manufacture Purchaser’s requirements of Products for distribution in the United States and Seller’s (and its Affiliates’) requirements of products containing the active pharmaceutical ingredient tapentadol for distribution outside the United States (such products, the “Seller Products”); and

 

(C)       Purchaser wishes to purchase Products, and Manufacturer is willing to supply Products to Purchaser, on the terms and conditions of this Supply Agreement.

 

NOW IT IS AGREED AS FOLLOWS:

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

2

 

DEFINITIONS

 

All capitalized terms not otherwise defined in this Supply Agreement shall have the same definition as set forth in the Asset Purchase Agreement. As used throughout this Supply Agreement, each of the following terms shall have the respective meaning set forth below (and plural forms of singular and vice-versa and other variants thereof shall have correlative meanings). In the event of a conflict between the terms of this Supply Agreement and the terms of the Asset Purchase Agreements, the terms of this Supply Agreement shall prevail:

 

	
“API”
    	
 
    	
shall mean the active pharmaceutical ingredient tapentadol.
    
	
 
    	
 
    	
 
    
	
“API Supply Agreement”
    	
 
    	
shall mean that certain Supply Agreement by and between Noramco, Inc. and Purchaser, dated as of the   Effective Date, pursuant to which Noramco. Inc. has agreed to supply API to   Purchaser.
    
	
 
    	
 
    	
 
    
	
“Applicable Law”
    	
 
    	
shall mean all applicable laws, rules, regulations, guidelines or   other requirements of governmental authorities, including those that may be   in effect from time to time in the United States or Seller Countries with   respect to the validity or enforceability of this Supply Agreement or   activities under this Supply Agreement, as may be applicable.
    
	
 
    	
 
    	
 
    
	
“Asset Purchase Agreement”
    	
 
    	
shall have the meaning as set forth in the recitals to this Supply Agreement.
    
	
 
    	
 
    	
 
    
	
“BDP” or   “Bulk Drug Products”
    	
 
    	
shall mean bulk Product(s) with or without its primary packaging   as described and defined in the documentation and Specifications.
    
	
 
    	
 
    	
 
    
	
“BDS” or   “Bulk Drug Substance”
    	
 
    	
shall mean bulk API as described and defined in the documentation and   Specifications.
    
	
 
    	
 
    	
 
    
	
“Binding Period”
    	
 
    	
shall have the meaning set forth in Section 3.2(b).
    

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

3

 

	
“Breaching Party”
    	
 
    	
shall have the meaning set forth in Section 7.1.
    
	
 
    	
 
    	
 
    
	
“Certificate of Analysis”
    	
 
    	
shall have the meaning set forth in the Quality Agreement.
    
	
 
    	
 
    	
 
    
	
“Certificate of Conformance”
    	
 
    	
shall have   the meaning set forth in the Quality Agreement.
    
	
 
    	
 
    	
 
    
	
“cGMP” or “GMP”
    	
 
    	
shall mean current good manufacturing practices as required by the   rules and regulations of the FDA or any other Regulatory Authority   outside the United States, as applicable to the manufacturing, packaging,   handling, storage and control of API or Products.
    
	
 
    	
 
    	
 
    
	
“Claim”
    	
 
    	
shall have the meaning set forth in Section 17.3.
    
	
 
    	
 
    	
 
    
	
“Corrective Action”
    	
 
    	
shall have the meaning set forth in Section 10.4.
    
	
 
    	
 
    	
 
    
	
“Damages”
    	
 
    	
shall mean any and all damages, liabilities, claims, costs, charges,   judgments, injuries, awards, fines, penalties, fees and expenses (including   reasonable attorneys’ fees) suffered or incurred.
    
	
 
    	
 
    	
 
    
	
“Days of Coverage”
    	
 
    	
shall mean [***]
    
	
 
    	
 
    	
 
    
	
“DEA”
    	
 
    	
shall mean the Drug   Enforcement Administration of the United States Department of Justice or any   successor organization.
    
	
 
    	
 
    	
 
    
	
“DEA Aggregate Production Quota”
    	
 
    	
shall mean the national limit set by the DEA on the amount of   tapentadol which may be produced in a given calendar year.
    
	
 
    	
 
    	
 
    
	
“DEA Manufacturing Quota”
    	
 
    	
shall mean the amount of tapentadol that Manufacturer or its   Affiliates may produce in a given calendar year, which amount is set by the   DEA and must be equal to or
    

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

4

 

	
 
    	
 
    	
less than the DEA Aggregate Production Quota, provided that the   Parties acknowledge that the DEA aligns the grant based on API supplier   information given by Manufacturer and/or Purchaser, as the case may be.
    
	
 
    	
 
    	
 
    
	
“DEA Procurement Quota”
    	
 
    	
shall mean the quota issued by the DEA to Manufacturer (and/or Purchaser’s   CMO) for the purchase of API and formulation of such API into Product in a   given calendar year, which includes factor-in sales, manufacturing losses,   allowable inventory and exports and applies to movement between   Manufacturer’s manufacturing sites, between Manufacturer and Purchaser’s CMO   and customer returns.
    
	
 
    	
 
    	
 
    
	
“Default Interest Amount”
    	
 
    	
shall mean the prime rate of interest quoted in The Wall Street   Journal on the first business day of the month during which an amount becomes   overdue under this Supply Agreement, plus [***]   calculated on an annual basis.
    
	
 
    	
 
    	
 
    
	
“Defective Product”
    	
 
    	
shall mean any Product that, upon Delivery, is not (i) in   compliance with the Specifications for such Product, (ii) in compliance   with cGMP or GMP, (iii) is adulterated or misbranded, (iv) in   compliance with all applicable Laws or (v) in compliance with any   Regulatory Approvals applicable to such Product.
    
	
 
    	
 
    	
 
    
	
“Delivery”
    	
 
    	
shall have the meaning set forth in Section 8.1(c).
    
	
 
    	
 
    	
 
    
	
“Discretionary Changes”
    	
 
    	
shall have the meaning set forth in Section 5.3.
    
	
 
    	
 
    	
 
    
	
“Distribution”
    	
 
    	
shall mean, with respect to the United States and, as may by   applicable, the Seller Countries, importing, selling, distributing,   exporting, transporting and other activities associated with the foregoing   listed activities with
    

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

5

 

	
 
    	
 
    	
respect to the distribution of a product, including inventory   management and control, warehousing and distribution, invoicing, collection   of sales proceeds, preparation of sales records and reports, customer   relations and services, and the handling of returns.
    
	
 
    	
 
    	
 
    
	
“Effective Date”
    	
 
    	
shall have the meaning set forth in the preamble to this Supply   Agreement.
    
	
 
    	
 
    	
 
    
	
“ER Line 1”
    	
 
    	
shall mean the manufacturing   equipment related to the ER Products (as defined below) set forth on Appendix B attached hereto.
    
	
 
    	
 
    	
 
    
	
“ER Line 2”
    	
 
    	
shall mean the manufacturing   equipment related to the ER Products (as defined below) set forth on Appendix C attached hereto.
    
	
 
    	
 
    	
 
    
	
“ER Product”
    	
 
    	
shall mean any Product that is identified as “extended release” or   “ER” on Appendix A.
    
	
 
    	
 
    	
 
    
	
“FDA”
    	
 
    	
shall mean the United   States Food and Drug Administration, and any successor organization having   substantially the same functions.
    
	
 
    	
 
    	
 
    
	
“Force Majeure Event”
    	
 
    	
shall have the meaning set forth in Section 11.1.
    
	
 
    	
 
    	
 
    
	
“Forecast”
    	
 
    	
shall mean   the Initial Forecast and/or the Rolling Forecast, as applicable.
    
	
 
    	
 
    	
 
    
	
“Good Distribution   Practice” or “GDP”
    	
 
    	
shall mean the then-current standards for Distribution activities as   set forth by the World Health Organization and Applicable Law, as amended   from time to time.
    
	
 
    	
 
    	
 
    
	
“Hidden Defect”
    	
 
    	
shall mean a defect in a Product which cannot reasonably be detected, either upon Delivery or upon   first receipt by Purchaser, by means of a customary visual inspection of the   shipment (without opening
    

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

6

 

	
 
    	
 
    	
secondary packaging) or by consulting   the Certificate of Analysis accompanying such Product.
    
	
 
    	
 
    	
 
    
	
“Indemnified Party”
    	
 
    	
shall have the meaning set forth in Section 17.3.
    
	
 
    	
 
    	
 
    
	
“Indemnifying Party”
    	
 
    	
shall have the meaning set forth in Section 17.3.
    
	
 
    	
 
    	
 
    
	
“Initial Forecast”
    	
 
    	
shall have the meaning set forth in Section 3.1.
    
	
 
    	
 
    	
 
    
	
“Initial Price Term”
    	
 
    	
shall have   the meaning set forth in Section 2.1.
    
	
 
    	
 
    	
 
    
	
“Inventory”
    	
 
    	
shall mean   the stock of Raw Materials, BDS, BDP, work-in-progress, and/or Products in   the possession of Manufacturer and/or its Affiliates.
    
	
 
    	
 
    	
 
    
	
“IR Product”
    	
 
    	
shall mean any Product that is not an ER Product.
    
	
 
    	
 
    	
 
    
	
“Mandatory Changes”
    	
 
    	
shall have the meaning set forth in Section 5.2.
    
	
 
    	
 
    	
 
    
	
“Manufacturer”
    	
 
    	
shall have the meaning as set forth in the preamble to this Supply   Agreement.
    
	
 
    	
 
    	
 
    
	
“Manufacturer Indemnified Parties”
    	
 
    	
shall have the meaning set forth in Section 17.1.
    
	
 
    	
 
    	
 
    
	
“Manufacturer’s Facility”
    	
 
    	
shall mean Manufacturer’s facility located at Gurabo, Puerto Rico.
    
	
 
    	
 
    	
 
    
	
“Manufacturer’s Image”
    	
 
    	
shall mean the label and packaging for each Product incorporating Manufacturer’s NDC, name, trademarks, logos and trade   dress.
    
	
 
    	
 
    	
 
    
	
“Minimum Order Quantity”
    	
 
    	
shall have the meaning set forth in   Section 3.4.
    
	
 
    	
 
    	
 
    
	
“NDC”
    	
 
    	
shall have the meaning set forth in Section 1.2.
    
	
 
    	
 
    	
 
    
	
“Non-Binding Period”
    	
 
    	
shall have the meaning set forth in Section 3.2(b).
    
	
 
    	
 
    	
 
    
	
“Party/Parties”
    	
 
    	
shall have the meaning as set forth in the preamble to
    

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

7

 

	
 
    	
 
    	
this Supply Agreement.
    
	
 
    	
 
    	
 
    
	
“Post-Transfer Supply Agreement”
    	
 
    	
shall have the meaning set forth in Section 4.3.
    
	
 
    	
 
    	
 
    
	
“Products” or “Product”
    	
 
    	
shall have the meaning set forth in the recitals to this Supply   Agreement.
    
	
 
    	
 
    	
 
    
	
“Purchase Order”
    	
 
    	
shall have the meaning set forth in Section 3.3(b).
    
	
 
    	
 
    	
 
    
	
“Purchaser”
    	
 
    	
shall have the meaning as set forth in the preamble to this Supply   Agreement.
    
	
 
    	
 
    	
 
    
	
“Purchaser Indemnified Parties”
    	
 
    	
shall have the meaning set forth in Section 17.2.
    
	
 
    	
 
    	
 
    
	
“Purchaser’s Image”
    	
 
    	
shall mean the label and packaging for each Product, which shall be identical to Manufacturer’s Image for such Product,   except that Manufacturer’s NDC, name, trademarks, logos and trade dress shall   be replaced with Purchaser’s NDC, name, trademarks, logos and trade dress.
    
	
 
    	
 
    	
 
    
	
“Purchaser’s Facility”
    	
 
    	
shall have the meaning set forth in Section 4.1(b).
    
	
 
    	
 
    	
 
    
	
“Quality Agreement”
    	
 
    	
shall have the meaning set forth in Section 10.1.
    
	
 
    	
 
    	
 
    
	
“Quarter”
    	
 
    	
shall have the meaning set forth in Section 3.2(b).
    
	
 
    	
 
    	
 
    
	
“Raw Materials”
    	
 
    	
shall mean the materials, components and packaging materials required   to manufacture and/or package the Products in accordance with the   Specifications.
    
	
 
    	
 
    	
 
    
	
“Regulatory Approval”
    	
 
    	
shall mean, with respect to any country or regulatory jurisdiction,   any and all approvals from any Regulatory Authority in such country or   regulatory jurisdiction which are   necessary for the manufacture, packaging, shipment, storage, importation,   marketing, use, distribution and sale of a
    

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

8

 

	
 
    	
 
    	
pharmaceutical product in such country or jurisdiction.
    
	
 
    	
 
    	
 
    
	
“Regulatory Authority”
    	
 
    	
shall mean all governmental agencies or authorities regulating the   manufacture, packaging, sale, shipment or storage of the Products, including   the FDA.
    
	
 
    	
 
    	
 
    
	
“Rolling Forecast”
    	
 
    	
shall have the meaning set forth in Section 3.2(a).
    
	
 
    	
 
    	
 
    
	
“Scale-Up Period”
    	
 
    	
shall mean, separately for the ER Products and the IR Products, as   applicable, the period beginning on the day after the last day of the   Transition Period and ending on the later of date on which the Parties   mutually agree that Purchaser shall assume responsibility for the manufacture   of Purchaser’s requirements of ER Products or IR Products, as applicable, for   Distribution in the United States and Seller’s requirements of extended   release Seller Products or immediate release Seller Products, as applicable,   for Distribution in the Seller Countries.
    
	
 
    	
 
    	
 
    
	
“Seller”
    	
 
    	
shall have the meaning as set forth in the recitals to this Supply   Agreement.
    
	
 
    	
 
    	
 
    
	
“Seller Countries”
    	
 
    	
shall mean all of the countries set forth on Appendix   D attached hereto, which may be amended by Manufacturer at any   time during the Term upon written notice to Purchaser, provided that   (i) manufacturing capacity for any new country is available and   (ii) the addition of any new country shall not impose any additional   material regulatory or legal requirement on Purchaser or Purchaser’s   Facility.
    
	
 
    	
 
    	
 
    
	
“Seller Products”
    	
 
    	
shall have the meaning as set forth in the recitals to this Supply   Agreement.
    

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

9

 

	
“Semi-Binding Period”
    	
 
    	
shall have the meaning set forth in Section 3.2(b).
    
	
 
    	
 
    	
 
    
	
“Specifications”
    	
 
    	
shall mean the specifications for each Product and the Raw Materials,   including the specifications for the design, composition, product safety   assurance, manufacture, packaging and quality control of the Products and the   Raw Materials, as set forth in NDA No. 022304 and NDA No. 200533   (and as may be modified thereafter by mutual agreement in accordance with the   Quality Agreement).
    
	
 
    	
 
    	
 
    
	
“Supply Agreement”
    	
 
    	
shall have the meaning as set forth in the preamble to this Supply   Agreement.
    
	
 
    	
 
    	
 
    
	
“Supply Prices”
    	
 
    	
shall have the meaning set forth in Section 2.1.
    
	
 
    	
 
    	
 
    
	
“Technology Transfer”
    	
 
    	
shall have the meaning as set forth in Section 4.2(a).
    
	
 
    	
 
    	
 
    
	
“Technology Transfer and Manufacturing
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Transition Plan” or “TTMTP”
    	
 
    	
shall have the meaning as set forth in Section 4.2(b).
    
	
 
    	
 
    	
 
    
	
“Term”
    	
 
    	
shall have the meaning set forth in Article 6.
    
	
 
    	
 
    	
 
    
	
“Transition Period”
    	
 
    	
shall mean, separately for the ER Products and the IR Products, as   applicable, the period beginning on the Effective Date and ending on the date   that Purchaser notifies Manufacturer in writing that it has received   Regulatory Approval to manufacture, at Purchaser’s Facility, the ER Products   or IR Products, as applicable, for Distribution in the United States.
    
	
 
    	
 
    	
 
    
	
“Transition Plan”
    	
 
    	
shall mean   the Transition Plan prepared by Purchaser and Seller in accordance with   Section 6.33 of the Asset Purchase Agreement.
    
	
 
    	
 
    	
 
    
	
“Visible Defect”
    	
 
    	
shall mean a defect in a Product which can or should 
    
	
 
    	
 
    	
 
    

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

10

 

	
 
    	
 
    	
reasonably be detected, either upon   Delivery or upon first receipt by Purchaser, by means of a customary visual   inspection of the shipment (without opening secondary packaging) or by   consulting the Certificate of Analysis accompanying such Product.
    

 

1.                                      Supply of Products

 

1.1                               General.

 

(a)                                 Subject to the terms and conditions of this Supply Agreement, during the Transition Period, Manufacturer shall manufacture, package and supply Purchaser with, and Purchaser shall purchase from Manufacturer, [***] of Purchaser’s requirements of Products in Manufacturer’s Image or in Purchaser’s Image, as applicable in accordance with Sections 1.1(c) and 1.2, for Distribution in the United States.

 

(b)                                 Subject to the terms and conditions of this Supply Agreement, during the Scale-Up Period, Manufacturer shall manufacture, package and supply Purchaser with, and Purchaser shall purchase from Manufacturer, those quantities of Products ordered by Purchaser for Distribution in the United States.

 

(c)                                  All Products provided under this Section 1.1 shall be in Purchaser’s Image; provided, however, that Products shall be in Manufacturer’s Image until (i) Purchaser notifies the FDA of a label change for each of the Products in accordance with Section 1.2 and such label change has become effective and, if approval were required, approved,  and (ii) released packaging materials with Purchaser’s Image are available at Manufacturer’s Facility.

 

(d)                                 The Parties acknowledge that Purchaser will not be obligated to buy any specific amounts of Products under this Supply Agreement, except for the quantities timely produced and as indicated in the Binding Period.  The Parties further acknowledge that Purchaser’s right to purchase, and Manufacturer’s obligation to supply, Products shall not commence unless and until the Parties fulfill their obligations under Section 6.08(a) of the Asset Purchase Agreement to execute and deliver to the FDA the Seller FDA Transfer Letters and the Purchaser FDA Transfer Letters.

 

1.2                               Change of Label.  As soon as possible following the Effective Date, Purchaser shall, with

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

11

 

respect to each Product, apply for and obtain a new National Drug Code (“NDC”) and notify the FDA that the label for such Product will be changed to Purchaser’s Image, in each case, in accordance with the Transition Plan.

 

1.3                               Stability Studies.  Manufacturer will perform stability studies with respect to Products manufactured at Manufacturer’s Facility required for the United States until analytical methods are transferred to Purchaser and Purchaser has received approval for its testing facility, with such stability studies to be at a cost to be mutually agreed by the Parties.  After approval of Purchaser’s testing facility, Purchaser and Manufacturer will agree on the testing site for on-going stability studies of Products manufactured at Manufacturer’s Facility, and Purchaser will be responsible for initiation of any new stability studies required for Products manufactured at Manufacturer’s Facility for Distribution in the United States.

 

1.4                               Regulatory Approvals.  As of the Effective Date and throughout the Term, Manufacturer has and will have all permits, establishment and facility licenses required by Regulatory Authorities that are necessary for Manufacturer to manufacture, store and test the Products at Manufacturer’s Facility and provide Products to Purchaser in accordance with the terms of this Supply Agreement. In the event of any Discretionary Change that has been requested by Purchaser and subsequently accepted by Manufacturer or any Mandatory Change that is not required for, or applicable to, any other product which Manufacturer manufactures in Manufacturer’s Facility, Manufacturer will be responsible for securing any Regulatory Approvals that are necessary to implement such change, all at Purchaser’s expense.

 

2.                                      Supply Prices for Products

 

2.1                               Supply Prices during Initial Price Term.  The initial prices for each Product ordered by Purchaser in accordance with the terms of this Supply Agreement during the period beginning on the Effective Date and ending [***] (the “Initial Price Term”) are set forth in Appendix E (the “Supply Prices”).

 

2.2                               Supply Prices after Initial Price Term.  After the Initial Price Term, a reasonable increase in the Supply Prices shall be mutually agreed upon by the Parties [***]; provided, however, that the initial increase in the Supply Prices shall be mutually agreed upon by the Parties by no later than [***] prior to the end of the Initial Price Term and shall apply for the remainder of the calendar year during which the Initial Price Term ends.  In the event the Parties do not mutually agree upon an increase in the Supply

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

12

 

Prices by the deadlines set forth in the immediately preceding sentence, then the Supply Prices shall be [***].

 

2.3                               Supply Price Adjustments to Reflect Costs.  In addition to the Supply Price increases set forth in Section 2.2, Manufacturer shall be entitled to adjust Supply Prices for Products to reflect any significant increases [***] in the aggregate costs of the Raw Materials, or fees of any third party contractor incurred by Manufacturer, as compared to the then-current costs or fees, and after good faith discussion with Purchaser. Such Supply Price increases shall be applicable to any and all orders placed more than [***] after Manufacturer has notified Purchaser in writing of (a) the increase in costs or fees and (b) the increased Supply Prices for the Products that reflect such increase in costs or fees. Purchaser shall be entitled to request that an independent certified accountant verify the accuracy of any such increases and adjustments to the Supply Price.

 

2.4                               Samples.  No free goods, such as analytical standards, Product samples, promotional Products or promotional materials, shall be provided by Manufacturer to Purchaser or to any Regulatory Authority, except that Manufacturer shall not unreasonably refuse to provide reasonable quantities of free goods for Purchaser’s technology transfer purposes.

 

2.5                               Payment Terms.  Purchaser shall pay all undisputed invoices within [***] end of month after receipt of such invoice for the order, provided that the relevant Certificate of Analysis, Certificate of Conformance and all other appropriate transport related documentation have been provided to Purchaser.  Such invoice shall be sent at the time of delivery of such Products to Purchaser or its Affiliate in accordance with Section 8.1.  All payments made hereunder shall be in U.S. Dollars.  Any payments not made within the specified period of time for payment shall incur an interest charge at the rate of the Default Interest Amount on such overdue amounts, excluding any amounts that are subject to a bona fide dispute between the Parties.  In addition, Manufacturer may withhold delivery of Products if Purchaser fails to make any payment required under this Supply Agreement (except for any amounts that are subject to a bona fide dispute) [***] days after the due date for such payment. Manufacturer will accept payment by wire transfer, provided that any wire transfer will include a reference to Manufacturer’s sales invoice number.

 

3.                                      Forecasts; Orders

 

3.1                               Initial Forecast for Products.  Prior to the Effective Date, Manufacturer provided

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

13

 

Purchaser with Seller’s forecast of finished Product for Distribution in the United States during the [***] period beginning on the Effective Date, including the Product packaging schedule based on existing purchase orders (the “Initial Forecast”).  The first (1st) [***] of the Initial Forecast shall be binding on Purchaser, meaning that Purchaser shall purchase all quantities of stock keeping units produced in accordance with such Initial Forecast as reasonably required for the forecasted quantities of Products for such [***] period.  Within [***] after the Effective Date, Purchaser shall provide Manufacturer with an updated Initial Forecast and Manufacturer shall use commercially reasonable efforts to meet such updated Initial Forecast; provided, however, no changes shall be made to the first [***] of the Initial Forecast.

 

3.2                               Updated Rolling Forecast for Products.

 

(a)                                 Beginning [***], Purchaser shall provide to Manufacturer, no later than [***], an updated forecast of its requirements of Products for Distribution in the United States during the following [***] period (the “Rolling Forecast”) starting with the month following the month during which such Rolling Forecast was provided.

 

(b)                                 The Rolling Forecast shall be divided in [***] consecutive three (3) month periods (each, a “Quarter”) starting with the month following the month during which such Rolling Forecast was provided.  The [***] of the Rolling Forecast shall be binding (the “Binding Period”).  The forecast for the Binding Period shall be provided in monthly quantities of number of packs of stock keeping units.  The [***] Quarters of the Rolling Forecast shall be semi-binding (the “Semi-Binding Period”), meaning that, in the next Rolling Forecast, Purchaser may increase or decrease the quantities forecasted [***]  Manufacturer shall use commercially reasonable efforts to plan the manufacture of Products to meet Purchaser’s forecast for the Semi-Binding Period.  The forecast for the Semi-Binding Period shall be provided in monthly quantities of number of packs of stock keeping units.  The [***] Quarters of the Rolling Forecast are considered to be non-binding (the “Non-Binding Period”).  The forecast for the Non-Binding Period shall be provided in quarterly quantities of number of packs of specific stock keeping units.  The Parties acknowledge and agree that Manufacturer’s application to the DEA for DEA Procurement Quota for each calendar year will be based on Purchaser’s Forecast for Products for distribution in the United States for such calendar year and Seller’s (and its Affiliates’) forecasts for Seller Products for distribution outside the United States for such calendar year.  Promptly after the DEA grants a DEA Procurement Quota to Manufacturer for any calendar year, Manufacturer will allocate such DEA Procurement Quota between Purchaser and Seller (and its Affiliates) in proportion to the forecasts used to prepare the application for such DEA Procurement Quota, and will notify Purchaser of the portion of such

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

14

 

DEA Procurement Quota allocated to Purchaser (such portion, the “Purchaser DEA Procurement Quota”).  Notwithstanding anything to this contrary in this Section 3.2, the quantities set forth in the Rolling Forecast shall not exceed the Purchaser DEA Procurement Quota for the applicable calendar year.  If, after Manufacturer notifies Purchaser of the Purchaser DEA Procurement Quota for any calendar year, Purchaser demonstrates that an increase to such Purchaser DEA Procurement Quota is warranted by demand, Manufacturer will cooperate with Purchaser to apply to the DEA for an increase to the DEA Procurement Quota for such calendar year and, if necessary to satisfy the requested increase to the DEA Procurement Quota, an increase to the DEA Manufacturing Quota granted to Noramco for such calendar year and an increase to the DEA Aggregate Production Quota for such calendar year.  Any requested increases to the DEA Procurement Quota, DEA Manufacturing Quota and DEA Aggregate Production Quota shall be subject to the approval of the DEA and shall be sought in accordance with DEA regulations, rules and procedures.  If the DEA approves an increase to the DEA Procurement Quota (and any corresponding increase to the DEA Manufacturing Quota and DEA Aggregate Production Quota) sought in accordance with this Section 3.2(b), then: (i) the approved increase to the DEA Procurement Quota shall be added to the Purchaser DEA Procurement Quota for the applicable calendar year, (ii) Manufacturer may initiate the additional manufacture of Product (and, if necessary, request that Noramco initiate the manufacture of, or supply, the additional API needed for such additional Product) to satisfy the increase in the Purchaser DEA Procurement Quota, and (iii) Purchaser may update the Rolling Forecast to reflect the increased Purchaser DEA Procurement Quota.  For the sake of clarity, in no event shall Manufacturer be required to apply any portion of the DEA Procurement Quota to the manufacture of Products for Purchaser other than the Purchaser DEA Procurement Quota.

 

(c)                                  During the period prior to the effective date of the label change contemplated by Section 1.1(c), Purchaser and Manufacturer shall cooperate to minimize the number of Products packaged in Manufacturer’s trade dress and to maximize the number of Products packaged in Purchaser’s trade dress, which may include, without limitation, reasonable changes to existing Purchase Orders, the Binding Periods and Semi-Binding Periods and Purchase Orders with quantities below the Minimum Order Quantity.

 

3.3                               Purchase Orders for Products.

 

(a)                                 On the Effective Date, Purchaser agrees to accept and be bound by existing purchase orders covering the currently effective Binding Period for Products not yet manufactured and for Distribution in the United States submitted by Seller and present in Manufacturer’s purchase order

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

15

 

system.

 

(b)                                 Purchaser shall deliver to Manufacturer, together with each Rolling Forecast, but in any event no later than [***] prior to the requested delivery date, a written purchase order for the Products during the months covered by the Binding Period of such Rolling Forecast (each, a “Purchase Order”).  Purchaser shall issue a Purchase Order by written or electronic means (or by any other means agreed to by the Parties), stating (i) the quantity of each of the Products ordered and (ii) the desired date of delivery.

 

3.4                               Minimum Order Quantities.  Manufacturer shall not be obligated to accept Purchase Orders for quantities of any Product that are less than the “Minimum Order Quantity” for such Product set forth in the table below; provided, however, Manufacturer will reasonably consider accepting such Purchase Orders submitted prior to the effective date of the label change pursuant to Section 1.1(c), as outlined in Section 3.2(c).

 

	
Janssen Material
    Number
    	
 
    	
Janssen Material Description
    	
 
    	
Minimum Order Quantity
    
	
[***]
    	
 
    	
[***]
    	
 
    	
[***]
    
	
[***]
    	
 
    	
[***]
    	
 
    	
[***]
    
	
[***]
    	
 
    	
[***]
    	
 
    	
[***]
    
	
[***]
    	
 
    	
[***]
    	
 
    	
[***]
    
	
[***]
    	
 
    	
[***]
    	
 
    	
[***]
    
	
[***]
    	
 
    	
[***]
    	
 
    	
[***]
    
	
[***]
    	
 
    	
[***]
    	
 
    	
[***]
    
	
[***]
    	
 
    	
[***]
    	
 
    	
[***]
    
	
[***]
    	
 
    	
[***]
    	
 
    	
[***]
    
	
[***]
    	
 
    	
[***]
    	
 
    	
[***]
    
	
[***]
    	
 
    	
[***]
    	
 
    	
[***]
    

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

16

 

3.5                               Order Confirmation and Rejection.  Manufacturer shall confirm, reject or otherwise respond to Purchaser within [***] after receipt of any Purchase Order.  Manufacturer shall not unreasonably refuse any Purchase Order and, except as expressly provided herein, Manufacturer shall timely provide Purchaser with the required quantities of Products as indicated in a confirmed Purchase Order.  Notwithstanding the foregoing, Manufacturer shall have the right to reject any Purchase Order for quantities of Products that are different from the quantities as forecasted by Purchaser in the Binding Period of the Forecast.

 

3.6                               Order Cancellation.  If Purchaser cancels a Purchase Order, or any part thereof, [***] or less prior to Manufacturer’s planned packaging date of the Products covered by such Purchase Order, then Manufacturer shall use commercially reasonable efforts to utilize, for other manufacturing and packaging activities, the manufacturing and packaging capacities in Manufacturer’s Facility that would have been used to manufacture and package the amounts of Products covered by such Purchase Order, or part thereof, that was cancelled. If Manufacturer, in spite of using commercially reasonable efforts, cannot utilize such manufacturing and packaging capacities, Manufacturer will charge Purchaser and Purchaser will pay a fee of [***] of the Supply Prices for the cancelled Products.

 

3.7                               Raw Materials.  Purchaser acknowledges and agrees that, in order for Manufacturer to meet its obligation to supply Products under this Supply Agreement, Manufacturer must order Raw Materials in accordance with defined lead times and any minimum order quantities imposed by third party vendors. Manufacturer shall be entitled to order, and shall maintain, quantities of Raw Materials required to manufacture those Products forecasted for the Binding Period so that Manufacturer will be able to comply with Purchaser’s delivery dates for Purchaser’s actual and anticipated orders of Products. Manufacturer shall be responsible for, and shall administer on a daily basis, the procurement of the Raw Materials in accordance with the terms herein.  Manufacturer’s responsibilities in connection with the purchasing and procurement of Raw Materials from the third party vendors in accordance with the terms of this Supply Agreement shall include: ordering, purchasing, transportation, reception, inspection, release and storage of Raw Materials.

 

3.8                               Reimbursement for Unused Raw Materials.  To the extent Manufacturer has purchased Raw Materials in accordance with Section 3.7, but subsequent to such purchase and prior to the 

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

17

 

conversion of any Raw Materials into Products, Purchaser either cancels a Purchase Order or does not issue a Purchase Order in accordance with the Binding Period of a Rolling Forecast or informs Manufacturer that it no longer desires to have Manufacturer use such Raw Materials in any Products, Manufacturer shall first use good faith efforts to return such Raw Materials to applicable third party vendors and receive a credit for such purchase.  If the third party vendor refuses to accept such Raw Materials and provide Manufacturer with a credit, then Manufacturer shall invoice Purchaser for the cost of such Raw Materials within [***] of Purchaser cancelling a Purchase Order or not issuing a Purchase Order in accordance with the Binding Period of a Rolling Forecast or informing Manufacturer that it no longer desires to have Manufacturer use such Raw Materials in any Products and Purchaser shall pay such invoice within [***] after receipt. After receipt of payment for such Raw Materials, Manufacturer shall either ship or destroy such Raw Materials, as directed by Purchaser.  Purchaser shall reimburse Manufacturer for all reasonable and documented costs and expenses relating to the shipment or destruction of such Raw Materials.

 

3.9                               Conflicts.  To the extent of any conflict or inconsistency between this Supply Agreement and any Purchase Order, purchase order release, confirmation, acceptance or any similar document, the terms of this Supply Agreement shall govern.

 

4.                                      Transfer of Manufacturing Equipment; Technology Transfer and Manufacturing Transition

 

4.1                               Transfer of Manufacturing Equipment.

 

(a)                                 Pursuant to the Asset Purchase Agreement, title and risk of loss/damage with respect to ER Line 1 and ER Line 2 shall pass to Purchaser on the Effective Date.

 

(b)                                 Promptly following the Effective Date, Manufacturer shall dismantle and ship ER Line 2 to Purchaser’s designated facility (“Purchaser’s Facility”).  Manufacturer and Purchaser shall each bear its own internal costs incurred in dismantling and shipping ER Line 2 to Purchaser’s Facility, and Purchaser shall reimburse Manufacturer for all reasonable and documented out-of-pocket expenses in dismantling and shipping ER Line 2 to Purchaser’s Facility, including the costs of physically transporting ER Line 2 from Manufacturer’s Facility to Purchaser’s Facility.

 

(c)                                  During the Transition Period and Scale-Up Period, ER Line 1 shall remain at

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

18

 

Manufacturer’s Facility, and Purchaser hereby grants Manufacturer the right to use ER Line 1 to manufacture ER Products.  ER LINE 1 IS BEING USED BY MANUFACTURER “AS IS” WITH ALL FAULTS AND WITHOUT WARRANTY OF ANY KIND BY PURCHASER.  Manufacturer shall, at Manufacturer’s sole cost and expense, conduct all regularly scheduled maintenance and performance qualifications as currently performed in the normal course of business, and provide replacement parts necessary to maintain ER Line 1 in good working condition and in good repair, which replacement parts shall become part of ER Line 1.

 

(d)                                 Promptly following the end of the Scale-Up Period, Manufacturer shall dismantle and ship ER Line 1 to Purchaser’s Facility.  Manufacturer and Purchaser shall each bear its own internal costs incurred in dismantling and shipping ER Line 1 to Purchaser’s Facility and Purchaser shall reimburse Manufacturer for all reasonable and documented out-of-pocket expenses incurred by Purchaser in dismantling and shipping ER Line 1 to Purchaser’s Facility.

 

4.2                               Technology Transfer and Manufacturing Transition.

 

(a)                                 Technology Transfer.  Beginning on the Effective Date, Manufacturer and Purchaser shall use commercially reasonable and diligent efforts to initiate, implement and complete a technology transfer to Purchaser’s Facility (the “Technology Transfer”) to enable Purchaser to manufacture (or have manufactured) each Product on a commercial scale, sufficient to meet Purchaser’s requirements of such Product for Distribution in the United States and Seller’s (and its Affiliates’) requirements of each Seller Product for Distribution in the Seller Countries, as applicable, which Technology Transfer shall include the following activities:

 

(i)                                     Purchaser’s installation of ER Line 2 promptly following receipt at Purchaser’s Facility and such Purchaser’s Facility being appropriately updated to receive ER Line 2;

 

(ii)                                  Purchaser’s provision of equipment suitable for the manufacture of IR Products at Purchaser’s Facility as soon as possible following the Effective Date;

 

(iii)                               Purchaser’s performance of technology transfer of the manufacturing processes for both the ER Products and IR Products;

 

(iv)                              Manufacturer’s provision of a forecast of Seller’s and its 

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

19

 

Affiliates’ anticipated requirements of Seller Products for Distribution in the Seller Countries, which forecast shall be updated quarterly during the Term;

 

(v)                                 Manufacturer’s transfer of all manufacturing know-how and technical information related to Products, including all such know-how and technical information provided by Grünenthal GmbH to Manufacturer and its Affiliates pursuant to the License;

 

(vi)                              if other CII products are manufactured at Purchaser’s Facility, Purchaser’s submission to the DEA of all documentation required to register Purchaser’s Facility with respect to tapentadol or, if no CII products are manufactured at Purchaser’s Facility, Purchaser’s performance of all activities necessary to prepare Purchaser’s Facility for CII products and submission to the DEA of all documentation required to register Purchaser’s Facility with the DEA;

 

(vii)                           Purchaser’s performance of all activities (including all qualification and validation activities) necessary to obtain Regulatory Approval to manufacture Products for Distribution in the United States, at Purchaser’s Facility, using the equipment at Purchaser’s Facility to manufacture IR Products and ER Line 2 to manufacture ER Products, which activities shall include stability and bioequivalence studies with respect to registration/validation batches of Products manufactured at Purchaser’s Facility and shall be performed using API supplied to Purchaser pursuant to the API Supply Agreement;

 

(viii)                        Purchaser’s performance of all activities (including all qualification and validation activities) necessary to obtain Regulatory Approval to manufacture Seller Products for Distribution in the Seller Countries, in Purchaser’s Facility and using the equipment at Purchaser’s Facility to manufacture immediate release Seller Products and ER Line 2 to manufacture extended release Seller Products, which activities shall include stability studies and the bioequivalence study described in the first sentence of Section 4.2(d) and shall be performed using API supplied to Purchaser pursuant to the API Supply Agreement; provided, however, if any such activity solely supports the manufacture of Seller Products for Distribution in the Seller Countries, such API shall be provided to Purchaser by Seller at no cost; provided further, however, that, if any such activity is substantially (but not solely) related to the manufacture of Seller Products for Distribution in the Seller Countries and is also required for the manufacture of Products for Distribution in the United States, the Parties shall agree upon an 

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

20

 

appropriate allocation of the costs of such activity;

 

(ix)                              following completion of the activities described in clause (vii), Purchaser’s submission of an application to the FDA for Regulatory Approval to manufacture Products, for Distribution in the United States, at Purchaser’s Facility;

 

(x)                                 following completion of the activities described in clause (viii), Manufacturer’s submission, on a country-by-country basis, of an application to the applicable Regulatory Authorities in each of the Seller Countries for Regulatory Approval to manufacture Seller Products, for Distribution in such country, at Purchaser’s Facility;

 

(xi)                              on a country-by-country basis, Purchaser’s scale-up of Product and Seller Product manufacturing at Purchaser’s Facility, and Manufacturer’s corresponding wind-down of Product manufacturing at Manufacturer’s Facility, within a reasonable period of time following receipt of the Regulatory Approvals described in clauses (ix) and (x) with respect to each country;

 

(xii)                           the Parties’ development of a transition plan for DEA Procurement Quota for purposes of discontinuation of Product manufacturing at Manufacturer’s Facility and transition of all Product manufacturing to Purchaser’s Facility, which shall be subject to approval by the DEA; and

 

(xiii)                        Purchaser’s installation of ER Line 1 and performance of all activities (including all qualification and validation activities) necessary to obtain Regulatory Approval to manufacture ER Products for Distribution in the United States and to manufacture extended release Seller Products for Distribution in the Seller Countries in Purchaser’s Facility using ER Line 1, which activities shall include stability studies and the bioequivalence study described in the first sentence of Section 4.2(d) and be performed using API supplied to Purchaser pursuant to the API Supply Agreement; provided, however, if any such activity solely supports the manufacture of Seller Products for Distribution in the Seller Countries, such API shall be provided to Purchaser by Seller at no cost; provided further, however, that if any such activity is substantially (but not solely) related to the manufacture of Seller Products for Distribution in the Seller Countries and is also required for the manufacture of Products for Distribution in the United States, the Parties shall agree upon an appropriate allocation of the 

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

21

 

costs of such activity.

 

(b)                                 Technology Transfer and Manufacturing Transition Plan.  The Technology Transfer will be conducted in accordance with a plan to be mutually agreed upon by the Parties within the later to occur of [***] following the Effective Date or [***] after the designation of Purchaser’s Facility by Purchaser and attached hereto as Appendix F (the “Technology Transfer and Manufacturing Transition Plan” or “TTMTP”).  In developing the TTMTP, the Parties shall seek to minimize costs and expenses associated with the Technology Transfer.  The TTMTP may be amended during the Term upon mutual written agreement of Manufacturer and Purchaser.  Purchaser will lead and is responsible for the completion of the Technology Transfer.  Purchaser will ensure that sufficient resources are allocated to successfully execute the TTMTP.  Manufacturer will perform the tasks assigned to Manufacturer in the TTMTP and will provide reasonable support to Purchaser in the performance of the tasks assigned to Purchaser in the TTMTP.  The TTMTP will take into account that Manufacturer’s reasonable support shall be limited to the following activities:

 

(i)                                     providing clarification and explanation on the manufacturing know-how and technical information relating to the Products in writing, by teleconference and meetings, which will be held [***];

 

(ii)                                  at Purchaser’s reasonable request, reviewing protocols for the transfer of the analytical methods and manufacturing processes with respect to the Products;

 

(iii)                               providing in-person assistance or witnessing of the implementation of critical technical processes (including transfer of analytical methods) with respect to the manufacture of Products;

 

(iv)                              causing appropriate employees and, to the extent practicable, other representatives of Manufacturer to meet with employees of Purchaser or its designee, at Purchaser’s Facility, to assist with the working up and use of the manufacturing process to the extent reasonably necessary to enable Purchaser to manufacture Products in accordance with the Specifications on a commercial scale, provided that there shall be no more than [***] such meetings with respect to the IR Products and [***] such meetings with respect to the ER Products during the first [***] of the Term;

 

(v)                                 providing documentation or advice as are reasonably necessary 

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

22

 

to assist Purchaser in obtaining any Regulatory Approval with respect to Purchaser’s manufacture of Products, but only to the extent that such documentation is pre-existing or can be easily obtained or gathered by Manufacturer; and

 

(vi)                              providing expert advice in case of unexpected results during the Technology Transfer.

 

(c)                                  Costs of Technology Transfer.  Purchaser shall be responsible for all costs of performing the Technology Transfer, except that Manufacturer shall be responsible for the costs of performing the tasks assigned to Manufacturer in the TTMTP and the costs of any activities that are solely related to the manufacture of Seller Products for Distribution in the Seller Countries (including registration, qualification and validation expenses and stability and bioequivalence studies that support only or substantially the Seller Countries); provided, however, that the Parties shall agree upon an appropriate allocation of the costs of any activities that are substantially (but not solely) related to the manufacture of Seller Products for Distribution in the Seller Countries and are also required for the manufacture of Products for Distribution in the United States.

 

(d)                                 Bioequivalence Studies.  Notwithstanding anything to the contrary in this Supply Agreement, the Parties shall seek to develop a protocol for a single bioequivalence study that satisfies the regulatory requirements in all countries for which such studies are necessary (or as many countries as possible) and shall agree upon an appropriate allocation of the costs thereof between Manufacturer and Purchaser, which protocol and allocation shall be reflected in the TTMTP.  If any bioequivalence study that is necessary to obtain Regulatory Approval in any of the Seller Countries cannot be reasonably combined as described in the foregoing sentence, then Manufacturer shall be responsible for performing such bioequivalence study at its own expense.

 

(e)                                  Additional Activities performed by Manufacturer.  Any technical or other support services with respect to the Technology Transfer not explicitly described in the TTMTP shall be considered as additional activities, which shall be performed at Manufacturer’s sole discretion.  Purchaser shall reimburse Manufacturer for any reasonable and documented personnel costs and documented out-of-pocket expenses (e.g., travel and lodging) incurred by Manufacturer in performing any such additional activities.  The hourly rate for the personnel costs shall be [***] and shall be increased each year thereafter by [***].  Such additional activities will require prior written approval by Purchaser.  For the avoidance of doubt, Manufacturer shall have no obligation to assist Purchaser with respect to any 

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

23

 

proposed improvements or modifications to the manufacturing process of Products, except for adaptations required due to the Technology Transfer or changes initiated by Manufacturer.

 

(f)                                   Communication.  Purchaser shall, upon request of Manufacturer but at least twice per year during the Term, provide written updates to Manufacturer with respect to the status of the Technology Transfer, in such format as to be agreed between the Parties.

 

4.3                               Post-Transfer Supply Agreement.  Within [***] prior to the anticipated completion of the Technology Transfer for the ER Products or IR Products, whichever is sooner, Purchaser and Seller shall initiate negotiation of an agreement pursuant to which Purchaser shall manufacture up to [***] of Seller’s and its Affiliates’ (and its or their successors or assignees with respect to the Seller Products) requirements of Seller Products for Distribution in the Seller Countries (the “Post-Transfer Supply Agreement”).  No later than the day on which the process validation batches for the ER Products or IR Products are submitted to the appropriate Regulatory Authority in the first Seller Country, whichever is sooner, Purchaser and Seller shall execute the Post-Transfer Supply Agreement.  [***]  If requested by Seller, Purchaser shall execute separate Post-Transfer Supply Agreements with Seller or any its Affiliates (or any of its or their successors or assignees with respect to the Seller Products) for individual Seller Countries; provided, however, that the terms of any such Post-Transfer Supply Agreement shall be modified as necessary if a successor or assignee with respect to the Seller Products will be a party to any such Post-Transfer Supply Agreement and such successor or assignee will not supply API to Purchaser.

 

5.                                      Changes to Products

 

5.1                               Changes Generally.

 

(a)                                 Changes to Specifications and/or the manufacturing, testing and packaging process of the Products pursuant to this Section 5.1 shall be made in accordance with the Quality Agreement. Manufacturer and Purchaser shall cooperate in good faith to resolve any Product supply issues that may result from changes in the Specifications and/or the manufacturing, testing and packaging process of the Products. Each Party shall give the other Party reasonable written notice prior to any changes to the Specifications and/or the manufacturing and/or the packaging processes of the Products that it requires, as further set forth in this Article 5.

 

(b)                                 To the best of Manufacturer’s knowledge, as of the Effective Date, Manufacturer is not aware of any changes to Specifications and/or manufacturing, testing and packaging processes of the 

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

24

 

Products which are planned to be implemented during the Term, other than any upcoming changes as disclosed to Purchaser prior to the Effective Date.

 

5.2                               Mandatory Changes.  Manufacturer shall give Purchaser written notice prior to any changes to the manufacturing and production process of the Products (or changes related to Manufacturer’s Facility, to the extent that such changes could have a direct or indirect impact on the Products) that are required by cGMP or Applicable Law (collectively, “Mandatory Changes”).  If Purchaser refuses to approve a Mandatory Change or disputes whether a change constitutes a Mandatory Change, the Parties shall resolve such matter in accordance with the provisions of Article 18.

 

5.3                               Discretionary Changes.  Either Party may submit to the other Party written proposals of changes to the manufacturing and production process for the Products other than Mandatory Changes (collectively, “Discretionary Changes”).  Manufacturer shall implement Discretionary Changes upon the written consent of the non-requesting Party, which consent shall not be unreasonably withheld, conditioned or delayed.

 

5.4                               Costs of Changes.  Subject to Section 1.4, any and all costs associated with Mandatory Changes that primarily relate to the manufacturing, packaging, testing and supply of Products for distribution in the United States (including Regulatory Authority filings, write off and other costs due to such changes associated with obsolete Raw Materials, work-in-process and Products inventories) shall be borne by Purchaser and the costs of all other Mandatory Changes shall be borne by Manufacturer. Any and all costs associated with Discretionary Changes shall be paid by the Party requesting such changes. Each Party shall reasonably document such costs and provide such documentation upon request to the Party bearing or paying for such costs.

 

6.                                      Term

 

The term of this Supply Agreement shall commence on the Effective Date and shall continue until the last day of the Scale-Up Period, unless sooner terminated as expressly provided for in this Supply Agreement (the “Term”).

 

7.                                      Termination

 

7.1                               Material Breach.  This Supply Agreement may be terminated by either Party by giving 

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

25

 

written notice to the other Party if the other Party (the “Breaching Party”) is in material breach or default of any of its obligations hereunder (including any payment obligations) as follows: (a) the terminating Party must send written notice of the material breach or material default to the Breaching Party; and (b) the termination shall become effective sixty (60) days after receipt of such written notice by the Breaching Party, unless either (i) the Breaching Party has cured such material breach or default prior to the expiration of such sixty (60) day period or (ii) if such material breach or material default is not capable of being cured within such sixty (60) day period, the Breaching Party has commenced activities reasonably expected to cure such material breach or material default within such sixty (60) days period and thereafter uses diligent efforts to complete the cure as soon as practicable, provided that, if such material breach or default is not cured within one hundred twenty (120) days after receipt of such written notice by the Breaching Party, the termination shall become effective upon the expiration of such one hundred twenty (120) day period.

 

7.2                               Insolvency.  Either Party may terminate this Supply Agreement without prior notice to the other upon the occurrence of any of the following involving the other Party:

 

(a)                                 the other Party files a petition seeking an order for relief under the Federal Bankruptcy Code (Title 11 of the United States Code), as now or hereafter in effect, or under similar law (including laws in countries or jurisdictions other than the United States), or files a petition in bankruptcy or for reorganization or for an arrangement pursuant to any state bankruptcy law or any similar state or local law (including laws in countries or jurisdictions other than the United States); or

 

(b)                                 an involuntary case against the other Party as debtor is commenced by a petition under the Federal Bankruptcy Code (Title 11 of the United States Code), as now or hereafter in effect, or under similar law (including laws in countries or jurisdictions other than the United States), or a petition or answer proposing the adjudication of the other Party as a bankrupt or its reorganization pursuant to any state bankruptcy law or any similar state or local law (including laws in countries or jurisdictions other than the United States) is filed in any court and not dismissed, discharged or denied within sixty (60) days after the filing thereof; or

 

(c)                                  a custodian, receiver, United States Trustee, trustee or liquidator of the other Party or of all or substantially all of the other Party’s property is appointed in any proceedings brought by the other Party; or

 

(d)                                 a custodian, receiver, United States Trustee, trustee or liquidator is appointed in any proceedings brought against the other Party and is not be discharged within sixty (60) days after that 

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

26

 

appointment, or if the other Party consents to or acquiesces in such appointment; or

 

(e)                                  the other Party generally does not pay its debts as those debts become due, or makes an assignment for the benefit of creditors, or admits in writing its inability to pay its debts generally as they become due.

 

7.3                               Termination of Obligation to Supply.  Manufacturer shall have the right to terminate this Supply Agreement by giving six (6) months notice to Purchaser at any time after the date that is three (3) months after the date on which the Product manufacturing process at Purchaser’s Facility is successfully validated; provided, however:

 

(a)                                 in the event (i) the quantities of Seller Products set forth in the most recent Forecast provided by Manufacturer pursuant to Section 4.2(a)(iv) are [***], this Supply Agreement will not be terminated pursuant to this Section 7.3 unless and until Purchaser and Manufacturer discuss in good faith and agree upon a plan to meet such requirements; and

 

(b)                                 in the event [***] this Supply Agreement will not be terminated pursuant to this Section 7.3 unless [***].

 

7.4                               Effects of Termination or Expiration. In the event of termination or expiration of this Supply Agreement, the following provisions shall apply:

 

(a)                                 All Purchase Orders of the Products not yet manufactured shall automatically be deemed cancelled, and Manufacturer shall have no further obligation to supply Purchaser with such Products.

 

(b)                                 Purchaser shall be obligated to purchase (i) all Products manufactured or in the process of being manufactured and covered by the Binding Period and (ii) any and all Inventory that exists on the effective date of termination and for which Manufacturer has no other use and cannot be used by Manufacturer.  Purchaser will purchase such Inventory from Manufacturer at a price equal to a cost plus basis of such Inventory.  Once purchased, Purchaser may request Manufacturer to destroy Inventory which cannot be used by Manufacturer; in this case, Manufacturer shall destroy the Inventory and Purchaser shall bear the out-of-pocket destruction costs.

 

(c)                                  Any expiration or termination of this Supply Agreement shall not release the Parties from liabilities or obligations accrued on or prior to the date of expiration or termination. The following provisions shall survive termination or expiration of this Supply Agreement indefinitely or for

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

27

 

such shorter period as is provided in such Sections, along with any other provisions of this Supply Agreement that are necessary to interpret or give effect to any of the following provisions:  Sections 3.9 (Conflicts), 4.1 (Transfer of Manufacturing Equipment), 4.2 (Technology Transfer and Manufacturing Transition) (but only until the completion of the Technology Transfer, provided that Manufacturer’s obligation to provide reasonable support under Section 4.2(b) shall terminate upon the earlier of the completion of the Technology Transfer or six (6) months after the effective date of expiration or termination of this Supply Agreement), 4.3 (Post-Transfer Supply Agreement), 7 (Termination), 9.3 (Records), 9.4 (Inspection by Manufacturer), 10.1 (Quality Agreement), 10.4 (Corrective Action), 10.5 (Product Complaints), 10.6 (Liability for Corrective Actions) and 10.7 (Regulatory Inspections); and Articles 14 (Confidential Information), 15 (Public Announcements), 17 (Indemnification), 18 (Dispute Resolution) and 19 (Miscellaneous).

 

8.                                      Delivery

 

8.1                               Delivery Terms.

 

(a)                                 Manufacturer shall deliver all Products so ordered by Purchaser on the delivery date stated in each Purchase Order and as confirmed by Manufacturer in accordance with Section 3.5.

 

(b)                                 Manufacturer shall be responsible for the release of Products prior to the delivery date specified on the applicable Purchase Order, and shall issue the Certificate of Analysis and Certificate of Conformance immediately following the release of Products in Manufacturer’s quality system.

 

(c)                                  Manufacturer shall deliver Products ordered by Purchaser, [***] in a packaging configuration agreed upon in advance by the Parties (each a “Delivery”).  If Purchaser requires any special packaging for the transportation of Products, the cost thereof shall be separately invoiced to Purchaser.  The Certificate of Analysis, Certificate of Conformance and all documents relating to each shipment shall be available at the time the Products are picked up from Manufacturer’s Facility.  All shipments must be accompanied by a packing slip which describes the articles, including lot numbers, production date and shelf life for each article, states the purchase order number and shows the shipment’s destination.  Manufacturer shall promptly forward the original bill of lading or other shipping receipt for each shipment in accordance with Purchaser’s or its Affiliate’s instructions and work with Purchaser to complete all applicable DEA forms.  Manufacturer further agrees to promptly render, after delivery of 

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

28

 

goods or performance of services, correct and complete invoices to Purchaser or its Affiliate.

 

8.2                               Shortages and Manufacturing Constraints.  In the event that any manufacturing capacity constraint or shortage of Raw Materials required for completing the manufacturing, packaging and supply activities of Products set forth in this Supply Agreement in a timely manner occurs, or is reasonably anticipated to occur, Manufacturer shall promptly notify Purchaser of such constraint or shortage, its cause and, to the extent known, its expected duration.  In the event such constraint or shortage cannot be remediated by Manufacturer in a reasonable period of time, [***].

 

8.3                               Tolerance.  Notwithstanding the provisions of Section 8.1, each Purchase Order will be considered supplied in full if (a) the quantities of Products delivered are within a range of plus or minus [***] of the quantities ordered and (b) if delivery is within [***] of the required Delivery date set forth in such Purchase Order.

 

8.4                               Minimum Shelf Life Remaining for Products.  All Product supplied by Manufacturer to Purchaser under this Supply Agreement shall upon Delivery have not less than [***] shelf life remaining.

 

8.5                               Storage of Finished Product.  Manufacturer shall not provide handling and storage services to Purchaser for Products at Manufacturer’s Facility after Delivery as set forth in this Article 8.  In the event Manufacturer agrees, in its sole discretion, to store Products after Delivery for Purchaser upon Purchaser’s written request or if Purchaser’s carrier fails to pick up the Products after Delivery, Manufacturer shall have the right to charge Purchaser a reasonable storage fee per pallet of Products for all such pallets that are stored by Manufacturer for [***] after Delivery.

 

9.                                      Inspection

 

9.1                               Reserved.

 

9.2                               Inspection of Manufacturer’s Facility.

 

(a)                                 Purchaser shall have the right, upon reasonable notice to Manufacturer (and in no event less than [***] in advance) and during regular business hours, [***] to inspect and audit the specific areas of Manufacturer’s Facility where manufacturing, storage, testing and/or packaging services are performed pertaining to Products or Raw Materials, to assure compliance by Manufacturer with cGMP, GDP and applicable rules and regulations and with other provisions of this Supply Agreement; 

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

29

 

provided, however, that Manufacturer shall have the right to deny access to any areas in Manufacturer’s Facility where no such activities with respect to Products or Raw Materials are undertaken.

 

(b)                                 Within [***] of completing any audit hereunder, Purchaser shall submit to Manufacturer a written report outlining its findings and/or observations from any such audit. If deficiencies are discovered during an audit that could, in Purchaser’s opinion, prevent Manufacturer from satisfying the requirements of cGMP and Manufacturer in good faith disputes the observations or conclusions of Purchaser, then the Parties shall promptly enter into good faith discussions to resolve their differences.  If the Parties fail to resolve their differences within [***] after receipt of the audit report, then the matter shall be promptly referred to a third party independent expert mutually acceptable to the Parties.  The third party independent expert shall render an opinion based on the audit report and its own observations within [***] from the start of its assignment.  Such opinion shall be binding on the Parties. The fee of the third party independent expert [***].  If Manufacturer does not dispute the observations of Purchaser made during an audit or if the observations of Purchaser have been confirmed by the third party independent expert, Manufacturer shall provide a proposed corrective plan to Purchaser and the Parties shall in good faith discuss and agree on a final corrective action plan to remedy or cause the remedy of any deficiencies which may be noted in any such audit, including the appropriate apportionment of costs associated therewith.

 

9.3                               Records.  Purchaser shall have the right to audit Manufacturer’s records relating to its performance under this Supply Agreement. Manufacturer shall maintain all batch records and other manufacturing and analytical records related to Products manufactured hereunder, all records of shipments of Products and all validation data and other applicable records with respect to Products manufactured hereunder required under cGMP or the Quality Agreement for the greater of (a) the time period required by Applicable Law or (b) the time periods set forth in the Quality Agreement. Manufacturer shall in good faith work with Purchaser to make such data available to Purchaser and any Regulatory Authority upon Purchaser’s reasonable request or if required by Applicable Law.  To the extent that such records also include data or information that does not specifically pertain to Products or Raw Materials, Manufacturer shall be entitled to redact such data or information from such records prior to audit by or disclosure to Purchaser.

 

9.4                               Inspection by Manufacturer.  For so long as Purchaser is Distributing Products manufactured in Manufacturer’s Image, Manufacturer shall has the right to audit the warehousing facilities of Purchaser, to the same extent that Purchaser is permitted to audit Manufacturer’s Facility 

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

30

 

pursuant to Section 9.2, only that Manufacturer will perform the audit through Purchaser (i.e. will not directly issue observations and requests for corrections to wholesaler).

 

10.                               Quality; Defective Products; Regulatory Inspections; Testing

 

10.1                        Quality Agreement.  The Parties are entering into a Quality Agreement regarding the production by Manufacturer of Raw Materials and Products (the “Quality Agreement”) on the Effective Date.  To the extent there are any inconsistencies or conflicts between this Supply Agreement and the Quality Agreement, the terms and conditions of this Supply Agreement shall control except with respect to quality matters.

 

10.2                        Disposition of Defective Products.

 

(a)                                 Purchaser shall, as soon as practical (and, in any event, within [***]) after receipt of any Delivery of Products, notify Manufacturer of the existence and nature of any Visible Defects in such Products.

 

(b)                                 Purchaser shall, as soon as practical (and, in any event, within [***]) after the day on which Purchaser became aware or should reasonably have become aware of a Hidden Defect in any Products, notify Manufacturer of the existence and nature of such Hidden Defect in such Products.

 

(c)                                  If notice of a Visible Defect or Hidden Defect is not provided within the applicable time period stated above, then all such Products shall be deemed to be in compliance with this Supply Agreement.

 

(d)                                 If Purchaser notifies Manufacturer of the existence and nature of any Defective Products during the applicable time period, Manufacturer shall have a reasonable opportunity, not to exceed [***] from receipt of notification, to inspect such Defective Products (provided Purchaser has provided Manufacturer appropriate samples of the impacted shipments of Products) and provide Purchaser with detailed written instructions to return or dispose of such Defective Products. Subject to the provisions of Section 10.6, Manufacturer shall replace Defective Products at its own cost and expense, including reimbursement of freight and disposition costs incurred by Purchaser.

 

10.3                        Independent Testing.  If, after Manufacturer’s inspection of any Product alleged by Purchaser to be Defective Product, the Parties disagree as to whether such Product is Defective Product, 

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

31

 

the Parties shall deliver such Product to an independent third party laboratory, mutually selected by the Parties, for analytical testing to verify the Product’s conformance to the Specifications.  All costs associated with such third party testing shall be at the expense of the [***].  The report of the independent third party laboratory shall be binding on the Parties.

 

10.4                        Corrective Action.  In the event any governmental agency having appropriate jurisdiction requests or orders, or Purchaser determines to undertake, any corrective action with respect to any Products supplied under this Supply Agreement, including any recall or market withdrawal, corrective action or market action (a “Corrective Action”), the Parties shall cooperate in the handling and disposition of such Corrective Action and the replacement of such Products.  Purchaser will have the right to make a final determination as to the initiation of any such Product withdrawal or recall.

 

10.5                        Product Complaints.  The Parties shall notify one another of any complaints relating to Products supplied under this Supply Agreement in accordance with the Quality Agreement.

 

10.6                        Liability for Corrective Actions.  In case of a Corrective Action caused by a Defective Product (other than a Visible Defect), Manufacturer will [***].  The conduct of any recall of Products supplied under this Supply Agreement shall be the sole responsibility of Purchaser. Subject to the liability limitations set forth in Section 17.4, Manufacturer will [***].

 

10.7                        Regulatory Inspections.  In the event Manufacturer’s Facility is the subject of an inspection by any Regulatory Authority or any other duly authorized agency of any national, state or local government directly relating to the manufacturing, packaging or warehousing of the Products, Manufacturer shall notify Purchaser within [***] of learning of such inspection, and shall, if reasonably possible given the circumstances, afford Purchaser the opportunity to be present at such inspection. Manufacturer shall supply Purchaser with redacted copies of any correspondence or portions of correspondence to the extent relating to the Products. In the event Manufacturer receives any regulatory letter or written comments from any Regulatory Authority in connection with manufacturing and packaging of the Products under this Supply Agreement, it shall provide Purchaser with a copy of each such communication. To the extent Manufacturer is required to submit any correspondence to a Regulatory Authority that relates to the manufacture, packaging or warehousing of the Products, Manufacturer shall provide Purchaser with a copy of such correspondence as far in advance of its submission to such Regulatory Authority as possible and Purchaser shall have the opportunity to review and comment upon such correspondence. Purchaser will cooperate fully with Manufacturer in its 

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

32

 

interactions and correspondence with Regulatory Authorities in furtherance of this Section.

 

10.8                        Safety.  Manufacturer shall enforce safety procedures for its manufacturing, packaging and storing of the Products and Raw Materials and handling and disposal of waste relating thereto that comply with all environmental and occupational safety and health laws.  Such responsibilities shall include the proper disposal of waste in an appropriate manner consistent with the nature of the waste and at a permitted disposal facility.

 

10.9                        Storage.  To the extent any Products or Raw Materials are stored, Manufacturer shall store such Products and Raw Materials in a controlled environment that meets the Specifications, cGMP and all other Applicable Laws.

 

11.                               Force Majeure

 

11.1                        Neither Party will be liable for non-performance or delay in the fulfillment of its obligations under this Supply Agreement if such non-performance or delay is occasioned by any cause beyond the reasonable control of Purchaser or Manufacturer, as the case may be, including acts of God, fire, flood, earthquakes, explosions, sabotage, strikes, or labor disturbances (regardless of the reasonableness of the demands of the labor force), civil commotion, riots, military invasions, wars, failure of utilities, failure of carriers, inability to obtain any required raw material, energy source, equipment, labor or transportation, at prices and on terms Manufacturer deems practicable from its usual sources of supply or any acts, restraints, requisitions, regulations, or directives issued by a competent Governmental Authority, including changes in Law (each, a “Force Majeure Event”); provided, however, a Force Majeure Event shall never excuse a Party from paying any sum of money owed under this Supply Agreement.

 

11.2                        In the event that either Party is prevented from discharging its obligations under this Supply Agreement on account of a Force Majeure Event, such Party shall promptly notify the other Party, and shall nevertheless make reasonable, good faith efforts to discharge its obligations, even if in a partial or compromised manner.  In the event that a Force Majeure Event continues for a period of [***], or for periods which aggregate [***] during any [***], the Party not claiming the Force Majeure Event will be entitled to terminate this Supply Agreement forthwith, but without penalty or liability to the Party affected by the Force Majeure Event, on written notice to the Party claiming the Force Majeure Event, provided that such termination shall not affect any Party’s right to receive amounts which have accrued or 

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

33

 

became due prior to the termination.

 

11.3                        The Party affected by a Force Majeure Event shall use commercially reasonable efforts to limit the effects of a Force Majeure Event upon its performance of this Supply Agreement and shall notify the other Party, immediately, of the cessation of the Force Majeure Event.

 

12.                               Insurance

 

Manufacturer shall procure and maintain in full force and effect during the term of this Supply Agreement valid insurance policies or a program of self-insurance in connection with its activities as contemplated hereby.

 

13.                               Labelling

 

Purchaser shall be responsible at its own expense for developing and approving the labeling and packaging material for the Products in the Purchaser’s Image (including without limitation for the design and production of all related artwork) and for obtaining all approvals from Regulatory Authorities necessary to manufacture, market, promote, distribute and sell Products in the Purchaser’s Image in accordance with Section 1.2.

 

14.                               Confidential Information

 

The existence, subject matter and contents of this Supply Agreement are confidential and constitute Confidential Information and the terms and conditions relating to the disclosure of this Supply Agreement (or any related information) are governed by Section 6.26 of the Asset Purchase Agreement.

 

15.                               Public Announcements

 

The terms and conditions relating to the making of any public announcements on this Supply Agreement shall be governed by Section 6.04 of the Asset Purchase Agreement.

 

16.                               Representations and Warranties

 

16.1                        Product Warranties.  Manufacturer represents and warrants to Purchaser that all Products 

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

34

 

supplied under this Supply Agreement shall be manufactured and provided in accordance and conformity with the Specifications and in accordance with Applicable Law. MANUFACTURER MAKES NO OTHER WARRANTIES OR REPRESENTATION OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, OR ANY OTHER MATTER WITH RESPECT TO THE PRODUCT.

 

16.2                        Execution and Performance of Agreement.  Each Party represents to the other Party that it has full right, power and authority to enter into and perform its obligations under this Supply Agreement. Each Party further represents and warrants to the other Party, as of the Effective Date, that the performance of its obligations under this Supply Agreement will not result in a violation or breach of, and will not conflict with or constitute a default under any agreement, contract, commitment or obligation to which such Party is a party or by which it is bound.

 

16.3                        GMP Compliance Warranty.  Manufacturer represents and warrants to Purchaser that the Products manufactured, packaged and supplied under this Supply Agreement shall be GMP compliant.

 

17.                               Indemnification

 

17.1                        Indemnification by Purchaser.  Subject to the limitations set forth in Section 17.5 and excluding those matters for which Manufacturer is obligated to indemnify Purchaser pursuant to this Supply Agreement, Purchaser shall indemnify and hold Manufacturer and its Affiliates and their respective directors, officers, employees, agents, consultants, subcontractors, representatives, successors and assigns (collectively, the “Manufacturer Indemnified Parties”) harmless from and against any and all Losses incurred by Manufacturer Indemnified Parties to the extent arising from or relating to (a) any action, claim or proceeding instituted by a third party in connection with the distribution, promotion or sale in the United States of Products supplied under this Supply Agreement, including product liability claims (except to the extent such Product is a Defective Product, the defect is not a Visible Defect and the action, claim or proceeding arises directly from such defect); or (b) any breach of any representation, warranty or obligation of Purchaser contained in this Supply Agreement.  This Section 17.1 provides the sole recourse and exclusive means by which any Manufacturer Indemnified Party may assert and remedy any Losses arising under or with respect to this Supply Agreement.

 

17.2                        Indemnification by Manufacturer.  Subject to the limitations set forth in Section 17.4 and excluding those matters for which Purchaser is obligated to indemnify Manufacturer pursuant to this 

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

35

 

Supply Agreement, Manufacturer shall indemnify and hold Purchaser and its Affiliates their respective directors, officers, employees, agents, consultants, subcontractors, representatives, successors and assigns (collectively, the “Purchaser Indemnified Parties”) harmless from and against any and all Losses incurred by Purchaser Indemnified Parties to the extent arising from or relating to (a) any action, claim or proceeding instituted by a third party in connection with a Defective Product supplied by Manufacturer to Purchaser under this Supply Agreement (other than in case of a Visible Defect); or (b) any breach of any representation, warranty or obligation of Manufacturer contained in this Supply Agreement.  This Section 17.2 provides the sole recourse and exclusive means by which any Purchaser Indemnified Party may assert and remedy any Losses arising under or with respect to this Supply Agreement.

 

17.3                        Claims.

 

(a)                                 Any Purchaser Indemnified Party or Manufacturer Indemnified Party claiming it may be entitled to indemnification under this Supply Agreement (the “Indemnified Party”) shall give prompt written notice to the other Party (the “Indemnifying Party”) of each matter, action, cause of action, claim, demand, fact or other circumstance upon which a claim for indemnification (the “Claim”) may hereunder be based, and the Indemnifying Party shall have the right to defend such Claim, provided that the failure to give such notice shall not affect the Indemnified Party’s rights to indemnification, except to the extent that the Indemnifying Party is actually prejudiced thereby.  The Indemnifying Party shall have control over the Claim; provided, however, that the Indemnifying Party shall not be entitled to assume or maintain control of the defense of a third party Claim and shall pay the fees and expenses of counsel retained by the Indemnified Party if (i) such third party Claim relates to or arises in connection with any criminal Legal Proceeding, (ii) such third party Claim seeks an injunction or equitable relief against the Indemnified Party or any of its Affiliates, (iii) such third party Claim seeks monetary damages and the sum of the amount of the monetary damages is greater than twice the maximum amount from which the Indemnifying Party is required to indemnify the Indemnified Party under this Supply Agreement, (iv) the Indemnified Party reasonably concludes, based on the advice of counsel, that there is an irreconcilable conflict of interest between the Indemnifying Party and the Indemnified Party in the conduct of such defense or (v) after assuming control of such defense, the Indemnifying Party withdraws from such defense or fails to diligently pursue and maintain such defense.

 

(b)                                 If the Indemnifying Party is controlling a third party Claim, the Indemnifying Party may compromise or settle such Claim; provided, however, that the Indemnifying Party shall not, absent the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld, conditioned or delayed), consent to the entry of any judgment or enter into any compromise or settlement (a) that provides for any relief other than the payment of monetary damages for which the Indemnifying Party shall be solely liable or (b) where the claimant or plaintiff does not release the Indemnified Party, its Affiliates and their respective directors, officers, employees, Affiliates, agents, consultants, subcontractors, representatives successors and assigns, as the case may be, from all liability in respect thereof.  No Indemnified Party may compromise or settle any third party Claim for which it is seeking indemnification hereunder without the prior written consent of the Indemnifying Party, which consent shall not be unreasonably withheld, conditioned or delayed.

 

(c)                                  The Parties shall cooperate in the defense of any third party Claim.  The Indemnified Party shall have the right, at its own expense, to participate in the defense of any third party Claim.  The Indemnifying Party shall keep the Indemnified Party reasonably apprised of the status of the defense of such Claim.

 

17.4                        Limitation on Manufacturer’s Liability.  Manufacturer’s maximum liability to Purchaser in any calendar year under this Supply Agreement, including its indemnity obligations, shall not exceed the greater of (a) thirty million dollars ($30,000,000) or (b) the total amount paid by Purchaser to Manufacturer under this Supply Agreement for the prior completed calendar year, except with respect to damages or claims resulting from Manufacturer’s gross negligence, fraud, willful misconduct or breach of confidentiality obligations.

 

17.5                        Limitations of Purchaser’s Liability.  Purchaser’s maximum liability towards Manufacturer (including any liability for the acts and omissions of any of its Affiliates or any of its or their respective directors, officers, employees, Affiliates, agents, consultants, subcontractors,  representatives, successors or assigns), and the sole remedy of the Manufacturer, for breach of Purchaser’s obligation to order, take delivery of or pay for Products shall be a claim for monetary damages equal to the purchase price thereof,  increased by an amount calculated using the Default Interest Amount as provided herein and any direct costs arising from such breach (limited to costs of disposal or shipping of Products or Raw Materials or write-offs related thereto), except with respect to damages or claims resulting from Purchaser’s gross negligence, fraud, willful misconduct or breach of confidentiality obligations.  Except with respect to breaches described in the immediately preceding sentence (which shall be subject to the limitations set forth in the immediately preceding sentence), Purchaser’s maximum liability to Manufacturer Indemnified Parties in any calendar year under this Supply Agreement, including its indemnity obligations, shall not exceed the greater of (a) thirty million dollars ($30,000,000) or (b) the total amount paid plus any amounts payable by Purchaser to Manufacturer under this Supply Agreement for the prior completed calendar year, except with respect to damages or claims resulting from Purchaser’s gross negligence, fraud, willful misconduct or breach of confidentiality obligations.

 

17.6                        WAIVER OF DAMAGES.  EXCEPT FOR RELIEF MANDATED BY STATUTE OR 

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

36

 

ANY BREACH OF ARTICLE 14, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR SPECIAL, INDIRECT, INCIDENTAL, PUNITIVE, EXEMPLARY, MULTIPLIED OR CONSEQUENTIAL DAMAGES (INCLUDING LOSS OF PROFITS OR LOSS OF OPPORTUNITY), OR LOST PROFITS EVEN IF DESIGNATED DIRECT DAMAGES, WHETHER IN CONTRACT, WARRANTY, NEGLIGENCE, TORT, STRICT LIABILITY OR OTHERWISE EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY THEREOF; PROVIDED, HOWEVER, THAT THE FOREGOING SHALL NOT BE CONSTRUED TO PRECLUDE RECOVERY IN RESPECT OF ANY LOSS DIRECTLY INCURRED OR SUFFERED FROM THIRD PARTY CLAIMS FOR WHICH ONE PARTY IS OBLIGATED TO INDEMNIFY THE OTHER PARTY (OR AN INDEMNITEE OF SUCH OTHER PARTY) PURSUANT TO THIS ARTICLE 17.

 

18.                               Dispute Resolution

 

Any controversy or claim between the Parties arising out of or relating to this Supply Agreement shall be resolved in accordance with Section 10.11 of the Asset Purchase Agreement.

 

19.                               Miscellaneous

 

19.1                        Relationship of the Parties.  The relationship of Purchaser and Manufacturer established by this Supply Agreement is that of independent contractors, and nothing contained herein shall be construed to:

 

(a)                                 give either Party any right or authority to create or assume any obligation of any kind on behalf of the other; or

 

(b)                                 constitute the Parties as partners, joint ventures, co-owners or otherwise as participants in a joint or common undertaking.

 

19.2                        Third Party Rights.  Nothing in this Supply Agreement shall be deemed to create any third party beneficiary rights in or on behalf of any other person.

 

19.3                        Entire Agreement; Modifications.  This Supply Agreement, together with the Quality Agreement and including the Appendices hereto which are incorporated by reference, constitutes the entire agreement of the Parties with respect to its subject matter and supersedes all prior agreements,

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

37

 

arrangements, dealings and writings between the Parties that relate to the matters covered herein.  Any terms and conditions of an invoice, acknowledgement or similar document provided by Manufacturer for Products, or any terms and conditions of Purchase Orders provided by Purchaser for Products, that are inconsistent with or in addition to the terms of this Supply Agreement shall be null and void.  This Supply Agreement may not be amended or modified except in writing executed by the duly authorized representatives of both Parties.

 

19.4                        Headings.  The Article and Section headings contained in this Supply Agreement are for reference purposes only and shall not affect in any way the meaning and interpretation of this Supply Agreement.

 

19.5                        Notices.  All notices, requests, demands and other communications under this Supply Agreement shall be in writing and shall be deemed to have been duly given if delivered, addressed or telecopied to the address or telecopier number set forth below and shall be deemed to have been made:  (a) on the date of service, if served personally on the Party; (b) on the second business day after delivery to an overnight courier service, if first available delivery is indicated and paid for; (c) on the third business day after mailing, if mailed to the Party to whom notice is to be given, by first class mail, registered or certified, postage prepaid; or (iv) on the date of transmission, if sent by telecopier and confirmation of transmittal is received by the transmitting Party.  Any Party may change its address for purposes of this Section by giving the other Party’s written notice of the new address in the manner set forth above.

 

If to Manufacturer:                                     Janssen Ortho LLC

State Road 933 Km 0.1

Mamey Ward

HC 02, Box 19250

Gurabo, Puerto Rico 00778

Attn: General Manager

Facsimile: (787) 272-7691

 

and

 

Janssen Pharmaceuticals, Inc.

c/o Johnson & Johnson

One Johnson & Johnson Plaza

New Brunswick, NJ 08933

Attn: Assistant General Counsel, Corporate Legal Department

Facsimile: (752) 524-5334

 

If to Purchaser:                                                            Depomed, Inc.

7999 Gateway Boulevard, Suite 300

Newark, California 94560

Attn: Legal Department

Facsimile: (510) 744-8001

 

19.6                        Failure to Exercise.  The failure of either Party to enforce at any time for any period any

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

38

 

provision hereof shall not be construed to be a waiver of such provision or of the right of such Party thereafter to enforce each such provision, nor shall any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy. Remedies provided herein are cumulative and not exclusive of any remedies provided at law.

 

19.7                        Assignment.  This Supply Agreement, or any of the rights or obligations under this Supply Agreement, may not be assigned or otherwise transferred by a Party without the prior written consent of the other Party; provided, however, that (i) either Party may, without such consent, but with notice to the other Party, assign this Supply Agreement, or any of its rights or obligations under this Supply Agreement, in whole or in part: (a) in connection with the transfer or sale of all or substantially all of such Party’s assets or the line of business for the Products; (b) to a successor entity or acquirer in the event of a sale, merger, consolidation, change of control or similar transaction of such Party; or (c) to any Affiliate of such Party (in that case, so long as such assigning Party remains fully liable for all of its obligations hereunder as a primary obligor); and (ii) Purchaser may, without such consent, but with notice to Manufacturer, assign this Supply Agreement, or any of its rights or obligations under this Supply Agreement, (A) to any lender of Purchaser or purchaser of securities used to finance the Transactions or the transactions contemplated by this Supply Agreement as collateral security to secure the obligations of any indebtedness or Purchaser or (B) in connection with any transaction the primary purpose of which is to change the domicile of Purchaser.  Any purported assignment in violation of the preceding sentence will be void. Any permitted assignee will assume the rights and obligations of its assignor under this Supply Agreement.

 

19.8                        Severability.  In the event that any one (1) or more of the provisions (or any part thereof) contained in this Supply Agreement or in any other instrument referred to herein, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect pursuant to a final, non-appealable decision in accordance with the dispute resolution provisions set forth in Article 18, then to the maximum extent permitted by law, such invalidity, illegality or unenforceability shall not affect any other provision of this Supply Agreement or any other such instrument. Any term or provision of this Supply Agreement which is invalid, illegal or unenforceable in any jurisdiction shall, to the extent the economic benefits conferred by this Supply Agreement to both Parties remain substantially unimpaired, not affect the validity, legality or enforceability of any of the terms or provisions of this Supply Agreement in any other jurisdiction.

 

19.9                        Expenses.  Each Party shall pay all of its own fees and expenses (including all legal, accounting and other advisory fees) incurred in connection with the negotiation and signature of this

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

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Supply Agreement and the arrangements contemplated hereby.

 

19.10                 Use of Affiliates.  Each Party shall be entitled to delegate the performance of one or more of its obligations hereunder to one or more of its Affiliates, provided that such Party shall at all times remain responsible towards the other Party for the performance of such delegated tasks.

 

19.11                 Interpretation.

 

(a)                                 The words “hereof”, “herein”, “hereto” and “hereunder” and words of similar import, when used in this Supply Agreement, shall refer to this Supply Agreement as a whole and not to any particular provision of this Supply Agreement.

 

(b)                                 The terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa.

 

(c)                                  The terms “U.S. Dollars” and “$” shall mean lawful currency of the United States of America.

 

(d)                                 The terms “include,” “includes” and “including” shall mean “including, without limitation.”

 

(e)                                  When a reference is made in this Supply Agreement to an Article, a Section, an Appendix or a Schedule, such reference shall be to an Article or a Section of, or an Appendix or a Schedule to, this Supply Agreement unless otherwise indicated.

 

(f)                                   Time periods based on a number of days within or following which any payment is to be made or act is to be done shall be calculated by excluding the day on which the period commences and including the day on which the period ends and, if applicable, by extending the period to the next business day following if the last day of the period is not a business day.

 

(g)                                  The term “United States” shall refer to the United States of America and its territories, including Puerto Rico.

 

19.12                 Counterparts.  This Supply Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and together shall constitute one and the same agreement and

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

40

 

shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Party, it being understood that both Parties need not sign the same counterpart.  This Supply Agreement, following its execution, may be delivered via telecopier machine or other form of electronic delivery, which shall constitute delivery of an execution original for all purposes.

 

[Remainder of the page intentionally blank]

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

41

 

IN WITNESS of which the Parties have entered into this Supply Agreement as of the Effective Date.

 

 

	
JANSSEN ORTHO LLC
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ John O’Hara
    	
 
    
	
Name:
    	
John O’Hara
    	
 
    
	
Title:
    	
General Manager
    	
 
    

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

[Signature Page to Transitional Supply Agreement]

 

 

	
JANSSEN PHARMACEUTICALS, INC.
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Michael Grissinger
    	
 
    
	
Name:
    	
Michael Grissinger
    	
 
    
	
Title:
    	
Authorized Signatory
    	
 
    

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

[Signature Page to Transitional Supply Agreement]

 

 

	
DEPOMED, INC.
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ James A. Schoeneck
    	
 
    
	
Name:
    	
James A. Schoeneck
    	
 
    
	
Title:
    	
President and Chief Executive Officer
    	
 
    

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

[Signature Page to Transitional Supply Agreement]

 

 

APPENDICES

 

Appendix A:                          Products

Appendix B:                          ER Line 1

Appendix C:                          ER Line 2

Appendix D:                          Seller Countries

Appendix E:                          Supply Prices

Appendix F:                           Technology Transfer and Manufacturing Transition Plan

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

 

APPENDIX A

 

Products

 

[***](1)

 

(1) Five pages omitted and filed separately with the Commission.

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

 

APPENDIX B

 

ER Line 1

 

[***](2)

 

(2) One page omitted and filed separately with the Commission.

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

 

APPENDIX C

 

ER Line 2

 

[***](3)

 

(3) One page omitted and filed separately with the Commission.

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

 

APPENDIX D

 

Seller Countries

 

Canada

Hong Kong

Indonesia

Japan

Malaysia

Singapore

Thailand

Philippines

Vietnam

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

 

APPENDIX E

 

Supply Prices

 

[***](4)

 

(4) One page omitted and filed separately with the Commission.

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

 

APPENDIX F

 

Technology Transfer and Manufacturing Transition Plan

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.Exhibit 10.5

 

CERTAIN MATERIAL (INDICATED BY [***]) HAS BEEN OMITTED FROM THIS DOCUMENT PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.  THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

SUPPLY AGREEMENT

 

THIS SUPPLY AGREEMENT (this “Agreement”) is made as of April 2, 2015 (the “Effective Date”), by and between Noramco, Inc., a Georgia corporation, with offices at 500 Swedes Landing Road, Wilmington, Delaware 19801 (“Noramco”) and Depomed, Inc., a California corporation located at 7999 Gateway Boulevard, Suite 300, Newark, California 94560 (hereinafter referred to as “Purchaser”).  Noramco and Purchaser may be referred to herein as a “Party” or “Parties” as the context may require.

 

RECITALS

 

WHEREAS, Noramco is engaged in the business of manufacturing and selling active pharmaceutical ingredients, including tapentadol (“API”);

 

WHEREAS, Janssen Pharmaceuticals, Inc. (“Seller”), an Affiliate of Noramco, and Purchaser are parties to that certain Asset Purchase Agreement, dated as of January 15, 2015 (the “Asset Purchase Agreement”), pursuant to which Seller agreed to sell, and Purchaser agreed to purchase, certain rights and assets related to the products containing API set forth on Appendix A (the “Products”), and Purchaser agreed to assume certain liabilities related to the Products, in the United States (the “Transaction”);

 

WHEREAS, prior to the Effective Date, Noramco manufactured and supplied API to Seller and its Affiliates for use in the commercial manufacture of Products for distribution in the United States;

 

WHEREAS, pursuant to Section 6.07 of the Asset Purchase Agreement, Purchaser and Seller (or its Affiliate) agreed to enter into an API supply agreement pursuant to which, following the closing of the Transaction, Seller or its Affiliate would manufacture and supply Purchaser’s requirements of API for use in (i) the validation and qualification of Purchaser’s facility for the manufacture of Products and (ii) following the validation and qualification of Purchaser’s facility, the manufacture of Purchaser’s requirements of finished Products for distribution in the United States, on the terms set forth in Exhibit D to the Asset Purchase Agreement; and

 

WHEREAS, Purchaser wishes to purchase API, and Noramco is willing to supply API to Purchaser, on the terms and conditions of this Agreement.

 

NOW THEREFORE, INTENDING TO BE LEGALLY BOUND HEREBY AND IN CONSIDERATION OF THE MUTUAL REPRESENTATIONS, WARRANTIES AND COVENANTS SET FORTH IN THIS AGREEMENT AND OTHER GOOD AND VALUABLE CONSIDERATION THE RECEIPT AND SUFFICIENCY OF WHICH IS HEREBY ACKNOWLEDGED, THE PARTIES AGREE AS FOLLOWS:

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

 

DEFINITIONS

 

For purposes of this Agreement, the following words or expressions have the meanings provided below:

 

“AAA” shall have the meaning set forth in Section 19.1.

 

“AAA Rules” shall have the meaning set forth in Section 19.2.

 

“Action” shall have the meaning set forth in Section 10.1.

 

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person at any time during the period for which the determination of affiliation is being made.  For purposes of this definition, “control” of a Person means the power, direct or indirect, to direct or cause the direction of the management and policies of such Person whether by contract or otherwise and, in any event and, without limitation of the previous sentence, any Person owning more than fifty percent (50%) or more of the voting securities of another Person shall be deemed to control that Person.

 

“Agreement” shall have the meaning set forth in the preamble to this Agreement.

 

“API” shall have the meaning set forth in the Recitals.

 

“API Manufacturing Patents” mean United States Patent No. [***] and United States Patent No. [***].

 

“Asset Purchase Agreement” shall have the meaning set forth in the Recitals.

 

“Breaching Party” shall have the meaning set forth in Section 13.2.

 

“cGMP” means current good manufacturing practices as required by the rules and regulations of the FDA, as applicable to the manufacturing, packaging, handling, storage and control of API.

 

“Commercial Use” shall have the meaning set forth in Section 1.3.

 

“Confidential Information” shall have the meaning set forth in Section 11.5.

 

“DEA” means the Drug Enforcement Administration of the US Department of Justice or any successor organization.

 

“Dispute” shall have the meaning set forth in Section 19.1.

 

“DMF” means the Drug Master File as filed with the FDA by Noramco or its Affiliates.

 

“Effective Date” shall have the meaning set forth in the preamble to this Agreement.

 

“FDA” means the United States Food and Drug Administration or any successor organization.

 

“Finished Good Tapentadol” means the amount of API contained in the finished Product, as calculated in the manner set forth on Appendix D, manufactured at a Seller facility (using the standard

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

2

 

manufacturing practices at such Seller facility) and sold to Purchaser under the Transitional Supply Agreement for Commercial Use only in the United States.

 

“Force Majeure Events” shall have the meaning set forth in Section 16.1.

 

“Forecast” shall have the meaning set forth in Section 3.1.

 

“Indemnified Party” shall have the meaning set forth in Section 10.3.

 

“Indemnifying Party” shall have the meaning set forth in Section 10.3.

 

“Infringement Claim” has the meaning set forth in Section 12.2.

 

“Initial Price Term” shall mean the term commencing on the Effective Date and ending on [***].

 

“Initial Term” shall have the meaning set forth in Section 13.1.

 

“J&J Calendar Year” shall mean a calendar year based on the Johnson & Johnson Universal Calendar.

 

“Losses” shall have the meaning set forth in Section 10.1.

 

“Manufacturing Interruptions” shall have the meaning set forth in Section 8.1.

 

“Manufacturing Quota” means the amount of an API allotted to Noramco by the DEA pursuant to applicable DEA regulations so that Noramco may manufacture API.

 

“Manufacturing Quota Restrictions” shall have the meaning set forth in Section 8.2.

 

“Non-Commercial Use” shall have the meaning set forth in Section 1.1.

 

“Nonconforming API” shall have the meaning set forth in Section 6.1.

 

“Noramco” shall have the meaning set forth in the preamble to this Agreement.

 

“Noramco Indemnitee” shall have the meaning set forth in Section 10.1.

 

“Party/Parties” shall have the meaning set forth in the preamble to this Agreement.

 

“Person” means an individual, a limited liability company, a joint venture, a corporation, a partnership, an association, a trust, a division, unincorporated organization, or an operating group of any of the foregoing or any other entity or organization, whether governmental or otherwise.

 

“Post-Transfer Supply Agreement” shall have the meaning set forth in the Asset Purchase Agreement.

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

3

 

“Procurement Quota” means the quota allotted to Purchaser by the DEA pursuant to applicable DEA regulations so as to permit shipment of API from Noramco to Purchaser.

 

“Procurement Quota Restrictions” shall have the meaning set forth in Section 8.3.

 

“Products” shall have the meaning set forth in the Recitals.

 

“Purchase Order” shall have the meaning set forth in Section 3.3.

 

“Purchaser” shall have the meaning set forth in the preamble to this Agreement.

 

“Purchaser Indemnitee” shall have the meaning set forth in Section 10.2.

 

“Purchaser’s Facility” means the manufacturing facility of Purchaser (or its designee).

 

“Quality Agreement” means the agreement related to quality assurance and control entered into between Purchaser and Seller as of the date hereof.

 

“Regulatory Authority” means any and all governmental bodies and organizations regulating the manufacture, importation, distribution, use and/or sale of a Product.

 

“Renewal Term” shall have the meaning set forth in Section 13.1.

 

“Seller” shall have the meaning set forth in the Recitals.

 

“Specification(s)” means the API specification(s) contained in Appendix B, except as may be agreed in writing by Purchaser and Noramco as an amendment to this Agreement.

 

“Supply Price” shall have the meaning set forth in Section 4.1.

 

“Term” shall have the meaning set forth in Section 13.1.

 

“Transaction” shall have the meaning set forth in the Recitals.

 

“Transition Period” means the period beginning on the Effective Date and ending on the date that Purchaser commences the manufacture of any Product for Commercial Use at Purchaser’s Facility for distribution in the United States.

 

1.                                      SUPPLY

 

1.1.                            Subject to the terms and conditions of this Agreement, during the first [***] of the Term, Noramco shall supply to Purchaser, and Purchaser shall purchase from Noramco, [***] of Purchaser’s requirements of API and thereafter, Noramco shall supply to Purchaser, and Purchaser shall purchase from Noramco, [***] of Purchaser’s requirements of API; provided however, that beginning the first full J&J Calendar Year after the Transition Period, Purchaser shall purchase from Noramco a minimum annual volume of [***] of API during the Term,

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

4

 

subject to availability of Manufacturing Quota and Procurement Quota.  The calculation of the minimum annual volume of API shall include the Finished Good Tapentadol as calculated in accordance with Appendix D.  [***]

 

1.2.                            During the Transition Period, such API is for use in the qualification and validation of Purchaser’s facility for the manufacture of Products, clinical and non-clinical development of Products, or analytical testing or analytical development of Products (such use “Non-Commercial Use”).  Purchaser shall not use any API supplied by Noramco during the Transition Period for any purpose other than Non-Commercial Use without Noramco’s prior written consent.

 

1.3.                            After the Transition Period, such API is for use in the manufacture of Products for commercial distribution in the United States (such use “Commercial Use”).  Purchaser shall not use any API supplied by Noramco for any purpose other than Commercial Use or Non-Commercial Use without Noramco’s prior written consent.

 

1.4.                            Noramco shall use commercially reasonable efforts to supply Purchaser with API in the quantities and on the date(s) specified in each Purchaser purchase order. Noramco will use commercially reasonable efforts to supply Purchaser with impurity reference standards related to API at a commercially reasonable cost, with such impurity reference standards to be used only to support Purchaser’s analytical testing.

 

1.5.                            Purchaser will keep accurate records of its requirements of API during the Term, and, upon the request of Noramco, will permit Noramco or its duly authorized agents to examine such records during normal business hours for the purpose of verifying the correctness of all calculations in such records.

 

2.                                      PERMITS; DMF(S) AND cGMP

 

2.1.                            Noramco will be responsible for obtaining [***] any licenses or permits, and any regulatory and government approvals necessary for the manufacture of API, provided that Manufacturing Quota is addressed in Article 8 below.

 

2.2.                            Noramco [***] has filed or will file and shall maintain a valid DMF covering the API during the Term, all in accordance with all applicable laws, rules and regulations of the FDA or any other Regulatory Authority.

 

2.3.                            Noramco shall provide Purchaser with an access or right of reference letter entitling Purchaser to make continuing reference to the Noramco DMFs in connection with any regulatory filings made with the FDA by Purchaser with respect to Product.

 

2.4.                            Noramco shall provide a certificate of analysis with each shipment of API delivered hereunder.  All API sold to Purchaser under this Agreement will be manufactured in accordance with cGMP and conform to the Specifications.

 

2.5.                            A Party that desires a change in filed Specifications shall provide the other Party with its written request therefore, in a timely manner, and in no case, later than [***] before the Product made using the changed filed Specifications is delivered.  Requested changes shall be

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

5

 

implemented only if and after the other Party consents to them, which consent shall not be unreasonably withheld.  The Party requesting a change in filed Specifications shall bear the financial costs of implementing such change.

 

3.                                      FORECASTS AND PURCHASE ORDERS FOR API

 

3.1.                            On [***] throughout the Term, Purchaser shall provide to Noramco a [***] rolling ([***]), binding (except as set forth below) forecast (each a “Forecast”) of the anticipated monthly purchases of API under this Agreement, provided that the initial Forecast shall be provided to Noramco no later than [***] after the Effective Date.  The Forecast will include quantities for planned regulatory filings.  The [***] Forecast shall be binding on Purchaser and shall constitute a firm commitment by Purchaser to issue a purchase order for the API indicated for such months, subject to availability of Manufacturing Quota and Procurement Quota, provided, however, that if necessary in light of significant changes in the market for the Products due to availability of a generic equivalent of the Products, regulatory actions or other developments materially and adversely affecting the market for the Products, the Parties will discuss in good faith and mutually agree upon a commercially reasonable reduction to such forecasts.  With respect to any Forecast submitted by Purchaser hereunder, Purchaser may request an increase of no greater than [***] in the quantity of API forecast [***] and Noramco shall take commercially reasonable efforts to accommodate such request.

 

3.2.                            With respect to each Forecast (and any increase to such Forecast), [***]

 

3.3.                            Purchaser shall place monthly purchase orders for API with Noramco, each of which shall specify quantities in kilograms and a delivery date that is not less than [***], nor more than [***], from the date of Noramco’s receipt of such purchase order (each, a “Purchase Order”).  Subject to this Section 3.3 and Article 8, Noramco shall supply and deliver such quantities of API to Purchaser as set forth in each Purchase Order, provided that, unless Noramco otherwise agrees in its sole discretion, each Purchase Order shall be consistent with the quantities set forth in the applicable Forecast provided in accordance with Section 3.1 and the delivery date restrictions set forth in this Section 3.3.  Each Purchase Order must be submitted with a certificate of available Procurement Quota or a completed DEA Form 222 which evidences that Purchaser shall be able to take delivery of the API subject to the Purchase Order; provided, however, that Noramco, in its sole discretion, may agree to accept a Purchase Order which specifies the amounts of API that are contingent upon future receipt of Procurement Quota.  In the event that Noramco accepts any Purchase Order which specifies that all or a portion of API is contingent upon receipt of Procurement Quota, the supply and purchase thereof shall be subject to Article 8.

 

4.                                      CONSIDERATION FOR SUPPLY OF API

 

4.1.                            The price of API to be sold to Purchaser during the Initial Price Term shall be based on the annual volume of API ordered by Purchaser as set forth on Appendix C (the “Supply Price”).  For the avoidance of doubt [***]

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

6

 

4.2.                            After the Initial Price Term, a reasonable increase in the Supply Price shall be mutually agreed upon by the Parties [***]  In the event a mutual agreement is not reached on the price increase, the Supply Price shall be [***]

 

4.3.                            In addition to the foregoing, at any time during the Term, Noramco shall be entitled to adjust the Supply Price in the event of increases to the cost of raw materials or fees of third party contractors incurred by Noramco as compared with such costs on the Effective Date; provided, however, that such adjustments to the Supply Price shall not take effect until Noramco and Purchaser discuss such adjustments in good faith.  Such Supply Price increases shall be applicable to any and all orders placed more than [***] after Noramco has notified Purchaser of the increase in writing.  Purchaser shall be entitled to request that an independent certified accountant verifies the accuracy of any such Supply Price increases.

 

4.4.                            Purchaser shall pay Noramco for all supplied quantities of API within [***] from the date of invoice, provided that, pending resolution of any disagreement under Article 6, Purchaser is not obligated for any payment payable with respect to API for which Purchaser has delivered a written objection pursuant to Article 6.

 

4.5.                            All payments payable for the purchase of API will be made by electronic transfer of United States Dollars to an account designated in writing by Noramco.

 

4.6.                            Noramco will not be obligated to honor orders or shipments to Purchaser should Purchaser’s account with Noramco fall greater than [***] in arrears.

 

4.7.                            In addition to the Supply Price for quantities of API delivered hereunder, Purchaser shall pay Noramco any and all governmental taxes, charges or duties of every kind (excluding any tax based upon Noramco’s net income) that Noramco may be required to collect or pay upon sale, transfer or shipment of API to Purchaser.

 

5.                                      SHIPMENT OF API

 

5.1.                            Noramco shall make deliveries of API to Purchaser or its designate [***].  Each shipment of API delivered to Purchaser hereunder shall be accompanied by an invoice for the quantity of API included in such shipment.

 

5.2.                            In the event that a Purchase Order is delivered where delivery of any API thereunder is contingent upon Purchaser securing Procurement Quota, Noramco may require cash or satisfactory security prior to accepting such Purchase Order or shipments or deliveries of API hereunder.  The election by Noramco to require such cash or security shall not affect the obligation of Purchaser to take and pay for the ordered API.  Purchaser shall pay all costs and expenses, including reasonable attorneys’ fees, incurred by Noramco in the collection of any sum payable by Purchaser to Noramco under this Agreement.  Noramco shall be entitled to interest on any overdue sum at the maximum rate allowed by applicable law.

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

7

 

6.                                      INSPECTION AND REJECTION

 

6.1.                            All API delivered to Purchaser hereunder may be inspected by Purchaser and rejected if the API does not meet the Specifications or has not been manufactured in accordance with cGMP(s) (any such API, “Nonconforming API”).  API will be deemed accepted if Noramco does not receive a written notice from Purchaser setting forth in reasonable detail the claimed visible nonconformity within [***] after delivery to Purchaser of such API or the claimed non-visible nonconformity within [***] after Purchaser’s discovery of such non-visible nonconformity, provided, however, in no event shall any API be rejected based on nonconformity less than [***] prior to its expiration date.

 

6.2.                            Upon receipt of a written notice that any API delivered hereunder is Nonconforming API within the time period specified in Section 6.1, Noramco will have [***] to inspect the allegedly Nonconforming API and make a reasonable assessment of the alleged nonconformance.  At Noramco’s request, Purchaser must promptly supply samples of the allegedly Nonconforming API or some other evidence of nonconformity that Noramco may reasonably specify.

 

6.3.                            If Noramco disagrees with Purchaser’s determination that API delivered hereunder is Nonconforming API, Noramco shall promptly notify Purchaser and, if the Parties are unable to resolve such disagreement within a [***] period, such disagreement will be investigated in accordance with the Quality Agreement.  If the Parties cannot agree after such investigation whether such API is in fact Nonconforming API, (a) if Purchaser alleges that such API does not meet the Specifications, then samples of such API will be submitted to a qualified independent laboratory mutually agreed to by Noramco and Purchaser for testing and such laboratory will use the test methods contained in the applicable Specifications or (b) if Purchaser alleges that such API has not been manufactured in accordance with cGMP(s), then such disagreement shall be referred to a mutually agreed upon third party expert for resolution which shall include root cause investigation, independent expert assessment, independent third party testing and replacement of API.  The determination of such laboratory or third party expert with respect to all or part of such API will be final and binding on the Parties, absent manifest error.  The fees and expenses of the laboratory or third party expert incurred in making such determination will be paid by Noramco, if the determination is made against Noramco or by Purchaser, if the determination is made against Purchaser.

 

6.4.                            If the Parties agree or there is a determination under Section 6.3 that any API delivered hereunder is Nonconforming API, Noramco, at its sole cost and expense and as Purchaser’s sole remedy shall, subject to Sections 10.4 and 10.5, promptly replace such Nonconforming API and reimburse Purchaser [***].  Nonconforming API will be returned to Noramco at its expense.

 

6.5                               During the Term and for [***] thereafter, Purchaser shall have the right, upon at least [***] notice, to inspect, during normal business hours, those areas of Noramco’s production facilities where API is manufactured, handled, packaged and stored, any facility or location where API is tensed, and to audit the records described in this Agreement.

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

8

 

7.                                      PRODUCT COMPLAINTS, ADVERSE EXPERIENCES AND RECALLS

 

7.1.                            During the Term, Noramco shall assist Purchaser with any necessary investigation arising from customer complaints relating to Product in accordance with the Quality Agreement.  Without in any manner limiting the foregoing, each of Purchaser and Noramco shall comply with FDA requirements for complaint handling. Purchaser shall maintain a system for monitoring, investigating, and following up on adverse event reports received by it involving Product(s), and shall provide prompt notice to Noramco of any Product complaints, including, but not limited to, information concerning adverse drug events that are required to be reported to FDA, side effects, injury, toxicity, or sensitivity reaction in those instances where the adverse drug event can be attributed specifically to the API.

 

7.2.                            Each Party shall notify the other Party of any regulatory action or other action concerning the safety of the API in accordance with the Quality Agreement, including but not limited to FDA inspection reports, warning letters or import alerts.

 

7.3.                            In the event of a recall of Product that does not result from the breach of Noramco’s obligations under Section 2.4 to manufacture API in accordance with cGMP and the Specifications, as between Noramco and Purchaser, [***]  For the purposes of this Section 7.3, the direct expenses of a recall shall include only [***]

 

8.                                      MANUFACTURING INTERRUPTIONS, QUOTA RESTRICTIONS AND SHORTAGES

 

8.1.                            Manufacturing Interruptions.  Purchaser acknowledges that the day-to-day manufacturing operation of the facilities used by Noramco to produce API may be subject to interruptions, fluctuations, slow-downs, suspensions and reductions, due to a variety of reasons in the ordinary course of business (“Manufacturing Interruptions”).  If Noramco believes that a Manufacturing Interruption is reasonably likely to result in a material reduction of API available to be delivered to Purchaser, Noramco shall provide notice to Purchaser of, and consult with Purchaser about, such Manufacturing Interruption prior to or as soon as reasonably possible after the commencement of such Manufacturing Interruption.  After the termination of any Manufacturing Interruption that results in a material reduction of API, Noramco shall promptly communicate to Purchaser regarding the termination of such Manufacturing Interruption and the reason therefor, as well as any actions taken or planned to be taken to prevent a repeat event.

 

8.2.                            Manufacturing Quota Restrictions.  Purchaser further acknowledges that the production and supply of API is contingent upon DEA rules, orders or directives related to the Manufacturing Quota that may limit or restrict the manufacture or supply of API by Noramco to Noramco’s customers (“Manufacturing Quota Restrictions”).  If Noramco believes that a Manufacturing Quota Restriction is reasonably likely to result in a material reduction or suspension of the delivery of API to Purchaser, Noramco shall promptly consult with Purchaser to coordinate with respect to their respective obligations in accordance with Sections 8.4 and 8.5.

 

8.3.                            Procurement Quota Restrictions.  It is the sole responsibility of Purchaser, and Purchaser shall use commercially reasonable efforts, to obtain Procurement Quota for API, provided that Noramco shall reasonably cooperate with Purchaser to assist Purchaser in obtaining Procurement Quota.  Noramco acknowledges that Purchaser’s receipt of API manufactured by Noramco is contingent

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

9

 

upon DEA rules, orders or directives related to the Procurement Quota that may limit or restrict Noramco’s customers from receiving API manufactured by Noramco (“Procurement Quota Restrictions”).  If Purchaser believes that a Procurement Quota Restriction is reasonably likely to result in Purchaser’s inability to take delivery of an API from Noramco in accordance with the delivery date set forth in a Purchase Order, Purchaser shall promptly consult with Noramco to coordinate with respect to their respective obligations in accordance with Section 8.4.

 

8.4.                            Failure to Obtain Quota.  Each Party shall use commercially reasonable efforts to prepare and plan for the supply and purchase of API(s) against Purchase Orders to be given in accordance with the Forecasts in anticipation of each Party receiving applicable quota from the DEA.  In the event that a Party does not obtain the necessary Manufacturing Quota or Procurement Quota, as the case may be, to allow it to perform its obligations under this Agreement, such Party shall promptly inform the other Party in writing.  In the event that there is not sufficient Manufacturing Quota or Procurement Quota with respect to an outstanding Purchase Order, such Purchase Order shall nonetheless remain valid and binding upon the Parties, provided that the Purchase Order delivery date will be adjusted by the Parties for a period not to exceed [***] so as to permit receipt of the necessary Manufacturing Quota or Procurement Quota, as the case may be.  In the event that Manufacturing Quota is not received by Noramco within [***] of the original delivery date set forth in a Purchase Order, then such Purchase Order may be, but is not required to be, cancelled by Purchaser by written notice to Noramco, which cancellation shall be Purchaser’s sole and exclusive remedy for the applicable Manufacturing Quota Restriction.  In the event that Purchaser does not obtain Procurement Quota within [***] of the original delivery date set forth in a Purchase Order, [***]

 

8.5.                            Allocation Among Customers and Cooperation.  Purchaser recognizes that, due to Manufacturing Interruptions or Manufacturing Quota Restrictions, Noramco may produce less API in any given time period than anticipated, and that Noramco may, at its discretion, allocate its available supply of API among its customers, itself, and its Affiliates [***].  Notwithstanding the above, Noramco shall (a) use commercially reasonable efforts to minimize interruptions in the supply of API and (b) use commercially reasonable efforts to coordinate with Purchaser to mitigate against the consequences of any shortages related to Manufacturing Interruptions or Manufacturing Quota Restrictions.

 

8.6.                            No Liability for Manufacturing Quota Restrictions.  Subject to Noramco’s compliance with its obligations set forth in this Article 8, Noramco shall not be liable to Purchaser for any damage, inconvenience, or any other consequences that may arise from Manufacturing Quota Restrictions.

 

9.                                      WARRANTIES; DISCLAIMER

 

9.1.                            Noramco hereby represents, warrants and covenants to Purchaser that:

 

9.1.1.                  it has the corporate authority to enter into this Agreement and to perform its obligations hereunder;

 

9.1.2.                  it is not subject to any legal, contractual or regulatory restriction, limitation or conditions that may affect adversely its ability to perform its obligations hereunder; and

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

10

 

9.1.3.                  all API sold to Purchaser by Noramco pursuant to this Agreement shall meet all Specifications.

 

9.2.                            Purchaser hereby represents, warrants and covenants to Noramco that:

 

9.2.1.                  it has the corporate authority to enter into this Agreement and to perform its obligations hereunder; and

 

9.2.2.                  it is not subject to any legal, contractual or regulatory restriction, limitation or conditions that may affect adversely its ability to perform its obligations hereunder.

 

9.3.                            THE PARTIES AGREE THAT, EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE 9, NEITHER PARTY MAKES ANY REPRESENTATIONS OR EXTENDS ANY WARRANTIES OF ANY KIND AND THE LIMITED REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS ARTICLE 9 ARE THE SOLE REPRESENTATIONS AND WARRANTIES WITH RESPECT TO API AND ARE MADE EXPRESSLY IN LIEU OF, AND EXCLUDE, ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR NON-INFRINGEMENT OF THIRD PARTY PATENT RIGHTS AND ALL OTHER EXPRESS OR IMPLIED WARRANTIES PROVIDED BY APPLICABLE LAW, INCLUDING THE UNIFORM COMMERCIAL CODE AND THE UN CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS.

 

10.                               INDEMNIFICATION; CONSEQUENTIAL DAMAGES AND LIMITATION OF LIABILITY

 

10.1.                     Purchaser shall indemnify, defend, save and hold Noramco and each of its Affiliates and their respective officers, directors, employees and agents (each a “Noramco Indemnitee”) harmless from and against any liability, loss, costs, damage and/or expense, including reasonable attorneys, experts and consultants fees and disbursements (“Loss or Losses”) in connection with any and all suits, investigations (governmental or otherwise), claims, proceedings or demands initiated or filed by a third party (each an “Action”) against a Noramco Indemnitee, to the extent resulting from or arising out of (a) any breach of any representation, warranty or covenant hereunder by any Purchaser Indemnitee; (b) a Purchaser Indemnitee’s negligence or willful misconduct; or (c) Purchaser’s, manufacture, use or sale of Product, in each case ((a), (b) and (c)), except to the extent that such Losses result from or arise out of a Noramco Indemnitee’s negligence or willful misconduct.

 

10.2.                     Noramco shall indemnify, defend, save and hold Purchaser and each of its Affiliates and their respective officers, directors, employees and agents (each a “Purchaser Indemnitee”) harmless from and against Loss or Losses in connection with any Action against a Purchaser Indemnitee, to the extent resulting from or arising out of (a) any breach of any representation, warranty or covenant hereunder by a Noramco Indemnitee or (b) a Noramco Indemnitee’s negligence or willful misconduct, in each case ((a) and (b)), except to the extent that such Losses result from or arise out of a Purchaser Indemnitee’s negligence or willful misconduct.

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

11

 

10.3.                     Upon becoming aware of an Action subject to indemnification under Section 10.1 or 10.2, the Party entitled to indemnification (the “Indemnified Party”) shall give prompt written notice thereof to the other Party (the “Indemnifying Party”), which notice shall include reasonable details of the nature of the Action and the basis of the indemnity claim, and shall further expressly state that the Indemnified Party it is seeking indemnity pursuant to this Agreement.  For the avoidance of doubt, and without prejudice to the Indemnified Party’s obligation to give prompt written notice, an Indemnifying Party’s knowledge of events or circumstances pursuant to which an Indemnified Party might seek indemnification, including correspondence between the Parties regarding a matter for which indemnity is not expressly sought, shall not constitute the notice required by this provision, and any attorneys, experts or consultant fees or expenses incurred by an Indemnified Party prior to proper notice shall be the sole responsibility of such Party; provided, however, that failure to provide timely notice shall not bar any indemnification claim unless the Indemnifying Party shall be, or has been, materially prejudiced by failure to receive such timely notice.  The Indemnifying Party will have the right, at its expense and with counsel of its choice, to defend, contest, or otherwise protect against any Action. The Indemnified Party will also have the right, but not the obligation, to participate, at its own expense, in the defense thereof with counsel of its choice. The Indemnified Party shall cooperate to the extent reasonably necessary to assist the Indemnifying Party in defending, contesting or otherwise protesting against any Action, provided that the reasonable cost in doing so shall be paid for by the Indemnifying Party.  If the Indemnifying Party fails, within thirty (30) days after receipt of notice of an Action from the Indemnified Party, to (a) notify the Indemnified Party of its intent to defend such Action or (ii) defend, contest or otherwise protect against such Action or diligently continue to provide defense against such Action after undertaking to do so, then the Indemnified Party will have the right. upon ten (10) days’ prior written notice to the Indemnifying Party, to defend, settle and satisfy such Action and recover the costs of the same from the Indemnifying Party.  No Action may be settled other than by the Party defending the same, and then only with the consent of the other Party, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however, that the Indemnifying Party shall have no obligation to obtain the consent of the Indemnified Party to settle an Action if such settlement does not impose on the Indemnified Party any liability or obligation.

 

10.4.                     EXCEPT TO THE EXTENT INCLUDED IN LOSSES RESULTING FROM OR ARISING OUT OF AN ACTION FOR WHICH ONE PARTY IS OBLIGATED TO INDEMNIFY THE OTHER PARTY (OR AN INDEMNITEE OF SUCH OTHER PARTY) PURSUANT TO THIS ARTICLE 10 OR ANY BREACH OF ARTICLE 11, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR SPECIAL, INDIRECT, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES (INCLUDING LOSS OF PROFITS OR LOSS OF OPPORTUNITY), OR LOST PROFITS EVEN IF DESIGNATED DIRECT DAMAGES, WHETHER IN CONTRACT, WARRANTY, NEGLIGENCE, TORT, STRICT LIABILITY OR OTHERWISE EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY THEREOF.

 

10.5.                     Noramco’s maximum liability to Purchaser in any calendar year under this Agreement, including its indemnity obligations, shall not exceed the greater of (a) ten million dollars ($10,000,000) or (b) the total amount paid by Purchaser to Noramco under this Agreement for the prior completed twelve (12) month period.

 

11.                               CONFIDENTIALITY

 

11.1.                     Each Party agrees that it and its Affiliates (a) will not disclose any Confidential Information of the other Party to any third party at any time during the Term without the prior written consent of such other Party; (b) will not make use of any Confidential Information of the other Party for any purpose other than the performance of its obligations under this Agreement and (iii) will use all reasonable efforts to prevent unauthorized publication or disclosure by any Person of Confidential Information of the other Party.  Notwithstanding the foregoing, (i) a Party may disclose Confidential Information of the other Party to its Affiliates, and to its and their directors, employees, consultants, and agents, in each case who, in such disclosing Party’s sole determination, have a specific need to know such Confidential Information and who are bound by obligations of confidentiality and restriction on use no less restrictive than those set forth in this Article 11 and (ii) Noramco may disclose Confidential Information of Purchaser in accordance with Section 14.2.

 

11.2.                     Notwithstanding the foregoing, a Party may, upon reasonable prior written notice to the other Party if permitted, disclose Confidential Information of the other Party to the extent necessary to comply with law or court order, provided that such first Party provides prior written notice of such disclosure to the other Party if permitted and takes all reasonable actions to avoid or minimize the degree of such disclosure.

 

11.3.                     All Confidential Information in any form must be returned to the Party who disclosed the Confidential Information within thirty (30) days of the termination or expiration of this Agreement, provided that the receiving Party may retain one copy of Confidential Information disclosed to it hereunder as a record of such receiving Party’s ongoing confidentiality obligations under this Agreement, which copy shall either be returned to the Party who disclosed the Confidential Information within thirty (30) days after the [***] period referred

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

12

 

to in Section 11.4 or, if not returned, shall continue to be subject to the confidentiality provisions of this Agreement indefinitely.

 

11.4.                     The confidentiality and non-use obligations of this Agreement shall remain in effect during the Term and for a period of [***] thereafter.

 

11.5.                     “Confidential Information” means [***]  Notwithstanding the foregoing, Confidential Information does not include information, data or know-how that the receiving Party can show:

 

(a)                                 was in the public domain at the time of the disclosure to the receiving Party, or thereafter became part of the public domain without any fault of the receiving Party;

 

(b)                                 rightfully was in its possession prior to the disclosure by the disclosing Party;

 

(c)                                  was lawfully obtained from a third party who had the right to make such disclosure, as evidenced by written records; or

 

(d)                                 was developed by the receiving Party independently of that disclosure, as evidenced by written records, by individuals who did not rely on or otherwise use Confidential Information.

 

12.                               INTELLECTUAL PROPERTY

 

12.1.                     Noramco hereby grants to Purchaser during the Term a non-exclusive, royalty-free license under the API Manufacturing Patents to (a) use API supplied by Noramco to Purchaser hereunder to make or have made Products for distribution in the United States and (b) offer for sale, sell, commercialize and import Products containing API supplied by Noramco to Purchaser hereunder in the United States.

 

12.2.                     If (a) Noramco’s process of manufacture of API becomes the subject of a written third party claim for infringement of such third party’s U.S. patent rights and (b) Noramco reasonably determines in [***] that such process is reasonably likely to infringe such third party’s U.S. patent rights (an “Infringement Claim”), Noramco may [***]

 

12.3.                     All rights to and interests in Noramco’s and its Affiliates’ intellectual property, including any improvements thereto, will remain solely with Noramco and its Affiliates and no right or interest therein is transferred or granted to Purchaser under this Agreement, except as expressly provided for herein or in the Asset Purchase Agreement.  Except as otherwise set forth in the Asset Purchase Agreement, Purchaser agrees that it does not acquire, pursuant to this Agreement, any license or any other right to Noramco’s or its Affiliate’s intellectual property or improvements thereto, except as expressly provided for herein.

 

12.4.                     [***]

 

13.                               TERM, RENEWAL AND TERMINATION

 

13.1.                     The initial term of this Agreement shall commence on the Effective Date and shall continue until the seventh (7th) anniversary of the Effective Date, unless sooner terminated as

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

13

 

expressly provided for in this Agreement (the “Initial Term”).  Thereafter, this Agreement shall be automatically renewed for additional terms of one (1) year (each, a “Renewal Term” and all Renewal Terms together with the Initial Term, the “Term”).  If an alternative or replacement source of API has been qualified by Purchaser to supply API for Commercial use, either party may notify the other Party in writing no later than six (6) months prior to the end of the then-current Initial Term or Renewal Term, as the case may be, that it does not wish to renew the Agreement.  If [***], Noramco may notify Purchaser in writing no later than [***] prior to the end of the then-current Initial Term or Renewal Term, as the case may be, that it does not to wish to renew the Agreement.

 

13.2.                     Purchaser may terminate this Agreement without cause immediately following [***] prior written notice to Noramco; provided, however, that the effective date of such termination shall in no event be earlier than the [***] of the Effective Date.

 

13.3.                     This Agreement may be terminated by either Party by giving written notice to the other Party if the other Party (the “Breaching Party”) is in material breach or default of any of its obligations hereunder (including any payment obligations) as follows: (a) the terminating Party must send written notice of the material breach or material default to the Breaching Party; and (b) the termination shall become effective sixty (60) days after receipt of such written notice by the Breaching Party unless either (i) the Breaching Party has cured such material breach or default prior to the expiration of such sixty (60) day period or (ii) if such material breach or material default is not capable of being cured within such sixty (60) day period, the Breaching Party has commenced activities reasonably expected to cure such material breach or material default within such sixty (60) day period and thereafter uses diligent efforts to complete the cure as soon as practicable, provided that, if such material breach or material default is not cured within one hundred and twenty (120) days after receipt of such written notice by the Breaching Party, the termination shall become effective upon the expiration of such one hundred and twenty (120) day period.

 

13.4.                     Either Party may terminate this Agreement without prior notice to the other upon the occurrence of any of the following involving the other Party:

 

(a)                                 that other Party files a petition seeking an order for relief under the Federal Bankruptcy Code (Title 11 of the United States Code), as now or hereafter in effect, or under similar law (including laws in countries or jurisdictions other than the United States), or files a petition in bankruptcy or for reorganization or for an arrangement pursuant to any state bankruptcy law or any similar state or local law (including laws in countries or jurisdictions other than the United States); or

 

(b)                                 an involuntary case against the other Party as debtor is commenced by a petition under the Federal Bankruptcy Code (Title 11 of the United States Code), as now or hereafter in effect, or under similar law (including laws in countries or jurisdictions other than the United States), or a petition or answer proposing the adjudication of the other Party as a bankrupt or its reorganization pursuant to any state bankruptcy law or any similar state or local law (including laws in countries or jurisdictions other than the United States) is filed in any court and not dismissed, discharged or denied within sixty (60) days after the filing thereof; or

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

14

 

(c)                                  a custodian, receiver, United States Trustee, trustee or liquidator of the other Party or of all or substantially all of the other Party’s property is appointed in any proceedings brought by the other Party; or

 

(d)                                 a custodian, receiver, United States Trustee, trustee or liquidator is appointed in any proceedings brought against the other Party and is not be discharged within sixty (60) days after that appointment, or if the other Party consents to or acquiesces in such appointment; or

 

(e)                                  the other Party generally does not pay its debts as those debts become due, or makes an assignment for the benefit of creditors, or admits in writing its inability to pay its debts generally as they become due.

 

13.5.                     Any expiration or termination of this Agreement shall not release the Parties from liabilities or obligations accrued on or prior to the date of expiration or termination. The following provisions shall survive termination and/or expiration of this Agreement indefinitely or for such shorter period as is provided in such Articles or Sections, along with any other provisions of this Agreement that are necessary to interpret or give effect to any of the following provisions: (a) Sections 6.5, 8.6, 9.3 and 12.3; and (b) Articles 10 (Indemnification; Consequential Damages; Limitations of Liability), 11 (Confidentiality), 15 (Notices); 19 (Dispute Resolution); 23 (No Benefit to Third Parties), and 24 (Publicity).

 

14.                               INDEPENDENT CONTRACTORS; SUBCONTRACTORS

 

14.1.                     The status of the Parties under this Agreement is that of independent contractors.  Nothing is this Agreement may be construed as establishing a partnership or joint venture relationship between the Parties hereto.  No Party has the right to enter into any agreements on behalf of the other Party, nor may it represent to any Person that it has that right or authority.

 

14.2.                     Noramco may subcontract any or all of its obligations hereunder to any of its Affiliates without the approval of Purchaser or to any other third party approved by Purchaser (which approval shall not be unreasonably withheld), provided that Noramco shall remain fully responsible for performing such obligations in compliance with this Agreement and shall take reasonable measures to ensure that its subcontractors perform such obligations in compliance with this Agreement.  [***]  Notwithstanding anything in this Agreement to the contrary, Noramco shall be permitted to share Confidential Information of Purchaser with its permitted subcontractors, provided such subcontractor is bound by obligations of confidentiality and restriction on use no less restrictive than those set forth in Article 11.

 

15.                               NOTICES

 

All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given if delivered, addressed or telecopied to the address or telecopier number set forth below and shall be deemed to have been made:  (a) on the date of service, if served personally on the Party; (b) on the second business day after delivery to an overnight courier service, if first available delivery is indicated and paid for; (c) on the third business day after mailing, if mailed to the Party to whom notice is to be given, by first class mail, registered or certified, postage prepaid; or

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

15

 

(iv) on the date of transmission, if sent by telecopier and confirmation of transmittal is received by the transmitting Party.  Any Party may change its address for purposes of this Article by giving the other Party’s written notice of the new address in the manner set forth above.

 

	
If   to Purchaser:
    	
 
    	
Depomed, Inc.
    
	
 
    	
 
    	
7999   Gateway Blvd., Suite 300
    
	
 
    	
 
    	
Newark,   California 94560
    
	
 
    	
 
    	
Attention:   Legal Department
    
	
 
    	
 
    	
Facsimile   No.: 510-744-8001
    
	
 
    	
 
    	
 
    
	
If   to Noramco:
    	
 
    	
Noramco, Inc.
    
	
 
    	
 
    	
500   Swedes Landing Road

Wilmington,   Delaware 19801

Attention:   Vice President Marketing & Business Development

Facsimile   No.: 302-761-2913
    

 

16.                               FORCE MAJEURE

 

16.1.                     Neither Party will be liable for non-performance or delay in the fulfillment of its obligations under this Agreement if such non-performance or delay is occasioned by any cause beyond the reasonable control of Purchaser or Noramco, as the case may be, including acts of God, fire, flood, earthquakes, explosions, sabotage, strikes, or labor disturbances (regardless of the reasonableness of the demands of the labor force), civil commotion, riots, military invasions, wars, failure of utilities, failure of carriers, inability to obtain any required raw material, energy source, equipment, labor or transportation, at prices and on terms Noramco deems practicable from its usual sources of supply or any acts, restraints, requisitions, regulations, or directives issued by a competent government authority, including changes in law or regulation (“Force Majeure Events”); provided, however, a Force Majeure Event shall never excuse a Party from paying any sum of money owed under the terms of this Agreement.

 

16.2.                     In the event that either Party is prevented from discharging its obligations under this Agreement on account of a Force Majeure Event, that Party shall promptly notify the other Party, and shall nevertheless make reasonable, good faith efforts to discharge its obligations, even if in a partial or compromised manner.  In the event that a Force Majeure Event continues for a period of [***], the Party not claiming the Force Majeure Event will be entitled to terminate this Agreement forthwith, but without penalty or liability to the Party affected by the Force Majeure Event, on written notice to the Party claiming the Force Majeure Event, provided that such termination shall not affect any Party’s right to receive amounts which have accrued or became due prior to the termination.

 

16.3                        The Party affected by a Force Majeure Event shall use commercially reasonable efforts to limit the effects of a Force Majeure Event upon its performance of the Agreement and shall notify the other Party, immediately, of the cessation of the Force Majeure Event.

 

17.                               ENTIRE AGREEMENT; MODIFICATION

 

This Agreement, including the appendices hereto which are incorporated by reference, constitutes the entire agreement of the Parties with respect to its subject matter and supersedes all prior agreements, arrangements, dealings and writings between the Parties that relate to the matters covered herein.  Any terms and conditions of an invoice, acknowledgement or similar document provided by Noramco for

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

16

 

API, or any terms and conditions of Purchase Orders provided by Purchaser for API, which are inconsistent with or in addition to the terms of this Agreement shall be null and void.  This Agreement may not be amended or modified except in writing executed by the duly authorized representatives of both Parties.

 

18.                               WAIVER

 

No waiver of a breach or default hereunder will be considered valid unless written and signed by the Party granting such waiver, and no waiver will be deemed a waiver of any subsequent breach or default of the same or similar nature.

 

19.                               DISPUTE RESOLUTION

 

19.1.                     Any controversy or claim arising out of or relating to this Agreement, including any such controversy or claim involving any Affiliate of any Party (a “Dispute”), shall first be submitted to mediation according to the Commercial Mediation Procedures of the American Arbitration Association (“AAA”)  (see www.adr.org).  Such mediation shall be attended on behalf of each Party for at least one session by a senior business person with authority to resolve the Dispute.  Any period of limitations that would otherwise expire between the initiation of mediation and its conclusion shall be extended until [***] days after the conclusion of the mediation.

 

19.2.                     Any Dispute that cannot be resolved by mediation within [***] days of notice by one Party to the other of the existence of a Dispute (unless the Parties agree to extend that period) shall be resolved by arbitration in accordance with the Commercial Arbitration Rules of the AAA (“AAA Rules”; see www.adr.org) and the Federal Arbitration Act, 9 U.S.C. §1 et seq..  The arbitration shall be conducted in New Jersey, by one arbitrator appointed in accordance with the AAA Rules.

 

19.3.                     The arbitrator shall follow the ICDR Guidelines for Arbitrators Concerning Exchanges of Information in managing and ruling on requests for discovery.  The arbitrator, by accepting appointment, undertakes to exert her or his best efforts to conduct the process so as to issue an award within [***] of her or his appointment, but failure to meet that timetable shall not affect the validity of the award.

 

19.4.                     The arbitrator shall decide the Dispute in accordance with the substantive law of New Jersey.  The arbitrator may not award special, indirect, incidental, punitive or consequential damages (including loss of profits or loss of opportunity), or lost profits even if designated direct damages, nor may the arbitrator apply any multiplier to any award of actual damages, except as may be required by statute.  The award of the arbitrator may be entered in any court of competent jurisdiction.

 

20.                               SEVERABILITY

 

Should any part or provision of this Agreement be held unenforceable or in conflict with applicable law, the invalid or unenforceable part or provision will, so long as it does not go to the essence of this Agreement, be replaced with a revision that accomplishes, to the extent possible, the original

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

17

 

commercial purpose of that part or provision in a valid and enforceable manner, and the balance of this Agreement shall remain in full force and effect and binding upon the Parties hereto.

 

21.                               SUCCESSORS AND ASSIGNS

 

This Agreement may not be assigned or otherwise transferred by a Party without the prior written consent of the other Party; provided, however, that (i) either Party may, without such consent, but with notice to the other Party, assign this Agreement, in whole or in part: (a) in connection with the transfer or sale of all or substantially all of such Party’s assets or the line of business for the API (in the case of Noramco) or the Products (in the case of Purchaser); (b) to a successor entity or acquirer in the event of a sale, merger, consolidation, change of control or similar transaction of such Party; or (c) to any Affiliate of such Party (in that case, so long as such assigning Party remains fully liable for all of its obligations hereunder as a primary obligor); (ii) Purchaser may, without such consent, but with notice to Noramco, assign this Agreement (a) in connection with any transaction the primary purpose of which is to change the domicile of Purchaser or (b) to any lender of Purchaser or purchaser of securities used to finance the Transactions as collateral security to secure the obligations of any indebtedness of Purchaser; and (iii) in the event Noramco determines, in its sole discretion, that Noramco and its Affiliates will permanently discontinue all manufacture and supply of API, Seller shall notify Purchaser about the decision without delay and, thereafter, Noramco shall have the right to assign this Agreement in its entirety to [***].  Any permitted assignee will assume the rights and obligations of its assignor under this Agreement.  Any purported assignment in violation of this Section 21 will be void.

 

22.                               COUNTERPARTS

 

This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and together shall constitute one and the same agreement and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Party, it being understood that both Parties need not sign the same counterpart.  This Agreement, following its execution, may be delivered via telecopier machine or other form of electronic delivery, which shall constitute delivery of an execution original for all purposes.

 

23.                               NO BENEFIT TO THIRD PARTIES

 

The representations, warranties, covenants and agreements set forth in this Agreement are for the sole benefit of the Parties hereto and their successors and permitted assigns, and they will not be construed as conferring any rights on any other Persons.

 

24.                               PUBLICITY

 

Neither Party may make any press release or public statement regarding the subject matter of this Agreement or the existence thereof or use the other Party’s or its Affiliates’ names, trademarks, logos, symbols or other image in any form of advertising, promotion or publicity without the prior written consent of the other Party, except to the extent that the press release or public statement may be required by applicable law.

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

18

 

25.                               INTERPRETATION

 

25.1.                     The words “hereof”, “herein”, “hereto” and “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement.

 

25.2.                     The terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa.

 

25.3.                     The terms “U.S. Dollars” and “$” shall mean lawful currency of the United States of America.

 

25.4.                     The terms “include,” “includes” and “including” shall mean “including, without limitation.”

 

25.5.                     When a reference is made in this Agreement to an Article, a Section, an Exhibit or a Schedule, such reference shall be to an Article or a Section of, or an Exhibit or a Schedule to, this Agreement unless otherwise indicated.

 

25.6.                     Time periods based on a number of days within or following which any payment is to be made or act is to be done shall be calculated by excluding the day on which the period commences and including the day on which the period ends and, if applicable, by extending the period to the next business day following if the last day of the period is not a business day.

 

25.7.                     The term “United States” shall refer to the United States of America and its territories, including Puerto Rico.

 

[Remainder of Page is Intentionally Blank]

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

19

 

IN WITNESS WHEREOF, each of the Parties has executed this Agreement on the Effective Date.

 

 

	
 Depomed, Inc.
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:   
    	
/s/   James A. Schoeneck
    	
 
    
	
Name:   
    	
James   A. Schoeneck 
    	
 
    
	
Title:   
    	
President   and Chief Executive Officer
    	
 
    

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

[Signature Page for API Supply Agreement]

 

 

	
Noramco, Inc.
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:   
    	
/s/   Matthew Martin 
    	
 
    
	
Name:   
    	
Matthew   Martin 
    	
 
    
	
Title:   
    	
General   Manager
    	
 
    

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

[Signature Page for API Supply Agreement]

 

 

APPENDIX A

 

Products

 

[***](1)

 

(1) Two pages omitted and filed separately with the Commission.

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

 

APPENDIX B

 

Specifications

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

 

APPENDIX C

 

Commercial Supply Price

 

[***]

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

 

 

APPENDIX D

 

Finished Good Tapentadol Calculation

 

[***]

 

Confidential Information indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission.

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