Document:

Exhibit 10.7

 

DISTRIBUTION AGREEMENT

 

DISTRIBUTION AGREEMENT, dated as of May 2, 2005, by and between Amphastar Pharmaceuticals, Inc., a Delaware corporation (“Seller”) and Andrx Pharmaceuticals, Inc., a Florida corporation (“Purchaser”).

 

WHEREAS, Seller desires to appoint Purchaser as Seller’s exclusive distributor of the Product to Purchaser Customers in the Territory and Purchaser desires to accept such appointment, all pursuant to the terms of this Agreement.

 

NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements hereinafter set forth, the parties hereto agree as follows:

 

ARTICLE 1

 

DEFINITIONS

 

As used throughout this Agreement and any exhibits, schedules and attachments hereto, each of the following terms shall have the respective meaning set forth below:

 

1.1                               “Act” means the Federal Food, Drug, and Cosmetic Act, as amended.

 

1.2                               “Adverse Event” means any adverse event associated with the use of the Product in humans, whether or not considered drug-related, including an adverse event occurring in the course of the use of the Product in professional practice, in studies, in investigations or in tests or an adverse event occurring from Product overdose (whether accidental or intentional), from Product abuse, or from Product withdrawal, as well as any toxicity, sensitivity, failure of expected pharmacological action, or laboratory abnormality that is, or is thought by the reporter thereof to be, serious or associated with relevant clinical signs or symptoms.

 

1.3                               “Adverse Resolution” means any resolution of the Lawsuit, whether by settlement, summary judgment or trial court decision in the U.S. District Court, or as a result of any appeal, subsequent review or reconsideration of such summary judgment or trial court decision, that prevents, enjoins, materially restricts or imposes royalties on sales of or otherwise makes commercially unreasonable the manufacture, use, sale or offer to sell of the Product to Purchaser Customers in the Territory.

 

1.4                               “Affiliate” of a party means any Person directly or indirectly controlled by, controlling or under common control with such party. “Control” means the legal power to direct or cause the direction of the general management or policies of a Person through more than fifty percent (50%) of the ownership of voting securities, by contract or by other means.

 

1.5                               “ANDA” means an Abbreviated New Drug Application filed with the FDA and any amendments or supplements thereto.

 

1.6                               “Anda” shall have the meaning given in Section 2.2.

 

1.7                               “Applicable Laws” means all applicable laws, rules, and regulations that apply to the development, manufacture, supply, marketing, sale or distribution of the Product in the Territory, or the performance of either party’s obligations under this Agreement, including the Act, cGMP and other current regulations promulgated by the FDA or any other governmental agency.

 

1.8                               “At-Risk Launch” shall have the meaning given in Section 2.3.

 

1.9                               “At-Risk Launch Notice” shall have the meaning given in Section 2.3.

 

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

 

1.10                        “Authorized Generic Product” means a therapeutically equivalent, bioequivalent and legally substitutable generic version of the brand-name product Lovenox® (including the brand name product sold as a generic) that is sold and distributed in the Territory by any one or more of Aventis Pharma S.A., Aventis Pharmaceuticals, Inc., their respective Affiliates, successors or assigns and/or licensees of any of the foregoing.

 

1.11                        “Bankruptcy Code” shall have the meaning given in Section 8.2.

 

1.12                        “cGMP” means the current Good Manufacturing Practices regulations of the FDA (as in effect from time to time) in 21 C.F.R. pts. 210 and 211.

 

1.13                        “Commercially Reasonable Efforts” means, with respect to each party, efforts and resources normally used by such party to, in the case of Seller, develop, manufacture, package and supply or, in the case of Purchaser, market, sell and distribute, a generic pharmaceutical product owned by it or to which it has rights, which is of similar overall market potential at a similar stage in its product lifecycle, taking into account, inter alia, the competitiveness of the marketplace, the proprietary position of the product, the profitability of the product and other relevant factors. The parties acknowledge that the level of effort and resources may change at different times during the product life cycle of the Product.

 

1.14                        “Compensatory Payments” shall have the meaning given in Section 2.3.

 

1.15                        “Competitive Product” means, other than the Product or an Authorized Generic Product, a therapeutically equivalent, bioequivalent and legally substitutable generic version of the brand-name product Lovenox®, which generic version is in the same dosage and delivery form, has the same active ingredient and the same strength and is for the same indication as the Product, that is sold and distributed in commercial quantities in the Territory by any Person, other than Purchaser or its Affiliates, licensees or assigns.

 

1.16                        “Confidential Information” shall have the meaning given in Article 14.

 

1.17                        “Damages” shall have the meaning given in Section 17.1.

 

1.18                        “Effective Date” means the date of this Agreement.

 

1.19                        “Favorable Resolution” means a resolution of the Lawsuit, whether by settlement, summary judgment, trial court decision in the U.S. District Court, or otherwise, that does not prevent, enjoin, materially restrict or impose royalties on sales of or otherwise make commercially unreasonable the manufacture, use, sale or offer to sell of the Product to Purchaser Customers in the Territory, in each case irrespective of any rights of appeal, subsequent review or reconsideration of the resolution or of the outcome of such appeal, review or reconsideration.

 

1.20                        “FDA” means the U.S. Food and Drug Administration, and any successor or replacement agency thereto.

 

1.21                        “Final Favorable Resolution” means a Favorable Resolution that is not subject to any rights of appeal, subsequent review or reconsideration by the applicable governmental authority having competent jurisdiction over the Lawsuit.

 

1.22                        “First Commercial Sale” means, as the context requires, the first date on which Purchaser sells (i.e., the date of shipment) the Product in commercial quantities to a third party, or the first date on which Seller sells (i.e., the date of shipment) the Product in commercial quantities to a third party pursuant to a Seller Launch.

 

1.23                        “Forecast” shall have the meaning given in Section 5.2.

 

1.24                        “Force Majeure Event” shall have the meaning given in Article 12.

 

1.25                        “GAAP” means U.S. generally accepted accounting principles.

 

1.26                        “Gross Profit” means Net Sales of Purchaser from sales of Product during a calendar quarter less the aggregate Transfer Price paid for such Product. In the event for any calendar quarter the above calculation results in a negative number, “Gross Profit” shall be deemed zero for such calendar quarter.

 

1.27                        “Gross Profit Split” shall have the meaning given in Section 4.2.

 

1.28                        “Initial Purchase Order” shall have the meaning given in Section 5.1.

 

2

 

1.29                        “Label”, “Labeled” or “Labeling” means all labels and other written, printed or graphic matter upon (i) any packaging, container or wrapper used with the Product, or (ii) any written material accompanying the Product, including package inserts; or, as the context requires, the act of applying and/or using the same.

 

1.30                        “Labor Costs” shall have the meaning given in Section 4.1

 

1.31                        “Lawsuit” means (i) the lawsuit captioned Aventis Pharma S.A. and Aventis Pharmaceuticals, Inc. v. Amphastar Pharmaceuticals, Inc. and Teva Pharmaceuticals USA, Inc. under Case No. 03-CV-887 RT (SGLx) in the U.S. District Court in the Central District of California Eastern Division and (ii) any related or subsequent U.S. trial court action pertaining to the same subject matter as the lawsuit described in clause (i) above, brought by Aventis Pharma S.A. and Aventis Pharmaceuticals, Inc. against Seller prior to Seller delivering a Launch Notice, seeking to obtain a Adverse Resolution.

 

1.32                        “Launch Notice” shall have the meaning given in Section 2.3.

 

1.33                        “Launch Quantities” shall have the meaning given in Section 5.1.

 

1.34                        “Maximum Compensatory Payments” shall have the meaning given in Section 2.3.

 

1.35                        “Maximum Annual Product Units” shall have the meaning given in Section 5.6.

 

1.36                        “Minimum Annual Product Units” shall have the meaning given in Section 8.4.

 

1.37                        “Net Sales” means, with respect to the Product, the gross revenues derived from the sale of the Product by Purchaser or, with respect to the determination of the Compensatory Payments, by Seller, and their respective Affiliates, licensees and assignees to independent third parties, minus normal and customary (i) early pay incentives (i.e., cash discounts), (ii) trade discounts, quantity discounts, trade rebates, chargebacks, governmental rebates, such as Medicaid, retroactive price adjustments (i.e., shelf stock adjustments) and cash incentive payments, (i.e., slotting allowances), (iii) Product returns, (iv) freight (inbound and outbound), (v) marketing allowances, (vi) bad debt allowance which shall be deemed to be [***] of Net Sales for the first twelve months after First Commercial Sale and [***] of Net Sales for periods thereafter and (vii) other normal and customary deductions utilized to calculate net sales, in each case to the extent applicable to the sale of such Product. Marketing allowances shall (i) in the case of sales by Purchaser, be the actual marketing expenses but not in excess of [***] of the applicable Net Sales and (ii) in the case of sales by Anda, be deemed to be [***] of the applicable Anda Net Sales of Product. The elements of Net Sales as described above shall be determined in accordance with GAAP, applied on a basis consistent with the annual audited financial statements of Purchaser’s parent corporation or Seller, as the context requires.

 

1.38                        “Non-At-Risk Launch” shall have the meaning given in Section 2.3.

 

1.39                        “Overdue Interest Amount” means the prime rate of interest quoted as such in The Wall Street Journal on the first business day of each month during which an amount is overdue under this Agreement, plus 5%, calculated on an annual basis, not to exceed the maximum rate permitted by Applicable Law.

 

1.40                        “Packaging” means all primary and/or bulk (as applicable) containers, Labels, shipping cases or any other like matter used in packaging or accompanying the Product; or as the context requires, the act of applying and/or using the same.

 

1.41                       “Person” means an individual, corporation, partnership, limited liability company or other entity.

 

1.42                        “Product” means Seller’s generic version of the enoxaparin sodium injectable product, in 30 mg, 40 mg, 60 mg, 80 mg, 100 mg, 120 mg, and/or 150 mg strengths, to the extent approved under ANDA 76-684, that is therapeutically equivalent and bioequivalent to, and legally substitutable for, the brand-name product Lovenox®.

 

1.43                        “Product Liability Claims” means any claim, action or proceeding based on personal injury, death or other similar adverse effect to humans caused by (or alleged to be caused by) use of the Product.

 

1.44                        “Product Warranty” shall have the meaning given in Section 16.1.

 

1.45                        “Purchase Orders” shall have the meaning given in Section 5.3.

 

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

3

 

1.46                        “Purchaser Customers” means, in each case to the extent located in the Territory, (a) chain retail pharmacies and stores, (b) independent retail pharmacies, (c) grocery and food stores, (d) mail order pharmacies, (e) certain other types of customers not included within items (a)-(d) that are pre-approved in writing by Seller pursuant to an amendment to this Agreement, and (f) drug wholesalers (solely to the extent allocated for resale to customers included in items (a)—(e) above). Notwithstanding anything herein to the contrary, Seller expressly retains all rights to all current and future customers and markets for the Product, other than the customers expressly included in items (a)-(f) above; and, without limiting the foregoing and by way of clarification, Seller’s retained rights shall expressly include the right to sell Product to drug wholesalers so long as Seller does not supply, sell or distribute Product to drug wholesalers for resale to any customer included in items (a)-(e) above.

 

1.47                        “Purchaser Recall” shall have the meaning given in Section 11.3.2.

 

1.48                        “Purchaser Trademarks” shall have the meaning given in Section 6.3.

 

1.49                        “Raw Material Costs” shall have the meaning given in Section 4.1.

 

1.50                        “Seller Launch” shall have the meaning given in Section 2.3.

 

1.51                        “Specifications” means the specifications for the composition, manufacture, Packaging and/or quality control of the Product as described in the ANDA for the Product, as the same may be supplemented from time to time as expressly provided in this Agreement.

 

1.52                        “Territory” means the United States of America and its territories, including the Commonwealth of Puerto Rico.

 

1.53                        “Third Party Infringement Claim” shall have the meaning given in Section 17.4.

 

1.54                        “Transfer Price” shall have the meaning given in Section 4.1.

 

1.55                        “Unit Price” shall have the meaning given in Section 4.1.

 

ARTICLE 2

 

APPOINTMENT; SUPPLY AND PURCHASE OF PRODUCT

 

2.1                               Appointment; Agreement to Supply; Development.

 

2.1.1                     Subject to the terms and conditions of this Agreement, Seller hereby appoints Purchaser as its exclusive distributor of the Product for sale and distribution to Purchaser Customers in the Territory, and Purchaser hereby accepts such appointment. Subject to the terms of this Agreement, Seller shall use its Commercially Reasonable Efforts to manufacture and supply to Purchaser its requirements of the Product for sale and distribution to Purchaser Customers in the Territory in accordance with Purchaser’s Purchase Orders as provided herein. Seller shall not, and shall cause its Affiliates not to, manufacture or supply the Product to Purchaser Customers in the Territory. Notwithstanding anything herein to the contrary, the parties acknowledge and agree that Seller retains all rights to develop, manufacture, supply, sell, distribute, market, promote and otherwise commercialize, directly or through Seller’s Affiliates or third parties, Product to customers other than Purchaser Customers in the Territory; and without limiting the foregoing and by way of clarification, Seller’s retained rights shall expressly include the right to sell Product to drug wholesalers or any other Persons so long as Seller shall not supply, sell or distribute Product to drug wholesalers or any other Person for resale to any customer included in items (a)-(e) of Section 1.46.

 

2.1.2                     Seller hereby represents that it has filed with the FDA ANDA, File No. 76-684, for the Product. Seller shall, at its expense, use Commercially Reasonable Efforts to prosecute the ANDA and to obtain approval from the FDA of the ANDA. Seller shall promptly upon its receipt of same deliver to Purchaser written notice certifying that Seller has received final FDA approval of the Product’s ANDA. The ANDA and all other regulatory approvals related to the manufacture and supply of the Product shall be in Seller’s name and owned exclusively by Seller. In addition, Seller shall, at its expense, use Commercially Reasonable Efforts to obtain a Favorable Resolution to enable FDA approval of the Product’s ANDA and the launch of the Product in the Territory. Notwithstanding the foregoing, nothing herein shall constitute a guarantee or warranty from Seller that the ANDA for the Product will be approved by the FDA, or, if the Product ANDA is approved, any market exclusivity will be awarded, or any other regulatory approvals will be obtained by Seller or that a Favorable Resolution will be obtained. Nothing herein shall limit Purchaser’s right to terminate this Agreement pursuant to its terms.

 

4

 

2.2                               Agreement to Purchase.

 

2.2.1                     Subject to the terms of this Agreement, Purchaser shall purchase exclusively from Seller all of Purchaser’s requirements for the Product for marketing, sale and distribution to Purchaser Customers in the Territory. Purchaser shall use Commercially Reasonable Efforts to market, sell and distribute the Product throughout the Territory to Purchaser Customers. Subject to the foregoing, Purchaser does not make any guaranty or warranty as to any minimum level of Gross Profits or Net Sales. Nothing herein shall limit each party’s right to terminate this Agreement pursuant to its terms, including Section 8.4. Unless otherwise consented to in writing by Seller, Purchaser shall not offer the Product as a loss leader, whether alone or in connection with any other product or sell the Product in combination or otherwise bundle the Product with other products in any fashion which decreases the revenue that would otherwise be attributable to the Product had it not been sold as a loss leader or in combination or otherwise bundled. Subject to the foregoing and Purchaser performing its obligations hereunder (including its obligation to use Commercially Reasonably Efforts to sell and distribute the Product), launch timing, pricing, marketing, sale and distribution and related strategy for the Product for sale and distribution to Purchaser Customers in the Territory shall be the sole responsibility of, and shall be solely controlled by, Purchaser.

 

2.2.2                     Purchaser shall, and shall cause its Affiliates to, sell and distribute the Product only to Purchaser Customers in the Territory and only in accordance with Applicable Law and the Product’s ANDA. Purchaser shall reasonably cooperate with Seller in investigating and tracing any sales of the Product outside of the Territory or to any Persons in the Territory other than Purchaser Customers originating from sales by Purchaser hereunder. Seller shall not, and shall cause its Affiliates not to, sell and distribute the Product to Purchaser Customers in the Territory (provided that, by way of clarification, Seller may sell Product to drug wholesalers or any other Persons so long as Seller shall not supply, sell or distribute Product to drug wholesalers or any other Persons for resale to any customer included in items (a)-(e) of Section 1.46). Seller shall reasonably cooperate with Purchaser in investigating and tracing any sales of the Product to any Purchaser Customers originating from sales by Seller hereunder.

 

2.2.3                     During the term of this Agreement and, if this Agreement is terminated by Purchaser pursuant to Section 8.4, for a period of 12 months after such termination, neither Purchaser nor its Affiliates shall sell or distribute in the Territory any product that is or purports to be a generic equivalent (i.e. bioquivalent and legally substitutable) of the Lovenox® brand product, other than the Product supplied by Seller hereunder. [***].

 

2.3                               Commercial Launch of the Product.

 

2.3.1                     Notice of Launch. At any time after Seller receives both (i) a Favorable Resolution (which may, but is not required to be, a Final Favorable Resolution) and (ii) FDA approval of the Product’s ANDA and confirmation from the FDA that Seller has been awarded 180 days of “first to file” market exclusivity in accordance with Section 505(j)(5)(B)(iv) of the Act, Seller shall be entitled to deliver to Purchaser a written notice setting forth Seller’s intention to commence the commercial sale of the Product in the Territory. Such written notice shall be referred to herein as an “At-Risk Launch Notice,” unless based on a Final Favorable Resolution, in which case such written notice shall be referred to herein as a “Non-At-Risk Launch Notice.” As used herein, a “Launch Notice” may refer generally to an At-Risk Launch Notice and/or a Non-At-Risk Launch Notice. Notwithstanding the foregoing, in the event that Seller receives FDA approval of the Product’s ANDA, but Seller is not awarded 180 days “first to file” market exclusivity and/or has not received a Favorable Resolution, Seller, at its option, may notify Purchaser of Seller’s desire to commence the commercial sale of the Product in the Territory. In such event, Seller and Purchaser shall negotiate in good faith the terms and conditions of any Product launch to Purchaser Customers in the Territory; provided that, by way of clarification, nothing herein shall prevent (i) Seller from selling and distributing such Product in the Territory so long as Seller does not sell or distribute such Product to Purchaser Customers (provided that, by way of clarification, Seller may sell Product to drug wholesalers or any other Persons so long as Seller shall not supply, sell or distribute Product to drug wholesalers or any other Persons for resale to any customer included in items (a)-(e) of Section 1.46) or (ii) Purchaser from terminating this Agreement pursuant to its terms.

 

2.3.2                     At-Risk Launch. In the event that Purchaser receives an At-Risk Launch Notice, Purchaser shall notify Seller in writing within 10 days of Purchaser’s receipt thereof whether or not Purchaser agrees to launch the commercial sale of the Product to Purchaser Customers in the Territory as contemplated herein based on such At-Risk Launch Notice (an “At-Risk Launch”). In the event that Purchaser notifies Seller that it has determined to engage in an At-Risk Launch, Purchaser shall proceed according to the provisions of Section 2.3.3 below. In the event that Purchaser notifies Seller that it has determined to not engage in an At-Risk Launch, Seller shall have 10 days from receipt of Purchaser’s notice to notify Purchaser in writing whether or not Seller has determined to engage in an At-Risk Launch without Purchaser acting as Seller’s distributor of the Product to the Purchaser Customers in the Territory (a “Seller Launch”). In the event that Seller notifies Purchaser that it has determined to so engage in a Seller Launch, subject to Sections 2.3.4 and 2.3.5 below, this Agreement (including any rights of Purchaser to sell and distribute the Product in the Territory) shall automatically and immediately terminate as of the date of such Seller’s notice to Purchaser. In the event that Seller notifies Purchaser that it has determined to not engage in a Seller Launch, this Agreement shall continue in full force and effect and Seller may at any time thereafter submit a new Launch Notice, at which time the parties shall, among other things, again proceed in accordance with the provisions of this Section 2.3.

 

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

5

 

2.3.3                     Obligation to Launch. In the event that Seller delivers to Purchaser a Non-At-Risk Launch Notice or Purchaser notifies Seller that Purchaser has determined to engage in an At-Risk Launch, Purchaser shall (i) pay the milestone payment set forth in Section 3.1(b) below in accordance with the provisions thereof, and (ii) subject to the terms of this Agreement, Purchaser shall use Commercially Reasonable Efforts to commence with Purchaser’s First Commercial Sale as soon as commercially practicable thereafter, but in no event later than 5 business days following Purchaser’s receipt of Launch Quantities.

 

2.3.4                     Payment of Compensatory Payments upon a Seller Launch. Subject to Section 2.3.5 below, in the event that Seller engages in a Seller Launch, Seller shall pay to Purchaser payments (the “Compensatory Payments”), up to the aggregate amount of [***] (the “Maximum Compensatory Payments”), equal to:

 

(a)                                 during the first six full calendar months following Seller’s First Commercial Sale pursuant to the Seller Launch, the greater of (i) [***] of Seller’s Net Sales of Product sold in the Territory and (ii) [***];

 

(b)                                 during the second six full calendar months following Seller’s First Commercial Sale pursuant to the Seller Launch, the greater of (i) [***] of Seller’s Net Sales for Product sold in the Territory and (ii) [***]; and

 

(c)                                  [***] of Seller’s Net Sales of Product sold in the Territory during each calendar quarter after the first twelve full calendar months after Seller’s First Commercial Sale pursuant to the Seller Launch.

 

2.3.5                     The Compensatory Payments shall be paid within 30 days of the end of each calendar quarter following Seller’s First Commercial Sale pursuant to the Seller Launch. Each Compensatory Payments payment shall include a report setting forth in reasonable detail the amount of and the basis for such payment, including a calculation of Seller’s Net Sales (including itemizing all deductions to gross sales) for such quarterly period. With respect to any payment due as a result of the [***] minimum Compensatory Payments amounts set forth in Sections 2.3.4(a) and (b) above, such payment shall be made within 30 days of the end of the calendar quarter that contains the sixth month of the applicable six month period for which the [***] minimum Compensatory Payments amount accrued. Any payments not made within the specified period of time for payment shall incur an interest charge at the rate of the Overdue Interest Amount on such overdue amounts, excluding any amounts that are subject to a bona fide dispute between the parties.

 

2.3.6                     Subsequent Suspension of a Seller Launch. In the event that, within 30 days of Seller’s First Commercial Sale pursuant to a Seller Launch, Seller either voluntarily or as a result of an order of the FDA or any court having competent jurisdiction ceases to sell in and withdraws the Product from the market in the Territory, Seller’s obligation to pay the Compensatory Payments pursuant to such Seller Launch shall immediately terminate as of the date of such withdrawal and this Agreement shall be automatically and immediately reinstated and be in full force and effect on and after the date of such withdrawal pursuant to its terms. Without limiting the generality of the preceding sentence, in the event that, at any time after such withdrawal of the Product, Seller determines to engage in a new commercial launch of the Product in the Territory, Seller shall provide to Purchaser a Launch Notice pursuant to Section 2.3.1 above and the remaining provisions of this Section 2.3 shall again apply to such new Launch Notice. In the event that Seller after such withdrawal of the Product delivers to Purchaser a Non-At-Risk Launch Notice or Purchaser notifies Seller that it will engage in an At-Risk Launch in accordance with Section 2.3.2 above following receipt of an At-Risk Launch Notice, in addition to the payment of the milestone payment under Section 3.1(b) required in connection therewith, Purchaser shall refund to Seller any amount of the Compensatory Payments previously paid to Seller within 10 days of receipt by Purchaser of such Non-At-Risk Launch Notice or receipt by Seller of Purchaser’s notice of intention to engage in an At-Risk Launch. In the event that Purchaser determines to not engage in such subsequent At-Risk Launch and Seller commences a subsequent Seller Launch, (i) each of the [***] minimum Compensatory Payments amounts under Sections 2.3.4(a) and (b) shall be reduced to an amount equal to [***] multiplied by a fraction, the numerator of which is the number of months of Product sales under all previous Seller Launches pursuant to which Seller paid Compensatory Payments and the denominator of which is six and (ii) the Maximum Compensatory Payments shall be reduced by the amount all Compensatory Payments previously paid to Purchaser.

 

2.4                               Termination of Agreement Relating to Commercial Launch.

 

2.4.1                     In addition to Purchaser’s termination rights set forth elsewhere herein, Purchaser shall be entitled to terminate this Agreement as set forth in this Section 2.4.1:

 

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

6

 

(a)                                 Purchaser may terminate this Agreement after June 30, 2006, upon 30 days prior written notice to Seller, if Seller shall not have obtained a Favorable Resolution on or prior to June 30, 2006, so long as such termination notice is received by Seller on or before July 15, 2006.

 

(b)                                 Provided that Purchaser shall not have notified Seller that it will engage in an At-Risk Launch prior thereto, Purchaser may terminate this Agreement after June 30, 2006, upon 30 days prior written notice to Seller, if after June 30, 2006 an Adverse Resolution then exists, so long as such termination notice is received by Seller within 15 days after the later of June 30, 2006 or the date Purchaser is notified of such Adverse Resolution. Seller shall provide written notice to Purchaser within 10 days of any Adverse Resolution. For purposes of clarification, Purchaser’s right to terminate this Agreement under this Section 2.4.1(b) shall not apply after Seller’s delivery to Purchaser of a Launch Notice, unless such Launch Notice is an At-Risk Launch Notice, and then only in the event that this Agreement remains in effect pursuant to Seller’s determination to not engage in a Seller Launch under Section 2.3.2 or this Agreement is reinstated following a Product withdrawal pursuant to Section 2.3.6.

 

(c)                                  Purchaser may terminate this Agreement after June 30, 2007, upon 30 days prior written notice to Seller, if Seller shall not have delivered to Purchaser a Launch Notice on or before June 30, 2007, so long as such termination notice is received by Seller on or before July 15, 2007.

 

2.4.2                     Notwithstanding anything herein to the contrary, Purchaser’s sole remedy, whether in contract, tort or otherwise, for any failure by Seller to use Commercially Reasonable Efforts to obtain ANDA approval of the Product or any market exclusivity with respect thereto and/or any additional regulatory approvals necessary for the manufacture and supply of the Product and/or to obtain a Favorable Resolution shall be the termination of this Agreement as provided in this Section 2.4 and the right to any refund of the milestone payment under Section 3.2.

 

2.4.3                     This Agreement may be terminated by Seller upon 5 days written notice to Purchaser, if Purchaser shall have not effected Purchaser’s First Commercial Sale within 5 business days following Purchaser’s receipt of Launch Quantities in accordance with Section 2.3.3.

 

2.5                               Sales to Wholesalers.  Subject to the terms and conditions of this Agreement, Purchaser shall have exclusive rights to sell Product to drug wholesalers or any other Persons for resale and distribution to the customers in the Territory identified in items (a)-(e) of Section 1.46. Seller retains all rights to all other current and future customers and markets for the Product, including the right to sell Product to drug wholesalers or any other Persons so long as Seller does not supply, sell or distribute Product to drug wholesalers or any other Persons for resale to any customer included in items (a)-(e) of Section 1.46. As permitted by Applicable Law, Purchaser and Seller shall cooperate in creating arrangements with their respective drug wholesalers and other customers necessary to implement the foregoing. From time to time upon request, each party shall provide the other with reasonable access to all information in its possession and control (or which is reasonably obtainable) to confirm the ultimate customer of the Products sold by it to drug wholesalers or other Persons. To the extent Seller sells any Products to drug wholesalers or other Persons that are ultimately purchased by any customer included in items (a)-(e) of Section 1.46, Seller shall pay Purchaser its portion of the Gross Profits (i.e., Seller’s Net Sales less the imputed Transfer Price of the Product times Purchaser’s then applicable portion of the Gross Profit Split) attributable to such sales by Seller plus the Overdue Interest Amount on the amount due from the date of the sale to the date of payment. To the extent Purchaser sells any Product to drug wholesalers or other Persons that are ultimately purchased by any customer not included in items (a)-(e) of Section 1.46, then Purchaser shall pay to Seller all of the Gross Profit attributable to such sales by Purchaser plus the Overdue Interest Amount on the amount due from the date of the sale to the date of payment. The above described Gross Profit reimbursement shall be each party’s exclusive remedy for any inadvertent and unintentional breach by the other party of its obligations under this Section 2.5. In addition, without limiting either party’s indemnification obligations under Article 17, if either party intentionally breaches this Section 2.5, the party in breach shall indemnify the other party pursuant to Article 17 for all Damages caused thereby.

 

2.6                               Information.  Seller shall provide Purchaser with copies of all material study results and other written communications that Seller submits to the FDA in connection with its attempt to obtain approval of the Product’s ANDA or otherwise relating to the Product as soon as reasonably practicable after Seller’s receipt or submission thereof. At Purchaser’s request from time to time during normal business hours and upon reasonable notice, Seller shall also provide Purchaser reasonable access to any other study results and other written communications that Seller submits to the FDA in connection with its attempt to obtain approval of the Product’s ANDA or otherwise relating to the Product in Seller’s possession. In addition, Seller shall provide Purchaser with copies of all material pleadings, motions, briefs and other written communications relating to the Lawsuit as soon as reasonably practicable after Seller’s receipt or submission thereof. At Purchaser’s request from time to time during normal business hours and upon reasonable notice, Seller shall provide Purchaser with reasonable access to any other pleadings, motions, briefs and other written communications relating to the Lawsuit in Seller’s possession. The obligations of Seller provided above shall be subject to Applicable Law (including compliance with any protective order or other court or governmental agency order or requirement), maintaining applicable privileges and the terms of any confidentiality obligations of Seller owned to third parties.

 

7

 

ARTICLE 3

 

MILESTONES AND PAYMENTS

 

3.1                               Milestones and Payments. In consideration of Seller’s grant of the exclusive distribution rights hereunder to Purchaser, Purchaser shall pay Seller the following amounts upon completion of the applicable milestone:

 

	
Milestone: 
    	
 
    	
Amount of Payment Due:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
(a) The Effective Date   of this Agreement 
    	
 
    	
$
    	
4,500,000
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
(b) Within 10 days of   both (x) either (i) Purchaser’s receipt of a Non-At-Risk Launch   Notice under Section 2.3.1 above or (ii) Purchaser’s written notice   to Seller that Purchaser will engage in an At-Risk Launch under   Section 2.3.2 above and (y) delivery to Purchaser of the Launch   Quantities. 
    	
 
    	
$
    	
5,500,000
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
TOTAL:
    	
 
    	
$
    	
10,000,000
    	
 
    

 

3.2                               Payment Terms; Refund.

 

3.2.1                     Any payments not made within the specified period of time for payment shall incur an interest charge at the rate of the Overdue Interest Amount on such overdue amounts, excluding any amounts that are subject to a bona fide dispute between the parties. All payments shall be made in U.S. dollars through electronic transfer of funds or other wire transfers.

 

3.2.2                     Except as expressly set forth in this Section 3.2.2, no milestone payment shall be refundable in whole or in part under any circumstance, including a termination of this Agreement pursuant to Seller engaging in a Seller Launch under Section 2.3.2. The $4,500,000 milestone payment paid to Seller under Section 3.1(a) above shall be refunded by Seller to Purchaser in the event this Agreement is terminated pursuant to Section 2.4.1 above; provided, however, in the event that this Agreement is terminated pursuant to Section 2.4.1 at any time after Seller shall have paid Compensatory Payments to Purchaser, the amount of such Compensatory Payments shall be deducted from such refund of the milestone payment and any amount of such Compensatory Payments in excess of the amount of the milestone payment shall be refunded to Seller within 30 days of such termination. All such refunds shall be made by Seller within 30 days after the applicable termination date; provided that, such amount remaining outstanding shall bear simple interest at the rate of the Overdue Interest Amount commencing on the date such amount is due and payable (i.e., 30 days after the applicable termination date) until paid in full; and provided further that, if Seller does not have at the time the available funds to repay Purchaser such amount, such amount shall be repaid no later than one year from the applicable termination date. If payment is not made within 30 days of termination, upon request of Purchaser, Seller shall (as soon as reasonably practicable) provide Purchaser with reasonable security for repayment of any milestone payments not paid when due, including potentially, assignment of product revenues or a lien on other assets.

 

ARTICLE 4

 

PRICING

 

4.1                               Transfer Price.

 

4.1.1                     The transfer price (“Transfer Price”) payable by Purchaser for Product delivered by Seller shall be a payment equal to the product of (a) the number of units of Product delivered by Seller to Purchaser pursuant to the applicable Purchase Order (including the Initial Purchase Order), multiplied by (b) [***] per unit, regardless of dosage strength (the “Unit Price”). Notwithstanding the foregoing, on and after the [***] of the First Commercial Sale, Seller may increase the Unit Price during each twelve month period (which begins on an anniversary of the First Commercial Sale), effective upon 30 days prior written notice to Purchaser (or upon the later resolution of any disputed price increase, except if such dispute is resolved in Seller’s favor in which case the Unit Price increase shall be effective 30 days from Seller’s original notice thereof to Purchaser), by (i) the actual per unit increase in Seller’s raw materials costs (the “Raw Material Costs”) for the Product (including the costs of plunger rods, needle stick prevention devices, syringes, Packaging and other ingredients and materials used to manufacture and process the Product) over the 12 month period preceding the date of Seller’s notice of such price increase not to exceed (subject to Section 4.1.2) [***] of the amount

 

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

8

 

of Seller’s Raw Material Costs as at the beginning of the 12-month period immediately prior to such price increase and (ii) the actual per unit increase in Seller’s direct labor costs (“Labor Costs”) for the Product over the prior 12 month period preceding the date of Seller’s notice of such price increase not to exceed (subject to Section 4.1.2) [***] of the amount of the Seller’s Labor Costs as at the beginning of the 12-month period immediately prior to such price increase. Seller shall provide Purchaser with reasonable documentation evidencing the applicable increases in Seller’s Raw Material Costs and Labor Costs with Seller’s notice of the price increase. Purchaser may dispute in good faith any increase to the Unit Price pursuant to this Section 4.1.1 by written notice to Seller within 10 days of Purchaser’s receipt of Seller’s notice thereof. If the dispute is not resolved within 30 days of Purchaser’s dispute notice to Seller, then Purchaser may elect to seek resolution of the dispute pursuant to the provisions of Section 4.5 by providing written notice to Seller of such election. If Purchaser does not provide Seller such written notice within 10 days after the aforementioned 30 day period, then the dispute shall be deemed resolved in Seller’s favor.

 

4.1.2                     At the written request of Seller on and after the [***] of the First Commercial Sale, the parties shall discuss increases in the Unit Price in excess of the respective [***] limitations provided in Section 4.1.1 to the extent such increases are due to increases in Raw Material Costs and/or Labor Costs attributable to changes required by Applicable Law or governmental authority, including FDA, as provided in Section 6.2.1. Any such request for an increase in the Unit Price in excess of the respective [***] limitations provided in Section 4.1.1 shall be reasonably considered in good faith by Purchaser but shall not be implemented without Purchaser’s written consent (which shall not be unreasonably withheld, delayed or conditioned). In the event Seller’s Raw Material Costs and/or Labor Costs increase by [***] or more during any twelve month period as a result of changes required by Applicable Law or governmental authority, including FDA, as provided in Section 6.2.1 (based on reasonable documentation) and Purchaser does not consent to a corresponding increase as requested by Seller in the Unit Price in excess of the respective [***] limitations (as the case may be) provided in Section 4.1.1 within [***] of the date of Seller’s written request for such increase, then Seller shall (by written notice within [***] of the date of Seller’s written request for such increase) have the right to terminate this Agreement upon [***] written notice to Purchaser.

 

4.2                               Gross Profit Split.

 

4.2.1                     Purchaser shall pay to Seller, as additional consideration for Seller’s supply of Product hereunder to Purchaser, the following portion of Gross Profit (the “Gross Profit Split”):

 

(a)                              60% percent of the Gross Profit for so long as there are [***] Competitive Products;

 

(b)                                 55% percent of the Gross Profit for so long as there is (i) [***] Competitive Product being sold and distributed to Purchaser Customers in the Territory or (ii) [***] Competitive Product being sold and distributed to customers in the Territory other than Purchaser Customers and as a result of the sale and distribution of such Competitive Product, Purchaser’s Net Sales for the last completed calendar quarter are more than [***] less than Purchaser’s Net Sales for the calendar quarter immediately preceding the last completed calendar quarter; and

 

(c)                                  50% percent of the Gross Profit for so long as there are (i) [***] or more Competitive Products being sold and distributed to Purchaser Customers in the Territory or (ii) [***] or more Competitive Products being sold and distributed to customers in the Territory other than Purchaser Customers and as a result of the sale and distribution of such Competitive Products, Purchaser’s Net Sales for the last completed calendar quarter are more than [***] less than Purchaser’s Net Sales for the calendar quarter immediately preceding the last completed calendar quarter.

 

4.2.2                     Seller’s Gross Profit Split shall be calculated and paid to Seller quarterly, within 30 days after quarter end. Any adjustment to the Gross Profit Split as required from time to time due to an increase or decrease in the number of Competitive Products or Purchaser’s Net Sales shall be effective upon the day of the calendar month in which the change of number of Competitive Product(s) occurred in the case of Section 4.2.1(b)(i) and (c)(i) above and upon the first day of the immediately succeeding calendar month after the calendar month in which the change in Purchaser’s Net Sales triggered an adjustment to the Gross Profit Split in the case of Section 4.2.1(b)(ii) or (c)(ii) above. Notwithstanding anything herein to the contrary and by way of clarification, any adjustment to the Gross Profit Split resulting from a change in the number of Competitive Products or Net Sales shall change only the Gross Profit Split of Product having the same dosage strength as that of the relevant Competitive Product(s) then being sold and distributed in the Territory. Each party shall provide the other party prompt written notice of any adjustment to the Gross Profit Split which the notifying party believes is warranted as a result of a change in the number of Competitive Products or Purchaser’s Net Sales. With such notice, the notifying party shall provide an explanation to the other party as to the reasons why such adjustment is warranted and shall provide the other party any documentation in notifying party’s possession or control which supports the notifying party’s basis for such adjustment.

 

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

9

 

4.3                               Shipping Terms. The prices charged by Seller to Purchaser shall be FCA (Incoterms 2000), Seller’s designated manufacturing facility.

 

4.4                               Payment Terms.

 

4.4.1                     The Transfer Price for the Product shall be paid within 30 days of the date of the applicable invoice for such Product.

 

4.4.2                     The Gross Profit Split shall be paid within 30 days of the end of each calendar quarter, with a report setting forth in reasonable detail the amount of and the basis for such payment, including a calculation of Purchaser’s Net Sales (including itemizing all deductions to gross sales), Gross Profit and the Gross Profit Split (as applicable on a dosage strength basis) for such quarterly period [***].

 

4.4.3                     Any payments not made within the specified period of time for payment shall incur an interest charge at the rate of the Overdue Interest Amount on such overdue amounts, excluding any amounts that are subject to a bona fide dispute between the parties. In addition, Seller may withhold shipment of Product to Purchaser if Purchaser has failed to make any payment required under this Agreement (except for any amounts that are subject to a bona fide dispute) after the due date for such payment. All payments shall be made in U.S. dollars through electronic transfer of funds or other wire transfers.

 

4.5                               Audit Rights.  Purchaser with respect to Section 2.2.3 and this Article 4 and Seller with respect to Sections 2.3.4 and 4.1 shall keep complete and accurate books and records for purposes of documenting the amount and calculations of, as applicable, Net Sales [***], Gross Profit, Gross Profit Split, the Compensatory Payments and, to the extent it is a basis for an increase in the Transfer Price pursuant to Section 4.1, increases in Raw Material Costs and Labor Costs. Said books of account shall be kept at Purchaser’s or Seller’s principal place of business, as applicable. Upon reasonable notice, each Purchaser or Seller, as applicable, at its expense, shall have the right to have an independent public accounting firm (reasonably acceptable to the other party) obtain access to the other party’s financial records, during reasonable business hours, solely for the purpose of verifying such party’s payments hereunder; provided, however, that this right may not be exercised more than once in any calendar year (unless a prior audit by the audited party in such calendar year reveals a discrepancy of the greater of 5% of the payment(s) audited or $25,000 in any calendar quarter and then the auditing party may exercise its audit right no more than twice during such calendar year). The accountants engaged by the auditing party shall report to the auditing party only information of the audited party related to the accuracy of the audited party’s calculations then being audited. The findings of the accountants engaged by the auditing party shall be final and binding upon the parties hereto, and the payments attributable to any particular period may only be audited once for such period. Any underpayment or overpayment of the amount due hereunder due to a miscalculation of such amount shall be paid within 30 days after the delivery of a written accountants’ report to each party. In the event any such audit reveals a shortfall greater than 5% of the payment(s) audited or $25,000 in any calendar quarter, then the reasonable costs of the accountants engaged by the auditing party to perform such audit shall be reimbursed by the audited party. Any underpayment or overpayment amount paid pursuant to this Section 4.5 shall accrue interest on such amount from the original due date at the Overdue Interest Amount.

 

ARTICLE 5

 

LAUNCH QUANTITIES, FORECASTS, ORDERS

 

5.1                               Initial Purchase Order; Launch Quantities.  Within 5 days following receipt of a Non-At-Risk Launch Notice by Purchaser or delivery to Seller of Purchaser’s notice that it will engage in an At-Risk Launch, Purchaser shall deliver to Seller an initial binding order (the “Initial Purchase Order”) for the quantity of Product required for Purchaser’s commercial launch of the Product consistent with Purchaser’s then current Forecast; provided that, such quantity shall not exceed (without the prior written consent of Seller, which may be withheld in its sole discretion) [***] units of Product if the First Commercial Sale occurs in calendar year 2005 or [***] of the then existing Maximum Annual Product Units if the First Commercial Sale occurs in any calendar year after 2005 (the “Launch Quantities”). Subject to the terms of this Agreement, Seller shall use Commercially Reasonable Efforts to supply the Product to Purchaser in the Launch Quantities by no later than the delivery dates indicated in the Initial Purchase Order, which delivery dates shall be no sooner than 90 days after the date of the Initial Purchase Order unless Seller consents thereto. Seller shall thereafter use Commercially Reasonable Efforts to supply to Purchaser such additional quantities of the Product as ordered by Purchaser hereunder pursuant to Section 5.3.

 

5.2                               Forecasts.  Beginning at least 6 months prior to the anticipated date of FDA approval of the Product’s ANDA and at least 90 days prior to each calendar quarter thereafter, Purchaser shall provide to Seller a rolling 12-month forecast (each a “Forecast”) of the quantities of the Product to be purchased by Purchaser on a monthly basis. Without limiting the foregoing, in addition to the

 

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

10

 

above Product quantities, each Forecast delivered by Purchaser prior to its First Commercial Sale shall include the Launch Quantities. Forecasts shall be in good faith and non-binding, provided, however, that (a) on and after Purchaser’s delivery of its Initial Purchase Order to Seller, the first three months of each Forecast shall be binding on Purchaser, and shall constitute Purchaser’s firm order for the quantity of Product set forth in such Forecast; and (b) forecasted quantities of the Product for the fourth, fifth and sixth months forecasted thereunder shall not increase by more than 25% from the quantities forecasted for such months in the preceding Forecast without Seller’s prior written consent (not to be unreasonably withheld or delayed).

 

5.3                               Orders.  Except for the Initial Purchaser Order, Purchaser shall deliver to Seller purchase orders (“Purchase Orders”) for the Product no later than 90 days before the date that the Products for such Purchase Order are required to be delivered to Purchaser and provided such Purchase Orders are for the binding portion (i.e., the first three months) of the then current Forecast in accordance with Section 5.2, Seller shall accept such Purchase Orders. Subject to Section 5.6, Seller shall use Commercially Reasonable Efforts to satisfy Purchase Orders for amounts in excess of those forecasted for the binding portion of the then current Forecast pursuant to Section 5.2; provided that in no event shall Seller be required to add to its existing manufacturing capacity of its facility(ies) for the Product in order to satisfy Purchaser’s Purchase Orders. Each such Purchase Order shall be firm and shall specify the quantity of the Product ordered, the date on which such Product shall be delivered and the delivery address. Product shall be ordered by Purchaser in no less than full batch increments.

 

5.4                               Shipping Reports.  On or promptly after the date of each shipment of Product, Seller shall submit to Purchaser, via facsimile, a packing slip containing the ship date, trailer number, contents and quantities of each shipment and invoice for the Transfer Price.

 

5.5                              Standard Forms; Conflicts.  In ordering and delivering the Product pursuant hereto, Seller and Purchaser may use their standard forms (including Purchase Orders, invoices, sales acknowledgments, etc.), but nothing in those forms shall be construed to modify, amend or supplement the terms of this Agreement and, in case of any conflict herewith, the terms of this Agreement shall control, and any additional or modified terms contained in any such Purchase Order or other form shall be null and void and shall not be binding upon the receiving party.

 

5.6                               Capacity Allocation.

 

5.6.1                     Notwithstanding anything herein to the contrary or anything to the contrary in any Purchase Order or Forecast, Seller shall not be obligated to supply Purchaser (regardless of amounts ordered by Purchaser), more than the then applicable Maximum Annual Product Units during a twelve month period. Without limiting the foregoing, any Purchase Order or Forecast submitted by Purchaser hereunder for more than the then applicable Maximum Annual Product Units shall, to the extent of the excess, be deemed rejected by Seller, unless expressly accepted by Seller in writing. As used herein, the term “Maximum Annual Product Units” shall mean for the period ending twelve full calendar months from the First Commercial Sale and for each twelve month period thereafter, [***] of the total units of branded and generic Lovenox® product (including the brand name product, the Product, any Authorized Generic Product and any Competitive Product) sold for distribution into the Territory for the immediately preceding calendar year as reported by IMS Health (or such other nationally recognized data compilation source as mutually agreed); provided that, if the First Commercial Sale occurs during calendar year 2005, then the Maximum Annual Product Units for the period ending twelve full calendar months from the First Commercial Sale shall be deemed to be [***] units of Product. For each twelve month period beginning after the First Commercial Sale (other than as provided above if the First Commercial Sale occurs in calendar year 2005), the Maximum Annual Product Units shall be established as soon as data from IMS Health (or such other nationally recognized source as mutually agreed) for the immediately preceding calendar year becomes available to the parties and once the Maximum Annual Product Units for the then current twelve month period is established, it shall be effective retroactively to the beginning of and shall be fixed through such twelve month period. Without limiting the foregoing, but by way of example: If the First Commercial Sale occurs on September 1, 2005, then the Maximum Annual Product Units for the twelve month period ending with August 31, 2006 would be [***] units of Product. As a result, Purchaser would have no right to order or purchase, and Seller would have no obligation to supply, more than [***] units of Product during the twelve month period ending August 31, 2006. Assuming that [***] total units of branded and generic Lovenox® product were sold for distribution into the Territory for the 2005 calendar year as reported by IMS Health, then the newly established Maximum Annual Product Units for the twelve month period ending August 31, 2007 would be [***] units of Product (i.e., [***] units). As a result, Purchaser would have no right to order or purchase, and Seller would have no obligation to supply, more than [***] units of Product during the twelve month period ending August 31, 2007. The foregoing process would be repeated once each twelve month period thereafter to establish the Maximum Annual Product Units for the then current twelve month period. At Purchaser’s request from time to time, the parties shall discuss increasing the then existing Maximum Annual

 

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

11

 

Product Units based on then existing market conditions, Seller’s manufacturing capacity and other relevant factors. Seller shall reasonably consider Purchaser’s request and its reasons for an increase in the then existing Maximum Annual Product Units; provided that, Seller shall have no obligation to agree to (and may reject in Seller’s sole discretion and without liability) any increase requested by Purchaser in the then existing Maximum Annual Product Units.

 

5.6.2                     In the event that Seller’s inability (including any inability as a result of a Force Majeure Event) to satisfy any Purchase Order accepted pursuant to Section 5.3, in whole or in part, is due to a shortage of production capacity or raw materials, then, subject to the terms and conditions of this Agreement, including Section 5.6.1 above, Seller shall give priority to Purchaser’s Purchase Orders, and satisfy deliveries of amounts ordered consistent with Section 5.3 prior to fulfilling order for Product of any other Person, for up to (i) [***] units of Product to be delivered to Purchaser pursuant to its Purchase Orders for the period ending six full calendar months after the First Commercial Sale and (ii) [***] units of Product to be delivered to Purchaser pursuant to its Purchase Orders during each six month period thereafter and for any Product to be delivered to Purchaser pursuant to its Purchase Orders during such six month period in excess of the foregoing [***] unit amount, [***] of Seller’s units of its finished inventory of Product produced during the applicable period in excess of [***] units shall be allocated to fulfill any such remaining outstanding Purchase Orders.

 

ARTICLE 6

 

SPECIFICATIONS

 

6.1                               Specifications.  The Specifications for the Product will be as described in the ANDA that is approved by FDA for the Product. The Specifications for the Product shall not be changed except as expressly permitted under this Agreement.

 

6.2                               Change Management.

 

6.2.1                     Required Changes.  With respect to any changes to the Specifications or to any process involved in the manufacture, Packaging, Labeling, storage, transportation, delivery or testing of the Product that are required by Applicable Laws or by mandate of an applicable government authority (including the FDA), the parties shall reasonably cooperate in making such changes promptly, and Seller shall, subject to Section 4.1 and unless otherwise mutually agreed to in writing by the parties, bear the costs of implementing such changes, including the cost of scrapping materials (including raw materials, in-process materials, inventory and packaging material) associated with such changes.

 

6.2.2                     Discretionary Changes. With respect to changes to the Specifications or to any process involved in the manufacture, Packaging, Labeling, storage, transportation, delivery or testing of the Product that are not required by Applicable Laws or by mandate of an applicable government authority (including the FDA), the parties shall cooperate in good faith to reach a mutually agreeable solution with regard to such changes, but Seller shall not be obligated to make any such changes requested by Purchaser except as expressly provided in Section 6.2.3. Seller reserves the right to make such changes unilaterally; provided, however, that Seller will consult with Purchaser prior to making such changes; and provided further that, Seller shall obtain Purchaser’s prior written consent (which will not be unreasonably withheld or delayed) for any changes that would materially affect storage or transportation of the Product after delivery to Purchaser. The cost of making a discretionary change shall be borne solely by the party initiating the change or as otherwise mutually agreed to in writing by the parties. In the event any such changes initiated by Purchaser increase Seller’s costs of manufacturing and supplying the Product to Purchaser, at Seller’s request, the parties shall discuss and agree in good faith to an equitable adjustment of the Unit Price to account for such increase in costs.

 

6.2.3                     Product Labeling.  The Products supplied to Purchaser will include Purchaser’s NDC number and be packaged in labeling and artwork approved by Purchaser to indicate Purchaser as a distributor of the Product. In order for Purchaser to include in the Product Label Purchaser Trademarks or similar changes indicating Purchaser as a distributor of the Product; (a) upon Purchaser’s request, Seller shall provide Purchaser with the Label artwork and text in electronic format, (b) Purchaser may update such artwork and text to include Purchaser Trademarks and such other similar changes as desired by Purchaser to indicate Purchaser as a distributor of the Product, and (c) Purchaser’s costs in connection with the foregoing shall be at its sole expense. Thereafter, Seller shall make all necessary arrangements, at its expense (except as provided in Section 6.2.1 above), to have changed Labels or Labeling printed and shall provide printer’s proofs to Purchaser for Purchaser’s review. Purchaser shall, within two (2) weeks of receipt of said printer’s proofs, provide written notice to Seller of Purchaser’s approval of such proofs in the form submitted by Seller (which approval shall not be unreasonably conditioned, withheld or delayed) or with such corrections thereto (in Purchaser’s reasonable judgment) as included in Purchaser’s notice. Thereafter, Seller shall incorporate in such Labels and Labeling Purchaser’s requested corrections thereto, if any, and shall supply Purchaser with examples of such Product Labels and Labeling for Purchaser’s regulatory filings; provided, however, that, if Seller shall not agree with Purchaser’s requested corrections, Purchaser and Seller shall consult in good faith to reach a resolution mutually agreeable to Purchaser and Seller.

 

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

12

 

6.3                               Trademarks.  All trademarks, tradenames and packaging graphics used by Purchaser in connection with its sale and distribution of the Product to Purchaser Customers in the Territory (collectively, the “Purchaser Trademarks”) shall be chosen by Purchaser in its sole discretion, subject to the terms and conditions of this Agreement. Purchaser shall be responsible for any and all liabilities which may arise from Purchaser’s use of the Purchaser Trademarks (including any allegations of intellectual property infringement related thereto and any liabilities related to prescription errors related to such trademark usage). Unless consented to in writing by Seller, Purchaser shall not use any trademark, tradename, company name, or copyright of Seller in connection with the distribution, marketing or sale of the Product.

 

6.4                               Certificate of Analysis.  Each shipment of the Product to Purchaser shall be accompanied by a certificate of analysis prepared by an authorized representative of Seller certifying that the Product in the shipment has been tested in accordance with the ANDA for such Product, meets the Specifications and was manufactured in material compliance with cGMP (for the avoidance of doubt any non-compliance that would affect Purchaser’s sale or distribution of the Product hereunder shall be considered material). Seller shall deliver such certificate of analysis by facsimile or overnight delivery to Purchaser’s distribution facility as designated by Purchaser.

 

6.5                               Expiry Dating.  Except as otherwise agreed to in writing by Purchaser, all Product shipped to Purchaser, on the date of shipment by Seller, shall have a shelf-life of at least the approved dating of the Product (per the Product’s ANDA) [***].

 

6.6                               Stability Testing. Seller shall maintain a stability testing program for the Product and provide Purchaser with an annual product review thereon. At least one batch per year of Product shall be included in the stability program.

 

6.7                               Annual Report. At Seller’s written request, Purchaser will supply distribution information and other information reasonably requested by Seller, for the purposes of inclusion into Seller’s Annual Report to FDA.

 

ARTICLE 7

 

TERM

 

7.1                               Term. Subject to Article 8, the term of this Agreement shall commence on the Effective Date and remain in effect for a period of 7 years from the date of Purchaser’s First Commercial Sale. Notwithstanding the foregoing, Purchaser shall have the option to renew this Agreement for an additional term of 3 years from the date of the expiration of the initial term by providing Seller Purchaser’s irrevocable written notice thereof 12 months prior to the end of the initial term.

 

ARTICLE 8

 

TERMINATION

 

8.1                               Breach. This Agreement may be terminated, prior to the expiration of its term, by either party by giving written notice of its intent to terminate and stating the grounds therefor if the other party shall have materially breached or materially failed in the observance or performance of any representation, warranty, guarantee, covenant or obligation under this Agreement. The party receiving the default notice shall have 30 days from the date of receipt thereof to cure the breach or failure, except in the case of a breach of an obligation to pay money, in which case such cure period shall be 10 days; provided, however, that nonpayment in connection with a good faith dispute of the amount in dispute shall not be considered a breach hereof so long as once such dispute is resolved, payment of any amounts owing is made within 5 days of such resolution. If a breach (other than a breach of an obligation to pay money) is not curable within such 30 day period, then the non-performing party shall have an additional 30 days within which to cure such breach so long as the non-performing party is diligently working towards a remedy for such breach. In the event such breach or failure is cured in accordance with the provisions of this Section 8.1, the default notice shall become of no effect. In the event such breach or failure is not cured in accordance with the provisions of this Section 8.1, then this Agreement shall terminate immediately upon written notice to the defaulting party.

 

8.2                               Insolvency, Etc. This Agreement may be terminated, prior to the expiration of its term, immediately upon written notice by either party: (a) in the event that the other party hereto shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (ii) make a general assignment for the benefit of its creditors, (iii) commence a voluntary case under the United States Bankruptcy Code, as now or hereafter in effect (the “Bankruptcy Code”), (iv) file a petition seeking to take advantage of any law relating to bankruptcy,

 

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

13

 

insolvency, reorganization, winding-up, or composition or readjustment of debts, (v) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in any involuntary case under the Bankruptcy Code, or (vi) take any corporate action for the purpose of effecting any of the foregoing; or (b) if a proceeding or case shall be commenced against the other party hereto in any court of competent jurisdiction, seeking (i) its liquidation, reorganization, dissolution or winding-up, or the composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of the party or of all or any substantial part of its assets, or (iii) similar relief under any law relating to bankruptcy, insolvency, reorganization winding-up or composition or readjustment of debts, or an order, judgment or decree approving any of the foregoing shall be entered and continue unstayed for a period of 60 days; or an order for relief against the other party hereto shall be entered in an involuntary case under the Bankruptcy Code.

 

8.3                               Termination Relating to Commercial Launch; Force Majeure, No Increase in Unit Price.

 

8.3.1                     This Agreement shall terminate in accordance with Section 2.3.2.

 

8.3.2                     Purchaser or Seller, as the case may be, may terminate this Agreement as provided for under Section 2.4.

 

8.3.3                     Purchaser or Seller, as the case may be, may terminate this Agreement as provided for under Article 12.

 

8.3.4                     Seller may terminate this Agreement as provided in Section 4.1.2.

 

8.4                               Termination Due to Changed Circumstances. On and after Purchaser’s First Commercial Sale, Purchaser or Seller may terminate this Agreement upon 90 days prior written notice to the other party if Purchaser purchases less than the Minimum Annual Product Units during any rolling twelve month period beginning after the First Commercial Sale so long as such termination notice is provided to the non-terminating party within 90 days of the end of the twelve month period to which the termination is based. Notwithstanding the foregoing (unless Purchaser has not ordered at least the Minimum Annual Product Units), Seller’s right to terminate this Agreement pursuant to this Section 8.4 is conditioned upon Seller fulfilling all of Purchaser’s Purchase Orders for Product on a timely basis during the twelve month period upon which Seller’s exercise of its termination rights under this Section 8.4 is based. As used herein, the term “Minimum Annual Product Units” shall mean [***] units of Product during any twelve month period beginning after the First Commercial Sale there are no Authorized Generic Product or Competitive Product being sold and distributed in the Territory and [***] units of Product during any twelve month period beginning after the First Commercial Sale in which there are one or more Authorized Generic Products or Competitive Products being sold and distributed in the Territory (which adjustment shall be effective upon the date of market entry of such Authorized Generic Product or Competitive Product); provided that, in the event of any adjustment to Minimum Annual Product Units during any rolling twelve month period, the Minimum Annual Product Units existing immediately prior to and after such adjustment shall be prorated as of the effective date of such adjustment for the purpose of calculating the Minimum Annual Product Units for such twelve month period.

 

8.5                               Termination Due to Third Party Infringement Claim. On and after Purchaser’s First Commercial Sale, Purchaser may terminate this Agreement upon 30 days prior written notice to Seller in the event a Third Party Infringement Claim (other than with respect to the use of Purchaser Trademark) is made against Purchaser or its Affiliates so long as such termination notice is provided to Seller within 15 days of Purchaser receiving written notice of such Third Party Infringement Claim.

 

8.6                               Supply Obligations Upon Termination. Upon expiration of this Agreement or any termination of this Agreement after Purchaser’s First Commercial Sale, Seller shall supply and ship, and Purchaser shall purchase from Seller in accordance with the terms and conditions of this Agreement and shall be entitled to distribute to Purchaser Customers in the Territory, any and all amounts of Products ordered by Purchaser pursuant to Section 5.3 hereof prior to the effective date of such expiration or termination.

 

8.7                               Effect of Termination. Expiration or termination of this Agreement for any reason shall not release either party hereto from any liability that at such time had already accrued, or that thereafter accrues from a breach or default, prior to the effective date of such expiration or termination, nor affect in any way the survival of any other right, duty or obligation of either party hereto which is expressly stated elsewhere in this Agreement to survive such expiration or termination. In addition, termination or expiration of this Agreement shall in no event release Purchaser from its payment obligations under Article 4, including Purchaser’s obligation to pay Seller the Gross Profit Split with respect to sales of Product whether or not such Product is sold before or after the date of such termination or expiration. Except as expressly provided in Section 3.2.2, no payments to Seller made pursuant to Article 3 shall be refundable in whole or in part, whether upon termination or expiration of this Agreement or otherwise. Except as otherwise provided

 

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

14

 

herein, either party may pursue any remedy available in law or in equity with respect to any breach of this Agreement. Sections 2.2.3, 2.3.4 (but only in the event of a termination pursuant to Section 2.3.2), 2.3.5 (but only in the event of a termination pursuant to Section 2.3.2), 2.3.6, 3.2.2, 4.5, 6.7, 8.6, 8.7, Article 13, Article 14, Article 16, Article 17 and, as applicable, Article 11 and Article 18 hereof shall survive the expiration or termination of this Agreement in accordance with the respective terms thereof.

 

ARTICLE 9

 

WAREHOUSING; SHIPMENT

 

9.1                               Delivery. Seller shall not be responsible for warehousing finished goods for Purchaser. Purchaser is responsible for any delivery charges FCA (Incoterms 2000), Seller’s designated manufacturing site. All shipments shall be accompanied by a packing slip that describes the articles, states the Purchase Order number and shows the shipment’s destination. Seller shall use Commercially Reasonable Efforts to deliver Product in accordance with the delivery schedule set forth in the Initial Purchase Order or the Purchase Orders provided in compliance with Section 5.3 hereof.

 

9.2                               Shipment. The risk of loss with respect to Product shall be in accordance with FCA (Incoterms 2000), Seller’s designated manufacturing site. Purchaser shall notify Seller within 24 hours of discovery of any lost or stolen goods to facilitate Seller’s notification of the FDA.

 

ARTICLE 10

 

DEFECTIVE PRODUCT/INSPECTIONS/TESTING

 

10.1                        Disposition of Defective Product. Purchaser shall use Commercially Reasonable Efforts, within 20 days after receipt of any shipment of Product, to notify Seller in writing of the existence and nature of any non-compliance with the Product Warranty observable from a visual inspection. If such notice is not provided within such 20 day period, then all such Product shall be deemed to be accepted by Purchaser; provided, however, that, any such acceptance or deemed acceptance shall not adversely affect any applicable Product Warranty or rights to indemnification. If Purchaser notifies Seller of defective Product, then Seller shall have a reasonable opportunity to inspect such defective Product and provide Purchaser with detailed written instructions to return or dispose of such defective Product at Seller’s expense. Whether or not Seller agrees with Purchaser’s basis of rejection, Seller shall, at Purchaser’s request, use Commercially Reasonable Efforts to promptly replace the rejected Product. Purchaser shall pay the Transfer Price, and, to the extent Purchaser’s Net Sales derive from the sale of such Product, the applicable Gross Profit Split, for any Product shipped by Seller that replaces Product rejected by Purchaser hereunder. In accordance with Section 10.2 below, Purchaser shall not be obligated to pay for any properly rejected Product and any such payment shall be promptly returned to Purchaser if Seller agrees with Purchaser’s notice of non-compliance with respect to such rejected Product or such rejected Product is deemed by the independent third-party laboratory to be not in compliance with the Product Warranty. Purchaser shall not destroy, return or otherwise dispose of the rejected Product until written notification is received from Seller.

 

10.2                        Independent Testing. If Seller disagrees with Purchaser’s notice of non-compliance as to Product testing Specifications of the Product to the Product Warranty, the Product shall be submitted to an independent third-party laboratory, mutually and reasonably acceptable to both parties, for analytical testing to determine the extent of the Product’s compliance or non-compliance to the Product Warranty. All costs associated with such third-party laboratory testing shall be at Purchaser’s expense, and Purchaser shall be required to pay the Transfer Price and, in the event Purchaser’s Net Sales derive from the sale of such Product, the applicable Gross Profit Split, for all rejected Product (irrespective of whether Seller has replaced such Product), unless Seller agrees with Purchaser’s notice of non-compliance or the tested Product is deemed by such third-party laboratory to be not in compliance with the Product Warranty, in which case all such costs associated with such third-party laboratory testing, including reimbursement of freight and disposition costs, shall be promptly reimbursed by Seller to Purchaser and Purchaser shall not be obligated to pay for such rejected Product and any such payment shall be promptly returned to Purchaser.

 

10.3                        Short-Shipment. Purchaser shall notify Seller within 30 days of receipt of any short-shipment claim with respect to the Product and Seller shall use Commercially Reasonable Efforts to promptly address such claim to Purchaser’s reasonable satisfaction.

 

ARTICLE 11

 

REGULATORY MATTERS

 

11.1                        Adverse Event Reporting; Product Complaints. Purchaser shall have the responsibility in the Territory for complying with all regulatory filings, reporting requirements and other matters which relate solely to Purchaser acting as a distributor of the Product to Purchaser Customers in the Territory and Seller shall cooperate with Purchaser as reasonably necessary to

 

15

 

accomplish the foregoing. All other regulatory reporting matters (including investigating, evaluating and reporting Adverse Events and other Product complaints) shall be Seller’s responsibility. In this regard, Seller shall be responsible for all reporting to regulatory authorities of all Adverse Events associated with the use of Product. Purchaser shall notify Seller of any report of an Adverse Event concerning the Product within five (5) calendar days of receipt of the report and provide Seller with information as required by Applicable Laws or as reasonably requested by Seller. Purchaser shall cooperate with Seller as necessary to report such Adverse Event when so required under Applicable Laws. Purchaser shall also notify Seller within 10 days of any complaints related to the Product of which it becomes aware regarding problems with the Product other than those associated with Adverse Events, and Seller shall meet and confer periodically with Purchaser with respect to Seller’s responses to such complaints and whether any remedial actions by Purchaser are indicated as necessary or appropriate by the pattern of complaints, which actions shall be at the expense of the party to the extent its improper acts or omissions caused such complaints.

 

11.2                        FDA Communications. Purchaser and Seller agree to promptly notify the other party in the event they receive any communication or notice from the FDA with respect to the Product or an inspection of the facility where the Product is manufactured, Packaged or stored, and each party shall promptly provide a copy of such communications to the extent applicable to the Product to the other. The parties shall cooperate in good faith in responding to any such FDA inquiry or in making any report to the FDA with respect to the Product, but in all cases Seller shall have final authority for regulatory decisions concerning the Product and responsibility for all communications with the FDA.

 

11.3                        Recalls.

 

11.3.1              In the event of any recall or seizure of any Product, other than a Purchaser Recall (as defined below) Seller shall, at the written election of Purchaser and at Seller’s sole cost, either:

 

(a)                                 undertake Commercially Reasonable Efforts to replace the amount of Product recalled or seized; or

 

(b)                                 give credit to Purchaser against outstanding receivables due from Purchaser in an amount equal to the amount paid by Purchaser for the Product (including any Gross Profit Split paid to Seller on such Product) so recalled or seized or otherwise owing by Purchaser hereunder;

 

plus reimburse (or, at the written election of Purchaser, credit) Purchaser for the aggregate and reasonable transportation costs, taxes, freight insurance, handling and reasonable and verifiable out-of-pocket costs incurred by Purchaser in respect of such recalled or seized Product.

 

11.3.2              In the event of any recall or seizure of any Product occurring primarily as a result of any breach of this Agreement by, or negligent acts of omissions or intentional misconduct of, Purchaser or its Affiliates (a “Purchaser Recall”), (i) if such Purchaser Recall is classified by FDA as a Class I recall, Seller shall be responsible (as between Purchaser and Seller) for such recalled or seized Product and shall bear all costs of such recall or seizure, (ii) if such Purchaser Recall is classified by FDA as a Class II recall, Seller shall be responsible (as between Purchaser and Seller) for such recalled or seized Product and the parties shall share equally all costs of such recall or seizure and (iii) if such Purchaser Recall is classified by FDA as a Class III recall, Purchaser shall be responsible (as between Purchaser and Seller) for such recalled or seized Product and shall bear all costs of such recall or seizure, including reimbursement of Seller of any reasonable and verifiable out-of-pocket costs incurred by Seller related to the recall or seizure of such Product. Purchaser’s costs with respect to any Purchaser Recall as set forth above shall not be deducted in connection with the calculation of Purchaser’s Net Sales or Gross Profit hereunder.

 

11.3.3              For purposes of this Section 11.3, “recall” shall mean (i) any action by Seller, Purchaser, any Affiliate of either to recover title to or possession of any Product sold or shipped and/or (ii) any decision by Purchaser not to sell or ship Product to third parties which would have been subject to recall or seizure if it had been sold or shipped, in each case taken in the good faith belief that such action was appropriate or required under the circumstances. For purposes of this Section 11.3, “seizure” shall mean any action by any government agency to detain or destroy any Product. Notwithstanding anything to the contrary in this Section 11.3, Seller shall have final authority with respect to any recall of the Product and neither Purchaser nor its Affiliates shall initiate any recall of the Product without Seller’s prior written approval (such approval not to be unreasonably conditioned, withheld or delayed).

 

11.3.4              Seller and Purchaser shall keep the other fully informed of any notification or other information, whether received directly or indirectly, that might affect the marketability, safety or effectiveness of the Product, or which might result in liability issues or otherwise necessitate action on the part of either party, or which might result in recall or seizure of any Product. Purchaser shall maintain records of all sales of Product and customers reasonably sufficient to adequately administer a recall or seizure for the longer of three years after termination or expiration of this Agreement or the period required by Applicable Law. Seller will be responsible for assuring that such recall is closed-out with the FDA, unless the FDA shall otherwise require.

 

16

 

11.4                        Inspections.

 

11.4.1              Seller shall use Commercially Reasonable Efforts to maintain and operate the manufacturing facility designated in the ANDA, and to implement such quality control procedures, so as to cause Seller to be able to perform its obligations hereunder. Upon Purchaser’s written request and at its expense, Seller shall permit quality assurance representatives of Purchaser (reasonably acceptable to Seller) to inspect such manufacturing facility, at all times accompanied by a representative of Seller, upon reasonable notice, during normal business hours and on a confidential basis. Such inspection shall be limited to an assessment of such facility’s compliance with cGMP and other quality assurance standards as such relate to the manufacture of the Product. Seller shall also permit Purchaser reasonable periodic visits to discuss and review manufacturing and supply issues with management of Seller.

 

11.4.2              In the event Seller’s manufacturing, Packaging, testing or storage facility producing the Product hereunder is inspected by representatives of any federal, state, or local agency in connection with Seller’s manufacture, Packaging, testing or storage of Product, then Seller shall notify the Purchaser promptly upon learning of such inspection, and shall, within 10 days of such notice, supply Purchaser with copies of any correspondence or portions of correspondence which relate to the Product in Seller’s possession. If Seller is informed that a representative of any federal, state, or local agency will be conducting an audit of Seller’s manufacturing facility and such audit specifically relates to the Product, then Seller will, to the extent reasonably practicable, provide advance notice to Purchaser to permit Purchaser to observe and attend such audit. In the event Seller receives any regulatory letter or comments from any federal, state, or local agency in connection with its manufacture, Packaging, testing or storage of the Product requiring a response or action by Seller, including receipt of a Form 483 (Inspectional Observations) or a “Warning Letter,” Seller shall promptly following Seller’s receipt thereof, provide Purchaser with a copy of such communication which relate to the Product. At Seller’s request, Purchaser will provide Seller with any and all data or information reasonably required to prepare a response to such communication. Seller shall consult Purchaser with respect to any response relating to the Product; provided, however, that, as between Seller and Purchaser, Seller shall make the final determination as to any such response submitted to the regulatory authorities. Seller shall promptly provide Purchaser with a copy of any final response which relate to the Product after its submission to the regulatory authority.

 

11.4.3              Purchaser shall use Commercially Reasonable Efforts to maintain and operate any facility of Purchaser at which the Product is stored or distributed in compliance with cGMP and other quality assurance standards as such relate to the Product. Upon Seller’s written request and at its expense, Purchaser shall permit quality assurance representatives of Seller (reasonably acceptable to Purchaser) to inspect any facility of Purchaser at which the Product is stored or distributed. Such inspection shall be limited to an assessment of such facility’s compliance with cGMP and other quality assurance standards as such relate to the Product. In the event Purchaser is inspected or receives a regulatory letter or comments from any federal agency in connection with its sale or distribution of the Product, Purchaser shall notify Seller promptly upon learning of such inspection and/or provide Seller copies of such correspondence upon receiving such documentation. Seller shall have the right to, and at Purchaser’s written request shall, participate in that portion of such inspection relating to the Product. Regardless of whether Seller does participate as described above, Seller and Purchaser shall consult with respect to the response relating to the Product. Seller will provide Purchaser at Purchaser’s request with all data or information reasonably required to prepare a response relating to the Product, and Purchaser will promptly provide Seller with a copy of any final response submitted to the regulatory authority.

 

11.4.4              Seller will notify Purchaser within one day of any finished Product lot that results in a positive sterility test out of specification (OOS) condition, whether or not that lot was released or distributed, whether or not the positive sterility result was subsequently investigated and attributed to an assignable cause. In addition, Seller will notify Purchaser within one day of any stability test for the Product that results in an OOS condition relating to the Product Specifications, whether or not the OOS condition was subsequently investigated and attributed to an assignable cause. To the extent it is not reasonably practicable for Seller to provide notice within the one day period required by this Section, Seller will not be deemed to be in breach of this Agreement if it provides the required notice as soon as it is reasonably practicable. Seller will also provide quarterly reports to Purchaser of the number of lots of Product made and the number of lot failures during the preceding quarter and shall reasonably respond to any information requests relating thereto.

 

11.5                        Sales and Marketing Activities. Purchaser shall be responsible for establishing a formal written program in compliance with the California Comprehensive Compliance Program pursuant to California Health and Safety Code Sections 119400 et. seq., on or before July 1, 2005, for all applicable activities of Purchaser and its Affiliates related to the Product which are subject to this code section. Upon request of Seller, Purchaser shall provide Seller with reasonable evidence of its compliance with this Section 11.5.

 

11.6                        Cooperation. Seller shall provide reasonable assistance to Purchaser in its preparation and filing with appropriate regulatory agencies (both federal and state agencies related to reimbursement and health care insurance) of filings required for the marketing, and distribution of the Product to Purchaser Customers in the Territory by Purchaser. Seller and Purchaser shall cooperate in good faith to develop such necessary regulatory strategies which may be required for purposes of this Agreement, and to allow the Product to be listed on applicable formularies and other drug listings as reasonably requested by Purchaser, and making any applicable filings or registrations to allow the Product to be included on such formularies or listings, including Medicare and Medicaid.

 

17

 

ARTICLE 12

 

FORCE MAJEURE

 

12.1                        Force Majeure. If either party is prevented from performing any of its obligations hereunder (except for any monetary payments due hereunder) due directly or indirectly to fire; flood; accident; explosion; equipment or machinery breakdown; sabotage; strike; or any labor disturbance; civil commotions; riots’ invasions; wars (present or future); acts, restraints, requisitions, regulations, or directions or orders of any governmental entity; compliance with any request of any governmental entity; compliance with any request for material represented to be for purposes of (directly or indirectly) producing articles for national defense or national defense facilities; shortage of labor, fuel, power or raw materials; inability to obtain raw materials or supplies; failures of normal sources of supplies; inability to obtain or delays of transportation facilities; any act of God; any act of the other party or other causes (whether similar or dissimilar to the foregoing); in each case so long as such cause is beyond the reasonable control of such party (a “Force Majeure Event”), such non-performing party shall not be liable for breach of this Agreement with respect to such non-performance if and to the extent any such non-performance is due to a Force Majeure Event. Such non-performance will be excused for as long as such event shall be continuing; provided that, the non-performing party gives immediate written notice to the other party of the Force Majeure Event. Such non-performing party shall exercise all reasonable efforts to eliminate the Force Majeure Event and to resume performance of its affected obligations as soon as practicable. In the event that, as a result of such Force Majeure Event, a party does not perform all of its obligations hereunder for any period aggregating 120 days within any 360-day period, the other party may terminate this Agreement on 30 days prior written notice to the non-performing party.

 

ARTICLE 13

 

INSURANCE

 

13.1                        Insurance. Each party agrees to procure and maintain in full force and effect during the term of this Agreement and continuing for a period of not less than 36 months following the termination or expiration hereof, at its sole cost and expense, product liability insurance in amounts of not less than $2,000,000 per incident and $5,000,000 annual aggregate (provided that within 60 days after Purchaser’s payment of the amount to Seller under Section 3.1(b), the annual aggregate shall be increased to $10,000,000) which insurance shall be written on a “claims made” basis policy form with a reputable insurance carrier and name the other party as an additional insured. Each party shall, on request, provide to the other party a copy of a certificate of coverage or other written evidence reasonably satisfactory to such requesting party of such insurance coverage. Either party may substitute a program of self-insurance for all or part of the third party insurance required hereunder if reasonably satisfactory to the other party.

 

ARTICLE 14

 

CONFIDENTIALITY

 

14.1                        Confidentiality. As used herein, “Confidential Information” shall include all confidential or proprietary information given to one party by the other party, or otherwise acquired by such party in its performance of this Agreement, relating to such other party or any of its Affiliates, including information regarding any of the products of such other party or any of its Affiliates, information regarding its advertising, distribution, marketing or strategic plans or information regarding its costs, productivity or technological advances, specifications, data, know-how, formulations, product concepts, sample materials, manufacturing processes and other manufacturing information, business and technical information, pricing and other deal terms, whether in written form or disclosed orally, visually and/or in another tangible form. Neither party shall use, exploit or disclose to third parties any Confidential Information of the other and each party shall insure that its and its Affiliates’ employees, officers, representatives and agents shall not use or disclose to third parties any Confidential Information and upon the termination of this Agreement shall return to the other or destroy all Confidential Information in written form. Confidential Information shall not include information that (i) was lawfully already known to receiving party at the time of its receipt thereof, (ii) is disclosed to receiving party after its receipt thereof by a third party who has a right to make such disclosure without violating any obligation of confidentiality, (iii) is or becomes generally available to the public through no fault of receiving party or (iv) is independently developed by the receiving party as demonstrated by such party pursuant to contemporaneous written records. The obligations of confidentiality set out above shall survive termination or expiration of this Agreement for a period of 10 years. Notwithstanding the foregoing, in the event that a party is required under Applicable Law, the rules or regulations of any stock exchange or listing body upon which the stock of a party or a party’s parent corporation may then be traded, or by governmental agency or court of competent jurisdiction to disclose the Confidential Information of the other party, such party shall promptly notify the other party in writing of all details of the required disclosure and permit the other party a reasonable opportunity to intervene to oppose, limit or condition such disclosure prior to making such disclosure, and such party shall make any such disclosure ultimately required in the most restrictive fashion, in its reasonable judgment, consistent with the applicable requirement requiring such disclosure.

 

18

 

ARTICLE 15

 

PUBLIC ANNOUNCEMENTS; ETC.

 

15.1                        Public Announcements. No public announcement, news release, statement, publication, or presentation relating to the existence of this Agreement, the subject matter hereof, or either party’s performance hereunder will be made without the other party’s prior written approval, which approval shall not be unreasonably conditioned, withheld or delayed. Notwithstanding the foregoing, and subject to the provisions of Article 14 with respect to Confidential Information, either party may make any public disclosure relating to the existence of this Agreement, the subject matter hereof and its terms, or either party’s performance hereunder that is deemed necessary, in the reasonable judgment of a party, to comply with Applicable Laws or with the rules or regulations of any stock exchange or listing body upon which the securities of a party or a party’s parent corporation may then or are intended to be traded or of any governmental agency (e.g., the Securities and Exchange Commission) which regulates such securities (including the filing of a copy of this Agreement with such governmental agency); provided that, the party making such disclosure shall provide the non-disclosing party with a copy of the intended disclosure reasonably, and to the extent practicable, prior to public dissemination.

 

15.2                        No Use of Other Party’s Name. Neither party shall use the name of the other party or any of its Affiliates for advertising, promotional or other purposes without the prior written consent of the other party.

 

ARTICLE 16

 

REPRESENTATIONS AND WARRANTIES

 

16.1                        Product Warranty.

 

16.1.1              Seller represents and warrants to Purchaser that all Product supplied in connection with this Agreement shall: (i) be manufactured, packaged, tested, stored and handled in compliance in all material respects with cGMP and all other Applicable Laws (for the avoidance of doubt any non-compliance that would affect Purchaser’s sale or distribution of the Product hereunder shall be considered material); and (ii) meet the Specifications and the Product’s ANDA and not be adulterated or misbranded within the meaning of the Act (each of clauses (i) and (ii) being referred to collectively herein as the “Product Warranty”). The foregoing Product Warranty shall not apply to the extent that the failure of any such Product to meet the requirements of this Section 16.1.1 is caused by the negligent acts or omissions or intentional misconduct of Purchaser, its Affiliates, wholesalers or other customers (including modification or misuse or improper storage or transportation of the Product after shipment to Purchaser, whether by Purchaser, its Affiliates or any other Person).

 

16.1.2              EXCEPT AS EXPRESSLY PROVIDED IN SECTION 16.1.1 ABOVE, SELLER MAKES NO REPRESENTATION OR WARRANTY WITH RESPECT TO THE PRODUCT OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY AS TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR ANY WARRANTY THAT THE PRODUCT IS FREE FROM THE RIGHTFUL CLAIM OF ANY THIRD PARTY, BY WAY OF INFRINGEMENT OR THE LIKE.

 

16.2                        Warranties with Regard to Status.

 

16.2.1              Purchaser hereby represents and warrants to Seller that neither it nor any of its Affiliates is prohibited under any Applicable Laws from selling and distributing the Product (assuming that the ANDA for the Product is approved by FDA) within the Territory and that neither Purchaser nor any of its Affiliates is a person that is listed by a United States federal agency as debarred, suspended, proposed for debarment or otherwise ineligible for federal programs in the Territory.

 

16.2.2              Seller hereby represents and warrants to Purchaser that neither it nor any of its Affiliates is prohibited under any Applicable Laws from manufacturing, selling and distributing the Product (assuming that the ANDA for the Product is approved by FDA) within the Territory and that neither Seller nor any of its Affiliates is a person that is listed by a United States federal agency as debarred, suspended, proposed for debarment or otherwise ineligible for federal programs in the Territory.

 

16.3                        Purchaser Warranties.  Purchaser hereby represents warrants and covenants that:

 

(a)                                 Purchaser Trademarks may be lawfully used as directed by Purchaser;

 

19

 

(b)                                 the Product Label, if Labeled in accordance with specifications provided by Purchaser, will comply with the ANDA for the Product and Applicable Laws; and,

 

(c)                                  neither Purchaser nor its Affiliates has filed with the FDA an ANDA for a generic equivalent to Lovenox®.

 

16.4                        Execution and Performance of Agreement.  Each of Seller and Purchaser represents and warrants to the other that it has full right, power and authority to enter into and perform its obligations under this Agreement. Each of Seller and Purchaser further represents and warrants to the other that the performance of its obligations under this 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 or any of its Affiliates is a party or by which it is otherwise bound or any Applicable Law.

 

16.5                        LIMITATION ON LIABILITY OF PARTIES. EXCEPT WITH RESPECT TO (A) A CLAIM FOR BREACH UNDER ARTICLE 14 ABOVE, (B) A CLAIM FOR WILLFUL MISCONDUCT OR FRAUD AND (C) AMOUNTS PAYABLE TO A THIRD PARTY THAT ARE SUBJECT TO INDEMNIFICATION PURSUANT TO ARTICLE 17 BELOW, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR LOSS OF PROFITS OR INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES RESULTING FROM THIS AGREEMENT.

 

ARTICLE 17

 

INDEMNIFICATION

 

17.1                        Indemnification by Seller.  Seller shall indemnify, defend and hold harmless Purchaser (and its Affiliates) from and against any and all damages, liabilities, claims, costs, charges, judgments and expenses (including reasonable attorneys’ fees) (collectively “Damages”) that may be sustained, suffered or incurred by Purchaser (or its Affiliates) arising from or relating to any claim, action or proceeding made or brought by a third party against the Purchaser (or its Affiliates) to the extent arising from (a) the actual or alleged breach by Seller of any warranty, representation, covenant or agreement made by Seller in this Agreement; (b) negligent acts or omissions or intentional misconduct of Seller or its Affiliates; (c) any Product recall or seizure (other than a Purchaser Recall to the extent provided under Section 11.3.2); or (d) any Product Liability Claims (other than as provided in Section 17.2(d) below); provided, however, that in each such case above, Seller shall not be liable to Purchaser hereunder to the extent such Damages arise from the negligent acts or omissions or intentional misconduct of Purchaser or its Affiliates, wholesalers or other customers (including modification or misuse or improper storage or transportation of the Product after shipment to Purchaser, whether by Purchaser, its Affiliates or any other Person) or such other actions or inactions for which Purchaser is obligated to indemnify Seller under Section 17.2 below.

 

17.2                        Indemnification by Purchaser.  Purchaser shall indemnify, defend and hold harmless Seller (and its Affiliates) from and against any and all Damages, that may be sustained, suffered or incurred by Seller (or its Affiliates) arising from or relating to any claim, action or proceeding made or brought by a third party against the Seller (or its Affiliates) to the extent arising from (a) the actual or alleged breach by Purchaser of any warranty, representation, covenant or agreement made by Purchaser in this Agreement; (b) improper Product marketing, sales or distribution activities of Purchaser or its Affiliates, including any commercial arrangements entered into by Purchaser with its customers or other third parties; (c) negligent acts or omissions or intentional misconduct of Purchaser or its Affiliates (including modification or misuse or improper storage or transportation of the Product by Purchaser, its Affiliates or other Person acting on behalf of Purchaser or its Affiliates, excluding wholesalers and customers); (d) any Product Liability Claims to the extent arising from Purchaser’s breach hereof or the negligent acts or omissions or intentional misconduct of Purchaser and its Affiliates (including modification or misuse or improper storage or transportation of the Product by Purchaser, its Affiliates or other Person acting on behalf of Purchaser or its Affiliates, excluding wholesalers and customers); or (e) any Purchaser Recall (except as otherwise provided in Section 11.3.2); provided, however, that, in each such case above, Purchaser shall not be liable to Seller hereunder to the extent such Damages arise from the negligent acts or omissions or intentional misconduct of Seller or its Affiliates or such other actions or inactions for which Seller is obligated to indemnify Purchaser under Section 17.1 above.

 

17.3                        Claims.  Each indemnified party agrees to give the indemnifying party prompt written notice of any matter upon which such indemnified party intends to base a claim for indemnification under this Article 17; provided, however, that failure to give such prompt notification shall not affect the indemnification provided hereunder except to the extent the indemnifying party shall have been actually materially prejudiced as a result of such failure. The indemnified party shall permit, and shall cause its employees and agents to permit, the indemnifying party to defend or settle any such action, claim or liability and agrees to the complete control of such defense or settlement by the indemnifying party; provided, however, that such settlement does not impose any obligation or burden on the indemnified party without the prior written consent of the indemnified party. No such action, claim or liability shall be settled by the indemnified party without the prior written consent of the indemnifying party (which consent shall not be unreasonably conditioned, withheld or delayed) and the indemnifying party shall not be responsible for any fees or other costs incurred other than as provided in this Article 17. The indemnified party, its employees, agents and affiliates shall cooperate reasonably with the

 

20

 

indemnifying party and its legal representatives in the investigation and defense of any action, claim or liability covered by this indemnification at the sole expense of the indemnifying party. The indemnified party shall have the right, but not the obligation, to be represented by counsel of its own selection and at its own expense. Notwithstanding Sections 17.1 and 17.2 above, and by way of clarification, neither party shall be obligated to indemnify the other party hereunder for modification or misuse or improper storage or transportation of the Product by wholesalers or the customers of either party.

 

17.4                        Third Party Infringement Claims.  In the event any claim or action for infringement of any patent, trademark, or other intellectual property right shall be made or brought by a third party against Seller, Purchaser or any of their respective Affiliates because of, or in anticipation of, the manufacture and supply of Product by Seller to Purchaser hereunder, or the marketing, sale or distribution of such Product to Purchaser Customers in the Territory by Purchaser hereunder (a “Third Party Infringement Claim”), the party first receiving such notice of the Third Party Infringement Claim shall promptly notify the other party. With respect to the Third Party Infringement Claim, Seller and Purchaser each hereby agrees that all Damages arising from or related to the Third Party Infringement Claim (including any legal fees and associated costs incurred in defending the Third Party Infringement Claim and any fees, royalties or other amounts paid in settlement or upon judgment) shall be shared as follows:

 

(a)                                         Except as provided in clause (b) below, Seller shall be 100% responsible for all Damages arising from any Third Party Infringement Claim, including any fees, royalties or other amounts agreed to be paid in settlement or upon judgment of the Lawsuit or otherwise; and

 

(b)                                         Purchaser shall be 100% responsible for all Damages arising from any Third Party Infringement Claim with respect to the use of Purchaser Trademarks.

 

Each party agrees to indemnify the other party to ensure that Damages arising from any Third Party Infringement Claim are allocated in accordance with clauses (a) and (b) above. Unless otherwise agreed to by the parties, Seller shall control the defense any Third Party Infringement Claim described in clause (a) above and Purchaser shall control the defense of any Third Party Infringement Claim described in clause (b) above. The party controlling the defense of any Third Party Infringement Claim shall have the sole right to defend or settle any such Third Party Infringement Claim; provided, however, that such settlement does not impose any obligation or burden on the other party without the prior written consent of the other party (which consent shall not be unreasonably withheld). The party controlling the defense of any Third Party Infringement Claim shall keep the other party, at its request, materially informed of the status and progress of the defense of the Third Party Infringement Claim. No Third Party Infringement Claim shall be settled by the party who is not controlling the defense of such Third Party Infringement Claim without the prior written consent of the party controlling such defense. The non-controlling party, its employees, agents and Affiliates shall reasonably cooperate with the party (and its legal representatives) controlling the defense of any Third Party Infringement Claim in the investigation and defense of such Third Party Infringement Claim. Notwithstanding the above, and by way of clarification, neither party shall be obligated to indemnify the other party hereunder for modification or misuse of the Product by the other party or by wholesalers or the customers of either party. The provisions of this Section 17.4 shall be notwithstanding any conflicting provisions set forth in this Agreement, including Sections 17.1, 17.2 and 17.3.

 

17.5                        No Right of Offset.  Purchaser shall have no right to set off or retain any amounts otherwise payable to Seller under Articles 3 or 4 of this Agreement, including any amounts payable to satisfy any indemnification claims Purchaser may have hereunder.

 

ARTICLE 18

 

MISCELLANEOUS

 

18.1                        Governing Law.  This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of New York, without reference to rules of conflicts or choice of laws.

 

18.2                        Relationship of the Parties.  The relationship of Purchaser and Seller established by this Agreement is that of independent contractors, and nothing contained herein shall be construed to (i) give either party any right or authority to create or assume any obligation of any kind on behalf of the other or (ii) constitute the parties as partners, joint venturers, co-owners or otherwise as participants in a joint or common undertaking.

 

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

 

18.4                        Entire Agreement.  It is the mutual desire and intent of the parties to provide certainty as to their respective future rights and remedies against each other by defining the extent of their mutual undertakings as provided herein. The parties have in this Agreement incorporated all representations, warranties, covenants, commitments and understandings on which they have relied in

 

21

 

entering into this Agreement, and, except as provided for herein, neither party makes any covenant or other commitment to the other concerning its future action. Accordingly, this Agreement (i) constitutes the entire agreement and understanding between the parties with respect to the subject matter hereof and there are no promises, representations, conditions, provisions or terms related thereto other than those set forth in this Agreement and (ii) supersedes all previous understandings, agreements and representations between the parties, written or oral. No modification, change or amendment to this Agreement shall be effective unless in writing signed by each of the parties hereto.

 

18.5                        Interpretation.  Unless the context of this Agreement otherwise requires, (i) words of any gender include each other gender; (ii) words using the singular or plural number also include the plural or singular number, respectively; (iii) the terms “hereof,” “herein,” “hereby,” and derivative or similar words refer to this entire Agreement; (iv) the terms “Article” and “Section” refer to the specified Article and Section of this Agreement, and (v) the terms “include,” “includes,” or “including” shall be deemed to be followed by the words “without limitation” unless otherwise indicated. Whenever this Agreement refers to a number of days, unless otherwise specified, such number shall refer to calendar days. The headings in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

 

18.6                        Notices.  All notices and other communications hereunder shall be in writing. All notices hereunder of an indemnity claim, a Force Majeure Event, default or breach hereunder, or, if applicable, termination or renewal of the term hereof, or any other notice of any event or development material to this Agreement taken as a whole, shall be delivered personally, or sent by national overnight delivery service or postage pre-paid registered or certified U.S. mail, or facsimile, and shall be deemed given: when delivered, if by personal delivery or overnight delivery service; five business days after deposit in the U.S. mail, if mailed; or upon receipt of electronic confirmation of transmission, if sent by facsimile and followed on the same day by deposit in the U.S. mail. Notice shall be addressed:

 

If to Seller:

 

Amphastar Pharmaceuticals, Inc.

11570 Sixth Street

Rancho Cucamonga, California 91730

Attention: Chief Financial Officer

Telephone: (909) 980-9484

Fax: (909) 980-8296

 

If to Purchaser:

 

Andrx Pharmaceuticals, Inc.

8151 Peters Road, Fourth Floor

Plantation, Florida 33324

Attention Lawrence Rosenthal, President

Telephone: (954) 382-7608

Fax: (954) 382-7716

 

With a copy (which shall not constitute notice) to:

 

Andrx Corporation

8151 Peters Road, Fourth Floor

Plantation, Florida 33324

Attention: Scott Lodin, Esq.,

Executive Vice President and General Counsel

Telephone: (954) 382-7614

Fax: (954) 382-7744

 

or to such other place as either party may designate by written notice to the other in accordance with the terms of this Section 18.6.

 

18.7                        No Waiver.  The failure of either party to enforce at any time for any period any 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. Subject to any express provisions to the contrary contained herein, the remedies provided herein are cumulative and not exclusive of any remedies provided at law.

 

22

 

18.8                        Assignment.  This Agreement may not be assigned or delegated by either party without the prior written consent of the other, except that either party may assign or delegate its rights and/or obligations hereunder to any of its Affiliates, to a successor to all of its business, or to a successor to that portion of its business which relates to the Product. Subject to the foregoing and the other terms of this Agreement, this Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and permitted assigns.

 

18.9                        Severability.  In the event that any one or more of the terms or provisions (or any part thereof) contained in this 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, then to the maximum extent permitted by law, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or any other such instrument. Any term or provision of this Agreement that is so held to be invalid, illegal or unenforceable in any jurisdiction shall, to the extent the economic benefits conferred by this Agreement to both parties remain substantially unimpaired, not affect the validity, legality or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction.

 

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

 

18.11                 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 execution of this Agreement and the arrangements contemplated hereby.

 

[SIGNATURE PAGE FOLLOWS]

 

23

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized respective representatives as of the day and year first above written.

 

	
 
    	
AMPHASTAR PHARMACEUTICALS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ David W. Nassif
    
	
 
    	
Name:
    	
David W. Nassif
    
	
 
    	
Title:
    	
CFO and Senior Vice President of Global Licensing
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
ANDRX PHARMACEUTICALS, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Lawrence J. Rosenthal
    
	
 
    	
Name:
    	
Lawrence J. Rosenthal
    
	
 
    	
Title:
    	
President
    

 

24

 

THIS FIRST AMENDMENT TO DISTRIBUTION AGREEMENT (the “First Amendment”) is entered into as of this 15th day of August, 2008 (the “Amendment Date”) by and between Amphastar Pharmaceuticals, Inc., a Delaware Corporation, (“Amphastar”) and Andrx Pharmaceuticals, Inc. a Florida Corporation, d/b/a Watson Laboratories — Florida (“Watson”).

 

WHEREAS, Amphastar and Watson have previously entered into that certain Distribution Agreement dated May 2, 2005 (the “Agreement”) related to, among other things, Watson’s distribution of Product (as defined in the Agreement); and

 

WHEREAS, the parties wish to amend the Agreement as set forth below;

 

NOW THEREFORE, in consideration of the mutual covenants and promises contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

 

1.              Amendment of Section 3.1 and 3.2.2 of the Agreement.

 

(a)         Section 3.1 of the Agreement is hereby deleted in its entirety and replaced with the following:

 

“3.1                         Milestones and Payments. In consideration of Seller’s grant of the exclusive distribution rights hereunder to Purchaser, Purchaser shall pay Seller the sum of $4,500,000 upon the Effective Date of this Agreement.”

 

(b)         The fourth line of Section 3.2.2 of the Agreement is hereby amended by replacing “Section 3.1(a)” with “Section 3.1.”

 

2.              Amendment of Sections 4.1.1 and 4.1.2 of the Agreement.

 

(a)         The fourth line of Section 4.1.1 of the Agreement is hereby amended by replacing [***] with [***] The fifth line of Section 4.1.1 of the Agreement is hereby amended by replacing “third anniversary” with “first anniversary.”

 

(b)         The first line of Section 4.1.2 is hereby amended by replacing [***] with [***]

 

3.              Amendment of Section 4.2.1(a) of the Agreement.

 

Section 4.2.1(a) of the Agreement is hereby amended by replacing “60%” with [***]

 

4.              Amendment of Section 5.1 of the Agreement.

 

Section 5.1 of the Agreement is hereby deleted in its entirety and replaced with the following section 5.1:

 

“5.1   Initial Purchase Order; Launch Quantities. Within ten (10) days of the Amendment Date, Purchaser shall deliver to Seller an initial binding order (the “Initial Purchase Order”) for [***] units of Product (the “Launch Quantities”) required for Purchaser’s commercial launch of the Product consistent with Purchaser’s then current Forecast. Subject to the terms of this Agreement, Seller shall supply the Launch Quantities to Purchaser within [***] days of Seller’s receipt of final FDA approval of the Product ANDA. Seller shall thereafter use Commercially Reasonable Efforts to supply Purchaser such additional quantities of the Product as ordered by Purchaser hereunder pursuant to Section 5.3. All Launch Quantities shall have at least [***] of expiry dating remaining on such Products at the time of delivery to Purchaser. In order to ensure adequate inventory to timely deliver Purchaser’s anticipated needs for Launch Quantities, upon receipt of the Initial Purchase Order Seller shall promptly commence manufacture of [***] units of Product in such dosage strengths as requested by Purchaser (the “New Manufactured Lots”). Seller shall promptly notify Purchaser when it commences manufacture of the New Manufactured Lots and provide Purchaser with the lot numbers for all units of Product in the New Manufactured Lots. If, prior to delivery to Purchaser, a portion of the New Manufactured Lots possess less than [***] of expiry dating remaining on such Products, Purchaser shall reimburse Seller [***] for each unit of Product in the New Manufactured Lots that possess less than [***] of expiry dating.”

 

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

 

5.              Amendment of Section 5.6.1 of the Agreement.

 

Section 5.6.1 of the Agreement is hereby deleted in its entirety and replaced with the following new section 5.6.1:

 

“5.6.1   Notwithstanding anything herein to the contrary or anything to the contrary in any Purchase Order or Forecast, Seller shall not be obligated to supply Purchaser (regardless of amounts ordered by Purchaser), more than the Maximum Annual Product Units and, if applicable, the Quarterly Adjustment (as defined below) during a twelve month period measured from the date of First Commercial Sale and on each anniversary of the First Commercial Sale. Without limiting the generality of the foregoing, any Purchase Order or Forecast submitted by Purchaser hereunder for more than the Maximum Annual Product Units and, if applicable, the Quarterly Adjustment shall, to the extent of the excess, be deemed rejected by Seller, unless expressly accepted by Seller in writing.

 

“As used herein, “Maximum Annual Product Units” shall mean:

 

“For the first [***] following First Commercial Sale: [***] Units of Product, to be delivered to Purchaser as follows: [***] following First Commercial Sale; [***] following First Commercial Sale; and [***] following First Commercial Sale.

 

“For each annual period commencing on the [***] and each subsequent annual anniversary of the First Commercial Sale, [***] Units of Product, to be delivered at the rate of [***] Units of Product per [***].

 

“Subject to the foregoing provisions of this Section 5.6.1, commencing with the end of the [***] calendar quarter following First Commercial Sale, in the event Amphastar sells more than [***] Units of Product (including sales to Purchaser and any other Person) in any calendar quarter, as measured by [***] or a comparable, independent third party reporting agency, Amphastar shall, at Watson’s request, increase its supply of Product to Watson in the immediately following calendar quarter by up to the same percentage increase (the “Quarterly Adjustment”) by which Amphastar exceeded [***] total Units of Product sold; provided that, Amphastar shall have no obligation to supply Watson in any calendar quarter with any Product in excess of [***] of the total combined units of Product, Lovenox® brand product, Authorized Generic Product and Competitive Product sold to Purchaser Customers (collectively, the “Retail Market Sales”) in the immediately preceding calendar quarter. For purposes of clarification and notwithstanding anything to the contrary, if at any time the total of the Maximum Annual Product Units plus the then applicable Quarterly Adjustment exceeds [***] of the Retail Market Sales in the immediate preceding calendar quarter (the “Supply Limit”), Amphastar shall have no obligation to supply Purchaser with any Product in excess of the Supply Limit.

 

“From time to time, should Seller have additional manufacturing capacity to permit it to supply Products in excess of the Supply Limit, Purchaser may request and Seller shall reasonably consider Purchaser’s request to purchase additional Product quantities in excess of the Supply Limit; provided that, neither party shall have any obligation to agree to any increase of Product quantities in excess of the Supply Limit.”

 

6.                                      Scope of Amendment. Except as expressly and specifically amended hereby, all other provisions, terms and conditions of the Agreement shall remain unchanged and in full force and effect.

 

7.                                      Counterparts. This First Amendment may be executed in several counterparts, each of which shall be deemed and original, but all of which together shall constitute one and the same instrument. Signatures delivered via facsimile or other electronic means shall have the full force of an original signature.

 

8.                                      Definitions. Unless otherwise defined herein, capitalized terms shall have the meanings as defined in the Agreement.

 

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

2

 

IN WITNESS WHEREOF, the parties have caused their duly authorized representatives to execute this First Amendment as of the date first written above.

 

	
 
    	
AMPHASTAR PHARMACEUTICALS, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ John Weber
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
John Weber
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
C.F.O.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
ANDRX PHARMACEUTICALS, INC.,
    
	
 
    	
d/b/a WATSON LABORATORIES - FLORIDA
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Thomas R. Russillo
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
Thomas R. Russillo
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
EVP & President, Generics Division
    

 

3

 

THIS SECOND AMENDMENT TO DISTRIBUTION AGREEMENT (the “Second Amendment”) is entered into as of this 19th day of February, 2013 (the “Amendment Date”) by and between Amphastar Pharmaceuticals, Inc., a Delaware Corporation, (“Amphastar”) and Watson Laboratories, Inc. —— Florida, a Florida Corporation (f/k/a Andrx Pharmaceuticals, Inc.) (“Watson”).

 

WHEREAS, Amphastar and Watson have previously entered into that certain Distribution Agreement dated May 2, 2005 and First Amendment dated August 15, 2008 (collectively called the “Agreement”), related to, among other things, Watson’s distribution of Product (as defined in the Agreement); and

 

WHEREAS, the parties wish to amend the Agreement as set forth below;

 

NOW THEREFORE, in consideration of the mutual covenants and promises contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

 

1.  Amendment of Sections 4.1.1 of the Agreement and the First Amendment.

 

The fourth line of Section 4.1.1 of the Agreement is hereby amended by replacing “[***] per unit” with “[***] per unit [***], [***] per unit [***], and [***]”.

 

2.  Amendment of Section 1.26 of the Agreement.

 

For the purpose of clarification of this section, the Second line of Section 1.26 of the Agreement is hereby amended by replacing “aggregate. Transfer Price paid for such Product” with “actual Transfer Price paid for such Product”.

 

3.  Scope of Amendment. Except as expressly and specifically amended hereby, all other provisions and, terms and conditions of the Agreement shall remain unchanged and in full force and effect.

 

4.  Counterparts. This Second Amendment may be executed in several counterparts, each of which shall be deemed and original, but all of which together shall constitute one and the same instrument. Signatures delivered via facsimile or other electronic means shall have the full force of an original signature.

 

5.  Definitions. Unless otherwise defined herein, capitalized terms shall have the meanings as defined in the Agreement.

 

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

1

 

IN WITNESS WHEREOF, the parties have caused their duly authorized representatives to execute this Second Amendment as of the date first written above.

 

	
 
    	
AMPHASTAR   PHARMACEUTICALS, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   John Weber
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
John   Weber
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
C.F.O.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
WATSON   LABORATORIES, INC. — FLORIDA
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Jeff Regan
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
Jeff   Regan
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
V.P.,   Global Third Party Mfg.
    

 

2Exhibit 10.8

 

BUSINESS LOAN AGREEMENT

 

	
Principal
    	
 
    	
Loan Date
    	
 
    	
Maturity
    	
 
    	
Loan No
    	
 
    	
Call/Coll
    	
 
    	
Account
    	
 
    	
Officer
    	
 
    	
Initials
    	
 
    
	
$
    	
10,000,000.00
    	
 
    	
12-31-2010
    	
 
    	
12-31-2011
    	
 
    	
20002400
    	
 
    	
 
    	
 
    	
 
    	
 
    	
8282
    	
 
    	
RL
    	
 
    
																	

 

References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.

Any item above containing “***” has been omitted due to text length limitations.

 

	
Borrower:
    	
International Medication Systems, Limited
    	
Lender:
    	
East West Bank
    
	
 
    	
1886 Santa Anita Avenue
    	
 
    	
Loan Servicing Department
    
	
 
    	
So. El Monte, CA 91733
    	
 
    	
9300 Flair Drive, 6th Floor
    
	
 
    	
 
    	
 
    	
El Monte, CA 91731
    

 

THIS BUSINESS LOAN AGREEMENT dated December 31, 2010, is made and executed between International Medication Systems, Limited (“Borrower”) and East West Bank (“Lender”) on the following terms and conditions. Borrower has received prior commercial loans from Lender or has applied to Lender for a commercial loan or loans or other financial accommodations, including those which may be described on any exhibit or schedule attached to this Agreement. Borrower understands and agrees that: (A) in granting, renewing, or extending any Loan, Lender is relying upon Borrower’s representations, warranties, and agreements as set forth in this Agreement; (B) the granting, renewing, or extending of any Loan by Lender at all times shall be subject to Lender’s sole judgment and discretion; and (C) all such Loans shall be and remain subject to the terms and conditions of this Agreement.

 

TERM. This Agreement shall be effective as of December 31, 2010, and shall continue in full force and effect until such time as all of Borrower’s Loans in favor of Lender have been paid in full, including principal, interest, costs, expenses, attorneys’ fees, and other fees and charges, or until such time as the parties may agree in writing to terminate this Agreement.

 

ADVANCE AUTHORITY. The following person or persons are authorized to request advances and authorize payments under the line of credit until Lender receives from Borrower, at Lender’s address shown above, written notice of revocation of such authority: Jack Y. Zhang, President/CEO of International Medication Systems, Limited; and John Weber, CFO of International Medication Systems, Limited.

 

CONDITIONS PRECEDENT TO EACH ADVANCE. Lender’s obligation to make the initial Advance and each subsequent Advance under this Agreement shall be subject to the fulfillment to Lender’s satisfaction of all of the conditions set forth in this Agreement and in the Related Documents.

 

Loan Documents. Borrower shall provide to Lender the following documents for the Loan: (1) the Note; (2) Security Agreements granting to Lender security interests in the Collateral; (3) financing statements and all other documents perfecting Lender’s Security Interests; (4) evidence of insurance as required below; (5) guaranties; (6) together with all such Related Documents as Lender may require for the Loan; all in form and substance satisfactory to Lender and Lender’s counsel.

 

Borrower’s Authorization. Borrower shall have provided in form and substance satisfactory to Lender properly certified resolutions, duly authorizing the execution and delivery of this Agreement, the Note and the Related Documents. In addition, Borrower shall have provided such other resolutions, authorizations, documents and instruments as Lender or its counsel, may require.

 

Payment of Fees and Expenses. Borrower shall have paid to Lender all fees, charges, and other expenses which are then due and payable as specified in this Agreement or any Related Document.

 

Representations and Warranties. The representations and warranties set forth in this Agreement, in the Related Documents, and in any document or certificate delivered to Lender under this Agreement are true and correct.

 

No Event of Default. There shall not exist at the time of any Advance a condition which would constitute an Event of Default under this Agreement or under any Related Document.

 

REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as of the date of this Agreement, as of the date of each disbursement of loan proceeds, as of the date of any renewal, extension or modification of any Loan, and at all times any Indebtedness exists:

 

Organization. Borrower is a corporation for profit which is, and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the State of Delaware. Borrower is duly authorized to transact business in all other states in which Borrower is doing business, having obtained all necessary filings, governmental licenses and approvals for each state in which Borrower is doing business. Specifically, Borrower is, and at all times shall be, duly qualified as a foreign corporation in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. Borrower has the full power and authority to own its properties and to transact the business in which it is presently engaged or presently proposes to engage. Borrower maintains an office at 1886  Santa Anita Avenue  So. El Monte, CA 91733. Unless Borrower has designated otherwise in writing, the principal office is the office at which Borrower keeps its books and records including its records concerning the Collateral. Borrower will notify Lender prior to any change in the location of Borrower’s state of organization or any change in Borrower’s name. Borrower shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to Borrower and Borrower’s business activities.

 

Assumed Business Names. Borrower has filed or recorded all documents or filings required by law relating to all assumed business names used by Borrower. Excluding the name of Borrower, the following is a complete list of all assumed business names under which Borrower does business: None.

 

Authorization. Borrower’s execution, delivery, and performance of this Agreement and all the Related Documents have been duly authorized by all necessary action by Borrower and do not conflict with, result in a violation of, or constitute a default under (1) any provision of (a) Borrower’s articles of incorporation or organization, or bylaws, or (b) any agreement or other instrument binding upon Borrower or (2) any law, governmental regulation, court decree, or order applicable to Borrower or to Borrower’s properties.

 

Financial Information. Each of Borrower’s financial statements supplied to Lender truly and completely disclosed Borrower’s financial condition as of the date of the statement, and there has been no material adverse change in Borrower’s financial condition subsequent to the date of the most recent financial statement supplied to Lender. Borrower has no material contingent obligations except as disclosed in such financial statements.

 

Legal Effect. This Agreement constitutes, and any instrument or agreement Borrower is required to give under this Agreement when delivered will constitute legal, valid, and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms.

 

Properties. Except as contemplated by this Agreement or as previously disclosed in Borrower’s financial statements or in writing to Lender and as accepted by Lender, and except for property tax liens for taxes not presently due and payable, Borrower owns and has good title to all of Borrower’s properties free and clear of all Security Interests, and has not executed any security documents or financing statements

 

 

relating to such properties. All of Borrower’s Collateral are titled in Borrower’s legal name, and Borrower has not used or filed a financing statement under any other name for at least the last five (5) years.

 

Hazardous Substances. Except as disclosed to and acknowledged by Lender in writing, Borrower represents and warrants that: (1) During the period of Borrower’s ownership of the Collateral, there has been no use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance by any person on, under, about or from any of the Collateral. (2) Borrower has no knowledge of, or reason to believe that there has been (a) any breach or violation of any Environmental Laws; (b) any use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance on, under, about or from the Collateral by any prior owners or occupants of any of the Collateral; or (c) any actual or threatened litigation or claims of any kind by any person relating to such matters. (3) Neither Borrower nor any tenant, contractor, agent or other authorized user of any of the Collateral shall use, generate, manufacture, store, treat, dispose of or release any Hazardous Substance on, under, about or from any of the Collateral; and any such activity shall be conducted in compliance with all applicable federal, state, and local laws, regulations, and ordinances, including without limitation all Environmental Laws. Borrower authorizes Lender and its agents to enter upon the Collateral to make such inspections and tests as Lender may deem appropriate to determine compliance of the Collateral with this section of the Agreement. Any inspections or tests made by Lender shall be at Borrower’s expense and for Lender’s purposes only and shall not be construed to create any responsibility or liability on the part of Lender to Borrower or to any other person. The representations and warranties contained herein are based on Borrower’s due diligence in investigating the Collateral for hazardous waste and Hazardous Substances. Borrower hereby (1) releases and waives any future claims against Lender for indemnity or contribution in the event Borrower becomes liable for cleanup or other costs under any such laws, and (2) agrees to indemnify, defend, and hold harmless Lender against any and all claims, losses, liabilities, damages, penalties, and expenses which Lender may directly or indirectly sustain or suffer resulting from a breach of this section of the Agreement or as a consequence of any use, generation, manufacture, storage, disposal, release or threatened release of a hazardous waste or substance on the Collateral. The provisions of this section of the Agreement, including the obligation to indemnify and defend, shall survive the payment of the Indebtedness and the termination, expiration or satisfaction of this Agreement and shall not be affected by Lender’s acquisition of any interest in any of the Collateral, whether by foreclosure or otherwise.

 

Litigation and Claims. No litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Borrower is pending or threatened, and no other event has occurred which may materially adversely affect Borrower’s financial condition or properties, other than litigation, claims, or other events, if any, that have been disclosed to and acknowledged by Lender in writing.

 

Taxes. To the best of Borrower’s knowledge, all of Borrower’s tax returns and reports that are or were required to be filed, have been filed, and all taxes, assessments and other governmental charges have been paid in full, except those presently being or to be contested by Borrower in good faith in the ordinary course of business and for which adequate reserves have been provided.

 

Lien Priority. Unless otherwise previously disclosed to Lender in writing, Borrower has not entered into or granted any Security Agreements, or permitted the filing or attachment of any Security Interests on or affecting any of the Collateral directly or indirectly securing repayment of Borrower’s Loan and Note, that would be prior or that may in any way be superior to Lender’s Security Interests and rights in and to such Collateral.

 

Binding Effect. This Agreement, the Note, all Security Agreements (if any), and all Related Documents are binding upon the signers thereof, as well as upon their successors, representatives and assigns, and are legally enforceable in accordance with their respective terms.

 

AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so long as this Agreement remains in effect, Borrower will:

 

Notices of Claims and Litigation. Promptly inform Lender in writing of (1) all material adverse changes in Borrower’s financial condition, and (2) all existing and all threatened litigation, claims, investigations, administrative proceedings or similar actions affecting Borrower or any Guarantor which could materially affect the financial condition of Borrower or the financial condition of any Guarantor.

 

Financial Records. Maintain its books and records in accordance with GAAP, applied on a consistent basis, and permit Lender to examine and audit Borrower’s books and records at all reasonable times.

 

Financial Statements. Furnish Lender with the following:

 

Additional Requirements. Borrower understands and agrees that while this agreement is in effect, Borrower will maintain a financial condition indicated by the following statements at all times, unless otherwise noted:

 

Interim Statements. As soon as available, but in no event later than forty five (45) days after the end of each quarter, Borrower shall provide Lender with balance sheet, income and expense statements, reconciliation of net worth and statement of cash flows, with notes thereto for the period ended, prepared by Borrower satisfactory to Lender.

 

Agings. Within forty five (45) days, or sooner, after the end of  each quarter, Borrower shall provide Lender with a listing and aging by invoice date of all accounts receivable and all accounts payable in detailed format acceptable to Lender.

 

Inventory. Within sixty (60) days, or sooner, after the end of each year, Borrower shall provide Lender with a listing of inventories in detailed format acceptable to Lender.

 

Corporate Guarantor Annual Statements. As soon as available, but in no event later than forty five (45) days after the end of each fiscal year, Borrower shall provide Lender with the Corporate Guarantor’s balance sheet, income and expense statements, reconciliation of net worth and statement of cash flows, with notes thereto for the year ended, audited a certified public accountant  satisfactory to Lender.

 

Annual Statements. As soon as available, but in no event later than one hundred fifty (150) days after the end of each fiscal year, Borrower shall provide Lender with Borrower’s balance sheet, income and expense statements, reconciliation of net worth and statement of cash flows, with notes thereto for the year ended, audited by a certified public accountant satisfactory to Lender.

 

All financial reports required to be provided under this Agreement shall be prepared in accordance with GAAP, applied on a consistent basis, and certified by Borrower as being true and correct.

 

Additional Information. Furnish such additional information and statements, as Lender may request from time to time.

 

Financial Covenants and Ratios. Comply with the following covenants and ratios:

 

Additional Requirements. Borrower understands and agrees that while this Agreement is in effect, Borrower will maintain a financial condition indicated by the following ratios at all times, unless otherwise noted:

 

Effective Tangible Net Worth. Maintain an Effective Tangible Net Worth (defined as total assets, less intangible assets, loans to

 

2

 

shareholders/affiliates/officers/employees, minus total liabilities, plus subordinated debt) of not less than $20,000,000.00.

 

Debt to Effective Tangible Net Worth. Maintain a Debt to Effective Tangible Net Worth (defined as total debt divided by effective tangible net worth defined as total assets, less intangible assets, loans to shareholders/affiliates/officers/employees, less total liabilities plus subordinated debt) not to exceed 1.30 to 1.00.

 

Debt Coverage Ratio. Maintain a Debt Coverage Ratio (defined as net profit before total interest expense, taxes, depreciation, and amortization (EBITDA) divided by CPLTD plus interest) of not less than 1.45 to 1.00

 

All financial covenants are based on International Medication Systems, Limited on a stand alone basis.

 

Except as provided above, all computations made to determine compliance with the requirements contained in this paragraph shall be made in accordance with generally accepted accounting principles, applied on a consistent basis, and certified by Borrower as being true and correct.

 

Insurance. Maintain fire and other risk insurance, public liability insurance, and such other insurance as Lender may require with respect to Borrower’s properties and operations, in form, amounts, coverages and with insurance companies acceptable to Lender. Borrower, upon request of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled or diminished without at least thirty (30) days prior written notice to Lender. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Borrower or any other person. In connection with all policies covering assets in which Lender holds or is offered a security interest for the Loans, Borrower will provide Lender with such lender’s loss payable or other endorsements as Lender may require.

 

Insurance Reports. Furnish to Lender, upon request of Lender, reports on each existing insurance policy showing such information as Lender may reasonably request, including without limitation the following: (1) the name of the insurer; (2) the risks insured; (3) the amount of the policy; (4) the properties insured; (5) the then current property values on the basis of which insurance has been obtained, and the manner of determining those values; and (6) the expiration date of the policy. In addition, upon request of Lender (however not more often than annually), Borrower will have an independent appraiser satisfactory to Lender determine, as applicable, the actual cash value or replacement cost of any Collateral. The cost of such appraisal shall be paid by Borrower.

 

Guaranties. Prior to disbursement of any Loan proceeds, furnish executed guaranties of the Loans in favor of Lender, executed by the guarantors named below, on Lender’s forms, and in the amounts and under the conditions set forth in those guaranties.

 

	
Name of Guarantor
    	
 
    	
Amount
    	
 
    
	
Amphastar Pharmaceuticals, Inc.
    	
 
    	
Unlimited
    	
 
    

 

Other Agreements. Comply with all terms and conditions of all other agreements, whether now or hereafter existing, between Borrower and any other party and notify Lender immediately in writing of any default in connection with any other such agreements.

 

Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness and obligations, including without limitation all assessments, taxes, governmental charges, levies and liens, of every kind and nature, imposed upon Borrower or its properties, income, or profits, prior to the date on which penalties would attach, and all lawful claims that, if unpaid, might become a lien or charge upon any of Borrower’s properties, income, or profits. Provided however, Borrower will not be required to pay and discharge any such assessment, tax, charge, levy, lien or claim so long as (1) the legality of the same shall be contested in good faith by appropriate proceedings, and (2) Borrower shall have established on Borrower’s books adequate reserves with respect to such contested assessment, tax, charge, levy, lien, or claim in accordance with GAAP.

 

Performance. Perform and comply, in a timely manner, with all terms, conditions, and provisions set forth in this Agreement, in the Related Documents, and in all other instruments and agreements between Borrower and Lender. Borrower shall notify Lender immediately in writing of any default in connection with any agreement.

 

Operations. Maintain executive and management personnel with substantially the same qualifications and experience as the present executive and management personnel; provide written notice to Lender of any change in executive and management personnel; conduct its business affairs in a reasonable and prudent manner.

 

Environmental Studies. Promptly conduct and complete, at Borrower’s expense, all such investigations, studies, samplings and testings as may be requested by Lender or any governmental authority relative to any substance, or any waste or by-product of any substance defined as toxic or a hazardous substance under applicable federal, state, or local law, rule, regulation, order or directive, at or affecting any property or any facility owned, leased or used by Borrower.

 

Compliance with Governmental Requirements. Comply with all laws, ordinances, and regulations, now or hereafter in effect, of all governmental authorities applicable to the conduct of Borrower’s properties, businesses and operations, and to the use or occupancy of the Collateral, including without limitation, the Americans With Disabilities Act. Borrower may contest in good faith any such law, ordinance, or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Borrower has notified Lender in writing prior to doing so and so long as, in Lender’s sole opinion, Lender’s interests in the Collateral are not jeopardized. Lender may require Borrower to post adequate security or a surety bond, reasonably satisfactory to Lender, to protect Lender’s interest.

 

Inspection. Permit employees or agents of Lender at any reasonable time to inspect any and all Collateral for the Loan or Loans and Borrower’s other properties and to examine or audit Borrower’s books, accounts, and records and to make copies and memoranda of Borrower’s books, accounts, and records. If Borrower now or at any time hereafter maintains any records (including without limitation computer generated records and computer software programs for the generation of such records) in the possession of a third party, Borrower, upon request of Lender, shall notify such party to permit Lender free access to such records at all reasonable times and to provide Lender with copies of any records it may request, all at Borrower’s expense.

 

Compliance Certificates. Unless waived in writing by Lender, provide Lender at least annually, with a certificate executed by Borrower’s chief financial officer, or other officer or person acceptable to Lender, certifying that the representations and warranties set forth in this Agreement are true and correct as of the date of the certificate and further certifying that, as of the date of the certificate, no Event of Default exists under this Agreement.

 

Environmental Compliance and Reports. Borrower shall comply in all respects with any and all Environmental Laws; not cause or permit to exist, as a result of an intentional or unintentional action or omission on Borrower’s part or on the part of any third party, on property owned and/or occupied by Borrower, any environmental activity where damage may result to the environment, unless such environmental activity is pursuant to and in compliance with the conditions of a permit issued by the appropriate federal, state or local governmental authorities; shall furnish to Lender promptly and in any event within thirty (30) days after receipt thereof a copy of any notice, summons,

 

3

 

lien, citation, directive, letter or other communication from any governmental agency or instrumentality concerning any intentional or unintentional action or omission on Borrower’s part in connection with any environmental activity whether or not there is damage to the environment and/or other natural resources.

 

Additional Assurances. Make, execute and deliver to Lender such promissory notes, mortgages, deeds of trust, security agreements, assignments, financing statements, instruments, documents and other agreements as Lender or its attorneys may reasonably request to evidence and secure the Loans and to perfect all Security Interests.

 

LENDER’S EXPENDITURES. If any action or proceeding is commenced that would materially affect  Lender’s interest in the Collateral or if Borrower fails to comply with any provision of this Agreement or any Related Documents, including but not limited to Borrower’s failure to discharge or pay when due any amounts Borrower is required to discharge or pay under this Agreement or any Related Documents, Lender on Borrower’s behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including but not limited to discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied or placed on any Collateral and paying all costs for insuring, maintaining and preserving any Collateral. All such expenditures incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note from the date incurred or paid by Lender to the date of repayment by Borrower. All such expenses will become a part of the Indebtedness and, at Lender’s option, will (A) be payable on demand; (B) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become due during either (1) the term of any applicable insurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon payment which will be due and payable at the Note’s maturity.

 

NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this Agreement is in effect,  Borrower shall not, without the prior written consent of Lender:

 

Continuity of Operations. (1) Engage in any business activities substantially different than those in which Borrower is presently engaged, (2) cease operations, liquidate, change its name, dissolve or transfer or sell Collateral out of the ordinary course of business, or i/ JW JZ

 

Agreements. Enter into any agreement containing any provisions which would be violated or breached by the performance of Borrower’s obligations under this Agreement or in connection herewith.

 

CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to Borrower, whether under this Agreement or under any other agreement, Lender shall have no obligation to make Loan Advances or to disburse Loan proceeds if: (A) Borrower or any Guarantor is in default under the terms of this Agreement or any of the Related Documents or any other agreement that Borrower or any Guarantor has with Lender; (B) Borrower or any Guarantor dies, becomes incompetent or becomes insolvent, files a petition in bankruptcy or similar proceedings, or is adjudged a bankrupt; (C) there occurs a material adverse change in Borrower’s financial condition, in the financial condition of any Guarantor, or in the value of any Collateral securing any Loan; or (D) any Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such Guarantor’s guaranty of the Loan or any other loan with Lender; or (E) Lender in good faith deems itself insecure, even though no Event of Default shall have occurred.

 

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower’s accounts with Lender (whether checking, savings, or some other account). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the Indebtedness against any and all such accounts, and, at Lender’s option, to administratively freeze all such accounts to allow Lender to protect Lender’s charge and setoff rights provided in this paragraph.

 

DEFAULT. Each of the following shall constitute an Event of Default under this Agreement:

 

Payment Default. Borrower fails to make any payment when due under the Loan.

 

Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any of the Related Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower.

 

Default in Favor of Third Parties. Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of the Borrower’s or any Grantor’s property or Borrower’s or any Grantor’s ability to repay the Loans or perform their respective obligations under this Agreement or any of the Related Documents.

 

False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower’s behalf under this Agreement or the Related Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter.

 

Insolvency. The dissolution or termination of Borrower’s existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower’s property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower.

 

Defective Collateralization. This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any collateral document to create a valid and perfected security interest or lien) at any time and for any reason.

 

Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the Loan. This includes a garnishment of any of Borrower’s accounts, including deposit accounts, with Lender. However, this Event of Default shall

 

4

 

not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute.

 

Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness.

 

Change in Ownership. Any change in ownership of fifty percent (50%) or more of the common stock of Borrower. i/ JW JZ

 

Adverse Change. A material adverse change occurs in Borrower’s financial condition, or Lender believes the prospect of payment or performance of the Loan is impaired.

 

Right to Cure. If any default, other than a default on Indebtedness, is curable and if Borrower or Grantor, as the case may be, has not been given a notice of a similar default within the preceding twelve (12) months, it may be cured if Borrower or Grantor, as the case may be, after Lender sends written notice to Borrower or Grantor, as the case may be, demanding cure of such default: (1) cure the default within fifteen (15) days; or (2) if the cure requires more than fifteen (15) days, immediately initiate steps which Lender deems in Lender’s sole discretion to be sufficient to cure the default and thereafter continue and complete all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical.

 

EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where otherwise provided in this Agreement or the Related Documents, all commitments and obligations of Lender under this Agreement or the Related Documents or any other agreement immediately will terminate (including any obligation to make further Loan Advances or disbursements), and, at Lender’s option, all Indebtedness immediately will become due and payable, all without notice of any kind to Borrower, except that in the case of an Event of Default of the type described in the “Insolvency” subsection above, such acceleration shall be automatic and not optional. In addition, Lender shall have all the rights and remedies provided in the Related Documents or available at law, in equity, or otherwise. Except as may be prohibited by applicable law, all of Lender’s rights and remedies shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Borrower or of any Grantor shall not affect Lender’s right to declare a default and to exercise its rights and remedies.

 

CROSS ACCELERATION. In addition to the due dates and maturity date set forth in the Note, all principal and accrued interest and other amounts owed under this Note shall become due in full at such earlier time, if any, the obligations of Borrower to Lender under that Promissory Note dated September 13, 2005, in the face amount of $5,000,000.00, loan number 18700; Promissory Note dated September 15, 2006, in the face amount of $2,775,000.00. loan number 28933; Promissory Note dated September 15, 2006, in the face amount of $5,500,000.00, loan number 2003102; and Promissory Note dated May 15, 2009, in the face amount of $8,000,000.00, loan number 3001266 (as such notes may be amended or extended from time to time) are paid in full.

 

LINE USAGE FOR FACILITY A. The usage of the Loan shall be governed by the following sub-limits with a maximum outstanding aggregate Loan balance not to exceed $5,000,000.00 and the aggregate balance of sub-limits from any items from 4 to 7 not to exceed $5,000,000.00:

 

1. Up to $3,000,000.00 for issuance of Sight Letters of Credit (LC) with expiration date not to exceed 120 days from date of issuance.

 

2. Up to $3,000,000.00 for issuance of Unsecured Sight Letters of Credit (LC) with expiration date not to exceed 120 days from date of issuance and title documents consigned to applicant or to order.

 

3. Up to $3,000,000.00 for issuance of Usance (time) Letters of Credit with expiration date not to exceed 120 days from date of issuance and tenor of drafts drawn not to exceed 120 days.

 

4. Up to $3,000,000.00 for Banker’s Acceptance under usance letter of credit issued and accepted by Lender.

 

5. Up to $3,000,000.00 for advance of up to 120 days for Trust Receipt Financing of sight draft due and payable under letter of credit.

 

6. Up to $3,000,000.00 for advance of up to 120 days for Trust Receipt Financing of Banker’s Acceptance due and payable letter of credit issued and accepted by Lender with the term of the advance reduced by the tenor of the usance draft.

 

7. Up to $5,000,000.00 for Clean Advance of up to Maturity date of the line.

 

SPECIAL INSTRUCTIONS ON SUB-NOTES

 

Allow to book sub-notes up to 120 days past loan maturity

 

Allow to issue letter of credits up to 120 days past loan maturity.

 

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement:

 

Amendments. This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.

 

Attorneys’ Fees;  Expenses. Borrower agrees to pay upon demand all of Lender’s costs and expenses, including Lender’s attorneys’ fees and Lender’s legal expenses, incurred in connection with the enforcement of this Agreement. Lender may hire or pay someone else to help enforce this Agreement, and Borrower shall pay the costs and expenses of such enforcement. Costs and expenses include Lender’s attorneys’ fees and legal expenses whether or not there is a lawsuit, including attorneys’ fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Borrower also shall pay all court costs and such additional fees as may be directed by the court.

 

Caption Headings. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement.

 

Consent to Loan Participation. Borrower agrees and consents to Lender’s sale or transfer, whether now or later, of one or more participation interests in the Loan to one or more purchasers, whether related or unrelated to Lender. Lender may provide, without any limitation whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Lender may have about Borrower or about any other matter relating to the Loan, and Borrower hereby waives any rights to privacy Borrower may have with respect to such matters. Borrower additionally waives any and all notices of sale of participation interests, as well as all notices of any repurchase of such participation interests. Borrower also agrees that the purchasers of any such participation interests will be considered as the absolute owners of such interests in the Loan and will have all the rights granted under the participation agreement or agreements governing the sale of such participation interests. Borrower further waives all rights of offset or counterclaim that it may have now or later against Lender or against any purchaser of such a participation interest and unconditionally agrees that either Lender or such purchaser may enforce Borrower’s obligation under the Loan irrespective of the failure or insolvency of any holder of any interest in the Loan. Borrower further agrees that the purchaser of any such participation interests may enforce its interests irrespective of any personal claims or

 

5

 

defenses that Borrower may have against Lender.

 

Governing Law. This Agreement will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of California without regard to its conflicts of law provisions. This Agreement has been accepted by Lender in the State of California.

 

Choice of Venue. If there is a lawsuit, Borrower agrees upon Lender’s request to submit to the jurisdiction of the courts of Los Angeles County, State of California.

 

No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender’s right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Borrower, or between Lender and any Grantor, shall constitute a waiver of any of Lender’s rights or of any of Borrower’s or any Grantor’s obligations as to any future transactions. Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender.

 

Notices. Any notice required to be given under this Agreement shall be given in writing, and shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Agreement. Any party may change its address for notices under this Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party’s address. For notice purposes, Borrower agrees to keep Lender informed at all times of Borrower’s current address. Unless otherwise provided or required by law, if there is more than one Borrower, any notice given by Lender to any Borrower is deemed to be notice given to all Borrowers.

 

Severability. If a court of competent jurisdiction finds any provision of this Agreement to be illegal, invalid, or unenforceable as to any circumstance, that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other circumstance. If feasible, the offending provision shall be considered modified so that it becomes legal, valid and enforceable. If the offending provision cannot be so modified, it shall be considered deleted from this Agreement. Unless otherwise required by law, the illegality, invalidity, or unenforceability of any provision of this Agreement shall not affect the legality, validity or enforceability of any other provision of this Agreement.

 

Successors and Assigns. All covenants and agreements by or on behalf of Borrower contained in this Agreement or any Related Documents shall bind Borrower’s successors and assigns and shall inure to the benefit of Lender and its successors and assigns. Borrower shall not, however, have the right to assign Borrower’s rights under this Agreement or any interest therein, without the prior written consent of Lender.

 

Survival of Representations and Warranties. Borrower understands and agrees that in extending Loan Advances, Lender is relying on all representations, warranties, and covenants made by Borrower in this Agreement or in any certificate or other instrument delivered by Borrower to Lender under this Agreement or the Related Documents. Borrower further agrees that regardless of any investigation made by Lender, all such representations, warranties and covenants will survive the extension of Loan Advances and delivery to Lender of the Related Documents, shall be continuing in nature, shall be deemed made and redated by Borrower at the time each Loan Advance is made, and shall remain in full force and effect until such time as Borrower’s Indebtedness shall be paid in full, or until this Agreement shall be terminated in the manner provided above, whichever is the last to occur.

 

Time is of the Essence. Time is of the essence in the performance of this Agreement.

 

Waive Jury. To the extent permitted by applicable law, all parties to this Agreement hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by any party against any other party.

 

DEFINITIONS. The following capitalized words and terms shall have the following meanings when used in this Agreement. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code. Accounting words and terms not otherwise defined in this Agreement shall have the meanings assigned to them in accordance with generally accepted accounting principles as in effect on the date of this Agreement:

 

Advance. The word “Advance” means a disbursement of Loan funds made, or to be made, to Borrower or on Borrower’s behalf on a line of credit or multiple advance basis under the terms and conditions of this Agreement.

 

Agreement. The word “Agreement” means this Business Loan Agreement, as this Business Loan Agreement may be amended or modified from time to time, together with all exhibits and schedules attached to this Business Loan Agreement from time to time.

 

Borrower. The word “Borrower” means International Medication Systems, Limited and includes all co-signers and co-makers signing the Note and all their successors and assigns.

 

Collateral. The word “Collateral” means all property and assets granted as collateral security for a Loan, whether real or personal property, whether granted directly or indirectly, whether granted now or in the future, and whether granted in the form of a security interest, mortgage, collateral mortgage, deed of trust, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor’s lien, equipment trust, conditional sale, trust receipt, lien, charge, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise.

 

Environmental Laws. The words “Environmental Laws” mean any and all state, federal and local statutes, regulations and ordinances relating to the protection of human health or the environment, including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. (“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 (“SARA”), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable state or federal laws, rules, or regulations adopted pursuant thereto.

 

Event of Default. The words “Event of Default” mean any of the events of default set forth in this Agreement in the default section of this Agreement.

 

6

 

GAAP. The word “GAAP” means generally accepted accounting principles.

 

Grantor. The word “Grantor” means each and all of the persons or entities granting a Security Interest in any Collateral for the Loan, including without limitation all Borrowers granting such a Security Interest.

 

Guarantor. The word “Guarantor” means any guarantor, surety, or accommodation party of any or all of the Loan.

 

Guaranty. The word “Guaranty” means the guaranty from Guarantor to Lender, including without limitation a guaranty of all or part of the Note.

 

Hazardous Substances. The words “Hazardous Substances” mean materials that, because of their quantity, concentration or physical, chemical or infectious characteristics, may cause or pose a present or potential hazard to human health or the environment when improperly used, treated, stored, disposed of, generated, manufactured, transported or otherwise handled. The words “Hazardous Substances” are used in their very broadest sense and include without limitation any and all hazardous or toxic substances, materials or waste as defined by or listed under the Environmental Laws. The term “Hazardous Substances” also includes, without limitation, petroleum and petroleum by-products or any fraction thereof and asbestos.

 

Indebtedness. The word “Indebtedness” means the indebtedness evidenced by the Note or Related Documents, including all principal and interest together with all other indebtedness and costs and expenses for which Borrower is responsible under this Agreement or under any of the Related Documents.

 

Lender. The word “Lender” means East West Bank, its successors and assigns.

 

Loan. The word “Loan” means any and all loans and financial accommodations from Lender to Borrower whether now or hereafter existing, and however evidenced, including without limitation those loans and financial accommodations described herein or described on any exhibit or schedule attached to this Agreement from time to time.

 

Note. The word “Note” means the Note executed by International Medication Systems, Limited in the principal amount of $10,000,000.00 dated December 31, 2010, together with all renewals of, extensions of, modifications of, refinancing of, consolidations of, and substitutions for the note or credit agreement.

 

Permitted Liens. The words “Permitted Liens” mean (1) liens and security interests securing Indebtedness owed by Borrower to Lender; (2) liens for taxes, assessments, or similar charges either not yet due or being contested in good faith; (3) liens of materialmen, mechanics, warehousemen, or carriers, or other like liens arising in the ordinary course of business and securing obligations which are not yet delinquent; (4) purchase money liens or purchase money security interests upon or in any property acquired or held by Borrower in the ordinary course of business to secure indebtedness outstanding on the date of this Agreement or permitted to be incurred under the paragraph of this Agreement titled “Indebtedness and Liens”; (5) liens and security interests which, as of the date of this Agreement, have been disclosed to and approved by the Lender in writing; and (6) those liens and security interests which in the aggregate constitute an immaterial and insignificant monetary amount with respect to the net value of Borrower’s assets.

 

Related Documents. The words “Related Documents” mean all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Loan.

 

Security Agreement. The words “Security Agreement” mean and include without limitation any agreements, promises, covenants, arrangements, understandings or other agreements, whether created by law, contract, or otherwise, evidencing, governing, representing, or creating a Security Interest.

 

Security Interest. The words “Security Interest” mean, without limitation, any and all types of collateral security, present and future, whether in the form of a lien, charge, encumbrance, mortgage, deed of trust, security deed, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor’s lien, equipment trust, conditional sale, trust receipt, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever whether created by law, contract, or otherwise.

 

BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS DATED DECEMBER 31, 2010.

 

	
BORROWER:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
INTERNATIONAL MEDICATION   SYSTEMS, LIMITED
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
By:
    	
/s/ JACK ZHANG
    	
 
    	
By:
    	
/s/ JOHN   WEBER
    
	
 
    	
Jack Y. Zhang, President/CEO of International  Medication   Systems, Limited
    	
 
    	
 
    	
John   Weber, CFO of International   Medication Systems, Limited
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
LENDER:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
EAST WEST BANK
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Rebecca Lee
    	
 
    	
 
    
	
 
    	
Authorized Signer
    	
 
    	
 
    

 

LASER PRO Lending, Ver. 5.54.00.006 Copr. Harland Financial Solutions, Inc. 1997, 2010. All Rights Reserved. — CA G:\APPS\EWBCFI\CFI\LPL\C40.FC TR-5159 PR-7

 

7

 

COMMERCIAL GUARANTY

 

	
Principal
    	
 
    	
Loan Date
    	
 
    	
Maturity
    	
 
    	
Loan No
    	
 
    	
Call/Coll
    	
 
    	
Account
    	
 
    	
Officer
    	
 
    	
Initials
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
8282
    	
 
    	
 
    

 

References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.

Any item above containing “***” has been omitted due to text length limitations.

 

	
Borrower:
    	
International Medication Systems, Limited
    	
Lender:
    	
East West Bank
    
	
 
    	
1886 Santa Anita Avenue
    	
 
    	
Loan Servicing Department
    
	
 
    	
So. El Monte, CA 91733
    	
 
    	
9300 Flair Drive, 6th Floor
    
	
 
    	
 
    	
 
    	
El Monte, CA 91731
    
	
 
    	
 
    	
 
    	
 
    
	
Guarantor:
    	
Amphastar   Pharmaceuticals, Inc.
    	
 
    	
 
    
	
 
    	
11570 Sixth Street
    	
 
    	
 
    
	
 
    	
Rancho Cucamonga, CA 91730
    	
 
    	
 
    

 

CONTINUING GUARANTEE OF PAYMENT AND PERFORMANCE. For good and valuable consideration, Guarantor absolutely and unconditionally guarantees full and punctual payment and satisfaction of the Indebtedness of Borrower to Lender, and the performance and discharge of all Borrower’s obligations under the Note and the Related Documents. This is a guaranty of payment and performance and not of collection, so Lender can enforce this Guaranty against Guarantor even when Lender has not exhausted Lender’s remedies against anyone else obligated to pay the Indebtedness or against any collateral securing the Indebtedness, this Guaranty or any other guaranty of the Indebtedness. Guarantor will make any payments to Lender or its order, on demand, in legal tender of the United States of America, in same-day funds, without set-off or deduction or counterclaim, and will otherwise perform Borrower’s obligations under the Note and Related Documents. Under this Guaranty, Guarantor’s liability is unlimited and Guarantor’s obligations are continuing.

 

INDEBTEDNESS. The word “Indebtedness” as used in this Guaranty means all of the principal amount outstanding from time to time and at any one or more times, accrued unpaid interest thereon and all collection costs and legal expenses related thereto permitted by law, attorneys’ fees, arising from any and all debts, liabilities and obligations of every nature or form, now existing or hereafter arising or acquired, that Borrower individually or collectively or interchangeably with others, owes or will owe Lender. “Indebtedness” includes, without limitation, loans, advances, debts, overdraft indebtedness, credit card indebtedness, lease obligations, liabilities and obligations under any interest rate protection agreements or foreign currency exchange agreements or commodity price protection agreements, other obligations, and liabilities of Borrower, and any present or future judgments against Borrower, future advances, loans or transactions that renew, extend, modify, refinance, consolidate or substitute these debts, liabilities and obligations whether: voluntarily or involuntarily incurred; due or to become due by their terms or acceleration; absolute or contingent; liquidated or unliquidated; determined or undetermined; direct or indirect; primary or secondary in nature or arising from a guaranty or surety; secured or unsecured; joint or several or joint and several; evidenced by a negotiable or non-negotiable instrument or writing; originated by Lender or another or others; barred or unenforceable against Borrower for any reason whatsoever; for any transactions that may be voidable for any reason (such as infancy, insanity, ultra vires or otherwise); and originated then reduced or extinguished and then afterwards increased or reinstated.

 

If Lender presently holds one or more guaranties, or hereafter receives additional guaranties from Guarantor, Lender’s rights under all guaranties shall be cumulative. This Guaranty shall not (unless specifically provided below to the contrary) affect or invalidate any such other guaranties. Guarantor’s liability will be Guarantor’s aggregate liability under the terms of this Guaranty and any such other unterminated guaranties.

 

CONTINUING GUARANTY. THIS IS A “CONTINUING GUARANTY” UNDER WHICH GUARANTOR AGREES TO GUARANTEE THE FULL AND PUNCTUAL PAYMENT, PERFORMANCE AND SATISFACTION OF THE INDEBTEDNESS OF BORROWER TO LENDER, NOW EXISTING OR HEREAFTER ARISING OR ACQUIRED, ON AN OPEN AND CONTINUING BASIS. ACCORDINGLY, ANY PAYMENTS MADE ON THE INDEBTEDNESS WILL NOT DISCHARGE OR DIMINISH GUARANTOR’S OBLIGATIONS AND LIABILITY UNDER THIS GUARANTY FOR ANY REMAINING AND SUCCEEDING INDEBTEDNESS EVEN WHEN ALL OR PART OF THE OUTSTANDING INDEBTEDNESS MAY BE A ZERO BALANCE FROM TIME TO TIME.

 

DURATION OF GUARANTY. This Guaranty will take effect when received by Lender without the necessity of any acceptance by Lender, or any notice to Guarantor or to Borrower, and will continue in full force until all the Indebtedness incurred or contracted before receipt by Lender of any notice of revocation shall have been fully and finally paid and satisfied and all of Guarantor’s other obligations under this Guaranty shall have been performed in full. If Guarantor elects to revoke this Guaranty, Guarantor may only do so in writing. Guarantor’s written notice of revocation must be mailed to Lender, by certified mail, at Lender’s address listed above or such other place as Lender may designate in writing. Written revocation of this Guaranty will apply only to new Indebtedness created after actual receipt by Lender of Guarantor’s written revocation. For this purpose and without limitation, the term “new Indebtedness” does not include Indebtedness which at the time of notice of revocation is contingent, unliquidated, undetermined or not due and which later becomes absolute, liquidated, determined or due. For this purpose and without limitation, “new Indebtedness” does not include all or part of the Indebtedness that is: incurred by Borrower prior to revocation; incurred under a commitment that became binding before revocation; any renewals, extensions, substitutions, and modifications of the Indebtedness. This Guaranty shall bind Guarantor’s estate as to the Indebtedness created both before and after Guarantor’s death or incapacity, regardless of Lender’s actual notice of Guarantor’s death. Subject to the foregoing, Guarantor’s executor or administrator or other legal representative may terminate this Guaranty in the same manner in which Guarantor might have terminated it and with the same effect. Release of any other guarantor or termination of any other guaranty of the Indebtedness shall not affect the liability of Guarantor under this Guaranty. A revocation Lender receives from any one or more Guarantors shall not affect the liability of any remaining Guarantors under this Guaranty. Guarantor’s obligations under this Guaranty shall be in addition to any of Guarantor’s obligations, or any of them, under any other guaranties of the Indebtedness or any other person heretofore or hereafter given to Lender unless such other guaranties are modified or revoked in writing; and this Guarantor shall not, unless provided in this Guaranty, affect, invalidate, or supersede any such other guaranty. It is anticipated that fluctuations may occur in the aggregate amount of the Indebtedness covered by this Guaranty, and Guarantor specifically acknowledges and agrees that reductions in the amount of the Indebtedness, even to zero dollars ($0.00), shall not constitute a termination of this Guaranty. This Guaranty is binding upon Guarantor and Guarantor’s heirs, successors and assigns so long as any of the Indebtedness remains unpaid and even though the Indebtedness may from time to time be zero dollars ($0.00).

 

GUARANTOR’S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either before or after any revocation hereof, without notice or demand and without lessening Guarantor’s liability under this Guaranty, from time to time: (A) prior to revocation as set forth above, to make one or more additional secured or unsecured loans to Borrower, to lease equipment or other goods to Borrower, or otherwise to extend additional credit to Borrower; (B) to alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms of the Indebtedness or any part of the Indebtedness, including increases and decreases of the rate of interest on the Indebtedness; extensions may be repeated and may be for longer than the original loan term; (C) to take and hold security for the payment of this Guaranty or the Indebtedness, and exchange, enforce, waive, subordinate, fail or decide not to perfect, and release any such security, with or without the substitution of new collateral; (D) to release, substitute, agree not to sue, or deal with any one or more of Borrower’s sureties, endorsers, or other guarantors on any terms or in any manner Lender may choose; (E) to determine how, when and what application of payments and credits shall be made on the Indebtedness; (F) to apply such security and direct the order or manner of sale thereof, including

 

 

Loan No: 20002400

 

without limitation, any nonjudicial sale permitted by the terms of the controlling security agreement or deed of trust, as Lender in its discretion may determine; (G) to sell, transfer, assign or grant participations in all or any part of the Indebtedness; and (H) to assign or transfer this Guaranty in whole or in part.

 

GUARANTOR’S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Lender that (A) no representations or agreements of any kind have been made to Guarantor which would limit or qualify in any way the terms of this Guaranty; (B) this Guaranty is executed at Borrower’s request and not at the request of Lender; (C) Guarantor has full power, right and authority to enter into this Guaranty; (D) the provisions of this Guaranty do not conflict with or result in a default under any agreement or other instrument binding upon Guarantor and do not result in a violation of any law, regulation, court decree or order applicable to Guarantor; (E) Guarantor has not and will not, without the prior written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer, or otherwise dispose of all or substantially all of Guarantor’s assets, or any interest therein; (F) upon Lender’s request, Guarantor will provide to Lender financial and credit information in form acceptable to Lender, and all such financial information which currently has been, and all future financial information which will be provided to Lender is and will be true and correct in all material respects and fairly present Guarantor’s financial condition as of the dates the financial information is provided; (G) no material adverse change has occurred in Guarantor’s financial condition since the date of the most recent financial statements provided to Lender and no event has occurred which may materially adversely affect Guarantor’s financial condition; (H) no litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Guarantor is pending or threatened; (I) Lender has made no representation to Guarantor as to the creditworthiness of Borrower; and (J) Guarantor has established adequate means of obtaining from Borrower on a continuing basis information regarding Borrower’s financial condition. Guarantor agrees to keep adequately informed from such means of any facts, events, or circumstances which might in any way affect Guarantor’s risks under this Guaranty, and Guarantor further agrees that, absent a request for information, Lender shall have no obligation to disclose to Guarantor any information or documents acquired by Lender in the course of its relationship with Borrower.

 

GUARANTOR’S WAIVERS. Except as prohibited by applicable law, Guarantor waives any right to require Lender to (A) make any presentment, protest, demand, or notice of any kind, including notice of change of any terms of repayment of the Indebtedness, default by Borrower or any other guarantor or surety, any action or non action taken by Borrower, Lender, or any other guarantor or surety of Borrower, or the creation of new or additional Indebtedness; (B) proceed against any person, including Borrower, before proceeding against Guarantor; (C) proceed against any collateral for the Indebtedness, including Borrower’s collateral, before proceeding against Guarantor; (D) apply any payments or proceeds received against the Indebtedness in any order; (E) give notice of the terms, time, and place of any sale of the collateral pursuant to the Uniform Commercial Code or any other law governing such sale; (F) disclose any information about the Indebtedness, the Borrower, the collateral, or any other guarantor or surety, or about any action or nonaction of Lender; or (G) pursue any remedy or course of action in Lender’s power whatsoever.

 

Guarantor also waives any and all rights or defenses arising by reason of (H) any disability or other defense of Borrower, any other guarantor or surety or any other person; (I) the cessation from any cause whatsoever, other than payment in full, of the Indebtedness; (J) the application of proceeds of the Indebtedness by Borrower for purposes other than the purposes understood and intended by Guarantor and Lender; (K) any act of omission or commission by Lender which directly or indirectly results in or contributes to the discharge of Borrower or any other guarantor or surety, or the Indebtedness, or the loss or release of any collateral by operation of law or otherwise; (L) any statute of limitations in any action under this Guaranty or on the Indebtedness; or (M) any modification or change in terms of the Indebtedness, whatsoever, including without limitation, the renewal, extension, acceleration, or other change in the time payment of the Indebtedness is due and any change in the interest rate, and including any such modification or change in terms after revocation of this Guaranty on the Indebtedness incurred prior to such revocation.

 

Guarantor waives all rights of subrogation, reimbursement, indemnification, and contribution and any other rights and defenses that are or may become available to Guarantor by reason of California Civil Code Sections 2787 to 2855, inclusive.

 

Guarantor waives all rights and any defenses arising out of an election of remedies by Lender even though that the election of remedies, such as a non-judicial foreclosure with respect to security for a guaranteed obligation, has destroyed Guarantor’s rights of subrogation and reimbursement against Borrower by operation of Section 580d of the California Code of Civil Procedure or otherwise.

 

Guarantor waives all rights and defenses that Guarantor may have because Borrower’s obligation is secured by real property. This means among other things: (N) Lender may collect from Guarantor without first foreclosing on any real or personal property collateral pledged by Borrower. (O) If Lender forecloses on any real property collateral pledged by Borrower: (1) the amount of Borrower’s obligation may be reduced only by the price for which the collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price. (2) Lender may collect from Guarantor even if Lender, by foreclosing on the real property collateral, has destroyed any right Guarantor may have to collect from Borrower. This is an unconditional and irrevocable waiver of any rights and defenses Guarantor may have because Borrower’s obligation is secured by real property. These rights and defenses include, but are not limited to, any rights and defenses based upon Section 580a, 580b, 580d, or 726 of the Code of Civil Procedure.

 

Guarantor understands and agrees that the foregoing waivers are unconditional and irrevocable waivers of substantive rights and defenses to which Guarantor might otherwise be entitled under state and federal law. The rights and defenses waived include, without limitation, those provided by California laws of suretyship and guaranty, anti-deficiency laws, and the Uniform Commercial Code. Guarantor acknowledges that Guarantor has provided these waivers of rights and defenses with the intention that they be fully relied upon by Lender. Guarantor further understands and agrees that this Guaranty is a separate and independent contract between Guarantor and Lender, given for full and ample consideration, and is enforceable on its own terms. Until all of the Indebtedness is paid in full, Guarantor waives any right to enforce any remedy Guarantor may have against the Borrower or any other guarantor, surety, or other person, and further, Guarantor waives any right to participate in any collateral for the Indebtedness now or hereafter held by Lender.

 

Guarantor’s Understanding With Respect To Waivers. Guarantor warrants and agrees that each of the waivers set forth above is made with Guarantor’s full knowledge of its significance and consequences and that, under the circumstances, the waivers are reasonable and not contrary to public policy or law. If any such waiver is determined to be contrary to any applicable law or public policy, such waiver shall be effective only to the extent permitted by law or public policy.

 

Subordination of Borrower’s Debts to Guarantor. Guarantor agrees that the Indebtedness, whether now existing or hereafter created, shall be superior to any claim that Guarantor may now have or hereafter acquire against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby expressly subordinates any claim Guarantor may have against Borrower, upon any account whatsoever, to any claim that Lender may now or hereafter have against Borrower. In the event of insolvency and consequent liquidation of the assets of Borrower, through bankruptcy, by an assignment for the benefit of creditors, by voluntary liquidation, or otherwise, the assets of Borrower applicable to the payment of the claims of both Lender and Guarantor shall be paid to Lender and shall be first applied by Lender to the Indebtedness. Guarantor does hereby assign to Lender all claims which it may have or acquire against Borrower or against any assignee or trustee in bankruptcy of Borrower; provided however, that such assignment shall be effective only for the purpose of assuring to Lender full payment in legal tender of the Indebtedness. If Lender so requests, any notes or credit agreements now or hereafter evidencing any debts or obligations of Borrower to Guarantor shall be marked with a legend that the same are subject to this Guaranty and shall be delivered to Lender. Guarantor agrees, and Lender is hereby authorized, in the name of Guarantor, from time to time to file financing statements and continuation statements and to

 

2

 

execute documents and to take such other actions as Lender deems necessary or appropriate to perfect, preserve and enforce its rights under this Guaranty.

 

Miscellaneous Provisions. The following miscellaneous provisions are a part of this Guaranty:

 

AMENDMENTS. This Guaranty, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Guaranty. No alteration of or amendment to this Guaranty shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.

 

ATTORNEYS’ FEES; EXPENSES. Guarantor agrees to pay upon demand all of Lender’s costs and expenses, including Lender’s attorneys’ fees and Lender’s legal expenses, incurred in connection with the enforcement of this Guaranty. Lender may hire or pay someone else to help enforce this Guaranty, and Guarantor shall pay the costs and expenses of such enforcement. Costs and expenses include Lender’s attorneys’ fees and legal expenses whether or not there is a lawsuit, including attorneys’ fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Guarantor also shall pay all court costs and such additional fees as may be directed by the court.

 

CAPTION HEADINGS. Caption headings in this Guaranty are for convenience purposes only and are not to be used to interpret or define the provisions of this Guaranty.

 

GOVERNING LAW. This Guaranty will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of California without regard to its conflicts of law provisions.

 

CHOICE OF VENUE. If there is a lawsuit, Guarantor agrees upon Lender’s request to submit to the jurisdiction of the courts of Los Angeles County, State of California.

 

INTEGRATION. Guarantor further agrees that Guarantor has read and fully understands the terms of this Guaranty; Guarantor has had the opportunity to be advised by Guarantor’s attorney with respect to this Guaranty; the Guaranty fully reflects Guarantor’s intentions and parol evidence is not required to interpret the terms of this Guaranty. Guarantor hereby indemnifies and holds Lender harmless from all losses, claims, damages, and costs (including Lender’s attorneys’ fees) suffered or incurred by Lender as a result of any breach by Guarantor of the warranties, representations and agreements of this paragraph.

 

INTERPRETATION. In all cases where there is more than one Borrower or Guarantor, then all words used in this Guaranty in the singular shall be deemed to have been used in the plural where the context and construction so require; and where there is more than one Borrower named in this Guaranty or when this Guaranty is executed by more than one Guarantor, the words “Borrower” and “Guarantor” respectively shall mean all and any one or more of them. The words “Guarantor,” “Borrower,” and “Lender” include the heirs, successors, assigns, and transferees of each of them. If a court finds that any provision of this Guaranty is not valid or should not be enforced, that fact by itself will not mean that the rest of this Guaranty will not be valid or enforced. Therefore, a court will enforce the rest of the provisions of this Guaranty even if a provision of this Guaranty may be found to be invalid or unenforceable. If any one or more of Borrower or Guarantor are corporations, partnerships, limited liability companies, or similar entities, it is not necessary for Lender to inquire into the powers of Borrower or Guarantor or of the officers, directors, partners, managers, or other agents acting or purporting to act on their behalf, and any indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed under this Guaranty.

 

NOTICES. Any notice required to be given under this Guaranty shall be given in writing, and, except for revocation notices by Guarantor, shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Guaranty. All revocation notices by Guarantor shall be in writing and shall be effective upon delivery to Lender as provided in the section of this Guaranty entitled “DURATION OF GUARANTY.” Any party may change its address for notices under this Guaranty by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party’s address. For notice purposes, Guarantor agrees to keep Lender informed at all times of Guarantor’s current address. Unless otherwise provided or required by law, if there is more than one Guarantor, any notice given by Lender to any Guarantor is deemed to be notice given to all Guarantors.

 

NO WAIVER BY LENDER. Lender shall not be deemed to have waived any rights under this Guaranty unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Guaranty shall not prejudice or constitute a waiver of Lender’s right otherwise to demand strict compliance with that provision or any other provision of this Guaranty. No prior waiver by Lender, nor any course of dealing between Lender and Guarantor, shall constitute a waiver of any of Lender’s rights or of any of Guarantor’s obligations as to any future transactions. Whenever the consent of Lender is required under this Guaranty, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender.

 

SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this Guaranty on transfer of Guarantor’s interest, this Guaranty shall be binding upon and inure to the benefit of the parties, their successors and assigns.

 

WAIVE JURY. To the extent permitted by applicable law, Lender and Guarantor hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by either Lender or Guarantor against the other.

 

CERTIFICATION OF ACCURACY. Guarantor certifies under penalty of perjury that all financial documents provided to Lender, which may include income statements, balance sheets, payable and receivable listings, inventory listings, rents rolls, and tax returns, are the most recent such documents prepared by Guarantor, that they give a complete and accurate statement of the financial condition of Guarantor, as of the dates of such statements, and that no material change has occurred since such time, except as disclosed to Lender in writing. Guarantor agrees to notify Lender immediately of the extent and character of any material adverse change in the Guarantor’s financial condition. The financial documents shall constitute continuing representations of Guarantor and shall be construed by Lender to be continuing statements of the financial condition of Guarantor and to be new and original statement of all assets and liabilities of Guarantor with respect to each advance under the Indebtedness and every other transaction in which Guarantor or Borrower becomes obligated to Lender until Guarantor advises Lender to the contrary. The financial documents are being given to induce Lender to extend credit and Lender is relying upon such documents. Lender may verify with third parties any information contained in financial documents delivered to Lender, obtain information from others, and ask and answer questions and requests seeking credit experience about the undersigned.

 

Definitions. The following capitalized words and terms shall have the following meanings when used in this Guaranty. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Guaranty shall have the meanings attributed to such terms in the Uniform Commercial Code:

 

BORROWER. The word “Borrower” means International Medication Systems, Limited and includes all co-signers and co-makers signing the Note and all their successors and assigns.

 

3

 

GUARANTOR. The word “Guarantor” means everyone signing this Guaranty, including without limitation Amphastar Pharmaceuticals, Inc., and in each case, any signer’s successors and assigns.

 

GUARANTY. The word “Guaranty” means the guaranty from Guarantor to Lender.

 

INDEBTEDNESS. The word “Indebtedness” means Borrower’s indebtedness to Lender as more particularly described in this  Guaranty.

 

LENDER. The word “Lender” means East West Bank, its successors and assigns.

 

NOTE. The word “Note” means and includes without limitation all of Borrower’s promissory notes and/or credit agreements evidencing Borrower’s loan obligations in favor of Lender, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of and substitutions for promissory notes or credit agreements.

 

RELATED DOCUMENTS. The words “Related Documents” mean all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness.

 

EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON GUARANTOR’S EXECUTION AND DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED “DURATION OF GUARANTY”. NO FORMAL ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY IS DATED DECEMBER 31, 2010.

 

GUARANTOR:

 

 

	
AMPHASTAR   PHARMACEUTICALS, INC.
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
By:
    	
/s/   JACK ZHANG
    	
 
    	
By:
    	
/s/   JOHN WEBER
    
	
 
    	
Jack Zhang, President/CEO of Amphastar   Pharmaceuticals, Inc.
    	
 
    	
 
    	
John Weber, CFO of Amphastar Pharmaceuticals, Inc.
    

 

LASER PRO Lending, Ver. 5.54.00.006 Copr. Harland Financial Solutions, Inc. 1997, 2010. All Rights Reserved. - CA G:\APPS\EWBCFI\CFI\LPL\E20.FC TR-5159 PR-7

 

4

 

CORPORATE RESOLUTION TO BORROW I GRANT COLLATERAL I SUBORDINATE

DEBT

 

	
Principal
    	
 
    	
Loan Date
    	
 
    	
Maturity
    	
 
    	
Loan No
    	
 
    	
Call/Coll
    	
 
    	
Account
    	
 
    	
Officer
    	
 
    	
Initials
    
	
$
    	
10,000,000.00
    	
 
    	
12-31-2010
    	
 
    	
12-31-2011
    	
 
    	
20002400
    	
 
    	
 
    	
 
    	
 
    	
 
    	
8282
    	
 
    	
i/R.L.
    
																

 

References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.

Any item above containing “***” has been omitted due to text length limitations.

 

	
Corporation:
    	
International Medication Systems, Limited
    	
Lender:
    	
East West Bank
    
	
 
    	
1886 Santa Anita Avenue
    	
 
    	
Loan Servicing Department
    
	
 
    	
So. El Monte, CA 91733
    	
 
    	
9300 Flair Drive, 6th Floor
    
	
 
    	
 
    	
 
    	
El Monte, CA 91731
    

 

WE, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:

 

THE CORPORATION’S EXISTENCE. The complete and correct name of the Corporation is International Medication Systems, Limited (“Corporation”). The Corporation is a corporation for profit which is, and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the State of Delaware. The Corporation is duly authorized to transact business in all other states in which the Corporation is doing business, having obtained all necessary filings, governmental licenses and approvals for each state in which the Corporation is doing business. Specifically, the Corporation is, and at all times shall be, duly qualified as a foreign corporation in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. The Corporation has the full power and authority to own its properties and to transact the business in which it is presently engaged or presently proposes to engage. The Corporation maintains an office at 1886 Santa Anita Avenue, So. El Monte, CA 91733. Unless the Corporation has designated otherwise in writing, the principal office is the office at which the Corporation keeps its books and records. The Corporation will notify Lender prior to any change in the location of the Corporation’s state of organization or any change in the Corporation’s name. The Corporation shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to the Corporation and the Corporation’s business activities.

 

RESOLUTIONS ADOPTED. At a meeting of the Directors of the Parent Corporation, or if the Corporation is a close corporation having no Board of Directors then at a meeting of the Corporation’s shareholders, duly called and held on August 4, 2006 JW, at which a quorum was present and voting, or by other duly authorized action in lieu of a meeting, the resolution set forth in this Resolution were adopted.

 

OFFICERS. The following named persons are officers of International Medication Systems, Limited:

 

	
NAMES
    	
 
    	
TITLES
    	
 
    	
AUTHORIZED
    	
 
    	
ACTUAL SIGNATURES
    	
 
    	
 
    
	
Jack Y. Zhang
    	
 
    	
President/CEO
    	
 
    	
Y
    	
 
    	
X
    	
/s/ JACK ZHANG 
    	
 
    	
(Seal)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
John Weber
    	
CFO
    	
 
    	
Y
    	
 
    	
X
    	
/s/   JOHN WEBER 
    	
 
    	
(Seal)
    

 

ACTIONS AUTHORIZED. Any one (1) of the authorized persons listed above may enter into any agreements of any nature with Lender, and those agreements will bind the Corporation. Specifically, but without limitation, any one (1) of such authorized persons are authorized, empowered, and directed to do the following for and on behalf of the Corporation:

 

Borrow Money. To borrow, as a cosigner or otherwise, from time to time from Lender, on such terms as may be agreed upon between the Corporation and Lender, such sum or sums of money as in their judgment should be borrowed, without limitation.

 

Execute Notes. To execute and deliver to Lender the promissory note or notes, or other evidence of the Corporation’s credit accommodations, on Lender’s forms, at such rates of interest and on such terms as may be agreed upon, evidencing the sums of money so borrowed or any of the Corporation’s indebtedness to Lender, and also to execute and deliver to Lender one or more renewals, extensions, modifications, refinancings, consolidations, or substitutions for one or more of the notes, any portion of the notes, or any other evidence of credit accommodations.

 

Grant Security. To mortgage, pledge, transfer, endorse, hypothecate, or otherwise encumber and deliver to Lender any property now or hereafter belonging to the Corporation or in which the Corporation now or hereafter may have an interest, including without limitation all of the Corporation’s real property and all of the Corporation’s personal property (tangible or intangible), as security for the payment of any loans or credit accommodations so obtained, any promissory notes so executed (including any amendments to or modifications, renewals, and extensions of such promissory notes), or any other or further indebtedness of the Corporation to Lender at any time owing, however the same may be evidenced. Such property may be mortgaged, pledged, transferred, endorsed, hypothecated or encumbered at the time such loans are obtained or such indebtedness is incurred, or at any other time or times, and may be either in addition to or in lieu of any property theretofore mortgaged, pledged, transferred, endorsed, hypothecated or encumbered.

 

Execute Security Documents. To execute and deliver to Lender the forms of mortgage, deed of trust, pledge agreement, hypothecation agreement, and other security agreements and financing statements which Lender may require and which shall evidence the terms and conditions under and pursuant to which such liens and encumbrances, or any of them, are given; and also to execute and deliver to Lender any other written instruments, any chattel paper, or any other collateral, of any kind or nature, which Lender may deem necessary or proper in connection with or pertaining to the giving of the liens and encumbrances. Notwithstanding the foregoing, any one of the above authorized persons may execute, deliver, or record financing statements.

 

Subordination. To subordinate, in all respects, any and all present and future indebtedness, obligations, liabilities, claims, rights, and demands of any kind which may be owed, now or hereafter, from any person or entity to the Corporation to all present and future indebtedness, obligations, liabilities, claims, rights, and demands of any kind which may be owed, now or hereafter, from such person or entity to Lender (“Subordinated Indebtedness”), together with subordination by the Corporation of any and all security interests of any kind, whether now existing or hereafter acquired, securing payment or performance of the Subordinated Indebtedness; all on such subordination terms as may be agreed upon between the Corporation’s Officers and Lender and in such amounts as in their judgment should be subordinated.

 

Negotiate Items. To draw, endorse, and discount with Lender all drafts, trade acceptances, promissory notes, or other evidences of indebtedness payable to or belonging to the Corporation or in which the Corporation may have an interest, and either to receive cash for the same or to cause such proceeds to be credited to the Corporation’s account with Lender, or to cause such other disposition of the proceeds derived therefrom as they may deem advisable.

 

Further Acts. In the case of lines of credit, to designate additional or alternate individuals as being authorized to request advances under such lines, and in all cases, to do and perform such other acts and things, to pay any and all fees and costs, and to execute and deliver

 

 

such other documents and agreements, including agreements waiving the right to a trial by jury, as the officers may in their discretion deem reasonably necessary or proper in order to carry into effect the provisions of this Resolution. The following person or persons are authorized to request advances and authorize payments under the line of credit until Lender receives from the Corporation, at Lender’s address shown above, written notice of revocation of such authority: Jack Y. Zhang, President/CEO of International Medication Systems, Limited; and John Weber, CFO of International Medication Systems, Limited.

 

ASSUMED BUSINESS NAMES. The Corporation has filed or recorded all documents or filings required by law relating to all assumed business names used by the Corporation. Excluding the name of the Corporation, the following is a complete list of all assumed business names under which the Corporation does business: None.

 

NOTICES TO LENDER. The Corporation will promptly notify Lender in writing at Lender’s address shown above (or such other addresses as Lender may designate from time to time) prior to any (A) change in the Corporation’s name; (B) change in the Corporation’s assumed business name(s); (C) change in the management of the Corporation; (D) change in the authorized signer(s); (E) change in the Corporation’s principal office address; (F) change in the Corporation’s state of organization; (G) conversion of the Corporation to a new or different type of business entity; or (H) change in any other aspect of the Corporation that directly or indirectly relates to any agreements between the Corporation and Lender. No change in the Corporation’s name or state of organization will take effect until after Lender has received notice.

 

CERTIFICATION CONCERNING OFFICERS AND RESOLUTIONS. The officers named above are duly elected, appointed, or employed by or for the Corporation, as the case may be, and occupy the positions set opposite their respective names. This Resolution now stands of record on the books of the Corporation, is in full force and effect, and has not been modified or revoked in any manner whatsoever.

 

NO CORPORATE SEAL. The Corporation has no corporate seal, and therefore, no seal is affixed to this Resolution.

 

CONTINUING VALIDITY. Any and all acts authorized pursuant to this Resolution and performed prior to the passage of this Resolution are hereby ratified and approved. This Resolution shall be continuing, shall remain in full force and effect and Lender may rely on it until written notice of its revocation shall have been delivered to and received by Lender at Lender’s address shown above (or such addresses as Lender may designate from time to time). Any such notice shall not affect any of the Corporation’s agreements or commitments in effect at the time notice is given.

 

IN TESTIMONY WHEREOF, we have hereunto set our hand and attest that the signatures set opposite the names listed above are their genuine signatures.

 

We have read all the provisions of this Resolution, and we each personally and on behalf of the Corporation certify that all statements and representations made in this Resolution are true and correct. This Corporate Resolution to Borrow / Grant Collateral / Subordinate Debt is dated December 31, 2010.

 

THIS RESOLUTION IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS RESOLUTION IS AND SHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW.

 

	
 
    	
CERTIFIED TO AND ATTESTED BY:
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
X:
    	
/s/   JACK Y. ZHANG 
    	
(Seal)
    
	
 
    	
 
    	
Jack Y. Zhang, President/CEO of International Mediation   Systems, Limited
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
X:
    	
/s/   JOHN WEBER 
    	
(Seal)
    
	
 
    	
 
    	
John Weber, CFO of International Medication Systems,   Limited
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
X:  
    	
/s/   STEPHEN CAMPBELL 
    	
(Seal)
    
	
 
    	
 
    	
Stephen Campbell, Secretary
    	
 
    

 

NOTE: If the officers signing this Resolution are designated by the foregoing document as one of the officers authorized to act on the Corporation’s behalf, it is advisable to have this Resolution signed by at least one non-authorized officer of the Corporation.

 

LASER PRO Lending, Ver. 5.54.00.006 Copr. Harland Financial Solutions, Inc. 1997, 2010. All Rights Reserved. - DE/CA G:\APPS\EWBCFI\CFI\LPL\C10.FC TR-5159 PR-7

 

2

 

CORPORATE RESOLUTION TO GRANT COLLATERAL I GUARANTEE /

SUBORDINATE DEBT

 

	
Principal
    	
 
    	
Loan Date
    	
 
    	
Maturity
    	
 
    	
Loan No
    	
 
    	
Call/Coll
    	
 
    	
Account
    	
 
    	
Officer
    	
 
    	
Initials
    
	
$
    	
10,000,000.00
    	
 
    	
12-31-2010
    	
 
    	
12-31-2011
    	
 
    	
20002400
    	
 
    	
 
    	
 
    	
 
    	
 
    	
8282
    	
 
    	
i/R.L.
    
																

 

References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.

Any item above containing “***” has been omitted due to text length limitations.

 

	
Borrower:
    	
International Medication Systems, Limited.
    	
Lender:
    	
East West Bank
    
	
 
    	
1886 Santa Anita Avenue
    	
 
    	
Loan Servicing Department
    
	
 
    	
So. El Monte, CA 91733
    	
 
    	
9300 Flair Drive, 6th Floor
    
	
 
    	
 
    	
 
    	
El Monte, CA 91731
    
	
 
    	
 
    	
 
    	
 
    
	
Corporation:
    	
Amphastar Pharmaceuticals, Inc.
    	
 
    	
 
    
	
 
    	
11570 Sixth Street
    	
 
    	
 
    
	
 
    	
Rancho Cucamonga, CA 91730
    	
 
    	
 
    

 

WE, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:

 

THE CORPORATION’S EXISTENCE. The complete and correct name of the Corporation is Amphastar Pharmaceuticals, Inc. (“Corporation”). The Corporation is a corporation for profit which is, and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the State of Delaware. The Corporation is duly authorized to transact business in the State of California and all other states in which the Corporation is doing business, having obtained all necessary filings, governmental licenses and approvals for each state in which the Corporation is doing business. Specifically, the Corporation is, and at all times shall be, duly qualified as a foreign corporation in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. The Corporation has the full power and authority to own its properties and to transact the business in which it is presently engaged or presently proposes to engage. The Corporation maintains an office at 11570 Sixth Street, Rancho Cucamonga, CA 91730. Unless the Corporation has designated otherwise in writing, the principal office is the office at which the Corporation keeps its books and records. The Corporation will notify Lender prior to any change in the location of the Corporation’s state of organization or any change in the Corporation’s name. The Corporation shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to the Corporation and the Corporation’s business activities.

 

RESOLUTIONS ADOPTED. At a meeting of the Directors of the parent Corporation, or if the Corporation is a close corporation having no Board of Directors then at a meeting of the Corporation’s shareholders, duly called and held on August 4, 2006 JW, at which a quorum was present and voting, or by other duly authorized action in lieu of a meeting, the resolutions set forth in this Resolution were adopted.

 

OFFICERS. The following named persons are officers of Amphastar Pharmaceuticals, Inc.:

 

	
NAMES
    	
 
    	
TITLES
    	
 
    	
AUTHORIZED
    	
 
    	
ACTUAL SIGNATURES
    	
 
    	
 
    
	
Jack Y. Zhang
    	
 
    	
President/CEO
    	
 
    	
Y
    	
 
    	
X
    	
/s/ JACK ZHANG 
    	
 
    	
(Seal)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
John Weber
    	
CFO
    	
 
    	
Y
    	
 
    	
X
    	
/s/   JOHN WEBER 
    	
 
    	
(Seal)
    

 

ACTIONS AUTHORIZED. All of the authorized persons listed above may enter into any agreements of any nature with Lender, and those agreements will bind the Corporation. Specifically, but without limitation, all of such authorized persons are authorized persons are authorized, empowered, and directed to do the following for and on behalf of the Corporation:

 

Guaranty. To guarantee or act as surety for loans or other financial accommodations to Borrower from Lender on such guarantee or surety terms as may be agreed upon between the officers of the Corporation and Lender and in such sum or sums of money as in their judgment should be guaranteed or assured, (the “Guaranty”).

 

Grant Security. To mortgage, pledge, transfer, endorse, hypothecate, or otherwise encumber and deliver to Lender any property now or hereafter belonging to the Corporation or in which the Corporation now or hereafter may have an interest, including without limitation all of the Corporation’s real property and all of the Corporation’s personal property (tangible or intangible), as security for the Guaranty, and as a security for the payment of any loans, any promissory notes, or any other or further indebtedness of International Medication Systems, Limited to Lender at any time owing, however the same may be evidenced. Such property may be mortgaged, pledged, transferred, endorsed, hypothecated or encumbered at the time such loans are obtained or such indebtedness is incurred, or at any other time or times, and may be either in addition to or in lieu of any property theretofore mortgaged, pledged, transferred, endorsed, hypothecated or encumbered. The provisions of this Resolution authorizing or relating to the pledge, mortgage, transfer, endorsement, hypothecation, granting of a security interest in, or in any way encumbering, the assets of the Corporation shall include, without limitation, doing so in order to lend collateral security for the indebtedness, now or hereafter existing, and of any nature whatsoever, of International Medication Systems, Limited to Lender. The Corporation has considered the value to itself of lending collateral in support of such indebtedness, and the Corporation represents to Lender that the Corporation is benefited by doing so.

 

Execute Security Documents. To execute and deliver to Lender the forms of mortgage, deed of trust, pledge agreement, hypothecation agreement, and other security agreements and financing statements which Lender may require and which shall evidence the terms and conditions under and pursuant to which such liens and encumbrances, or any of them, are given; and also to execute and deliver to Lender any other written instruments, any chattel paper, or any other collateral, of any kind or nature, which Lender may deem necessary or proper in connection with or pertaining to the giving of the liens and encumbrances. Notwithstanding the foregoing, any one of the above authorized persons may execute, deliver, or record financing statements.

 

Subordination. To subordinate, in all respects, any and all present and future indebtedness, obligations, liabilities, claims, rights, and demands of any kind which may be owed, now or hereafter, from any person or entity to the Corporation to all present and future indebtedness, obligations, liabilities, claims, rights, and demands of any kind which may be owed, now or hereafter, from such person or entity to Lender (“Subordinated Indebtedness”), together with subordination by the Corporation of any and all security interests of any kind, whether now existing or hereafter acquired, securing payment or performance of the Subordinated Indebtedness; all on such subordination terms as may be agreed upon between the Corporation’s Officers and Lender and in such amounts as in their judgment should be subordinated.

 

Further Acts. To do and perform such other acts and things and to execute and deliver such other documents and agreements, including agreements waiving the right to a trial by jury, as the officers may in their discretion deem reasonably necessary or proper in order to carry

 

 

into effect the provisions of this Resolution

 

ASSUMED BUSINESS NAMES. The Corporation has filed or recorded all documents or filings required by law relating to all assumed business names used by the Corporation. Excluding the name of the Corporation, the following is a complete list of all assumed business names under which the Corporation does business: None.

 

NOTICES TO LENDER. The Corporation will promptly notify Lender in writing at Lender’s address shown above (or such other addresses as Lender may designate from time to time) prior to any (A) change in the Corporation’s name; (B) change in the Corporation’s assumed business name(s); (C) change in the management of the Corporation; (D) change in the authorized signer(s); (E) change in the Corporation’s principal office address; (F) change in the Corporation’s state of organization; (G) conversion of the Corporation to a new or different type of business entity; or (H) change in any other aspect of the Corporation that directly or indirectly relates to any agreements between the Corporation and Lender. No change in the Corporation’s name or state of organization will take effect until after Lender has received notice.

 

CERTIFICATION CONCERNING OFFICERS AND RESOLUTIONS. The officers named above are duly elected, appointed, or employed by or for the Corporation, as the case may be, and occupy the positions set opposite their respective names. This Resolution now stands of record on the books of the Corporation, is in full force and effect, and has not been modified or revoked in any manner whatsoever.

 

NO CORPORATE SEAL. The Corporation has no corporate seal, and therefore, no seal is affixed to this Resolution.

 

CONTINUING VALIDITY. Any and all acts authorized pursuant to this Resolution and performed prior to the passage of this Resolution are hereby ratified and approved. This Resolution shall be continuing, shall remain in full force and effect and Lender may rely on it until written notice of its revocation shall have been delivered to and received by Lender at Lender’s address shown above (or such addresses as Lender may designate from time to time). Any such notice shall not affect any of the Corporation’s agreements or commitments in effect at the time notice is given.

 

IN TESTIMONY WHEREOF, we have hereunto set our hand and attest that the signatures set opposite the names listed above are their genuine signatures.

 

We each have read all the provisions of this Resolution, and we each personally and on behalf of the Corporation certify that all statements and representations made in this Resolution are true and correct. This Corporate Resolution to Grant Collateral / Guarantee / Subordinate Debt is dated December 31, 2010.

 

THIS RESOLUTION IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS RESOLUTION IS AND SHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW.

 

	
 
    	
CERTIFIED TO AND ATTESTED BY:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
X:
    	
/s/   JACK ZHANG 
    	
(Seal)
    
	
 
    	
 
    	
Jack Y. Zhang, President/CEO of Amphastar   Pharmaceuticals, Inc.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
X:
    	
/s/   JOHN WEBER 
    	
(Seal)
    
	
 
    	
 
    	
John Weber, CFO of Amphastar Pharmaceuticals, Inc.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
X:
    	
/s/   STEPHEN CAMPBELL 
    	
(Seal)
    
	
 
    	
 
    	
Stephen Campbell, Secretary
    	
 
    

 

NOTE: If the officers signing this Resolution are designated by the foregoing document as one of the officers authorized to act on the Corporation’s behalf, it is advisable to have this Resolution signed by at least one non-authorized officer of the Corporation.

 

LASER PRO Lending, Ver. 5.54.00.006 Copr. Harland Financial Solutions, Inc. 1997, 2010. All Rights Reserved. - DE/CA G:\APPS\EWBCFI\CFI\LPL\C10.FC TR-5159 PR-7

 

2

 

MODIFICATION TO THE LOAN AGREEMENT

 

	
Principal
    	
 
    	
Loan Date
    	
 
    	
Maturity
    	
 
    	
Loan No
    	
 
    	
Call/Coll
    	
 
    	
Account
    	
 
    	
Officer
    	
 
    	
Initials
    
	
$
    	
10,000,000.00
    	
 
    	
12-31-2010
    	
 
    	
12-31-2011
    	
 
    	
20002400
    	
 
    	
 
    	
 
    	
 
    	
 
    	
8282
    	
 
    	
i/R.L.
    
																

 

References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.

Any item above containing “***” has been omitted due to text length limitations.

 

	
Borrower:
    	
International Medication Systems, Limited
    1886 Santa Anita Avenue
    So. El Monte, CA 91733
    	
Lender:
    	
East West Bank
    Loan Servicing Department
    9300 Flair Drive, 6th Floor
    El Monte, CA 91731
    

 

This MODIFICATION TO THE LOAN AGREEMENT is attached to and by this reference is made a part of the Business Loan Agreement dated December 31, 2010, and executed in connection with a loan or other financial accommodations between Lender and Borrower.

 

The section entitled “Financial Statements” is hereby amended and restated as follows:

 

Interim Statements for Borrower. As soon as available, but in no event later than forty-five (45) days after the end of each quarter, Borrower shall provide Lender with balance sheet, income and expense statements, reconciliation of net worth and statement of cash flows, with notes thereto for the period ended, prepared by Borrower satisfactory to Lender.

 

Interim Statements for Corporate Guarantor. As soon as available, but in no event later than forty-five (45) days after the end of each quarter, Corporate Guarantor shall provide Lender with balance sheet, income and expense statements, reconciliation of net worth and statement of cash flows, with notes thereto for the period ended, prepared by Corporate Guarantor satisfactory to Lender

 

Agings. Within forty-five (45) days, or sooner, after the end of each quarter, Borrower shall provide Lender with a listing and aging by invoice date of all accounts receivable and all accounts payable in detailed format acceptable to Lender.

 

Inventory. Within sixty (60) days, or sooner, after the end of each year, Borrower shall provide Lender with a listing of inventory in detailed format acceptable to Lender.

 

Annual Statements for Borrower. As soon as available, but in no event later than forty-five (45) days after the end of each fiscal year, Borrower shall provide Lender with Borrower’s balance sheet, income and expense statements, reconciliation of net worth and statement of cash flows, with notes thereto for the year ended, prepared by Borrower satisfactory to Lender.

 

Annual Statements for Corporate Guarantor. As soon as available, but in no event later than one hundred fifty (150) days after the end of each fiscal year, Corporate Guarantor shall provide Lender with Corporate Guarantor’s consolidated balance sheet, income and expense statements, reconciliation of net worth and statement of cash flows, with notes thereto for the year ended, audited a certified public accountant satisfactory to Lender.

 

THIS MODIFICATION TO THE LOAN AGREEMENT IS EXECUTED ON DECEMBER 31, 2010.

 

BORROWER:

 

	
INTERNATIONAL MEDICATION   SYSTEMS, LIMITED
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Jack Zhang
    	
 
    
	
 
    	
Jack Y. Zhang, President/CEO of International Medication   Systems, Limited
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   John Weber
    	
 
    
	
 
    	
John Weber, CFO of International Medication Systems,   Limited
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
LENDER:
    	
 
    
	
 
    	
 
    
	
EAST WEST BANK
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
BY:
    	
/s/   Rebecca Lee
    	
 
    
	
 
    	
Authorized Officer.
    	
 
    

 

LASER PRO Lending, Ver. 5.54.00.006 Copr. Harland Financial Solutions, Inc. 1997, 2011. All Rights Reserved. - CA G:\APPS\EWBCFI\CFI\LPL\G60.FC TR-5159 PR-7

 

 

 

December 27, 2011

 

Mr. John Weber, CFO

International Medication Systems, Inc.

1886 Santa Anita Avenue

So. El Monte, CA 91733

 

Dear Mr. Weber:

 

Reference is made to your credit facility with East West Bank (Loan # 2000240 in the maximum principal amount of $10,000,000.00). Under the terms of the loan documents, your loan is about to mature.

 

In order to provide you smooth uninterrupted service under your credit facility while your request for a one year renewal of your loan is being reviewed, we are pleased to inform you that you have been approved for a short term extension of the maturity date of your line. The new maturity date is March 31, 2012. If your loan is an amortizing loan, monthly principal payment will continue in the same amount during this extension. There is no fee of this extension.

 

This extension should allow ample time for you to assemble and for us to review the financial information needed to consider your request for a one year renewal.

 

We appreciate your business and look forward to working with you on your request to renew this loan.

 

	
Very   truly yours,
    	
 
    
	
 
    	
 
    
	
/s/Rebecca   Lee
    	
 
    
	
 
    	
 
    
	
Rebecca   Lee
    	
 
    
	
Senior   Vice President &
    	
 
    
	
Regional   Manager
    	
 
    

 

Orange County Commercial Bank Center

 

19540 Jamboree Rd., Suite 150, Irvine, CA 92612,  Tel. 949.955.2728  Fax 949.955.2732  ·  Nasdaq: EWBC

 

 

CHANGE IN TERMS AGREEMENT

 

	
Borrower:
    	
International Medication Systems, Limited
    11570 6th Street
    Rancho Cucamonga, CA 91730
    	
Lender:
    	
East West Bank
    Loan Servicing Department
    9300 Flair Drive, 6th Floor
    El Monte, CA 91731
    

 

	
Principal Amount: $18,000,000.00
    	
 
    	
Date of Agreement: March 5, 2012
    

 

DESCRIPTION OF EXISTING INDEBTEDNESS. The Promissory Note dated December 31, 2010 for Loan Number: 20002400 in the original Principal Amount of $10,000,000.00, along with any and all subsequent Change In Terms Agreement.

 

DESCRIPTION OF COLLATERAL. Borrower acknowledges this Note is secured by the following collateral described in the security instrument listed herein:

 

(A) All Trademarks including but not limited to United States Serial #77514759 with a filing dale of 7/3/2008.

 

United States Patent Number 5024616 dated 06/18/1991, Application Number 07271749 - Disposable Sheath For Hypodermic Cannula Used With a Syringe.

 

United States Patent Number 5060812 dated 10/29/1991,  Application Number 07578746 - Medication Container Stopper Which Can Be Punctured by Nozzle of Hypodermic Syringe described in a Commercial Pledge Agreement dated December 31, 2010.

 

(B) Purchase Money in all Equipment, Inventory, Deposit Accounts, Chattel Paper, Accounts, and General Intangibles described in a Commercial Security Agreement dated December 31, 2010.

 

DESCRIPTION OF CHANGE IN TERMS. The section entitled “PAYMENT” is hereby amended and restated as follows:

 

The Maximum Credit Limit is hereby increased to $18,000,000.00 and consists of the following credit facilities:

 

Facility “A” loan amount $10,000,000.00 with Maturity date of 4/15/13

 

PAYMENT. Borrower will pay this loan in one payment of all outstanding principal plus all accrued unpaid interest on April 15, 2013. In addition, Borrower will pay regular monthly payments of all accrued unpaid interest due as of each payment date, beginning March 31, 2012, with all subsequent interest payments to be due on the same day of each month after that. Unless otherwise agreed to or required by applicable law, payments will be applied first to any accrued unpaid interest; then to principal; then to any late charges; and then to any unpaid collection costs. Borrower will pay Lender at Lender’s address shown above or at such other place as Lender may designate in writing. All payments received will be applied pro rata to Facility “A” and Facility “B”.

 

VARIABLE INTEREST RATE. The interest rate on this loan is subject to change from time to time based on changes in an independent index which is the daily Wall Street Journal Prime Rate, as quoted in the “Money Rates” column of The Wall Street Journal (Western Edition) rounded to two decimal places all as determined by Lender (the “Index”). The Index is not necessarily the Lowest rate charged by Lender on its loans. If the Index becomes unavailable during the term of this loan. Lender may designate a substitute index after notifying Borrower. Lender will tell Borrower the current Index rate upon Borrower’s request. The interest rate charge will not occur more often than each day Borrower understands that Lender may make loans based on other rates as well. The Index currently is 3.250% per annum. Interest on the unpaid principal balance of this Note will be calculated as described in the “INTEREST CALCULATION METHOD” paragraph using a rate equal to the Index, resulting in an initial rate of 3.250%. NOTICE: Under no circumstances will the interest rate on this Note be more than the maximum rate allowed by applicable law.

 

INTEREST CALCULATION METHOD. Interest on this loan is computed on a 365/360 basis; that is, by applying the ratio of the interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. All interest payable under this loan is computed using this method.

 

Facility “B” loan amount $8,000,000.00 with Maturity date of 4/15/17

 

DRAW PERIOD. The loan will have a 12-Month draw down period with interest payments due monthly ending on March 15, 2013. The first interest payment date is on April 15, 2012 at the prevailing rate of the Note.

 

CONVERSION TO TERM LOAN. After the draw period, the section entitled “Line of Credit for Facility B” is hereby deleted and the outstanding principal balance shall be converted to a 49-Month fully amortized term loan effective March 15, 2013, with the principal and interest payments due monthly. The first principal and interest payment is due on April 15, 2013. The final principal and interest payment is due on April 15, 2017 at the prevailing rate of the Note. Payments include principal and interest. Unless otherwise agreed to or required by applicable law, payments will be applied first to any accrued unpaid interest; then to principal; then to any late charges; and then to any unpaid collection costs. Borrower will pay Lender at Lender’s address shown above or at such other place as Lender may designate in writing. All payments received will be applied pro rata to Facility “A” and Facility “B”.

 

VARIABLE INTEREST RATE. The interest rate on this loan is subject to change from time to time based on changes in an independent index which is the daily Wall Street Journal Prime Rate, as quoted in the “Money Rates” column of The Wall Street Journal (Western Edition), rounded to two decimal places, all as determined by Lender (the “Index”). The Index is not necessarily the lowest rate charged by Lender on its loans. If the Index becomes unavailable during the term of this loan, Lender may designate a substitute index after notifying Borrower. Lender will tell Borrower the current Index rate upon Borrower’s request. The interest rate change will not occur more often than each day. Borrower understands that Lender may make loans based on other rates as well. The Index currently is 3.250% per annum. Interest on the unpaid principal balance of this loan will be calculated as described in the “INTEREST CALCULATION METHOD” paragraph using a rate of 0.250 percentage points over the Index, adjusted if necessary for any minimum and maximum rate limitations described below, resulting in an initial rate of 3.500%. NOTICE: Under no circumstances will the interest rate on this Note be more than the maximum rate allowed by applicable law.

 

INTEREST CALCULATION METHOD. Interest on this loan is computed on a 365/360 basis; that is, by applying the ratio of the interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. All interest payable under this loan is computed using this method.

 

LINE OF CREDIT FOR FACILITY “B”. This Agreement evidences a straight line of credit. Once the total amount of principal has been advanced, Borrower is not entitled to further loan advances. Advances under this Agreement may be requested only in writing by Borrower or as provided in this paragraph. All communications, instructions, or directions by telephone or otherwise to Lender are to be directed to Lender’s office shown above. The following person or persons are authorized to request advances and authorize payments under the line of credit until Lender receives from Borrower, at Lender’s address shown above, written notice of revocation of such authority: Jack Y. Zhang, President of International Medication Systems, Limited or John Weber, CFO of International Medication Systems, Limited. Borrower agrees to be liable for all sums either: (A) advanced in accordance with the instructions of an authorized person or (B) credited to any of Borrower’s accounts with

 

 

Loan No: 20002400

 

Lender. The unpaid principal balance owing on this Agreement at any time may be evidenced by endorsements on this Agreement or by Lender’s internal records, including daily computer print-outs.

 

CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreements evidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right to strict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute a satisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), including accommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not be released by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing below acknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisions of this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all such subsequent actions.

 

PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT. BORROWER AGREES TO THE TERMS OF THE AGREEMENT.

 

BORROWER:

 

 

INTERNATIONAL MEDICATION SYSTEMS, LIMITED

 

 

	
By:
    	
/s/   Jack Zhang
    	
 
    	
By:
    	
s/ John   Weber
    
	
 
    	
Jack Y. Zhang, President/CEO of International Medication   Systems, Limited
    	
 
    	
 
    	
John Weber, CFO of International Medication Systems,   Limited
    

 

LASER PRO Lending, Ver. 5.57.10.001 Copr. Harland Financial Solutions, Inc. 1997, 2012. All Rights Reserved. - CA F:\PROD\LOANDOC\CFI\LPL\D20C.FC TR-5159 PR-7

 

2

 

MODIFICATION TO THE LOAN AGREEMENT

 

	
Borrower:
    	
International Medication Systems, Limited
    11570 6th Street
    Rancho Cucamonga, CA 91730
    	
Lender:
    	
East West Bank
    Loan Servicing Department
    9300 Flair Drive, 6th Floor
    El Monte, CA 91731
    

 

This MODIFICATION TO THE LOAN AGREEMENT is attached to and by this reference is made a part of the Business Loan Agreement (Loan #20002400) dated December 31, 2010, and executed in connection with a loan or other financial accommodations between Lender and Borrower.

 

The section entitled “Financial Statements” is hereby amended and restated as follows:

 

Interim Statements for Borrower. As soon as available, but in no event later than forty-five (45) days after the end of each quarter, Borrower shall provide Lender with balance sheet, income and expense statements, reconciliation of net worth and statement of cash flows, with notes thereto for the period ended, prepared by Borrower satisfactory to Lender.

 

Agings. Within forty-five (45) days, or sooner, after the end of each quarter, Borrower shall provide Lender with a listing and aging by invoice date of all accounts receivable and all accounts payable in detailed format acceptable to Lender.

 

Inventory. Within sixty (60) days, or sooner, after the end of each year, Borrower shall provide Lender with a listing of inventory in detailed format acceptable to Lender.

 

Guarantor Annual Statements. Annually, Borrower shall provide Lender with the financial statement of each Guarantor certified by such Guarantor to be true and correct no later than May 15th.

 

Annual Statements. As soon as available, but in no event later than one hundred fifty (150) days after the end of each fiscal year, Borrower shall provide Lender with balance sheet, income and expense statements, reconciliation of net worth and statement of cash flows, with notes thereto for the year ended, prepared by Borrower.

 

The section entitled “Line Usage for Facility A” is hereby removed.

 

THIS MODIFICATION TO THE LOAN AGREEMENT IS EXECUTED ON MARCH 5, 2012.

 

 

BORROWER:

 

INTERNATIONAL MEDICATION SYSTEMS, LIMITED

 

	
By:
    	
/s/   Jack Zhang
    	
 
    
	
 
    	
Jack Y. Zhang, President/CEO of International Medication   Systems, Limited
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   John Weber
    	
 
    
	
 
    	
John Weber, CFO of International Medication Systems,   Limited
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
LENDER:
    	
 
    
	
 
    	
 
    
	
EAST WEST BANK
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
BY:
    	
/s/   Rebecca Lee
    	
 
    
	
 
    	
Authorized Officer.
    	
 
    

 

LASER PRO Lending, Ver. 5.57.10.001 Copr. Harland Financial Solutions, Inc. 1997, 2012. All Rights Reserved. -CA F:\PROD\LOANDOC\CFI\LPL\G60.FC TR-5159 PR-7

 

 

GUARANTOR CONSENT

 

	
Borrower:
    	
International Medication Systems, Limited
    11570 6th Street
    Rancho Cucamonga, CA 91730
    	
Lender:
    	
East West Bank
    Loan Servicing Department
    9300 Flair Drive, 6th Floor
    El Monte, CA 91731
    

 

The undersigned (“Guarantor”) has executed a Commercial Guaranty dated December 31, 2010, in favor of Lender (“Guaranty”). Guarantor hereby acknowledges its consent to the terms and provisions of the foregoing Change in Terms Agreement/Note and/or Modification Agreement and the transactions contemplated thereby. Guarantor hereby reaffirms its obligations to Lender under the Guaranty. Guaranty hereby reaffirms that its obligations under the Guaranty to Bank are separate and distinct from Borrower’s obligations to Bank.

 

Acknowledged and agreed as of March 5, 2012:

 

GUARANTOR:

 

	
Amphastar Pharmaceuticals, Inc.
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Jack Zhang
    	
 
    
	
 
    	
Jack Y. Zhang, President/CEO
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   John Weber
    	
 
    
	
 
    	
John Weber, CFO
    	
 
    

 

LASER PRO Lending, Ver. 5.57.10.001 Copr. Harland Financial Solutions, Inc. 1997, 2012. All Rights Reserved. - CA F:\PROD\LOANDOC\CFI\LPL\G60.FC TR-5159 PR-7

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00231-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00231-of-00352.parquet"}]]