Document:

EX-10.5 Contract Manufacturing Agreement

 

Exhibit 10.5

The confidential portions of this exhibit have been filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment request in
accordance with Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.
REDACTED PORTIONS OF THIS EXHIBIT ARE MARKED BY AN ***.

November 1, 2005

CONTRACT MANUFACTURING AGREEMENT

between

OSG NORWICH PHARMACEUTICALS, INC.

and

JDS PHARMACEUTICALS, LLC.

 

 

THIS CONTRACT MANUFACTURING AGREEMENT (the “Agreement”) is made this 1st.day of
November, 2005 (the “Agreement Date”), by and between JDS Pharmaceuticals, LLC. (“JDS”), a Delaware
Limited Liability Company with a principal place of business at 122 East 42nd. Street
New York, NY 10168 USA, and OSG NORWICH PHARMACEUTICALS, INC (“NPI”), a Delaware corporation with a
principal place of business at 6826 State Highway 12, Norwich, NY 13815 USA.

Recitals

     A. JDS is engaged in the business of, among other things, marketing and distributing certain
pharmaceutical products.

     B. NPI is in the business of contract manufacturing and packaging pharmaceutical products, and
providing related services.

     C. JDS has agreed to purchase from NPI, and NPI has agreed to provide to JDS, certain
manufacturing and quality assurance services relating to certain of JDS’s products, on the terms
and conditions set forth herein.

     NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, JDS and
NPI the (“Parties”) agree as follows:

Article 1 — Definitions

     The following terms used in this Agreement shall have the meanings set forth below. Other terms of
less general applicability are defined where appropriate and are listed in the List of Defined
Terms in the Appendix.

     1.1 “Confidential Information” means any and all trademarks, trademark applications,
tradenames, copyrights, patents, patent applications, technical information, know-how, formulae,
processes, clinical studies, trade secrets, confidential and/or proprietary information and other
know-how, information, documents and/or materials, technology, formulations, specifications,
testing data and analytical methods and, in
addition, information which would be considered a trade secret under the Uniform Trade Secrets Act
as in force and effect in the State of New York.

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     1.2 “Manufacture”, or any variation thereof, means all operations necessary to produce the
Products to the specified state of completion in accordance with the terms and conditions of this
Agreement. Without limiting the foregoing, the term “Manufacture” shall include (i) all receipt
and storage of Materials incident to such operations, and (ii) the performance of all quality
control procedures pertaining to the Products which are required by applicable regulations on the
Agreement Date, and/or which become required by such regulations after the Agreement Date, and
which NPI has agreed in writing to perform.

     1.3 “Product” or “Products” means those products of JDS more fully described on Schedule 1.3
in the presentation forms listed in Schedule 1.3.

     1.4 “Materials” means raw materials (chemicals) and packaging materials used to Manufacture
and package Products.

     1.5 “Printed Matter” means all printed Materials required pursuant to the Specifications or
necessary to sell the Product in compliance with the Laws, Rules and Regulations, including
labeling required to be affixed to and/or packaged with Products delivered to JDS hereunder.

     1.6 “Specifications” mean the written methods, formulae, procedures, specifications, tests
(and testing protocols) and standards pertaining to each presentation form of the Products set
forth in Schedule 1.6, as modified from time to time.

     1.7 “Supply Term” means the period starting on the Agreement Date and continuing for the
initial term of this Agreement and any subsequent extension period as set forth in Section 7.1
hereof, subject to any earlier termination of this Agreement pursuant to Section 7.2 hereof.

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     1.8 “Laws, Rules and Regulations” means the Federal Food, Drug, and Cosmetic Act (“FDCA”) and
all regulations promulgated thereunder, including, but not limited to, the current Good
Manufacturing Practices for finished pharmaceuticals (“cGMPs”), as promulgated by the U.S. Food and
Drug Administration (“FDA”) in Parts 210 and 211 of Title 21, United States Code of Federal
Regulations (“C.F.R.”), or when appropriate, any corresponding statutes and/or regulations of any
other country’s prescription pharmaceuticals regulating health authority / agency, now existing and
hereafter promulgated.

     1.9 “Commercially Reasonable Efforts” mean that degree of effort, expertise and resources
which a person, of ordinary skill, ability and experience in the matters addressed herein, would
utilize or otherwise apply with respect to fulfilling the obligations assumed hereunder.

Article 2 —Supply of Product

     2.1 Obligations of the Parties.

          (a) Relationship of the Parties. The Parties acknowledge that no partnership, joint venture,
or agency relationship is created between the Parties with respect to this Agreement.

          (b) Manufacture of Products. Subject to the terms and conditions hereof, NPI shall
Manufacture Products in accordance with applicable Laws, Rules and Regulations, the Specifications
provided to NPI by JDS, and the Quality Assurance Agreement attached as Schedule 2.1(b).

          (c) Product Recalls. JDS shall be responsible for conducting product recalls, and shall
promptly notify NPI of any recall notice for supplied Products. NPI shall use commercially
reasonable efforts to cooperate with and assist JDS in the performance of such duties and
obligations. NPI shall promptly notify JDS if it receives

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any notice, including a recall notice, which relates to the marketability, safety, or effectiveness
of any Product. JDS shall be responsible for the expense of all recalls initiated by JDS, except
where the recall results from NPI’s breach of warranties under this Agreement, defective
manufacture or packaging, or other breach or fault of NPI, its employees and agents, in which case
NPI shall be responsible for the expense of the recall. For purposes of this Agreement, the
“expense of the recall” shall be the reasonable out-of-pocket expenses associated with JDS
notification, product return, replacement or destruction, and any other charges incurred in order
to comply with recall procedures.

          (d) Stability Testing. JDS shall bear the cost of stability testing required for Products in
both finished packaged and semi-finished pack forms. The cost of NPI-supplied Stability services
is included in Schedule 2.1 (d).

          (e) Adverse Drug Experience Reports. JDS shall be responsible for filing, with the
responsible regulatory body in any country where JDS markets Products, any and all adverse drug
reaction reports that it receives.

          (f) Product Complaints. JDS shall have the responsibility for fielding, investigating and
responding to all Product complaints. NPI shall provide reasonable cooperation in promptly
investigating and reporting to JDS the results of investigations for all Product complaints that
may involve the Products not meeting specifications. In the event that NPI receives any Product
complaints, NPI shall notify JDS of all such complaints within five (5) days of receipt. NPI shall
notify JDS of any report of (i) a non-serious adverse drug reaction (as defined in 21 C.F.R.
section 314.80(a)) concerning any Product within three (3) days of receipt and for a serious
adverse drug reaction (as defined in 21 C.F.R. section 314.80(a)) concerning any Product within
twenty-four (24) hours of receipt and (ii) provide JDS with information as required by applicable
Law Rules and regulations.

     2.2 Technology Rights. Subject to the terms and conditions hereof, NPI shall have
the right to use JDS’s Confidential Information, which relates in any way to the Products, to
Manufacture the Products for JDS or JDS’s successors or assigns. The
Parties acknowledge and agree that JDS is the owner of its Confidential Information and that NPI
has no ownership rights thereto, and no right to use JDS’s Confidential Information except as
provided in this Agreement.

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     2.3 Purchase, Receipt and Storage of Materials. NPI shall be responsible to purchase,
receive and store Materials to support the Manufacture of JDS Products. JDS may, at its option and
upon prior notice to NPI, purchase or supply the Materials. However, to the extent that NPI is
tasked with purchasing Materials that will serve as active or inactive drug ingredients in any
Product, JDS shall provide NPI with a list of vendors from which NPI may purchase such Materials.
NPI may not purchase active or inactive drug ingredients for use in any Products from any other
vendor without JDS’s prior written approval. A list of Materials that NPI will purchase is
provided in Schedule 2.3. Any Materials not listed in Schedule 2.3 will be provided at the
expense of JDS. All materials provided to Norwich by JDS will be stored in accordance with Law,
Rules and Regulations and will be conspicuously labeled as JDS property.

     2.4 Shipment of Finished Goods All finished, labeled Products delivered
hereunder to JDS shall have proper dating on the labels and have at least 30 months shelf life
remaining at time of delivery.. All Products delivered to JDS hereunder shall be shipped F.O.B.
point of manufacture by a common carrier (“Carrier”) approved and paid for by JDS. NPI shall ship
such quantities to the destination(s) and at the time(s) specified in Purchase Orders (as defined
in Section 3.2 hereof) by JDS or its designee. JDS will designate an approved Carrier, or will
provide a schedule of approved Carriers of which NPI will choose one from the list.

     2.5 Labeling and Packaging of Supplied Products. JDS shall, at its own cost and
expense, supply NPI with the mechanical design of artwork for all Printed Matter to be used by NPI
in connection with packaging the Products. NPI shall be responsible for the printing of all
finished Printed Matter and for ensuring that the proper Printed Matter is affixed to, or included
with each Product. Each set of artwork supplied by JDS, and each partial set and/or alteration or
amendment thereto, for each piece of Printed Matter shall be identified by a unique item control
number or code (the “Code”) supplied by JDS, which is consistent with NPI’s existing control
practices. All physical specifications
of all Printed Matter shall comply with NPI’s control numbering system, quality control
requirements and manufacturing process constraints as provided by NPI. No changes to printed
matter will be made in the Master Packaging Record Specifications without the prior written consent
of JDS.

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     2.6 Inspections. Upon reasonable prior written notice, during NPI regular business
hours, and subject to NPI’s normal confidentiality and safety regulations governing visitors, JDS’s
representatives, including without limitation its employees, officers, agents, contractors and
consultants, shall have the right to enter and inspect the facility at which the Products are
Manufactured and to request samples of the Products being Manufactured. Such inspections shall be
conducted in a manner and at the times such as to cause the least possible amount of interference
with NPI’s operations, but, in any event, NPI shall permit the inspection no later than three days
following after the inspection date stated in JDS’s written notice. NPI shall maintain, in
compliance with applicable Laws, Rules and Regulations and make available to JDS, upon reasonable
request, true and accurate records of chemical, physical and other tests of the raw materials for
the Products. Such Inspections are typically scheduled not more frequently than annually;
however, specific events may require more frequent inspections, such as, without limitation,
failure investigations, implementation and/or validation of manufacturing or packaging changes, and
the failure of NPI to comply with the terms of this Agreement. JDS’s representatives shall be
bound by the provisions of Section 8.1 of this Agreement regarding any Confidential Information of
NPI obtained by such representatives as a result of any inspection conducted pursuant to this
provision.

     2.7 Governmental Action. If any governmental or regulatory authority notifies NPI
that it will inspect NPI’s facility, or any of NPI’s records, equipment, or procedures related to
the manufacture of the Product, NPI shall notify JDS as soon as is practicable (to the extent
possible, within two (2) business days and prior to the inspection or action), allow the authority
to conduct an inspection or take other legal action, and provide JDS with copies of any documents
issued to NPI by the authority (including, but not limited to, Lists of Inspectional Observations
(FDA Form 483), Establishment Inspection Reports (“EIRs”), and Warning Letters). Where
appropriate, NPI shall also
provide its proposed response to such documents to JDS for JDS’s prior review and approval (such
approval not to be unreasonably withheld). NPI shall provide JDS with copies of all such final
documents submitted to FDA or other governmental agencies within one (1) business day of
submission.

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     2.8 Customer Service. NPI shall maintain systems, staffing, and procedures in place
to consistently maintain excellent customer service to JDS. Upon notice by JDS, NPI and JDS shall
immediately and appropriately address and remedy any failure of NPI to maintain excellent customer
service.

Article 3 — Purchase of Product

     3.1 Purchase Obligation. JDS shall purchase and receive from NPI, and NPI shall sell
and deliver to JDS or its designated agent, JDS’s orders for Products, to be ordered pursuant to
the terms hereof in the quantities set forth in the Purchase Orders (as defined herein). The cost
of shipping all such Products shall be borne by JDS. Title to Products shipped by NPI in
accordance with the terms and conditions of this Agreement shall pass to JDS upon acceptance by the
Carrier; provided, however, pursuant to the Laws, Rules and Regulations, JDS shall always retain
title to the active pharmaceutical ingredient provided by or on behalf of JDS and any products
produced therefrom.

     3.2 Production Scheduling. At least thirty (30) days prior to the start of each
calendar quarter (the “First Quarter”) during the Supply Term, JDS or its designated agent shall,
by written notice hereunder, deliver to NPI: (i) a Purchase Order, if an order is being placed,
setting forth the Products to be purchased during the next succeeding calendar quarter (the “Second
Quarter”) and the desired delivery date(s) (which date(s) shall be no more than once each month
during the Second Quarter for each quantity so ordered; and (ii) a written forecast (the
“Forecast”) of JDS’s expected requirements of Products and the presentation forms thereof for the
next three (3) calendar quarters after the Second Quarter, together with the expected quantity and
delivery date(s) for each quantity so forecast to be ordered during such quarters. JDS may not
reject as
non-conforming orders filled within 10% of the requested order quantity, provided that the Products
are otherwise satisfactory.

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     (a) Release for Shipment. NPI shall release for shipment quantities of Product consistent
with the Purchase Order issued by JDS. If there is any discrepancy between the terms of the
Purchase Order and the terms of this Agreement, the terms of this Agreement shall control.

     (b) Limitations. JDS shall use commercially reasonable efforts to ensure that JDS’s Purchase
Orders comply as closely as possible with the Forecasts for each calendar quarter during the term
hereof. In no event shall NPI be obligated to deliver to JDS in the Second Quarter more than one
hundred twenty-five percent (125%) of the total quantity set forth in the Second Quarter forecast.
In no event shall JDS’s Purchase Order for the Second Quarter be less than seventy-five percent
(75%) of the total quantity set forth in Second Quarter forecast. If JDS’s Purchase Orders in the
Second Quarter are more than one hundred twenty-five percent (125%) of the total quantity set
forth in the Second Quarter forecast (the “Excess Order”), NPI shall determine feasibility of
meeting the Purchase Order request. If feasible, NPI shall produce and invoice JDS for any premium
costs required to deliver the product that exceeds one hundred twenty-five percent (125%) of the
Second Quarter forecast; provided, however, that NPI shall provide JDS notice of the proposed
premium costs at least three (3) days prior to the production of Product of such Excess Order and
JDS shall have the right to alter or amend the Excess Order. If JDS’s Purchase Order in the Second
Quarter is less than seventy-five percent (75%) of the Second Quarter forecast, NPI shall invoice
JDS for raw materials held in inventory pursuant to the Second Quarter forecast that are in excess
of the Second Quarter forecast, but less than what is necessary for one hundred twenty-five
percent (125%) of the Second Quarter forecast, at cost plus a 15% carrying fee. Any raw materials
paid for pursuant to this paragraph will become the property of JDS.

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     3.3 Certificate of Analysis and Release for Shipment. NPI shall provide a
certificate of analysis (“Certificate of Analysis”) to JDS or its designated agent prior to each
shipment of Supplied Product made hereunder. Such Certificate of Analysis shall
certify with respect to each shipment and lot (identified by batch/lot or control number): (i) the
quantity of the shipment and (ii) that the Product delivered was manufactured in accordance with
the Specifications, the Master Batch Records, the requirements of Laws, Rules and Regulations, and
production SOP’s; and (iii) that all documentation required by Laws, Rules and Regulations and/or
production SOPs are complete and accurate. Such Certificate of Analysis also shall be accompanied
by the following documents: (i) complete processing/packaging batch record(s); (ii) laboratory
test data and a release recommendation; (iii) a GMP statement (as per the QA Agreement); (iv)
applicable variance/out-of-specification/manufacturing failure investigations; and (v)
reconciliation calculation(s). Within ten (10) business days of receiving the Certificate of
Analysis and accompanying documents, JDS will notify NPI that the shipment is either approved for
delivery to JDS or rejected because it is not in compliance with the terms of this Agreement,
unless if JDS notifies NPI prior to the ten (10) days that additional information is needed in
order to determine whether the shipment is approved for delivery or rejected. In such case, both
parties will agree to cooperate to address the concern in as timely a manner as possible. However,
in such case, resolution may require more than ten (10) business days. No Product shall be
released by NPI prior to receiving JDS’s approval for shipment. The parties agree that they will
develop and execute a qualification plan that will reduce the batch record transmission and the
laboratory test data review by JDS in favor of a release decision to ship to JDS by NPI with the
document review by JDS reduced to an audit basis.

     3.4 Testing Upon Delivery. Promptly following receipt of the Products in any
shipment, JDS may check the compliance of such batch with the Specifications. Such compliance
check shall be performed by JDS’s Quality Assurance department and shall be certified by the head
of such department (or his/her designee). If JDS deems that any Products delivered to JDS
hereunder fail to conform to written and approved Specifications upon delivery to JDS, then JDS
shall notify NPI thereof in writing (such notice to include test results) within thirty (30) days
from delivery of such Products to JDS. JDS shall retain the non-conforming Products and NPI shall
have the right to inspect such Products. If NPI batch records show Products met JDS
Specifications at time of delivery to Carrier, and it can be demonstrated that Product damage was
due to
shipping, handling or other events taking place after transfer to the Carrier, then NPI shall not
be liable for any damage.

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     (a) Undisputed Claims. NPI shall, if it agrees with JDS’s complaint, replace any such
non-conforming Products with an equal quantity of Products complying with the Specifications at no
cost to JDS and without undue delay subject to the provisions of Section 8.2 of this Agreement
(force majeure). JDS shall dispose of any Products that are not in compliance with the
Specifications at NPI cost, and in compliance with all applicable laws, except that JDS shall
follow any reasonable instructions from NPI to return such Products to NPI, in which case, NPI
shall provide JDS with a written certification that all Products returned to NPI were destroyed in
accordance with applicable laws, rules, and regulations. NPI will reimburse JDS for the
out-of-pocket costs of JDS for any Materials, including any active pharmaceutical ingredient,
supplied by or paid for by JDS and contained in the non-conforming Products where the cause for the
non-conforming product loss is within control of NPI. NPI shall not be responsible for active
pharmaceutical ingredient, that is lost, spilled, scrapped or damaged in the ordinary course of
business in an amount up to and including an agreed upon yield loss of the active pharmaceutical
ingredient supplied by JDS or paid for by JDS. The ongoing yield loss percentage will be based on
the first ten (10) production lots, and the percentage loss will be reached by mutual agreement
between the Parties.

     (b) Disputed Claims. If NPI does not agree with JDS’s complaint, then NPI shall notify JDS of
such disagreement within thirty (30) days of receipt of notice of deficiency. If the Parties
cannot themselves resolve such disagreement within ten (10) business days of JDS’s receipt of NPI
notice of disagreement, then the matter shall be submitted (without undue delay) to an independent
laboratory agreed by the Parties in order to resolve the discrepancy in the analysis of the
Products in question. The assessment of such laboratory shall be binding upon the Parties and any
related expense shall be borne by the party whose analysis was in error. If such independent
laboratory declares that the Products are non-conforming, then the provisions of Section 3.4(a)
hereinabove shall apply.

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     3.5 Violations. Each party shall notify the other of any violation of any Laws, Rules
and Regulations applicable to the Products alleged by a third party promptly following receipt of
notice of such allegation.

     3.6 Taxes. JDS agrees to pay all taxes assessed on all materials excluding finished
product to which they have title respectively. JDS shall pay all taxes assessed on finished
product.

Article 4 — Pricing and Payment Terms

     4.1 Pricing. The price (the “Price”) for Products Manufactured hereunder shall be as
per the attached Schedule 4.1. All pricing and shipment terms shall be F.O.B. producing plant.
The Price shall be adjusted as follows:

     (a) Material Prices. Starting the January after the execution of this Agreement, and annually
thereafter, NPI may notify JDS of any changes in Material pricing. Changes to Material Prices may
include supplier price increases or decreases. *** Changes in Pricing will be effective one month
after the price change notification date (February 1st) of each year of the Supply Term.

     (b) Non-Material Costs. Components of NPI’s cost of the Products and the Manufacture
thereof, other than the cost of Materials, shall hereinafter be referred to as Non-Material Costs.
***

     4.2 Payment Terms. The Price for all Product Manufactured hereunder shall be due and
owing to NPI net *** after shipment of Product (s) to JDS or its designee and receipt from NPI of a
complete and correct invoice, and shall be payable in currency of the United States in immediately
available funds. NPI may withhold subsequent deliveries of Product or take other action it deems
appropriate should JDS fail to pay any complete and correct invoice within the terms set forth
herein. NPI shall give notice to JDS hereunder prior to any such action.

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     4.3 Capital. The equipment listed in Schedule 4.3 is owned by or licensed to JDS and
has been provided to NPI for the manufacture of Product or Products. NPI shall maintain the
equipment as in the normal course of operation in a pharmaceutical environment and accordance with
Laws, Rules and Regulations. NPI will not make use of this equipment for other products that would
interfere with the timely delivery of Product to JDS.

     4.4 Product Scrap. In the event NPI realizes Product Scrap costs which are (i)
caused by process capability issues inherent in the production formulation and/or design, and (ii)
not within the control of NPI personnel, NPI will invoice JDS for a) the cost of the Materials of
the Product scrapped, but only if purchased by NPI and not previously reimbursed by JDS; b)
out-of-pocket environmental disposal fees; and c) a product handling fee of 15% for Materials
acquired by NPI.

Article 5 — Change Management

     5.1 Required Manufacturing Changes. With respect to changes to the Specifications or
manufacturing process which are required by applicable Laws, Rules and Regulations or by action (or
inaction) of any legally competent government or other regulatory body or authority, or by medical
or scientific concerns as to the toxicity, safety and/or efficacy of the Products (collectively,
“Required Manufacturing Changes”), the Parties shall co-operate in making such changes promptly.
NPI may not implement any Required Manufacturing Changes without receiving written agreement in
advance from JDS. The cost for authorized Product or JDS- specific Required Manufacturing Changes
shall be borne by JDS. Facility and NPI Equipment-related Required Manufacturing Changes shall be
borne by NPI. For Product or JDS-specific Required Manufacturing Changes, JDS shall pay all the
costs of all remaining obsolete stock of Products, all inventories of affected raw materials (at
NPI actual acquisition cost plus 15%) and all remaining obsolete work in process of Products
resulting from any such changes. In no event shall JDS be responsible for the costs of any
JDS-specific

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Required Manufacturing Change necessitated by the failure of NPI to comply with any Laws, Rules and
Regulations or Specifications. In cooperating in making such changes, JDS shall be responsible for
communicating with regulatory agencies with respect to the health registrations and marketing
authorizations for the Products. Required Manufacturing Changes: (i) do not include changes to
the labeling only (which are dealt with in Section 5.3 hereof), and (ii) do include changes
resulting from or arising out of changes to or withdrawal of third party Materials.

     5.2 Discretionary Manufacturing Changes. With respect to changes to the
Specifications or the manufacturing process for Products which are not Required Manufacturing
Changes (collectively, “Discretionary Manufacturing Changes”), the Parties shall, to the extent
commercially reasonable under the circumstances, cooperate in making such changes and the party
initiating such change(s) shall bear all the costs associated with and resulting from any such
changes. In no event shall NPI implement a Discretionary Manufacturing Change without providing
JDS with six (6) months written notice of the change and, where appropriate, providing JDS with all
documentation necessary to support a regulatory submission for the change. If the proposed change
is judged to require a prospective process validation or regulatory submission, then the costs to
execute and resource such validation or submission shall be the responsibility of the initiating
party. All regulatory submissions will be filed by JDS.

     5.3 Labeling Changes. With respect to changes to the Printed Matter, the Parties
shall cooperate in making such changes promptly and JDS shall, unless otherwise agreed, reimburse
NPI for all remaining obsolete stock of Products, all inventory of Printed Matter (at NPI actual
acquisition cost plus 15%) and all remaining obsolete work in process of Products resulting from
any such change or amendment to the Printed Matter as long as the amount of material does not
exceed 125% of the most recent forecast. JDS may, at any time during the Supply Term, change or
amend any item of the labeling by notice hereunder, such change or amendment to be effective after
appropriate advance written notice hereof. Under no circumstances may NPI make changes to the
Printed Matter without the express written permission of JDS.

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     5.4 Changes to Specifications. JDS may make changes to the Specifications from time
to time, provided that all such changes, including Required Manufacturing Changes, are to be
communicated to NPI in writing and promptly acknowledged by NPI in writing. Under no circumstances
may NPI make changes to the Specifications without the express written permission of JDS. NPI will
have 30 days to assess any potential cost impact for such changes and shall pass on any cost impact
of such changes to JDS.

     5.5 Authorizations. During the Supply Term, NPI shall obtain and maintain in force
all licenses and authorizations necessary for NPI to Manufacture Products including, where
required, the FDA establishment fee. Except as may be required by Sections 5.1 or 5.2 hereof,
NPI shall bear the full cost and expense of so obtaining and maintaining such licenses and
authorizations. JDS shall give NPI all help reasonably necessary to assist NPI in so obtaining and
maintaining such licenses and authorizations and shall bear the full cost and expense of so
assisting NPI. In the event JDS Products require licenses in a new country or territory, JDS
shall pay the costs of new license requirements. JDS shall bear all costs associated with
maintenance of the health registrations for the Products, including new drug application (“NDAs”)
approvals under section 505 of the FDCA.

Article 6 — Liabilities and Indemnification

     6.1 Representations and Warranties .

     (a) NPI. NPI hereby represents and warrants to JDS that (i) it has the power and authority to
enter into this Agreement and to perform its obligations hereunder; (ii) all work to be performed
under this Agreement, including the Manufacture of all Products, shall be performed in a
professional manner, in accordance with the Quality Assurance Agreement (Schedule 2.1(b)) and all
applicable Laws, Rules and Regulations, including all health and safety ordinances and the cGMPs;
and (iii) NPI has all permits and authorizations necessary to fulfill its obligations under this
Agreement.

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     (b) JDS. JDS hereby represents and warrants to NPI that (i) it has the power and authority to
enter into this Agreement and to perform its obligations hereunder; (ii) it is, or has filed with
the FDA to become, the owner of all proprietary information, or the holder of licenses thereto,
necessary to allow NPI to Manufacture the Products, and no Products, when Manufactured in
accordance with the Specifications, will infringe upon the rights of any third party; and (iii) it
has, or has filed with the FDA to obtain, all licenses, permits, and other authorizations necessary
to fulfill its obligations under this Agreement.

     6.2 Product Warranties. NPI represents and warrants to JDS that the Products shall, on
the date of delivery to JDS’s carrier: (i) meet the requirements therefore set forth in the
Specifications; (ii) not be adulterated within the meaning of Section 501 of the FDCA and the
regulations promulgated thereunder as each may be amended from time to time ; and (iii) comply in
all material respects with all federal, state and local laws (including without limitation cGMP)
applicable to the Manufacture of the Products in accordance with the Specifications. NPI makes no
warranties with respect to the Products other than those specifically set forth in this section.
No other warranty is expressed or implied by NPI including any warranty of merchantability or
fitness for a particular purpose and none shall be implied. Further, all warranties with respect
to the Products shall be only in effect for the period beginning with the date NPI delivers such
products to the Carrier, and shall not apply to any product that is subsequently altered by JDS or
the Carrier.

     6.3 Consequential Damages. With regard to any alleged breaches of this Agreement and
any indemnification obligations herein, neither party shall be liable to the other for incidental,
consequential, or special damages of any kind whatsoever, even if the party alleged to be at fault
has been made aware of the possible occurrence of such damages.

     6.4 JDS Insurance. JDS shall provide NPI with evidence that it has in place the
following policies with a reputable and responsible insurance carrier, which shall remain in full
force and effect throughout the Supply Term: (i) All risk property insurance policy covering the
full replacement cost of JDS property; (ii) general liability

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including product and completed operations coverage in a minimum amount of *** insuring NPI against
liability for injury to persons occurring in, upon, or adjacent to NPI’s facilities. JDS shall
provide evidence that NPI has been named as an additional insured under the policies described
herein during the Supply Term.

     6.5 NPI Insurance. NPI shall provide JDS with evidence that it has in place with a
reputable and responsible insurance carrier, which shall remain in full force and effect throughout
the Supply Term, a minimum amount of *** insuring NPI against liability for Product defects. NPI
shall provide evidence that NPI has been named as an additional insured under policies described
herein during the term of this Agreement.

     6.6 JDS Indemnity. JDS shall indemnify, defend and hold harmless NPI, NPI’s
affiliates, and each of their respective officers, directors (past, present and future), employees,
representatives and agents (collectively, “Affiliates”) from and against any and all claims, loss,
damage, liability, payment, and obligation, and all expenses, including without limitation
reasonable legal fees (collectively, “Losses”) whether such Losses are based in contract, strict
liability, negligence, warranty, statutes or regulations, or any other legal theory, including
without limitation injury to or death of persons and/or property or contamination of or adverse
effect on humans, animals, aquatic life or the environment, arising out of or caused by: (i) the
Manufacture, use, sale or distribution of the Products, as long as such Products are in accordance
with Specifications and are not adulterated under Section 501 of the FDCA; (ii) any claim
threatened or brought against NPI alleging that the Specifications for any Product, including the
labeling for such Product, violate any applicable United States federal, state, or local rule,
regulation, law or ordinance, to the extent that such Specifications were provided to NPI by JDS
and the Products in question were manufactured in compliance with such Specifications and all
applicable Laws, Rules and Regulations; (iii) any material inaccuracy in or material breach of any
representation, warranty, or covenant made by JDS in this Agreement; (iv) the willful misconduct or
any negligent or reckless acts or omissions of any of JDS’s officers, directors, agents,
affiliates, employees and/or representatives, or any allegations of the same; (v) any claim

17

 

threatened or brought against NPI alleging that the Manufacture, in accordance with the design or
Specifications of any Product, as provided to NPI by JDS, infringes upon any intellectual property
interest of a third party; (vi) any product warranty claim or product liability claim threatened or
brought against NPI with respect to the Products, as long as the Products involved in the claim
meet the Specifications and are not adulterated under Section 501 of the FDCA ; and (vii) any
claim, including damage to any property, or injury to any person (including JDS’s employees,
representatives, agents, associates, or other persons invited by JDS to inspect NPI’s facilities on
behalf of JDS), arising out of, or related to the inspection of NPI’s facilities contemplated by
Section 2.6 of this Agreement.

     6.7 NPI Indemnity. NPI shall indemnify, defend and hold harmless JDS and JDS’s
Affiliates from and against any and all Losses, arising out of or caused by; (i) the failure of the
Products transferred to JDS hereunder to meet the requirements of Section 6.2 hereof, (ii) bodily
injury or property damage in connection with the Manufacture of the Products; (iii) a material
breach by NPI of any representation, warranty or covenant of this Agreement, or (iv) the willful
misconduct or any negligent or reckless acts or omissions of any of NPI’s officers, directors,
agents, affiliates, employees and/or representatives, or any allegations of the same.

     6.8 Joint Negligence. If any Loss incurred by or rendered against either party is
determined by an independent tribunal to be due to the negligence or willful misconduct of both NPI
and JDS, then the Parties shall share the costs attributable to such Loss (including but not
limited to the cost of defense thereof) in accordance with the proportion of each party’s relative
fault, as determined by the independent tribunal. Each party shall give the other notice of any
Loss to which the preceding sentence applies and the Parties shall cooperate in the defense
thereof.

     6.9 Notice and Opportunity to Defend. No party against whom a claim of indemnity
shall be made pursuant to Section 6.6 or 6.7 hereof (the “Indemnifying Party”) shall be liable
thereunder unless the party making such claim (the “Claiming Party”) shall notify the Indemnifying
Party of such claim promptly upon becoming aware of the existence or threatened existence of any
Loss giving rise to, or which may give rise to, a

18

 

claim of indemnity under Section 6.6 or 6.7 hereof, but in no event later than ten (10) business
days after the service (or discovery, if later) of the claim against the Claiming Party. Upon such
notice becoming effective hereunder, the Indemnifying Party will handle and control the defense of
such Loss. If both Parties claim indemnification hereunder for the same Loss or if the
Indemnifying Party in good faith rejects the claim of indemnity, then the party or Parties named as
defendant in the subject litigation will handle and control the defense of such Loss pending final
resolution of the Parties’ respective claims for or with respect to indemnity hereunder. At the
time of such resolution, defense costs incurred pursuant to the preceding sentence shall be
apportioned between the Parties in the same manner as the Parties share ultimate liability for the
underlying Loss pursuant to Sections 6.6 and 6.7 hereof. In all cases, the party not handling and
controlling such defense shall cooperate in such defense and may, at its own expense, participate
in such defense through counsel of its choice. The party handling and controlling such defense
shall not settle or otherwise voluntarily dispose of or agree to dispose of such matter without
prior approval of the other party, which shall not be unreasonably withheld.

Article 7 — Term and Termination

     7.1 Term. Subject to the provisions of Section 7.2 hereof, the initial term of this
Agreement shall commence on the Agreement Date and shall continue in full force and effect, unless
otherwise terminated earlier, for a period of thirty-six (36) months from the date first above
written. The term of this Agreement may be extended for two additional two-year terms by written
notice from JDS to NPI, and upon written acceptance from NPI to JDS, given at least twelve (12)
months before the expiration of the then current term. ***

     7.2 Termination. This Agreement shall not be terminated at any time prior to the
expiration of the Supply Term except in accordance with the terms and conditions of this Section
7.2.

19

 

     (a) Default. This Agreement may be terminated by written notice by either party if the other
party breaches any material provision of this Agreement and does not remedy such breach within
sixty (60) days of written notice of such breach.

     (b) Termination without Cause. Either Party may, at any time, terminate its obligation to
purchase or supply Product, by giving written notice to the other party at least eighteen (18)
months prior to the effective date of such termination.

     (c) Termination with Cause. Either party may terminate this Agreement at any time effective
upon delivery of written notice of such termination, upon the occurrence of any of the following:
(i) improper assignment of this Agreement by the non-terminating party; (ii) an assignment for the
benefit of creditors by the non-terminating party; or (iii) commencement of voluntary or
involuntary liquidation proceedings by the non-terminating party.

     7.3 Effects of Termination.

     (a) Raw Materials. If NPI has quantities of raw materials or packaging materials in excess of
JDS requirements therefore after expiration or termination of this Agreement, or if NPI is required
to order quantities of such raw materials or packaging materials in excess of JDS requirements
therefore after termination of this Agreement, JDS shall, upon such termination, purchase all
finished product at the agreed prices, and such Materials at NPI out of pocket cost plus 15% F.O.B.
producing plant.

     (b) Survival of Obligations. Termination or expiration of this Agreement shall not affect the
Parties’ obligations with respect to Sections 6.6, 6.7, and 8.1 of this Agreement.

20

 

Article 8 — General Provisions

     8.1 Confidentiality. During the Supply Term, and for a period of ten (10) years
thereafter, the Parties, and all of their respective employees, agents, representatives, and
advisors, shall maintain in confidence all of the other party’s Confidential Information, and shall
not disclose Confidential Information to any third party, or use Confidential Information in any
way or for the benefit of any person other than as expressly permitted in this Agreement. For the
purposes of this covenant, the Parties shall have no obligation with respect to any information
which has been either published or is otherwise in the public domain; is lawfully acquired from a
third party under no obligation of confidentiality to the owner of the Confidential Information; is
derived from information that is not otherwise confidential; or is required to be disclosed
pursuant to a court order or in connection with a legal proceeding. If either party is required
by law to disclose the other’s Confidential Information the disclosing party will promptly notify
the owner of the Confidential Information of the requirement and will cooperate in all reasonable
respects with the owner of the Confidential Information to limit the amount of information to be
disclosed.

     8.2 Force Majeure.

     (a) Neither party shall be subject to any liability for delay in performance (other than the
payment of money) or nonperformance hereunder as a result of contingencies and circumstances beyond
its reasonable control (including, but not limited to, fire, flood, or other natural catastrophe,
strike, labor trouble, accident, riot, war, act of governmental authority, or act of God)
interfering with the Production, supply, transportation or receipt of Product or with the supply of
any raw materials used in the Manufacture thereof, or any other required performance under this
Agreement. Quantities so affected may be eliminated from this Agreement without liability, but the
Agreement shall otherwise remain unaffected.

     (b) Except where the nature of the event shall prevent it from doing so, the party suffering
such force majeure shall promptly notify the other party in writing after the occurrence of such
force majeure and shall in every instance, to the extent
reasonable and lawful under the circumstances, use its best efforts to remove or remedy such cause
with all reasonable dispatch.

21

 

     (c) When the force majeure conditions in question cease to exist, the affected party shall
promptly notify the other party in written form about the force majeure termination.

     (d) Should a circumstance of force majeure prevent performance of this Agreement by either
party for a continuous three (3) month period, the other party may terminate this Agreement upon
thirty (30) days written notice during the continuance of such force majeure in excess of three (3)
months.

     8.3 Entire Agreement. This Agreement, and all exhibits and attachments hereto,
constitutes the full understanding of the Parties, a complete allocation of risk between them and a
complete and exclusive statement of the terms and conditions of their Agreement relating to the
Manufacture of Product hereunder and supersedes and replaces any and all prior or contemporaneous
agreements, arrangements, understandings, and negotiations, whether written or oral, that may exist
between the Parties with respect to the subject matter hereof. Except as provided otherwise in
this Agreement, no conditions, usage of trade, course of dealing or performance, understanding or
agreement purporting to modify, vary, explain or supplement the terms or conditions of this
Agreement shall be binding on the Parties unless described as a modification or amendment of this
Agreement made in writing and signed by the Parties to be bound. No modification hereof shall be
effected by the acknowledgment or acceptance of any purchase order or shipping instruction forms
containing terms and conditions at variance with or in addition to those set forth in this
Agreement.

     8.4 Headings. Section and article headings as to the contents of particular sections
and articles are for convenience only and are in no way to be construed as part of this Agreement
or as a limitation of the scope of the particular sections or articles to which they refer.

22

 

     8.5 Relations Between the Parties. NPI shall act as independent contractor of JDS in
performing its obligations hereunder and shall furnish all labor, supervision, machinery and
equipment necessary for performance hereunder and shall obtain and maintain all building and other
permits and licenses required by public authorities in connection therewith.

     8.6 Assignment. Neither this Agreement nor any claim arising directly or indirectly
out of or in connection with the performance of either Party hereunder shall be assignable by
either Party hereto without the prior written consent of the other Party, which shall not be
unreasonably withheld. The foregoing shall include merger or acquisition of either Party. JDS
reserves the right to reduce or discontinue purchases under this Agreement, or to terminate this
Agreement, without obligation, if any new entity or person obtains whole or more than 50% corporate
ownership or control of NPI. No such assignment or transfer shall relieve or release the assignor
or transferor from any of its liabilities or obligations under this Agreement. This Agreement is
assignable to a wholly-owned subsidiary of JDS without the consent of NPI.

     8.7 Notice. All communications under this Agreement shall be in writing and shall be
either faxed, sent by courier (Federal Express or equivalent) or mailed by first class mail,
postage prepaid, to the fax number and/or address specified below. If faxed, such communication
shall be deemed to be given when sent; provided, however, that such fax shall be confirmed by
sending a hard copy by courier or first class mail (by the methods specified herein) within one (1)
working day of the sending of such fax. If sent by courier or mailed by first class mail as
specified below, such communication shall be deemed to be given either two (2) business days after
sending (for communication sent by courier) or five (5) business days after mailing (for
communication sent by mail). Either party may change its address for notice purposes by complying
with the provisions of this Section 8.7. All communications hereunder shall be sent:

23

 

     (a) if to NPI at its address shown below or such other address as it may give to JDS
by notice hereunder:

	 	 	 
	 

	 	Christopher R. Calhoun, President
	 

	 	OSG Norwich Pharmaceuticals, Inc.
	 

	 	6826 State Highway 12
	 

	 	Norwich, NY 13815
	 
	 	 
	 

	 	Fax: (607) 335-3100
	 
	 	 
	With a copy to:

	 	Perry Morgan, Chief Financial Officer
	 

	 	Outsourcing Services Group
	 

	 	50 Tice Boulevard
	 

	 	Woodcliff Lake, NJ 07677
	 
	 	 
	 

	 	Fax: (201) 782-0499

     (b) if to JDS, at its address shown below or such other address as it may give to
NPI by notice hereunder

	 	 	 
	 

	 	Mr. Phillip M. Satow, CEO
	 

	 	JDS Pharmaceuticals, LLC.
	 

	 	122 East 42nd Street
	 

	 	New York, NY 10168
	 

	 	Fax: (212) 682-1946
	 
	 	 
	with a copy to:

	 	Mr. Herschel Weinstein, Esq.
	 

	 	Dornbush Schaeffer Strongin & Weinstein, LLP
	 

	 	747 Third Avenue
	 

	 	New York, NY 10017
	 

	 	Attn: Herschel S. Weinstein, Esq.
	 

	 	Fax: (212)-753-7673

     8.8 Severability. If any provision of this Agreement is found or declared to be
invalid or unenforceable by any court or other competent authority having jurisdiction, such
finding or declaration will not invalidate any other provision hereof and this Agreement shall
thereafter continue in full force and effect, except that such invalid or unenforceable provision,
and (if necessary) other provisions thereof, shall be reformed

24

 

by a court of competent jurisdiction so as to effect, insofar as is practicable, the intention of
the Parties as set forth in this Agreement, provided that if such court is unable or unwilling to
effect such reformation, the invalid or unenforceable provisions shall be deemed deleted to the
same extent as if it had never existed.

     8.9 Governing Law; Venue. The provisions of this Agreement shall be governed by the
laws of the State of New York, USA without regard to the rules on conflict of laws thereof. All
disputes between the parties to this Agreement arising out of or in connection with the execution,
interpretation and performance of this Agreement (including the validity, scope and enforceability
of this arbitration provision) shall be solely and finally settled by a board of arbitrators
consisting of three arbitrators. The arbitration proceedings shall be conducted in accordance
with the Commercial Arbitration Rules (the “AAA Rules”) of the American Arbitration Association
(the “AAA”). Except as provided under the Federal Arbitration Act, 9 U.S.C. §§10 and 11, the
parties agree that the award of the Arbitrators shall be final and binding and shall not be subject
to judicial review. Judgment on the arbitration award may be entered and enforced in any court
having jurisdiction over the Parties or their assets. It is the intent of the Parties that the
arbitration provisions hereof be enforced to the fullest extent permitted by applicable law,
including the Federal Arbitration Act, 9 U.S.C. §2. The award of the arbitrators may be confirmed
upon application of either party in any court having jurisdiction over the subject matter and the
parties.

     8.10 Remedies. No right or remedy herein conferred upon the Parties is intended to be
exclusive of any other right or remedy, and each and every right or remedy shall be cumulative and
in addition to any other right or remedy given hereunder or now or hereafter existing at law or in
equity or by statute.

25

 

     8.11 Attachments. The attachments to this Agreement are hereby incorporated in and
made a part of this Agreement. The Parties may, by mutual consent, amend any
attachment hereto at any time during the term hereof by executing a version of such attachments
dated after the then current version.

     8.12 Waiver; Amendment. Any waiver by either party hereto of a breach or a default of
any provision of this Agreement by any other party hereto shall not be construed as a waiver of any
succeeding breach of the same or any other provision, nor shall any delay or omission on the part
of any party hereto to exercise or avail itself of any right, power or privilege that it has or may
have hereunder operate as a waiver of any such right, power or privilege by such party. Any
amendment or supplementation of this Agreement shall be effective only if in writing signed by both
of the Parties hereto.

     8.13 Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original but all of which together shall constitute one and same
instrument. The Parties have agreed that for this purpose, facsimile signatures will be accepted as
originals.

     8.14 No Public Announcement. No public announcements will be made by either party
regarding the transactions contemplated hereby until after the execution and delivery of the
Agreements by all parties to the transaction. Not less than three business days prior to any
public announcement, a party proposing to make such announcement shall furnish the content of the
announcement to the other party and shall specify the date that the announcement will be made. The
parties shall jointly cooperate in the preparation and content of any press releases announcing the
transaction.

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized
representatives as of the date first above written.

	 	 	 
	JDS PHARMACEUTICALS, LLC.

	 	OSG NORWICH PHARMACEUTICALS, INC.
	(JDS)

	 	(NPI)
	 
	 	 
	By:

	 	By:
	 
	 	 
	/s/ Phillip M. Satow

	 	/s/ Christopher R. Calhoun
	 

	 	 
	Title: CEO

	 	Title: President

26EX-10.6 Manufacturing and Supply Agreement

 

Exhibit 10.6

     The confidential portions of this exhibit have been filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment request in
accordance with Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.
REDACTED PORTIONS OF THIS EXHIBIT ARE MARKED BY AN ***.

MANUFACTURING AND SUPPLY AGREEMENT

     THIS MANUFACTURING AND SUPPLY AGREEMENT (this “Agreement”) is dated as of August 25, 2004 and
is between SOLVAY PHARMACEUTICALS, INC., a Georgia corporation (“SOLVAY”), and JDS PHARMACEUTICALS,
LLC, a New York limited liability company, (“JDS”).

     The parties wish to set forth the terms and conditions under which SOLVAY will manufacture for
and supply to JDS the Product described herein. Accordingly, in consideration of the mutual
promises and undertakings contained herein and intending to be legally bound hereby, the parties
hereto agree as follows:

ARTICLE I

DEFINITIONS

     When used in this Agreement, the following terms shall have the meanings set forth below:

     “Act” shall mean the Federal Food, Drug and Cosmetic Act, as amended, and the regulations
promulgated thereunder from time to time.

     “Additional Purchase Price” shall have the meaning given to that term in Section
2.4(b) hereof.

     “Affiliate” shall mean any person or legal entity controlling, controlled by or under common
control with the person with respect to whom such status is at issue and shall include, without
limitation, any corporation 50% or more of the voting power of which (or other comparable ownership
interest for an entity other than a corporation) is owned, directly or indirectly, by a party
hereto or any corporation, person or entity which owns 50% of more of such voting power of a party
hereto.

     “Agreement” shall have the meaning given to that term in the introductory paragraph hereof.

     “Asset Purchase Agreement” shall mean the Asset Purchase Agreement dated August ___, 2004,
between JDS and SOLVAY providing for the sale and purchase of the Purchased Assets (as defined
therein) by SOLVAY to JDS.

     “cGMP” means the current Good Manufacturing Practice regulations applicable to the manufacture
of the Product hereunder.

     “Claims” shall have the meaning given to that term in Section 5.1 hereof.

     “Confidential Information” shall have the meaning given to that term in Section 7.1
hereof.

 

 

     “Contract Quarter” shall mean (i) the period from the date of this Agreement through and
including September 30, 2004 and (ii) thereafter, each period of three (3) successive calendar
months during each Contract Year.

     “Contract Year” shall mean (i) the period from the date of this Agreement through and
including December 31, 2004 and (ii) thereafter, January 1 through December 31 of each succeeding
calendar year, unless terminated before such later date as provided herein.

     “FDA” shall mean the United States Food and Drug Administration and any successor agency.

     “Force Majeure Event” shall have the meaning given to that term in Section 9.1 hereof.

     “Form” shall have the meaning given to that term in Section 2.3 hereof.

     “Indemnitee” shall have the meaning given to that term in Section 5.3 hereof.

     “Indemnitor” shall have the meaning given to that term in Section 5.3 hereof.

     “Labeling” shall mean all unit Product labels, package inserts, carton imprints, tablet
debossing and/or imprinting and all other markings on packaging for, or other similar materials
related to, the Product that are defined as labels or labeling under any applicable law or
regulation.

     “Labeling Specifications” shall mean the labeling and packaging specifications for the Product
attached hereto as Exhibit B and made a part hereof, as such specifications may be amended
from time to time by mutual agreement in writing of the Parties.

     “Law” means any applicable statute, law, ordinance, rule, regulation, order, judgment, ruling
or decree enacted, adopted, issued or promulgated by any Regulatory Authority.

     “Manufacturing Standards” shall mean all U.S. Laws applicable to the manufacture of the
Product.

     “Net Sales” shall have the meaning given to that term in Section 2.4(b)(iii) hereof.

     “Nonconformance” shall have the meaning given to that term in Section 2.7(c) hereof.

     “PPI” shall have the meaning given to that term in Section 2.4(c) hereof.

     “Product” shall mean the pharmaceutical dosage form consisting of Lithium Carbonate as an
active ingredient in the presentations specified in Exhibit A hereto and incorporated
herein by reference, including, without limitation, bulk form, whether to be ultimately sold by JDS
under the LITHOBID® (Lithium Carbonate, USP, Slow-Release Tablets) trademark or in generic form.

     “Product Specifications” shall mean the specifications for the Product attached hereto as
Exhibit C, incorporated by reference herein, the Product specifications and methods set
forth as of the date hereof in the manufacturing and control sections of the new drug application
heretofore submitted to
and approved by the FDA for the Product (including any Labeling requirements specified therein) and
any amendments to such specifications that may be mutually agreed upon by the parties in writing.

2

 

     “Regulatory Authority” shall mean any U.S. governmental regulatory authority involved in
granting approvals for the manufacture, marketing, sale, reimbursement and/or pricing of Product in
the U.S., including, without limitation, the FDA and any judicial or administrative decisions
relating thereto.

     “Regulatory Change” shall have the meaning given to that term in Section 9.2 hereof.

     “Regulatory Standards” shall mean all laws, rules, regulations and Regulatory Authority
advisory opinions or orders applicable to the manufacturing, marketing, sale, reimbursement and/or
pricing of any Product.

     “Sales Year” shall have the meaning given to that term in Section 2.4(b) hereof.

     “SOLVAY’s Shipping Point” shall mean either SOLVAY’s facility in Marietta, Georgia or
Baudette, Minnesota, as SOLVAY may designate.

     “Specifications” shall mean the Product Specifications and the Labeling Specifications.

     “Standard Cost” shall have the meaning given to that term in Section 2.4(c) hereof.

ARTICLE II

SUPPLY

     2.1 Generally. Subject to the terms and conditions of this Agreement, SOLVAY shall
supply to JDS and JDS shall purchase from SOLVAY the Product in such quantities as JDS may order
hereunder from time to time for its worldwide requirements. Except for such quantities of the
Product as JDS may order in bulk in accordance with the terms hereof, SOLVAY shall supply the
Product in finished, packaged form and tested in accordance with the Specifications and
Manufacturing Standards. SOLVAY will not implement any change in materials, components, processes
or test methods without consulting with and receiving the prior written approval of JDS. SOLVAY
will utilize its change control processes in this regard. In addition, a Quality Agreement will be
developed for quality governance substantially in the form attached hereto as Exhibit D.

     2.2 Forecasts

          (a) Initial Forecast. Within fifteen (15) business days of the signing of this
Agreement, JDS shall submit to SOLVAY a written forecast of its requirements for the Product for
the first Contract Year, the first Contract Quarter of which shall constitute a firm commitment of
JDS.

          (b) Subsequent Forecasts. JDS shall submit to SOLVAY by the first day of each
successive Contract Quarter a 12-month rolling forecast, by Contract Quarter, of its requirements
for the Product, the first quarter of which shall constitute a firm commitment of JDS.

     2.3 Purchase Orders. Within thirty (30) days of the signing of this Agreement, JDS
shall place its initial purchase order for the first quarter which is the firm commitment period
described in Section 2.2(a). JDS shall place orders for Product only in whole number
multiples of specified-size lots.
JDS shall place each subsequent order for Product by delivering to SOLVAY a written purchase order
specifying the quantity and delivery date (which delivery date shall not be less than ninety (90)
days after the date such purchase order is delivered to SOLVAY unless otherwise agreed). Unless the
parties otherwise agree, quantities specified in purchase orders for each Product for the second
and subsequent

3

 

Contract Quarters may not be less than 80% nor more than 120% of those set forth for
such quarter in the most recent forecast submitted to SOLVAY hereunder; provided,
however, that SOLVAY will use commercially reasonable efforts to fill any orders for
quantities in excess of such maximum amount. SOLVAY shall acknowledge and accept each purchase
order received from JDS which complies with the forecast and order procedures set forth herein,
within four (4) business days after receipt. All contrary, inconsistent or additional provisions,
terms and conditions of any purchase order, sales or order acknowledgment, invoice or other
standard business form (a “Form”) of either party shall be superseded by this Agreement and shall
be disregarded and have no force or effect. If a Form purports to be conditioned in any manner on
agreement to and/or acceptance of any provisions, terms or conditions other than those set forth
herein, then such condition is hereby deemed waived.

     2.4 Pricing and Payment.

          (a) General Price. The purchase price of Product supplied to JDS hereunder shall be
equal to (i) *** plus (ii) any applicable sales or use taxes, duties and other similar taxes,
unless JDS provides SOLVAY with a valid resale certificate or other proof of exemption.

          (b) Additional Purchase Price. During any period that SOLVAY continues to supply
JDS’s requirements of Product from a SOLVAY facility pursuant to the terms hereof, JDS agrees to
pay SOLVAY, as additional purchase price (the “Additional Purchase Price”), an amount equal to ***,
payable in accordance with, and subject to the following terms and conditions:

               (i) Additional Purchase Price shall only be payable in respect of a Sales Year if, during such
Sales Year, ***.

               (ii) Additional Purchase Price due shall be payable within 60 days of the end of the Sales
Year to which such payment relates. Each payment of Additional Purchase Price will be accompanied
by a statement which sets forth the calculation of Additional Purchase Price with reasonable
specificity. JDS shall maintain accurate books and records reflecting Net Sales, which books and
records shall be available for inspection and audit by SOLVAY no more than once per Sales Year
solely to the extent necessary, and for purposes of, verifying the amount of Additional Purchase
Price payable hereunder. The cost of any such inspection and audit shall be for the account of
SOLVAY; provided that if any such audit reveals an underpayment of Additional Purchase Price for
any Sales Year of 5% of more, JDS shall be responsible for the reasonable costs of such audit
together with correcting the payment shortfall.

               (iii) For purposes of this Section, “Net Sales” shall mean the amount invoiced by JDS, its
Affiliates or licensees for Product in the Territory to third parties, less deductions for returns
(including withdrawals and recalls), allowance for doubtful accounts, rebates (price reductions,
including Medicaid and similar types of discounts or rebates, e.g., chargebacks and
administrative fees charged by third parties directly related to Product sales), volume and cash
discounts earned, and sales, use, excise and other taxes incurred directly in connection with the
sales of Product. Sales and deductions from sales shall be recognized and accrued in accordance
with generally accepted accounting principles. Net Sales shall be determined on the basis of the
Product alone and shall not reflect discounts or price concessions attributable to the purchase of
any other JDS product.

          (c) Price Changes. ***

          (d) Other Increases and/or Payments: ***

4

 

          (e) Invoicing and Payment. SOLVAY shall invoice JDS for each shipment of the Product
simultaneously with SOLVAY’s actual shipment of Product and delivery to JDS of a certificate of
analysis relating to such shipment. Payment shall be due within thirty (30) days from invoice date.
Past due balances shall be subject to a service charge of 12% per annum, but in no event shall such
charge exceed the maximum rate permitted by law. All payments shall be made in U.S. dollars.

          (f) Books and Records. SOLVAY shall maintain accurate books and records of Standard
Cost and other costs for which JDS is responsible pursuant to Section 2.4 which shall be
made available for inspection and audit by JDS at least once per year solely for the purpose of
verifying price increases pursuant to this Section 2.4 and other costs for which JDS is
responsible. JDS shall be responsible for the costs of any such inspection and audit, provided
that if it is determined that JDS has paid costs which exceed the costs as to which JDS is
responsible pursuant to Section 2.4 by more than 5%, SOLVAY shall be responsible for the
reasonable costs of such audit, as well as for refunding the amount of the JDS overpayment.

     2.5 Delivery.

          (a) Generally. All Product sold to JDS hereunder shall be delivered to JDS FOB
SOLVAY’s Shipping Point. All risk of loss shall pass to JDS when SOLVAY so delivers Product to
carrier for JDS. JDS shall designate a carrier and mode of shipment on each purchase order
submitted to SOLVAY; provided, however, that should JDS fail to designate a carrier
on its purchase order, SOLVAY may select a common carrier for the account and risk of JDS.

          (b) Deviation from Agreed Delivery Time. SOLVAY shall use commercially reasonable
efforts to fill each purchase order submitted hereunder by the specified shipment date. Originally
agreed times for delivery to JDS’s carrier are not to be deemed of the essence of an accepted
order, and reasonable deviations from originally agreed times will be accepted by JDS. Deviations
of more than *** shall be deemed unreasonable, unless JDS has on hand an inventory of Product
sufficient to meet JDS’s requirements (based on its forecasts delivered to SOLVAY under Section
2.2) for ***, in which case deviations of more than *** will be deemed unreasonable.

          (c) Delay in Delivery. JDS recognizes the inherent difficulty in producing the Product
and also recognizes that delays in shipment, while non-routine, may occur from time to time.
SOLVAY shall notify JDS promptly of any circumstance that may cause a delay in making Product
available for shipment FOB SOLVAY’s Shipping Point, stating the estimated period of delay and the
reasons therefore. SOLVAY shall use commercially reasonable efforts to avoid or minimize the
delay, including, when necessary or at JDS’s request, the expenditure of premium time and shipping
via air or other expedited routing. Any additional cost caused by such requirements shall be borne
by the party causing the delay to the extent of any culpability. If no culpability can be assigned
to either party, such additional costs for premium time and air shipment requested by JDS shall be
borne solely by JDS. Nothing herein may be construed to prejudice any of the express rights or
remedies provided to either party in this Agreement. In addition to any such rights JDS may have
hereunder, JDS shall have the right to cancel any order which is not made available for shipment
FOB SOLVAY’s Shipping Point for more than *** after its agreed shipment date for causes other than
Force Majeure Events or Regulatory Changes so long as such delay has arisen through no fault or
negligence of JDS. Notwithstanding the
foregoing, SOLVAY shall not be liable in any way (including, without limitation, for the additional
costs caused by the requirements set forth above in this section) for any delay excused hereunder
or under Article IX hereof.

5

 

          (d) Priority of Supply. If for any reason (including without limitation, a back order
situation, a Force Majeure Event or a Regulatory Change) SOLVAY is unable to supply JDS’s demand
for Product and the demands of SOLVAY’s other customers (including SOLVAY’s affiliates), SOLVAY
shall give JDS’s demand at least equal priority to those of SOLVAY’s other customers.

     2.6 Labeling and Packaging.

          (a) Generally. JDS shall provide to SOLVAY and shall bear the sole responsibility for
ensuring the accuracy of the information contained in all Labeling Specifications and for
compliance thereof with all Regulatory Standards. SOLVAY shall be responsible for procuring all
Labeling, which shall be created in accordance with the Labeling Specifications. With respect to
all Product to be supplied in finished, packaged form, SOLVAY shall procure sufficient Labeling to
cover quantities of the Product as to which JDS’s forecasts under Section 2.2 hereof
constitute a firm commitment. Acquisition of additional inventory of Labeling components beyond
the three (3) month commitment shall be made only with advance consultation of JDS.

          (b) Changes. Should JDS desire or be required to change any component of Labeling or
to introduce a new packaging component to which Labeling will be affixed, JDS shall so inform
SOLVAY and shall be responsible for updating the artwork or text, as applicable, and providing it
to SOLVAY in camera-ready or electronic form and in compliance with the Labeling Specifications.
SOLVAY shall make all necessary arrangements for such Labeling to be printed and shall provide to
JDS printer’s proofs of all Labeling for JDS’s review. Within fifteen (15) business days of its
receipt of such proofs, JDS shall either provide to SOLVAY any necessary corrections thereto or
notify SOLVAY of its approval of such proofs. Upon JDS’s acceptance thereof, SOLVAY shall return
all artwork provided by JDS. SOLVAY shall be entitled to directly charge JDS, amounts to take
account of only those costs incurred in making changes to Labeling and/or packaging as provided for
in this Section 2.6(b). Allowable transition cost charges include, without limitation, the
costs of acquiring new Labeling in a timely manner to meet JDS’s pending purchase orders and
forecast demand and the acquisition and disposal costs associated with obsolete inventory of
Labeling, films, plates and packaging. SOLVAY will charge JDS direct, out-of-pocket expenses in a
one-time charge after completion of the Labeling transition.

     2.7 Stability Testing; Inspection of Product.

          (a) Stability Testing. SOLVAY shall provide stability testing for Product
manufactured hereunder, and shall provide all stability results to JDS in a timely fashion. SOLVAY
and JDS shall agree to a work outline to accomplish an acceptable stability program. SOLVAY shall
retain a suitable quantity of retained samples. Any costs associated with the agreed upon
stability testing program for the Product beyond those which SOLVAY customarily and routinely
incurs in connection with stability testing shall be charged to and shall be the sole
responsibility of JDS (through an adjustment to the Standard Cost). SOLVAY will notify JDS of
stability failures within 48 hours of SOLVAY’s becoming aware of any such failure.

          (b) Certificate of Analysis. SOLVAY will provide JDS with a certificate of analysis
for all batches of Product shipped to JDS which shall include, without limitation, the expiry date.
Such certificate of analysis shall be delivered to JDS at the time of shipment of the Product.
Delivery of any
Product by SOLVAY to JDS shall constitute a certification by SOLVAY that at the time of
delivery the Product conforms to the certificate of analysis provided therewith and the Product
Specifications and was manufactured in accordance the Manufacturing Standards. JDS shall store all
Product in conditions as specified in the Product Specifications. All Product delivered to JDS
shall have a remaining expiry

6

 

period of no more than four months less than the total initial
labeled expiry period. To avoid confusion, and as an example: for Product that has an initial
labeled expiry period of 18 months, the Product delivered must have at least 14 months remaining
expiry period upon receipt by JDS.

          (c) Nonconformance. Within thirty (30) days after its receipt of each shipment of
Product at the destination specified in the shipping instructions, JDS shall inspect such shipment
for material nonconformance with the applicable purchase order, the applicable Specifications or
the representations and warranties of SOLVAY set forth herein (“Nonconformance”). If, upon such
inspection, JDS discovers any Nonconformance, JDS may reject the nonconforming portion of such
shipment by giving prompt written notice to SOLVAY. Such notice shall include a copy of JDS’s test
results and specify the precise Nonconformance upon which such rejection is based. Absent such
notification, JDS shall be deemed to have accepted the shipment, except as to latent defects that
could not have been detected in such 30-day period. In no event shall SOLVAY be liable for any
Nonconformance arising out of the shipment, storage, use or handling of the Product following its
delivery FOB SOLVAY’s Shipping Point.

          (d) Procedure. Upon notifying SOLVAY of any Nonconformance, JDS shall afford SOLVAY a
reasonable opportunity to inspect the shipment in question and make any appropriate adjustment or
replacement. The parties shall submit any dispute regarding the proper rejection of a shipment to
a mutually selected independent laboratory, the determination of which shall be binding on the
parties and the costs of which shall be borne by the party against whom such determination is
rendered. If such laboratory confirms a Nonconformance in the shipment in question (or any part of
it) at the time of delivery to the carrier, or if the parties agree that there is a shortage or a
Nonconformance, then SOLVAY shall use commercially reasonable efforts to make up the shortage or
replace any nonconforming Product, as the case may be, with such new Product to be shipped at
SOLVAY’s expense to the same destination as the original shipment. If SOLVAY is unable to make up
the shortage or replace any nonconforming Product, it shall promptly refund any money paid by JDS
with respect to such undelivered or nonconforming Product and reimburse JDS for the costs of
shipping such Product. SOLVAY may, at its sole option, either direct JDS to return nonconforming
Product to SOLVAY, have it destroyed by JDS, or destroy them (and certify such destruction to
SOLVAY), all at SOLVAY’s expense. SOLVAY’s supply of substitute Product which conform to the
applicable Specifications or, as the case may be, payment of the refund and reimbursement provided
for herein, shall satisfy and discharge all claims or potential claims which JDS may have against
SOLVAY with respect to undelivered or nonconforming Product in that shipment, provided replacement
Product is available to JDS within thirty (30) days of the identified shortage.

     2.8 Inspection of Facility. JDS or its designees may, at its sole expense, inspect
the facilities being used by SOLVAY to manufacture, package, store or ship the Product to assure
compliance with Manufacturing Standards. Each such inspection shall be conducted upon reasonable
advance notice, at mutually agreed times during regular business hours and in a manner which
minimizes disruption of SOLVAY’s business operations. JDS may conduct such inspections no more
than twice each Contract Year unless it has a good faith reason to believe such facility is not
materially in compliance with Manufacturing Standards.

     2.9 Recalls. If any Regulatory Authority with applicable jurisdiction shall order, or
it shall otherwise become necessary to perform, any corrective action or market action with respect
to any Product (including, without limitation, any recall, field correction, market withdrawal,
stock recovery, customer notice or restriction), JDS shall have the exclusive responsibility to
appropriately manage such action. If such corrective action or market action is necessitated by
the breach by one of the parties of any of its warranties, representations, obligations, covenants
or agreements contained herein, then such party

7

 

shall be liable, and shall reimburse the other
party, for all reasonable costs incurred by the non-breaching party in connection with such action
(including, without limitation, reasonable attorney’s fees and expenses). If each of the parties
is partly responsible for such corrective action or market action, then each party shall be
responsible for its proportionate share of such costs. If neither party is responsible for such
corrective action or market action, then JDS shall be responsible for such costs. JDS shall also
be exclusively responsible for handling all customer complaints, inquiries and the like, and SOLVAY
shall appropriately cooperate with JDS, including the completion of an investigation and the
preparation and submission of a complaint report to JDS or its designees.

     2.10 Process Improvements and Development Activities. JDS recognizes that SOLVAY has
been conducting activities to support process changes and improvements in the manufacturing and
analysis of the Product. ***

ARTICLE III

REPRESENTATIONS AND WARRANTIES

     3.1 Representations and Warranties of SOLVAY. SOLVAY represents and warrants to JDS
as follows:

          (a) Conformance of Product. Subject to JDS’s obligations with respect to supplies of
the Labeling Specifications under Section 2.6 hereof, each certification by SOLVAY pursuant
to Section 2.7(b) shall be deemed a representation and warranty hereunder, any breach of
which representation and warranty being subject to the provisions of Section 5.1,
Section 2.7(c) and Section 2.7(d) and the limitations contained in Section
3.3.

          (b) Adulteration; Misbranding. Subject to JDS’s obligations with respect to supplies
of the Labeling Specifications under Section 2.6 hereof, no Product supplied by SOLVAY to
JDS under this Agreement shall, at the time of delivery to the carrier FOB SOLVAY’s Shipping Point,
be adulterated or misbranded within the meaning of the Act or be an article which may not be
introduced into interstate commerce under the provisions of Section 505 of the Act.

          (c) Organization; Standing. SOLVAY is a corporation duly organized, validly existing
and in good standing under the laws of the State of Georgia and has all requisite power and
authority to own, lease and operate its properties and to carry on its business as now being
conducted.

          (d) Authorization; Binding Effect. The execution and delivery by SOLVAY of this
Agreement, the performance by SOLVAY of its obligations hereunder and the consummation by SOLVAY of
the transactions contemplated hereby have been duly authorized by all necessary corporate action on
the part of SOLVAY. This Agreement has been duly executed and delivered by a duly authorized
officer of SOLVAY and constitutes the valid and legally binding obligation of SOLVAY enforceable
against SOLVAY in accordance with its terms.

          (e) No Conflict; Consents. The execution and delivery of this Agreement by
SOLVAY will not violate or result in the breach of, constitute a default under, or accelerate the
performance required by, any term of any covenant, agreement or understanding to which SOLVAY or
any Affiliate is a party, or any Law to which SOLVAY or any Affiliate is subject and (b) no
consents or agreements of any third party (including governmental bodies) is necessary for the
performance by SOLVAY of its obligations under this Agreement.

8

 

     3.2 Representations and Warranties of JDS. JDS represents and warrants to SOLVAY as
follows:

          (a) Organization; Standing. JDS is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of New York and has all requisite power
and authority to own, lease and operate its properties and to carry on its business as now being
conducted.

          (b) Authorization; Binding Effect. The execution and delivery by JDS of this
Agreement, the performance by JDS of its obligations hereunder and the consummation by JDS of the
transactions contemplated hereby have been duly authorized by all necessary action on the part of
JDS. This Agreement has been duly executed and delivered by a duly authorized officer of JDS and
constitutes the valid and legally binding obligation of JDS enforceable against JDS in accordance
with its terms.

          (c) No Conflict; Consents. The execution and delivery of this Agreement by JDS will
not violate or result in the breach of, constitute a default under, or accelerate the performance
required by, any term of any covenant, agreement or understanding to which JDS or any Affiliate is
a party, or any Law to which JDS or any Affiliate is subject and (b) no consents or agreements of
any third party (including governmental bodies) is necessary for the performance by JDS of its
obligations under this Agreement.

     3.3 Limitations. (a) EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, THE
PARTIES AGREE THAT SOLVAY MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS, IMPLIED OR
OTHERWISE, AND SPECIFICALLY DISCLAIMS AND SHALL NOT BE LIABLE TO JDS OR OTHERS IN RESPECT OF:

          (i) ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH
RESPECT TO THE PRODUCT, WHETHER USED ALONE OR IN COMBINATION WITH OTHER SUBSTANCES OR
MATERIALS;

          (ii) ANY LIABILITY FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES (OTHER THAN TO THE
EXTENT REASONABLY FORESEEABLE IN LIGHT OF THE OBJECTIVES OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT AND THE ASSET PURCHASE AGREEMENT, BUT SUBJECT TO THE FURTHER LIMITATIONS IN
SECTION 3.3(C) BELOW), WHETHER ARISING OUT OF A BREACH OF THE REPRESENTATIONS AND
WARRANTIES CONTAINED HEREIN OR OTHERWISE AND WHETHER IN CONTRACT, NEGLIGENCE, STRICT
LIABILITY OR OTHERWISE; AND

          (iii) ANY LIABILITY TO THE EXTENT ARISING AS A RESULT OF PRODUCT: (I) HAVING BEEN
TAMPERED WITH OTHER THAN BY SOLVAY OR ITS AGENTS, (II) HAVING BEEN SUBJECT TO MISUSE,
NEGLIGENCE OR ACCIDENT OTHER THAN BY SOLVAY OR ITS AGENTS, (III) HAVING BEEN STORED, HANDLED
OR USED OTHER THAN BY SOLVAY OR ITS AGENTS IN A MANNER CONTRARY TO REGULATORY STANDARDS
OR THE INSTRUCTIONS CONTAINED ON LABELING, OR (IV) HAVING EXCEEDED ITS STATED EXPIRATION.

          (b) IN NO EVENT SHALL SOLVAY’S LIABLITY FOR REASONABLY FORSEEABLE CONSEQUENTIAL DAMAGES EXCEED
THE ORIGINAL PRINCIPAL AMOUNT OF THE NOTE AND ANY SUCH LIABILITY SHALL BE SATISFIED SOLELY BY
OFFSET

9

 

AGAINST THE PAYMENTS OF INTEREST AND PRINCIPAL UNDER THE NOTE (UNLESS THE NOTE HAS BEEN
PREPAID BY JDS, IN WHICH CASE SOLVAY’S LIABLITY FOR REASONABLY FORSEEABLE CONSEQUENTIAL DAMAGES
SHALL NOT EXCEED AN AMOUNT EQUAL TO THE PRINCIPAL AND INTEREST THAT WOULD HAVE BEEN OUTSTANDING
(ASSUMING TIMELY AMORTIZATION OF THE NOTE) AT THE TIME OF THE RELEVANT CLAIM HAD THE NOTE NOT BEEN
PREPAID).

          (c) THE MAXIMUM AGGREGATE LIABILITY OF SOLVAY UNDER THIS AGREEMENT, WHEN AGGREGATED WITH ANY
LIABILITY UNDER THE ASSET PURCHASE AGREEMENT, SHALL NOT IN ANY EVENT EXCEED *** (BUT THIS
LIMITATION SHALL NOT AFFECT JDS’S RIGHT TO BRING ANY CLAIM UNDER THE ASSET PURCHASE AGREEMENT WHICH
IS NOT SUBJECT TO A MAXIMUM THEREUNDER).

          (d) NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, NONE OF THE LIMITATIONS ON LIABILITY SET
FORTH IN THIS SECTION SHALL APPLY TO ACTS OR OMISSIONS OF SOLVAY TAKEN OR OMITTED TO BE TAKEN WITH
INTENT TO BREACH THE REPRESENTATIONS, WARRANTIES OR OBLIGATIONS OF SOLVAY UNDER THIS AGREEMENT.

ARTICLE IV

TERM AND TERMINATION

     4.1 Term. The term of this Agreement shall commence on the date hereof and shall
continue for a period of five years, unless terminated earlier pursuant to Section 4.2 or
Section 4.3 hereof. This Agreement may be renewed for such additional period and upon such
other terms as the parties may mutually agree.

     4.2 Termination Without Cause; SOLVAY Reserved Right.

          (a) By Mutual Agreement. The parties may terminate this Agreement any time
by mutual written agreement.

          (b) By SOLVAY. SOLVAY may terminate this Agreement at any time upon not less than
eighteen (18) months notice to JDS; provided, however, that no such notice may be
furnished prior to the second anniversary of the date hereof and further provided that no such
termination shall be effective prior to July 1, 2009, unless JDS has secured or caused an
alternative manufacturer to secure all regulatory approvals necessary to manufacture the Product at
an alternative manufacturing site and shall have had a reasonable period to assure a smooth
transition of supply arrangements.

          (c) By JDS. JDS may terminate this Agreement at any time upon not less than twelve
(12) months notice to SOLVAY.

          (d) Alternative Facility. Within fifteen (15) months of the date of this Agreement,
JDS shall commence and thereafter diligently pursue with commercially reasonable efforts all
activities necessary to secure an alternative manufacturer for the Product and shall keep SOLVAY
advised of its progress. Toward this end, SOLVAY agrees to provide reasonable assistance and/or
consultation to JDS to support its development and qualification activities. These services will
be defined by written agreement prior to the initiation of any activities. JDS agrees to reimburse
SOLVAY for all pertinent time, materials, reasonable travel and related expenses associated with
this assistance and/or consultation.

10

 

          (e) SOLVAY Reserved Right. SOLVAY reserves the right, at its discretion and at its
sole cost and expense but in consultation with JDS, to commence and diligently pursue all
activities necessary to secure an alternative manufacturer for the Product, prior to the
termination period in Section 4.2(b), should SOLVAY (i) elect to cease manufacturing
operations in its Baudette, Minnesota Main Street facility, (ii) have business requirements that
necessitate the cessation of the manufacture of Product, or (iii) if JDS has not been diligent in
the pursuit of an alternative facility as required in Section 4.2(d). If an alternative
manufacturer identified by SOLVAY under this Section 4.2(e) charges more for the Product
than SOLVAY would have charged under the terms of this Agreement, then SOLVAY shall, during the
minimum period of time it would have been obligated to supply Product hereunder, bear the cost of
such excess, except in the case of Section 4.2(e)(iii), in which case JDS shall bear any
such excess. To be utilized as a source of supply hereunder, any such alternative manufacturer
shall be duly qualified under all applicable Manufacturing Standards and Regulatory Standards.
Subject to JDS’s obligations pursuant to Section 4.2(d), the use of an alternate supplier
by SOLVAY pursuant to this Section shall not limit, modify or amend the obligations,
representations or warranties of the parties hereto.

     4.3 Termination Upon Material Breach. Subject to the last two sentences of this
Section 4.3, either party may terminate this Agreement upon not less than sixty (60) days
written notice thereof to the other party of the material breach by the other party of any of its
representations, warranties, covenants or agreements contained in this Agreement (provided,
however, that the breaching party may extend such notice period by up to thirty (30)
additional days upon its written certification that (i) such breach is not reasonably capable of
being cured within such 60-day period and (ii) it has commenced and is diligently pursuing efforts
to cure such breach). Upon the expiration of such notice period, this Agreement shall terminate
without the need for further action by either party; provided, however, that if the
breach upon which such notice of termination is based shall have been fully cured to the reasonable
satisfaction of the non-breaching party within such notice period, then such notice of termination
shall be deemed rescinded, and this Agreement shall be deemed reinstated and in full force and
effect. Such right of termination shall be in addition to such other rights and remedies as the
terminating party may have under any Law. The time periods for termination stated above in this
Section 4.3, shall be suspended during the period commencing upon a bona fide dispute
arising between the parties as to whether a material breach has occurred and ending upon the date
such dispute is finally determined. In the event such final determination provides for the payment
of money and such amount is paid in full by the obligor within ten (10) days of such determination,
no termination right shall arise hereunder with respect to the matter in question.

     4.4 Rights and Duties Upon Termination.

          (a) Supply and Purchase of Product. Unless otherwise mutually agreed by the parties,
SOLVAY shall supply, and JDS shall purchase in accordance with the provisions hereof, all
quantities of Product ordered by JDS hereunder prior to the date of expiration or termination;
provided, however, that SOLVAY shall not be required to supply volumes of Product
which exceed the amounts for which SOLVAY is responsible under the forecast and firm order
procedures herein for the balance of the
Calendar Quarter in which the termination occurs. In addition, JDS shall remain liable for and
shall duly pay all costs incurred prior to the effective date of expiration or termination which
are properly chargeable to JDS pursuant to the terms of this Agreement. JDS shall have the right
to use and sell any such Product in the ordinary course including Product which may contain
reference to SOLVAY.

          (b) Purchase of Additional Materials. Upon the expiration or termination of this
Agreement, JDS shall, if so requested by SOLVAY, purchase (i) all materials acquired by SOLVAY
hereunder to manufacture the Product, at SOLVAY’s actual cost thereof, (ii) all work-in-progress of
the Product at SOLVAY’s

11

 

actual cost thereof, and (iii) all inventory of finished Product then in
SOLVAY’s possession at the then-current purchase price hereunder. In addition, in such case JDS
shall pay SOLVAY the actual out of pocket cost for any non-cancelable commitments made by SOLVAY
for materials hereunder. Notwithstanding anything to the contrary in the preceding two sentences,
the foregoing purchase and payment obligations of JDS shall be limited solely to materials
obtained, Product manufactured and non-cancelable commitments incurred by SOLVAY for quantities of
the Product as to which JDS’s forecasts under Section 2.2 hereof constitute a firm
commitment or for which purchase orders have been received and which, in the case of Product,
comply with the Product Specifications and all Manufacturing Standards. All materials purchased by
JDS become the property of JDS and SOLVAY will, at the request of JDS, arrange to ship such
materials to locations designated by JDS. The cost of the freight shall be borne by JDS. The
foregoing purchase and payment obligations shall not apply in the event of a termination by JDS
based on a breach by SOLVAY of its supply obligations.

ARTICLE V

INDEMNIFICATION

     5.1 By SOLVAY. Subject to the limitations described in Section 3.3, SOLVAY
shall defend, indemnify and hold harmless JDS and its Affiliates, successors, permitted assigns and
their respective officers, directors, stockholders, partners and employees from and against any and
all Claims arising out of (a) any breach of any representation, warranty or covenant of SOLVAY
hereunder, (b) any negligent storage or handling of the Product by SOLVAY prior to delivery to JDS
FOB SOLVAY’s Shipping Point, or (c) any negligent act or omission of SOLVAY or its employees,
agents or other contractors with respect to the Product. For purposes of this Agreement, “Claims”
shall mean any and all liabilities and expenses whatsoever, including, without limitation, claims,
adversary proceedings (whether before a court, Regulatory Authority or any other tribunal), damages
(other than special, incidental, consequential or punitive damages except to the extent awarded to
a third party), judgments, awards, penalties, settlements, investigations, costs, and attorneys’
fees and disbursements.

     5.2 By JDS. JDS shall defend, indemnify and hold harmless SOLVAY and its Affiliates,
successors, permitted assigns and their respective officers, directors, stockholders, partners and
employees from and against any and all Claims arising out of (a) any breach of any representation,
warranty or covenant of JDS hereunder, (b) any negligent act or omission of JDS or its employees,
agents or other contractors with respect to the Product, (c) the failure of JDS to comply with any
applicable Regulatory Standards with respect to the importation, marketing, distribution or sale of
the Product, (d) any Labeling for the Product approved by JDS, (e) the infringement of any patent,
trademark or other intellectual property rights by the manufacture, sale or use of the Product, or
(f) all personal injury (including death) and/or property damage resulting from the manufacture
handling, possession, marketing, promotion or use of the Product following SOLVAY’s delivery of the
Product to JDS FOB SOLVAY’s Shipping Point. Notwithstanding the preceding sentence, JDS shall not
be required to indemnify SOLVAY with respect to any Claim arising from SOLVAY’s breach of its
representations,
warranties or covenants hereunder or under the Asset Purchase Agreement or SOLVAY’s willful
misconduct with respect to the Product.

     5.3 Procedure. Any person or entity intending to claim indemnification hereunder (an
“Indemnitee”) shall notify the party hereunder from whom indemnification is sought (the
“Indemnitor”) in writing within a reasonable time of any third-party Claim for which
indemnification is sought hereunder. The failure to give timely notice to the Indemnitor shall not
release the Indemnitor from any liability to the Indemnitee to the extent the Indemnitor is not
prejudiced thereby. The Indemnitor shall have the right, by notice to the Indemnitee within
fifteen (15) days after the Indemnitor’s receipt of notice thereof, to assume the defense of any
such third-party Claim with counsel of the Indemnitor’s choice and at Indemnitor’s sole expense. If
the Indemnitor so assumes such defense, the Indemnitee may participate therein through counsel of
its choice, but at its sole expense. The party not assuming the defense of the third-party Claim
shall render all

12

 

reasonable assistance to the party assuming the defense, and all reasonable
out-of-pocket costs of such assistance shall be for the account of the Indemnitor. No such
third-party Claim shall be settled other than by the party defending it, and then only with the
consent of the other party (which shall not be unreasonably withheld or delayed). The Indemnitee
shall, however, have no obligation to consent to any settlement which imposes on the Indemnitee any
liability or obligation which cannot be assumed and performed in full by the Indemnitor, and the
Indemnitee shall have no right to withhold its consent to any settlement which involves only the
payment of money by the Indemnitor or its insurer.

ARTICLE VI

ADVERSE EVENT REPORTS

JDS shall be solely responsible for receiving, recording and responding to all customer inquiries
and complaints and all reports of alleged adverse events relating to the Product, and for reporting
all such matters to appropriate Regulatory Authorities in accordance with applicable law. SOLVAY
shall provide JDS with any technical information relating to formulation, manufacture or stability
of the Product reasonably necessary to enable JDS to perform all such activities. Should SOLVAY
receive any notice or inquiry regarding adverse events, it shall immediately transmit them to JDS.

ARTICLE VII

CONFIDENTIALITY

     7.1 Generally. Each party shall hold all Confidential Information disclosed to it by
the other in the strictest confidence and shall protect all such Confidential Information with the
same degree of care that it exercises with respect to its own proprietary information. Without the
prior written consent of the disclosing entity, the receiving party shall neither use, disclose,
divulge or otherwise disseminate any Confidential Information to any person or entity, except for
the receiving party’s attorney and such other professionals as the receiving party may retain in
order for it to enforce the provisions of this Agreement. For purposes of this Agreement,
“Confidential Information” shall consist of nonpublic, proprietary materials disclosed by a party
in writing and marked “confidential.”

     7.2 Restriction. Neither party shall use the other’s name or disclose the existence
or terms of this Agreement without the written permission of the other except for references in
Product packaging or labeling required by law or otherwise contemplated herein or in the Asset
Purchase Agreement or the Transition Services Agreement (as defined in the Asset Purchase
Agreement).

     7.3 Exceptions. Notwithstanding Section 7.1 hereof, neither party shall have
any obligations with respect to any Confidential Information which (a) is or becomes within the
public domain through no act of the receiving party in breach of this Agreement, (b) was lawfully
in the possession of the receiving party without any restriction on use or disclosure prior to its
disclosure hereunder, (c) is lawfully received from another source subsequent to the date of this
Agreement without any restriction on use or disclosure, (d) is deemed in writing by the disclosing
entity no longer to be Confidential Information, or (e) is required to be disclosed by order of any
court of competent jurisdiction or other governmental authority (provided, however,
in such latter case, however, that the receiving party shall timely inform the disclosing party of
all such legal or governmental proceedings so that the disclosing party may attempt by appropriate
legal means to limit such disclosure, and the receiving party shall further use its best efforts to
limit the disclosure and maintain confidentiality to the maximum extent possible).

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ARTICLE VIII

COOPERATION WITH GOVERNMENTAL REQUIREMENTS

     The parties shall cooperate with one another as may be reasonably necessary or appropriate to
satisfy all governmental requirements and obtain all needed permits, approvals and licenses with
respect to the manufacture, storage, packaging and sale of the Product. Such cooperation shall
include, without limitation, communicating with Regulatory Authorities and making available as
promptly as reasonably practicable all information, documents and other materials which result from
the performance by SOLVAY of its obligations hereunder which JDS is required to submit. The costs
and expenses of such cooperation, if applicable, shall be subject to the parties’ mutual agreement.
JDS shall be responsible for all regulatory reporting of Product. SOLVAY shall assist JDS by
providing necessary support and information and shall prepare the annual cGMP Product reviews.

ARTICLE IX

FORCE MAJEURE

     9.1 Effects of Force Majeure. Notwithstanding any other provision of this Agreement to
the contrary, neither party shall be held liable or responsible for failure or delay in fulfilling
or performing any of its obligations under this Agreement to the extent that such failure or delay
results from any cause beyond its reasonable control, including, without limitation, fire, flood,
explosion, war, strike, labor unrest, riot, embargo, inability to obtain necessary raw materials or
supplies, acts or omissions of carriers, or act of God (each, a “Force Majeure Event”). Subject to
Section 9.4, such excuse shall continue as long as the Force Majeure Event continues,
following which such party shall promptly resume performance hereunder.

     9.2 Effects of Regulatory Changes. Notwithstanding any other provision of this
Agreement to the contrary, neither party shall be held responsible or liable for failure or delay
in fulfilling or performing any of its obligations under this Agreement to the extent that such
failure or delay results from good faith efforts to comply with the enactment or revision of any
law, rule, regulation or regulatory advisory opinion or order applicable to the manufacturing,
marketing, sale, reimbursement and/or pricing of the Product (a “Regulatory Change”). Such excuse
shall continue as long as performance is prevented by the affected party’s good faith efforts to
comply with such Regulatory Change, following which such party shall promptly resume performance
hereunder.

     9.3 Notice. The party affected by a Force Majeure Event or a Regulatory Change shall
notify the other party thereof as promptly as practicable after its occurrence. Such notice shall
describe the nature of such Force Majeure Event or Regulatory Change and the extent and expected
duration of the affected party’s inability fully to perform its obligations hereunder. The affected
party shall use due diligence, where practicable, to minimize the effects of or end any such event
so as to facilitate the resumption of full performance hereunder and shall notify the other party
when it is again fully able to perform such obligations.

     9.4 Limitation. Notwithstanding anything to the contrary herein, in the event a
Regulatory Change or Force Majeure Event continues for more than 18 months, JDS shall have the
right to terminate this Agreement upon notice and upon JDS’s request, SOLVAY shall cooperate to
assist in the transfer of technology to a new manufacturer. JDS shall bear the cost and expense of
the foregoing technology transfer in the case of a Regulatory Change, and the parties shall bear
the cost and expense of a technology transfer in such proportion as is just and equitable in the
case of a Force Majeure Event.

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ARTICLE X

INDEPENDENT CONTRACTORS

     The relationship between SOLVAY and JDS is that of independent contractors, and nothing herein
shall be deemed to constitute the relationship of partners, joint venturers, nor of principal and
agent between SOLVAY and JDS. Neither party shall have any express or implied right or authority to
assume or create any obligations on behalf of or in the name of the other party or to bind the
other party to any contract, agreement or undertaking with any third party.

ARTICLE XI

FURTHER ACTIONS

     The parties shall execute such additional documents and perform all such other and further
acts as may be necessary to carry out the purposes and intents of this Agreement.

ARTICLE XII

MISCELLANEOUS

     12.1 Notices. All notices, requests, instructions, consents and other communications
to be given pursuant to this Agreement shall be in writing and shall be deemed received (a) on the
same day if delivered in person, by same-day courier or by telegraph, telex, facsimile, electronic
mail or other electronic transmission, (b) on the next day if delivered by overnight mail or
courier, or (c) on the date indicated on the return receipt, or if there is no such receipt, on the
third calendar day (excluding Sundays) if delivered by certified or registered mail, postage
prepaid, to the party for whom intended to the following addresses:

     If to JDS:

			
	               	 	JDS Pharmaceuticals, LLC

158 Mercer Street

New York, NY 10012

Attn: Chairman

     With a copy to:

			
	               	 	Dornbush Schaeffer Strongin & Weinstein, LLP

747 Third Avenue

New York, NY 10017

Attn: Herschel S. Weinstein, Esq.

Fax: (212) 753-7673

     If to SOLVAY:

			
	               	 	Solvay Pharmaceuticals, Inc.

901 Sawyer Road

Marietta, GA 30062

Attention: President & CEO

15

 

     With a copy to:

			
	               	 	Solvay Pharmaceuticals, Inc.

901 Sawyer Road

Marietta, GA 30062

Attention: Law Department

Fax: (770) 578-5749

     Each party may by written notice given to the other in accordance with this Agreement change
the address to which notices to such party are to be delivered.

     12.2 Entire Agreement. This Agreement and the agreements being executed
contemporaneously herewith contain the entire understanding of the parties with respect to the
subject matter hereof and thereof and supersede all prior agreements and understandings, whether
written or oral, between them with respect to the subject matter hereof and thereof. Each party has
executed this Agreement without reliance upon any promise, representation or warranty other than
those expressly set forth herein and in such other agreements.

     12.3 Amendment. No amendment of this Agreement shall be effective unless embodied in
a written instrument executed by both of the parties.

     12.4 Waiver of Breach. The failure of either party at any time to enforce any of the
provisions of this Agreement shall not be deemed or construed to be a waiver of any such provision,
nor in any way to affect the validity of this Agreement or any provisions hereof or the right of
any party hereto to thereafter enforce each and every provision of this Agreement. No waiver of
any breach of any of the provisions of this Agreement shall be effective unless set forth in a
written instrument executed by the party against whom or which enforcement of such waiver is
sought; and no waiver of any such breach shall be construed or deemed to be a waiver of any other
or subsequent breach.

     12.5 Assignability. Either party may assign this agreement upon notice to the other
party. In the event that this Agreement is assigned by JDS to a competitor of SOLVAY, SOLVAY shall
have the right to increase the price charged for Product hereunder to include a conventional
contract manufacturer’s profit. This Agreement shall be binding upon and inure to the benefit of
the parties, their successors and permitted assigns.

     12.6 Governing Law; Jurisdiction. This Agreement shall be governed by and construed in
accordance with the laws of Delaware, without regard to its conflicts of laws principles. The
parties consent to the personal jurisdiction and venue of the United States Federal Courts and
further consent that any process, notice of motion or other application to either such court or a
judge thereof may be served by registered or certified mail or by personal service, provided that a
reasonable time for appearance is allowed.

     12.7 Severability. All of the provisions of this Agreement are intended to be distinct
and severable. If any provision of this Agreement is or is declared to be invalid or unenforceable
in any jurisdiction, it shall be ineffective in such jurisdiction only to the extent of such
invalidity or unenforceability. Such invalidity or unenforceability shall not affect either the
balance of such provision, to the extent it is not invalid or unenforceable, or the remaining
provisions hereof, nor render invalid or unenforceable such provision in any other jurisdiction.

16

 

     12.8 Publicity. Neither party shall issue any press release or make any similar public
announcement concerning the transactions contemplated in this Agreement, except as may be required
by law (including federal securities law) or judicial order, without the prior written consent of
the other party. Neither party shall issue any press release or make any similar announcement which
includes the name of the other party or its affiliates or otherwise uses the name of the other
party in any public statement or publicly released document except as required by law (including
federal securities law) or with the prior written consent of the other party.

     12.9 Survival. The provisions of Section 2.5 (Delivery), Section 2.7
(Inspection of Product), Section 2.9 (Recalls), Section 3 (Representation and
Warranties), Section 4.4 (Rights and Duties Upon Termination), Article V
(Indemnification), Article VI (Adverse Event Reports), Article VII
(Confidentiality), Section 12.6 (Governing Law; Jurisdiction), Section 12.8
(Publicity) and this Section 12.9 (Survival) shall survive the termination or expiration of
this Agreement for any reason.

     12.10 Headings. The headings of sections and subsections have been included for
convenience only and shall not be considered in interpreting this Agreement.

     12.11 Counterparts. This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original, and all of which together shall constitute one and the
same Agreement. This Agreement may be executed and delivered via electronic facsimile transmission
with the same force and effect as if it were executed and delivered by the parties simultaneously
in the presence of one another.

     12.12 Execution. At the time of execution of this Agreement, the parties shall cause
their authorized officers to execute two original copies of this Agreement, one copy of which shall
be maintained by each party at that party’s offices. Each party represents that the person who
executes this Agreement is authorized and empowered to obligate and bind his party under this
Agreement.

     12.13 Facsimile Signatures. Any counterpart of this Agreement may be signed and
transmitted by facsimile with the same force and effect as if such counterpart was an ink-signed
original.

[SIGNATURE PAGE FOLLOWS]

17

 

     IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed on the date
first written above.

	 	 	 	 	 
	SOLVAY PHARMACEUTICALS, INC. 

 	 
	By:  	

/s/ W. A. Linscott
 	 
	 	Name:  	W. A. Linscott                          	 
	 	Title:  	V.P. Law, Gov't + Public Affairs 	 
	 

	 	 	 	 	 
	 	 
	By:  	/s/ Harold H. Shlevin
 	 
	 	Name:  	Harold H. Shlevin 	 
	 	Title:  	President & CEO 	 
	 

	 	 	 	 	 
	JDS PHARMAECUTICALS, LLC
 	 
	By:  	SATOW ASSOCIATES, LLC
 	 
	 	as its sole member 	 
	 
	By:  	/s/ Phillip M. Satow
 	 
	 	Name:  	Phillip M. Satow 	 
	 	Title:  	Manager 	 
	 

 

18

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