Document:

Exhibit 10.4

 

ACTIQ SETTLEMENT AGREEMENT

 

THIS SETTLEMENT AGREEMENT (“Agreement”)
is entered into this 1st day of February, 2006, by and between CEPHALON, INC.,
a corporation organized and existing under the laws of the State of Delaware,
with its principal place of business at 41 Moores Road, Frazer, Pennsylvania,
the UNIVERSITY OF UTAH RESEARCH FOUNDATION, a nonprofit corporation organized
and existing under the laws of the State of Utah, having its principal place of
business at 615 Arapeen Dr., Suite 310, Salt Lake City, Utah, on the one hand,
and BARR LABORATORIES, INC., a corporation organized and existing under the
laws of the State of Delaware, with its principal place of business at 400
Chestnut Ridge Road, Woodcliff Lake, New Jersey.

 

WHEREAS, United States
Patent No. 4,863,737 (“the ‘737 Patent”), entitled “Compositions and Methods of
Manufacture of Compressed Powder Medicaments,” was issued on September 5, 1989
by the United States Patent and Trademark Office to Theodore H. Stanley and
Brian Hague, was assigned to the University of Utah, and was subsequently
assigned to the UURF, which owns all right and title to the ‘737 Patent and has
the right to sue for and obtain equitable relief and damages for infringement. The
‘737 Patent expires on September 5, 2006.

 

WHEREAS, Cephalon is the
exclusive licensee under the ‘737 Patent, and has the right to sue for
infringement of the ‘737 Patent by a third party.

 

WHEREAS, Cephalon is the
approval holder of NDA 20-747 and sells drug products in the United States
under the trademark ACTIQ®, an oral transmucosal fentanyl citrate product which
is a solid drug matrix on a handle, is covered by claims of the ‘737 Patent,
and was

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.

 

 

approved by the FDA for the management of breakthrough cancer pain. The
FDA’s official publication of approved drugs (the “Orange Book”) includes
ACTIQ® listed together with the ‘737 Patent.

 

WHEREAS, Barr notified
Cephalon and UURF that Barr had submitted ANDA No. 77-312 to the FDA under
Section 505(j) of the Federal Food, Drug and Cosmetic Act (21 U.S.C. § 355(j))
with a Paragraph IV certification, seeking approval to engage in the commercial
manufacture, use, and sale of oral transmucosal fentanyl citrate products in
the form of a solid drug matrix on a handle and in various dosages equivalent
to 0.2, 0.4, 0.6, 0.8, 1.2 and 1.6 mg of the fentanyl base, before the
expiration date of the ‘737 Patent.

 

WHEREAS, Cephalon and UURF
timely filed suit against Barr in an action captioned Cephalon, Inc., et al. v. Barr Laboratories, Inc.,
Civil Action No. 05-29 (JJF), in the United States District Court for the
District of Delaware, seeking, among other things, a declaration that Barr’s
making, using, offering to sell, selling, or importing oral transmucosal
fentanyl citrate products as described in Barr’s ANDA No. 77-312 would infringe
the ‘737 Patent, an order providing that the effective date of any approval of
Barr’s ANDA No. 77-312 shall be a date which is not earlier than the date of
the expiration of the ‘737 Patent; and an order permanently enjoining Barr and
its affiliates and subsidiaries from making, using, offering to sell, selling,
or importing oral transmucosal fentanyl citrate products as described in Barr’s
ANDA No. 77-312 until after the date of the expiration of the ‘737 Patent.

 

WHEREAS, Barr answered the
complaint by denying infringement, by asserting affirmative defenses of
noninfringement and invalidity, and by filing counterclaims for declaratory
judgment of noninfringement and invalidity.

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.

 

2

 

WHEREAS, Cephalon and Barr
have taken fact discovery and are currently taking expert discovery, but no
partial or final judgment has entered as to any issue in dispute.

 

WHEREAS, Cephalon has sought
pediatric exclusivity for ACTIQ® through March 5, 2007.

 

WHEREAS, to avoid the time
and expense of further litigation, and in compromise of the disputed claims set
forth above, the parties now desire to resolve their disputes by settlement.

 

NOW, THEREFORE, in
consideration of the foregoing and the mutual covenants and conditions herein
set forth, the receipt and sufficiency of which consideration is hereby
acknowledged, the parties agree as follows:

 

1.                                      DEFINITIONS

 

1.1                                 “Action” shall
mean Cephalon, Inc., et al. v. Barr
Laboratories, Inc., Civil Action No. 05-29 (JJF), pending in the
United States District Court for the District of Delaware.

 

1.2                                 “ACTIQ” and “ACTIQ
SF” shall have the same meaning as those terms are defined in the Existing
License and Supply Agreement.

 

1.3                                 “ACTIQ NDA” and
“ACTIQ SF NDA” shall have the same meaning as those terms are defined in the
Existing License and Supply Agreement.

 

1.4                                 “Affiliate”
shall mean any corporation, partnership, joint venture or firm which controls,
is controlled by or under common control with a specified person or entity. For
purposes of this definition, “control” shall be presumed to exist if one of the
following conditions is met: (a) in the case of corporate entities, direct or
indirect ownership of at least fifty percent

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.

 

3

 

(50%) of the stock or shares having the right to vote for the election
of directors and (b) in the case of non-corporate entities, direct or indirect
ownership of at least fifty percent (50%) of the equity interest with the power
to direct the management and policy decisions of such non-corporate entities.

 

1.5                                 “Barr” shall
mean BARR LABORATORIES, INC., a corporation organized and existing under the
laws of the State of Delaware, with its principal place of business at 400
Chestnut Ridge Road, Woodcliff Lake, New Jersey, and its directors, officers,
employees, agents and representatives, predecessors, successors, and assigns
(including without limitation any assignee of Barr’s ANDA No. 77-312) ; its
subsidiaries, divisions, groups, and the respective directors, officers,
employees, agents and representatives, successors, and assigns of each.

 

1.6                                 “Barr Generic
Product” shall mean both “Barr Generic Product” and “Barr Generic SF Product”
as those terms are defined in the Existing License and Supply Agreement.

 

1.7                                 “Cephalon”
shall mean CEPHALON, INC., a corporation organized and existing under the laws
of the State of Delaware, with its principal place of business at 41 Moores
Road, Frazer, Pennsylvania, and its directors, officers, employees, agents and
representatives, predecessors, successors, and assigns; its subsidiaries,
divisions, groups, and the respective directors, officers, employees, agents
and representatives, successors, and assigns of each.

 

1.8                                 “Effective Date”
shall mean the date first written above.

 

1.9                                 “Existing
License and Supply Agreement” shall mean the License and Supply Agreement
entered into on July 7, 2004 by and between Cephalon and Barr.

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.

 

4

 

1.10                           “Existing
License Effective Date” shall mean the date on which the license granted under
Section 2.1(a) (i), (ii) and (iv) of the Existing License and Supply Agreement
becomes effective under Section 2.1(b) of the Existing License and Supply
Agreement.

 

1.11                           “FDA” shall
mean the Food and Drug Administration.

 

1.12                           “FTC” shall
mean the Federal Trade Commission.

 

1.13                           “FTC Consent”
shall mean the FTC’s Decision and Order issued September 20, 2004, In the Matter
of Cephalon, Inc. and Cima Labs Inc., FTC Docket No. C-4121.

 

1.14                           “OTFC” shall
mean oral transmucosal fentanyl citrate.

 

1.15                           “Patent In Suit”
shall mean the ‘737 Patent.

 

1.16                           “Subject OTFC
Product” shall mean [**].

 

1.17                           “Supplemental
License and Supply Agreement” shall mean the Actiq Supplemental License and
Supply Agreement attached hereto as Exhibit A.

 

1.18                           “UURF” shall
mean UNIVERSITY OF UTAH RESEARCH FOUNDATION, a nonprofit corporation organized
and existing under the laws of the State of Utah, having its principal place of
business at 615 Arapeen Dr., Suite 310, Salt Lake City, Utah, and its
directors, officers, employees, agents and representatives, predecessors,
successors, and assigns; its subsidiaries, divisions, groups, and the
respective directors, officers, employees, agents and representatives,
successors, and assigns of each.

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.

 

5

 

2.                                      EFFECTIVENESS

 

2.1                                 This Agreement
shall become effective on the Effective Date.

 

3.                                      INFRINGEMENT

 

3.1                                 Barr agrees
that the Patent in Suit is valid and enforceable. Barr agrees that the Patent
in Suit would be infringed by making, using, offering to sell or selling Barr
Generic Product within the United States, or by importing or causing to be
imported any Barr Generic Product into the United States, without a license to
do so. Barr agrees that the Patent in Suit would be infringed by actively
inducing any other entity to make, use, offer to sell, or sell Barr Generic
Product within the United States, or to import or cause to be imported any Barr
Generic Product into the United States, without a license to do so. Barr and
its Affiliates shall make no representation or assertion to the contrary in any
forum or context at any time.

 

3.2                                 Barr agrees
that it will not sell Subject OTFC Product prior to the earlier of December 6,
2006 and the Existing License Effective Date.

 

4.                                      SUPPLEMENTAL
LICENSE AND SUPPLY AGREEMENT

 

4.1                                 Cephalon and
Barr have entered into the Supplemental License and Supply Agreement. The terms
of the Supplemental License and Supply Agreement are not intended to alter the
rights and obligations in the FTC Consent, but rather are intended to, and do,
grant Barr additional rights beyond those set out in the FTC Consent.

 

5.                                      PAYMENTS

 

5.1                                 Any royalty
payments paid to Cephalon by Barr pursuant to the terms of the

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.

 

6

 

Supplemental License and Supply Agreement shall be credited against the
[**] milestone payment set forth in Exhibit B to the Existing License and
Supply Agreement.

 

6.                                      DISMISSAL

 

6.1                                 Upon the
Effective Date, Cephalon, UURF and Barr shall execute and file with the United
States District Court for the District of Delaware a Joint Stipulation for
Dismissal, in the form attached hereto as Exhibit B. Each party shall bear its
own costs with respect to the settlement of the Action.

 

6.2                                 Cephalon, UURF
and Barr waive any right to appeal any order previously entered in the Action.

 

7.                                      MUTUAL
RELEASES

 

7.1                                 Barr, on behalf
of itself and its subsidiaries, successors, and assigns, hereby releases, acquits,
and forever discharges Cephalon and UURF from and against any and all claims,
demands, liabilities, causes of action, damages, duties, or obligations arising
under, concerning, or relating to the Patent In Suit, including, without
limitation, any claim for declaratory judgment that the Patent In Suit is
invalid, unenforceable, or would not be infringed by any Barr Generic Product,
but specifically excluding a breach by Cephalon and/or UURF of their respective
covenants and obligations under this Agreement.

 

7.2                                 Cephalon, on
behalf of itself and its subsidiaries, successors, and assigns, hereby
releases, acquits and forever discharges Barr from any and all claims, demands,
liabilities, causes of action, damages, duties, or obligations arising under,
concerning, or relating to infringement of

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, as amended.

 

7

 

the Patent In Suit by any Barr Generic Product, but specifically
excluding a breach by Barr of its covenants and obligations under this
Agreement.

 

7.3                                 UURF, on behalf
of itself and its subsidiaries, successors, and assigns, hereby releases,
acquits and forever discharges Barr from any and all claims, demands,
liabilities, causes of action, damages, duties, or obligations arising under,
concerning, or relating to infringement of the Patent In Suit by any Barr
Generic Product, but specifically excluding a breach by Barr of its covenants
and obligations under this Agreement.

 

8.                                      CONFIDENTIALITY

 

8.1                                 Cephalon, UURF
and Barr shall continue to be bound by and to comply with the terms of the
Protective Order previously entered by the Court in the Action.

 

8.2                                 Except as
otherwise required by law, Cephalon, UURF and Barr agree that the terms of this
Agreement shall remain confidential and shall not be disclosed to third parties
except subject to a nondisclosure agreement, and pursuant to business
discussions relating to asset sales, mergers, or change of control
transactions, or upon order of a court of competent jurisdiction or to the
extent required by law or governmental regulation; provided that Cephalon, UURF
and Barr may issue mutually agreeable press releases and make public statements
consistent with the text of those press releases. Cephalon, UURF and Barr agree
that they will not otherwise publicize the terms and conditions of this
Agreement or make any statements or comments to any news media and/or trade
publication, or any third person or entity (except as set forth above)
regarding the terms and conditions of this Agreement. Information otherwise in
the

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.

 

8

 

public domain is not subject to the provisions of this Section.

 

9.                                      MISCELLANEOUS

 

9.1                                 The terms of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto, their respective successors, heirs, and assigns.

 

9.2                                 No party shall
assign any of its rights or obligations hereunder to any non-Affiliated third
party without first obtaining the written consent of the other party hereto,
which consent may not be unreasonably withheld.

 

9.3                                 The Agreement
shall be interpreted in accordance with and governed by the law of the State of
Delaware.

 

9.4                                 Cephalon, UURF
and Barr agree that the United States District Court for the District of
Delaware shall be the proper and exclusive forum for any action to enforce this
Agreement. Each party consents to the personal jurisdiction of that court for
such purposes.

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.

 

9

 

9.5                                 Notices under
this Agreement shall be sent by overnight or first class mail, return receipt
or other proof of delivery requested, to the following:

 

If to Cephalon:

 

Legal Department

Cephalon, Inc.

41 Moores Road

Frazer, PA  19355

Attn:  John E. Osborn

Sr. Vice President, General Counsel & Secretary

Telephone: (610)-738-6337

Fax:           (610)-738-6590

 

If to UURF:

 

University of Utah Research Foundation

Patent and Product Development Division

391-G Chipeta Way

Salt Lake City, UT 
84108

Attention: 
General Counsel

Facsimile: 
(801) 585-7007

 

If to Barr:

 

Barr Laboratories, Inc.

400 Chestnut Ridge Road

Woodcliff Lake, NJ 07677

Attention:  President

Facsimile:  (201) 930-3335

 

9.6                                 This Agreement
may not be modified, amended, supplemented or repealed except by written
agreement executed by duly authorized representatives of the parties.

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.

 

10

 

9.7                                 This Agreement
and its attachments represent the entire agreement between Cephalon, UURF and
Barr with respect to the subject matter of this Agreement and supersedes all
prior or contemporaneous agreements, proposals or understandings, whether
written or oral, between Cephalon, UURF and Barr with respect to that subject
matter. Except as specifically stated herein, however, all terms of the
Existing License and Supply Agreement remain in effect.

 

9.8                                 If one or more
provisions of this Agreement are ruled wholly or partly invalid or
unenforceable by a court or other government body of competent jurisdiction,
then the validity and enforceability of all other provisions of this Agreement
shall not in any way be affected or impaired.

 

9.9                                 No waiver of,
failure of a party to object to, or failure of a party to take affirmative
action with respect to any default, term, or condition of this Agreement, or
any breach thereof, shall be deemed to imply or constitute a waiver of any
other like default, term, or condition of this Agreement, or subsequent breach
thereof.

 

9.10                           Cephalon, UURF
and Barr have had all desired counsel, legal and otherwise, in entering into
this Agreement, and do so in accordance with their own free acts and deeds. This
Agreement shall therefore be deemed to have been negotiated and prepared at the
joint request, direction, and instruction of each of the parties, at arms
length, with the advice and participation of counsel, and will be interpreted
in accordance with its terms without favor to either party.

 

9.11                           Each party
represents that it is duly existing; that it has the full power and authority
to enter into this Agreement and the Supplemental License and Supply Agreement;
that

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.

 

11

 

there are no other persons or entities whose consent to this Agreement
and the Supplemental License and Supply Agreement or whose joinder herein or
therein is necessary to make fully effective the provisions of this Agreement
and the Supplemental License and Supply Agreement; that this Agreement and the
Supplemental License and Supply Agreement do not and will not interfere with
any other agreement to which it is a party and that it will not enter into any
agreement the execution and/or performance of which would violate or interfere
with this Agreement or the Supplemental License and Supply Agreement.

 

9.12                           This Agreement
may be signed in counterparts, each of which shall be deemed an original
hereof, but all of which together shall constitute one and the same instrument.

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.

 

12

 

IN WITNESS WHEREOF,
Cephalon, UURF and Barr have executed this Agreement effective as of the date
first written above.

 

 

	
  CEPHALON, INC.

  	
  BARR LABORATORIES, INC.

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Frank Baldino, Jr., Ph.D.

  	
   

  	
  By:

  	
  /s/
  Paul M. Bisaro

  	
   

  
	
  Printed
  Name:

  	
  Frank
  Baldino, Jr., Ph.D.

  	
   

  	
  Printed
  Name:

  	
  Paul
  M. Bisaro

  	
   

  
	
  Title:

  	
  Chairman
  and CEO

  	
   

  	
  Title:

  	
  President

  	
   

  
	
  Date:
  

  	
  February
  1, 2006

  	
   

  	
  Date:

  	
  February
  1, 2006

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  UNIVERSITY OF UTAH

  	
   

  	
   

  	
   

  
	
  RESEARCH FOUNDATION

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ John Morris

  	
   

  	
   

  	
   

  	
   

  
	
  Printed Name:

  	
  John Morris

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Secretary

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  February 1, 2006

  	
   

  	
   

  	
   

  	
   

  
																											

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.

 

13Exhibit 10.5

 

ACTIQ SUPPLEMENTAL LICENSE AND SUPPLY AGREEMENT

 

This ACTIQ
Supplemental License and Supply Agreement (this “Agreement”) is entered
into as of this 1st day of February 2006 (the “Effective Date”)
by and between Cephalon, Inc., a Delaware corporation, having its principal
place of business located at 41 Moores Road, P.O. Box 4011, Frazer,
Pennsylvania 19355, and Barr Laboratories, Inc., a Delaware corporation, having
its principal place of business located at 400 Chestnut Ridge Road, Woodcliff Lake,
New Jersey 07677.

 

WHEREAS,
Cephalon controls and has the right to grant rights under certain patent rights
relating to Cephalon’s proprietary pharmaceutical product known as ACTIQ®, a
drug indicated for the treatment of breakthrough cancer pain, and is the
assignee or exclusive licensee of certain rights in, and has the right to grant
sublicenses under certain patent rights relating to ACTIQ®;

 

WHEREAS,
Cephalon is developing a substantially sugar-free formulation of ACTIQ® (“ACTIQ
SF”) and controls and has the right to grant rights under certain patent
rights relating to ACTIQ SF; and

 

WHEREAS, in
order to resolve certain antitrust concerns raised by the Federal Trade
Commission (the “Commission”) in connection with Cephalon’s acquisition
of CIMA LABS INC. (“CIMA”), and as a condition of Commission approval of
such acquisition, Cephalon entered into an Agreement Containing Consent Order (“Consent
Agreement”), which required Cephalon to enter into a license and supply
agreement with Barr to develop, manufacture and market generic versions of
ACTIQ® and ACTIQ SF, including contingent supply of both products;

 

WHEREAS, on
July 7, 2004, Cephalon and Barr entered into that certain License and Supply
Agreement (the “Existing License and Supply Agreement”) pursuant to
which Cephalon granted to Barr certain rights and licenses and assumed certain
supply and other obligations, as required under the Consent Agreement;

 

WHEREAS, in
connection with Barr’s submission of ANDA No. 77-312 to the Food and Drug
Administration (the “FDA”) under Section 505(j) of the U.S. Federal
Food, Drug, and Cosmetic Act (21 U.S.C. § 355(j)), Cephalon filed suit against
Barr in an action captioned Cephalon, Inc.,
et al. v. Barr Laboratories,
Inc., Civil Action No. 05-29 (JJF), in the United States District
Court for the District of Delaware, and Barr answered the complaint by denying
infringement, by asserting affirmative defenses of noninfringement and
invalidity, and by filing counterclaims for declaratory judgment of
noninfringement and invalidity;

 

WHEREAS,
simultaneously with the execution of this Agreement, Cephalon and Barr have
entered into that certain Actiq Settlement Agreement pursuant to which the
Parties have resolved and settled the claims described above; and

 

**Portions of the
Exhibit have been omitted and have been filed separately pursuant to an
application for confidential treatment filed with the Securities and Exchange
Commission pursuant to Rule 24b-2 under the Securities Exchange Act of
1934, as amended.

 

 

WHEREAS, in
connection with such settlement, and without amending or modifying any terms
and conditions of the Existing License and Supply Agreement, Cephalon wishes to
grant to Barr, and Barr wishes to receive, the additional rights and licenses
set forth in this Agreement, subject to the terms and conditions hereof.

 

NOW,
THEREFORE, in consideration of the foregoing and for good and valuable
consideration, the receipt and adequacy of which is hereby affirmed, and
intending to be legally bound hereby, the Parties hereby agree as follows:

 

1.             DEFINITIONS

 

All
capitalized terms not defined herein shall have the respective meanings
ascribed to such terms in the Existing License and Supply Agreement. The
following terms shall have the following respective meanings:

 

1.1           “ACTIQ
Licensed Product” means both “ACTIQ Licensed Product” and “ACTIQ SF
Licensed Product” as each of those terms are defined in the Existing License
and Supply Agreement.

 

1.2           “Affiliate”
means any corporation, partnership, joint venture or firm which controls, is
controlled by or under common control with a specified person or entity. For
purposes of this definition, “control” shall be presumed to exist if one of the
following conditions is met: (a) in the case of corporate entities, direct or
indirect ownership of at least fifty percent (50%) of the stock or shares
having the right to vote for the election of directors and (b) in the case of
non-corporate entities, direct or indirect ownership of at least fifty percent
(50%) of the equity interest with the power to direct the management and policy
decisions of such non-corporate entities.

 

1.3           “Barr”
means Barr Laboratories, Inc., a corporation organized and existing under the
laws of the State of Delaware, with its principal place of business at 400
Chestnut Ridge Road, Woodcliff Lake, New Jersey 07677, and its directors,
officers, employees, agents and representatives, predecessors, successors, and
assigns; its subsidiaries, divisions, groups, and the respective directors,
officers, employees, agents and representatives, successors, and assigns of
each.

 

1.4           “Cephalon”
means Cephalon, Inc., a corporation organized and existing under the laws of
the State of Delaware, with its principal place of business at 41 Moores Road,
Frazer, Pennsylvania, and its directors, officers, employees, agents and
representatives, predecessors, successors, and assigns; its subsidiaries,
divisions, groups, and the respective directors, officers, employees, agents
and representatives, successors, and assigns of each.

 

1.5           “Exclusivity
Period” means the period from December 6, 2006 through the Existing License
Effective Date.

 

**Portions of the
Exhibit have been omitted and have been filed separately pursuant to an
application for confidential treatment filed with the Securities and Exchange
Commission pursuant to Rule 24b-2 under the Securities Exchange Act of
1934, as amended.

 

2

 

1.6           “Existing
License Effective Date” means the date on which the license granted under
Section 2.1(a) (i), (ii) and (iv) of the Existing License and Supply Agreement
becomes effective under Section 2.1(b) of the Existing License and Supply
Agreement.

 

1.7           “Generic
Subject OTFC Product” means any Subject OTFC Product that is not marketed
under the ACTIQ® mark.

 

1.8           “Licensed
Patents” means the (a) ACTIQ Patent Rights, including those patents owned
by Cephalon and identified in Exhibits C and E to the Existing License and
Supply Agreement, (b) ACTIQ Patent Rights licensed to Cephalon, including those
identified in Exhibit D to the Existing License and Supply Agreement, and (c)
ACTIQ SF Patent Rights, including those patents owned by Cephalon and
identified in Exhibit F to the Existing License and Supply Agreement.

 

1.9           “Net
Profits” shall mean the gross receipts derived in arms-length transactions
from the sale of ACTIQ Licensed Product in the United States by Barr (or by its
Affiliates), to independent third parties in the United States, less the sum of
the following items:

 

(a)           Import,
export, excise and sales taxes and custom duties paid or allowed by the selling
party and any other governmental charges imposed upon the production,
importation, use or sale of ACTIQ Licensed Product by Barr and/or its
Affiliates;

 

(b)           Credit
for returns, refunds, rebates and allowances, or trades to customers for
returned or recalled ACTIQ Licensed Product;

 

(c)           Trade,
quantity and cash discounts actually allowed;

 

(d)           Transportation,
freight and insurance allowances;

 

(e)           Rebates
to wholesalers, administrative fees in lieu of rebates paid to managed care and
other similar institutions, chargebacks and retroactive price adjustments,
including Shelf Stock Adjustments, and any other similar allowances which
effectively reduce the net selling price; and

 

(f)            The
purchase price paid to Cephalon for ACTIQ Licensed Product pursuant to Section
6.1(d) of the Existing License and Supply Agreement, as incorporated herein by
Section 4.1(c) of this Agreement, or Barr’s direct and reasonable costs of
making ACTIQ Licensed Product, as applicable, which shall in no event be
greater than Barr’s costs of purchasing ACTIQ Licensed Product from Cephalon
pursuant to Section 6.1(d) of the Existing License and Supply Agreement as so
incorporated.

 

Gross and Net
Profits shall be calculated according to US GAAP. Sales or transfers between or
among a Party and its Affiliates shall be excluded from the computation of Net
Profits except where such Affiliates are end users, but Net Profits shall
include the subsequent final sales to third parties by such Affiliates.

 

Where (i)
ACTIQ Licensed Product is sold as one of a number of items without a separate
price; or (ii) the consideration for the ACTIQ Licensed Product shall include
any non-cash element; or (iii) the ACTIQ Licensed Product shall be transferred
in any manner other than

 

**Portions of the
Exhibit have been omitted and have been filed separately pursuant to an
application for confidential treatment filed with the Securities and Exchange
Commission pursuant to Rule 24b-2 under the Securities Exchange Act of
1934, as amended.

 

3

 

an invoiced sale, the gross
sales applicable to any such transaction shall be deemed to be the selling
party’s average gross sales in the United States for the applicable quantity of
ACTIQ Licensed Product during the calendar quarter. If there are no independent
gross sales of ACTIQ Licensed Product in the United States at that time, then
Barr and Cephalon shall mutually agree on a surrogate measure to be used in
lieu thereof.

 

1.10         “Party”
or “Parties” means a party, or the parties, to this Agreement.

 

1.11         “Pediatric
Exclusivity” means exclusivity obtained in accordance with the requirements
of Section 505(a) of the U.S. Federal Food, Drug, and Cosmetic Act (21 U.S.C. §
355(a)).

 

1.12         “Shelf
Stock Adjustment” means the customary practice of providing a purchaser of
ACTIQ Licensed Product an adjustment to the net purchase price for on-hand
inventory in response to an offer from a supplier of a competing Generic
Subject OTFC Product,.

 

1.13         “Subject
OTFC Product” means [**].

 

2.             GRANT OF RIGHTS

 

2.1           Exclusivity;
License. If, and only if, the Existing License Effective Date has not
occurred on or prior to December 6, 2006, then the following terms and
conditions shall apply:

 

(a)           Exclusive
Authorized Generic. During the Exclusivity Period, Cephalon shall not
market or sell, nor shall it license or authorize any entity other than Barr to
market or sell, Generic Subject OTFC Products in the United States.

 

(b)           Grant
of Licenses. Cephalon grants to Barr an irrevocable, non-transferable,
exclusive (even as to Cephalon) license, without the right to sublicense, to
develop, use, sell, offer for sale, distribute or have distributed, promote or
advertise, import or have imported ACTIQ Licensed Product solely in the United
States and solely during the Exclusivity Period, in each case, under:

 

(i)            the
Licensed Patents; and

 

(ii)           (A)
the U.S. Trademark Registration No. 2,622,734 as needed for a single dose
entity of an ACTIQ Licensed Product (B) any trademark or trade dress covering
the size, shape and color of a single dose entity of ACTIQ Licensed Product, to
the extent Barr desires; and (C) the appearance, structure, textual or
graphical content and/or color scheme of any labeling, dosing information,
product inserts, Skeeper or other materials, and any Risk Management Program,
as may be necessary for the marketing and sale of ACTIQ Licensed Product.

 

The Parties acknowledge Barr’s rights to
certain manufacturing know-how, technology and material with respect to ACTIQ
Licensed Product under Sections 2.1(a)(iii) and 2.2(a)(ii) of the Existing
License and Supply Agreement entered into effect as of July 7, 2004.

 

**Portions of the
Exhibit have been omitted and have been filed separately pursuant to an
application for confidential treatment filed with the Securities and Exchange
Commission pursuant to Rule 24b-2 under the Securities Exchange Act of
1934, as amended.

 

4

 

(c)           Pediatric
Exclusivity. If, and only if, the Existing License Effective Date has not
occurred on or prior to December 6, 2006, then, during the Exclusivity Period,
Cephalon shall grant a license to Barr with respect to any such Pediatric
Exclusivity that may exist during such period with respect to ACTIQ or ACTIQ SF.
Cephalon shall reasonably cooperate with Barr in notifying the FDA that
Cephalon has waived Pediatric Exclusivity with respect to Barr, including, but
not limited to, by filing with the FDA a dated and executed copy of the letter
attached as Exhibit H to the Existing License and Supply Agreement.

 

(d)           Expiration.
Barr’s rights under Section 2.1(a), 2.1(b) and 2.1(c) shall expire as of the
Existing License Effective Date. It is understood and agreed by the Parties that
the terms of the FTC Consent and the Existing License and Supply Agreement may
provide rights and obligations in addition to those set forth herein, and the
grant or expiration of rights under this Section 2.1 shall not be deemed to
change, modify, amend or supersede any such other rights or obligations.

 

(e)           Reservation.
For purposes of clarity, nothing in this Section 2.1 shall be deemed to limit
or prevent Cephalon or its Affiliates or their respective licensees from
developing, making, having made, using, selling, offering for selling,
distributing or having distributed, promoting or advertising, importing or
having imported ACTIQ or ACTIQ SF under the ACTIQ® mark.

 

3.             ROYALTIES

 

3.1           Royalty.
Barr shall pay Cephalon a royalty of [**] ACTIQ Licensed Product sold by Barr
or its Affiliates during the Exclusivity Period.

 

3.2           Reporting.
Not later than [**], Barr shall deliver to Cephalon a statement setting forth
the Net Profits generated during the Exclusivity Period, itemized in such
manner as may be reasonably requested by Cephalon and containing such sales
information as Cephalon may reasonably require.

 

3.3           Payment.
Barr shall pay to Cephalon all royalties due hereunder on or before [**]. All
payments hereunder shall be made by check or wire transfer to such bank and
account as Cephalon may from time to time designate in writing. All payments
shall be made in U.S. Dollars. All payments due hereunder but not paid on the
due date shall bear interest (in U.S. Dollars) at the rate which is the lesser
of: (a) [**]; and (b) the maximum lawful interest rate permitted under
applicable law. No part of any amount payable to Cephalon hereunder may be
reduced due to any counterclaim, set-off, adjustment or other right which Barr
might have against Cephalon or any of its Affiliates.

 

3.4           Annual
True-Up. Within [**] after the end of each calendar year during the Term,
Barr shall perform a “true up” reconciliation (and shall provide Cephalon with
a written report of such reconciliation) of the deductions specified in Section
1.9 (a), (b) (excluding returns), (c), (d), (e) and (f). The reconciliation
shall be based on actual cash paid or credits

 

**Portions of the
Exhibit have been omitted and have been filed separately pursuant to an
application for confidential treatment filed with the Securities and Exchange
Commission pursuant to Rule 24b-2 under the Securities Exchange Act of
1934, as amended.

 

5

 

issued and estimates related to
the reported invoiced sales, but not yet issued for such items. If the
foregoing reconciliation report shows either an underpayment or an overpayment
to Barr, then Cephalon or Barr (respectively) shall pay the amount of the
difference to the other within [**] of the date of delivery of such report.

 

3.5           Final
Returns True-Up. Within [**] of the termination or expiration of this
Agreement, Barr shall perform a “true-up” reconciliation (and shall provide
Cephalon with a written report of such reconciliation) of the deductions for
returns specified in Section 1.9 (b). The
reconciliation shall be based on actual cash paid or credits issued for
returns, through the [**] period following the termination or expiration. If
the foregoing reconciliation report shows either an underpayment or an
overpayment to Barr, then Cephalon or Barr (respectively) shall pay the amount
of the difference to the other within [**] of the date of delivery of such
report.

 

3.6           Right
to Audit. Barr agrees to make and keep full and accurate books and records
in sufficient detail to enable royalties payable to Cephalon hereunder to be
determined. Cephalon shall have the right to appoint an independent accounting
firm, reasonably acceptable to Barr (“Independent Auditor”), to make a
special audit of the books and records of Barr that pertain to [**]. The
Independent Auditor shall treat as confidential all information obtained in
such audit and shall not disclose the same to Cephalon or others, except that
the Independent Auditor may disclose to Cephalon such information as may pertain
to [**]. Upon ten (10) days prior written notice to Barr, the Independent
Auditor shall have full access to the books and records of Barr necessary [**].
[**]. If it is determined following such audit that [**], then [**].

 

4.             OTHER PROVISIONS

 

4.1           The
following provisions of the Existing License and Supply Agreement shall be
deemed to be incorporated herein, but only to the extent that such provisions
apply with respect to the subject matter of this Agreement:

 

(a)           Section
4.1(a) (except that, for purposes of this Agreement, such provision shall apply
with respect to infringement of any ACTIQ Patent Rights or ACTIQ SF Patent
Rights to which Barr has an effective license under this Agreement);

 

(b)           Section
5.1 (except that, for purposes of this Agreement, the reference to “License
Effective Dates” shall be deemed to refer to the first day of the Exclusivity
Period, and excluding subsection (iii) of Section 5.1);

 

(c)           Section
6.1 (except that, for purposes of this Agreement, (i) each reference to “30
days prior to” in the first paragraph of Section 6.1 shall be deemed to refer
to 30 days prior to the start of the Exclusivity Period, (ii) Barr’s rights
under such provision shall expire as of the expiration of the Exclusivity
Period, (iii) the forecasts from Barr referenced in Section 6.1(e) shall be due
starting [**] prior to the start of the Exclusivity Period, (iv)
cross-references shall be deemed to refer to the corresponding provisions of
this Agreement to the extent included

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.

 

6

 

or incorporated herein; and (v)
the quality agreement described in Section 6.1(n) shall be negotiated and
agreed at least [**] prior to the start of the Exclusivity Period);

 

(d)           Sections
6.2 through 6.4;

 

(e)           Section
7.2;

 

(f)            Section
8.1

 

(g)           Section
8.2 (except that, for purposes of this Agreement, (i) the reference to “Section
2.1” and “Section 2.2” shall be deemed to be a reference to Section 2.1 of this
Agreement, and (ii) references to the “ACTIQ Patent Rights License Effective
Date” the “ACTIQ SF Patent Rights License Effective Date” and the “respective
License Effective Date” shall be deemed to be references to the first day of
the Exclusivity Period);

 

(h)           Section
8.3;

 

(i)            Article
9; and

 

(j)            Article
10 (except that (i) cross-references shall be deemed to refer to the
corresponding provisions of this Agreement to the extent included or
incorporated herein, and (ii) in no event shall either Party be entitled to, or
required to provide, any duplicative remedy, indemnification or recovery
arising from the same act, omission, fact or circumstance);

 

provided, however,
that the terms and conditions of this Article 4 shall apply herein as described
above if, and only if, the Existing License Effective Date has not occurred on
or prior to December 6, 2006.

 

4.2           Supply
Terms. The provisions of Sections 6.1 through 6.4 of the Existing License
and Supply Agreement, as modified and incorporated herein pursuant to Section
4.1 above, shall govern the Parties’ rights and obligations with respect to the
supply of ACTIQ Licensed Product by Cephalon to Barr for sale by Barr during
the Exclusivity Period.

 

5.             TERM

 

5.1           Term.
The term of this Agreement shall commence as of the Effective Date and shall
remain in effect until the Existing License Effective Date.

 

5.2           Survival
of Rights and Terms. Termination or expiration of this Agreement shall not
affect any accrued rights of either Party. The terms and conditions of Articles
3 and 6 and Sections 4(f) and 4(g) of this Agreement shall survive the
expiration or termination of this Agreement for any reason.

 

**Portions of the
Exhibit have been omitted and have been filed separately pursuant to an
application for confidential treatment filed with the Securities and Exchange
Commission pursuant to Rule 24b-2 under the Securities Exchange Act of
1934, as amended.

 

7

 

6.             GENERAL

 

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

 

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

 

6.3           Entire
Agreement. This Agreement and the Actiq Settlement Agreement dated February
1, 2006 between the Parties contain the entire agreement of the Parties
regarding the subject matter hereof and thereof and supersede all prior
agreements, understandings or conditions (whether oral or written) regarding
the same; provided, however, that nothing in this Agreement shall be
deemed to change, amend, modify, supplement or supersede any term or condition
of the Existing License and Supply Agreement, which agreement shall remain in
full force and effect in accordance with its terms. In the event of any
conflict between the terms and conditions of the Existing License and Supply
Agreement and this Agreement, the terms and conditions of the Existing License
and Supply Agreement shall govern. This Agreement may not be changed, modified,
amended or supplemented except by a written instrument signed by both Parties.

 

6.4           Assignment.
This Agreement and the rights established hereunder may not be assigned or
transferred by either Party without the prior written consent of the other
Party; provided, however, that prior written consent shall not be
required in the case of a decision on the part of Barr to discontinue the sale
of the ACTIQ Licensed Product and to assign all of Barr’s rights thereto and
obligations therefor under this Agreement to a third party; or in the case of a
sale or transfer of all or substantially all of the assets of the assigning
Party or a merger of the assigning Party in which the holders of such Party’s
capital stock prior to such merger do not hold a majority of the capital stock
immediately following such merger. In the event that this Agreement is
assigned, it shall be binding upon and inure to the benefit of the Parties and
their respective successors and assigns.

 

6.5           Independent
Contractors. The Parties are independent contractors under this Agreement. Nothing
contained in this Agreement is to be construed so as to create a joint venture
or to constitute Cephalon and Barr as partners, agents or employees of the
other, including with respect to this Agreement. Neither Party shall have any
express or implied right or authority to assume or create any obligations on
behalf of, or in the name of, the other Party or to bind the other Party to any
contract, agreement or undertaking with any third party. Each Party is solely
responsible for the payment of any and all taxes arising from the existence or
operation of its business or from the performance of its obligations hereunder
including, without limitation, income taxes, withholding taxes, employee
payroll and social security and welfare

 

**Portions of the
Exhibit have been omitted and have been filed separately pursuant to an
application for confidential treatment filed with the Securities and Exchange
Commission pursuant to Rule 24b-2 under the Securities Exchange Act of
1934, as amended.

 

8

 

taxes which may be imposed upon
said Party in accordance with applicable laws. Similarly, each Party is solely
responsible for satisfying any and all obligations which may arise from its
employment of any persons.

 

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

 

6.7           Notices
and Reports. All notices, consents or approvals required by this Agreement
shall be in writing and sent by express courier, certified or registered air
mail, postage prepaid or by facsimile or cable (confirmed by such certified or
registered mail) to the Parties at the following addresses or such other
addresses as may be designated in writing by the respective Parties. Notices
shall be deemed effective on the date of mailing.

 

If to Cephalon:

 

Cephalon, Inc.

41 Moores Road

P.O. Box 4011

Frazer, Pennsylvania 19355

Attention: 
Senior Vice President & General Counsel

Facsimile: 
(610) 344-7563

 

If to Barr:

 

Barr Laboratories, Inc.

400 Chestnut Ridge Road

Woodcliff Lake, NJ 07677

Attention: 
President

Facsimile: 
(201) 930-3335

 

6.8           Disputes;
Applicable Law

 

(a)           Governing
Laws. This Agreement shall be governed by and interpreted in accordance
with the substantive laws of the State of Delaware, United States of America.

 

(b)           Dispute
Resolution. In the event that any dispute arising between the Parties
relating to this Agreement cannot be resolved by their respective staffs, said
dispute shall be referred promptly to the Chief Executive Officer of Cephalon
and the Chief Executive Officer of Barr, who shall make a good faith effort to
resolve the matter within thirty (30) days from the date of any such referral. In
the event that the Parties still cannot amicably resolve any such dispute or
claim, then the Parties shall be free to seek any remedy available at law or in
equity.

 

6.9           Force
Majeure. Either Party’s failure to perform its obligations hereunder
(except to make payments hereunder) shall be excused to the extent and for the
period of time such

 

**Portions of the
Exhibit have been omitted and have been filed separately pursuant to an
application for confidential treatment filed with the Securities and Exchange
Commission pursuant to Rule 24b-2 under the Securities Exchange Act of
1934, as amended.

 

9

 

nonperformance is caused by an
event of force majeure, including but not limited to war, invasion, fire,
explosion, flood, riot, strikes, acts of God, delays or defaults of carriers,
energy shortage, failure or curtailment in Cephalon’s usual sources of supply,
acts of government (other than acts prohibiting the sale of ACTIQ Licensed
Product resulting from Cephalon’s failure to supply Cephalon Supplied Product
in compliance with the specifications or cGMPs (i.e., failure to comply with 21
C.F.R. §§ 210 and 211), Cephalon’s violations of EPA laws, OSHA
non-compliance of Cephalon (including facilities) or Cephalon’s violations
under 21 C.F.R. § 11), its agencies or instrumentalities, or contingencies
or causes beyond such Party’s reasonable control.

 

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

 

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

 

**Portions of the
Exhibit have been omitted and have been filed separately pursuant to an
application for confidential treatment filed with the Securities and Exchange
Commission pursuant to Rule 24b-2 under the Securities Exchange Act of
1934, as amended.

 

10

 

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

 

 

	
  BARR LABORATORIES, INC.

  	
  CEPHALON, INC.

  
	
   

  	
   

  
	
  By:

  	
  /s/ Paul M. Bisaro

  	
   

  	
  By:

  	
  /s/ Frank Baldino, Jr., Ph.D

  	
   

  
	
   

  	
   

  	
   

  
	
  Printed Name:

  	
  Paul M. Bisaro

  	
   

  	
  Printed Name:

  	
  Frank Baldino, Jr., Ph.D

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  President

  	
   

  	
  Title:

  	
  Chairman and CEO

  	
   

  
															

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.

 

11

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