Document:

Exhibit 10.1

 

COMMERCIAL
SUPPLY AGREEMENT

 

regarding

 

Linaclotide
(MD-1100)

 

among

 

PolyPeptide
Laboratories, Inc.

365 Maple Ave, Torrance

CA 90503

 

and

 

PolyPeptide
Laboratories (SWEDEN) AB

PO Box 30089

SE20061  LIMHAMN

SWEDEN

 

and

 

Ironwood
Pharmaceuticals, Inc.

320 Bent Street

Cambridge, MA 02141

 

and

 

Forest
Laboratories, Inc.

909 Third Avenue

New York, New York 10022

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request. An unredacted version of this
exhibit has been filed separately with the Commission.

 

 

This Agreement is entered into on the 23rd day of June, 2010 (the “Effective
Date”), among  PolyPeptide
Laboratories Inc., a Delaware corporation with its principal offices at 365
Maple Avenue, Torrance, CA 90503, USA (“PPL Inc.”) and PolyPeptide
Laboratories AB, a Swedish corporation having a place of business at PO Box
30089, SE-20061 LIMHAMN, Sweden (“PPL AB”) (PPL Inc. and PPL AB are
hereinafter jointly referred to as POLYPEPTIDE), and Ironwood Pharmaceuticals, Inc.,
a Delaware corporation with its principal offices at 320 Bent Street,
Cambridge, MA 02141 (“IRONWOOD”) 
and Forest Laboratories, Inc., a Delaware corporation with its
principal offices at 909 Third Avenue, New York, New York 10022 (“FOREST”)
(IRONWOOD and FOREST are hereinafter jointly referred to as “CUSTOMER”).

 

RECITALS

 

Whereas, POLYPEPTIDE has
developed or acquired patented and non-patented inventions, manufacturing and
testing practices and procedures, and know-how, relating to the manufacture and
testing of peptides, including  PRODUCT
(defined below), and possesses production facilities for large scale
manufacturing of pharmaceutical peptides;

 

Whereas, IRONWOOD
owns proprietary rights to linaclotide and compositions thereof, analytical
methods related to linaclotide and methods of making and using linaclotide;

 

Whereas, IRONWOOD
and FOREST are parties to that certain Collaboration Agreement (the “COLLABORATION
AGREEMENT”) dated September 12, 2007, pursuant to which IRONWOOD
licensed to FOREST certain rights to develop and commercialize the PRODUCT in
the TERRITORY (as defined below),

 

Whereas, IRONWOOD
and POLYPEPTIDE are parties to that certain Supply Agreement Relating to
Product MD 1100 Acetate dated June 14, 2005 pursuant to which POLYPEPTIDE
manufactures and supplies to IRONWOOD quantities of PRODUCT for clinical
development (the “DEVELOPMENT SUPPLY AGREEMENT”),

 

Whereas, the parties now
wish to enter into a long-term business relationship under which CUSTOMER
desires to have POLYPEPTIDE manufacture and supply commercial quantities of
PRODUCT and POLYPEPTIDE desires to manufacture and supply commercial quantities
of PRODUCT to CUSTOMER for the TERRITORY.

 

Now therefore, in
consideration of the foregoing premises, the mutual promises and covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of 

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request. An unredacted version of this
exhibit has been filed separately with the Commission.

 

2

 

which are hereby
acknowledged, the parties, intending to be legally bound, hereby agree as
follows:

 

ARTICLE 1

DEFINITIONS

 

Capitalized terms used in
this Agreement shall have the respective meanings set forth below:

 

1.1           “Affiliate” shall mean,
with respect to a party, any corporation, partnership or other entity which
owns or controls, is owned or controlled by or is under common ownership or
control of such party.  For these
purposes, “ownership” or “control” means (i) ownership, directly or
indirectly, of more than fifty per cent (50%) of the voting stock or
partnership interests of each such corporation, partnership or entity; or (ii) the
possession, directly or indirectly, of the legal power to direct or cause the
direction of the general management and policies of such corporation,
partnership or entity, whether through the ownership of voting securities, by
contract or otherwise.

 

1.2           “Alternative Suppliers”
shall have the meaning assigned to it in Section 7.1.

 

1.3           “Alternative Supply Trigger”
shall have the meaning assigned to it in Section 7.2(v).

 

1.4           “Applicable Laws” shall
mean all applicable statutes, ordinances, regulations, rules, or orders of any
kind whatsoever of any governmental authority (including amendments thereto),
applicable to the import, export, manufacture, packaging, labelling, storage
and shipment of PRODUCT in the Territory and any other applicable jurisdiction,
including, without limitation, the cGMPs.

 

1.5           “Bankrupt Customer” shall
have the meaning assigned to it in Section 8.5.

 

1.6           “Batch Records” shall
mean production and control records prepared for each batch of PRODUCT, in
accordance with the Master Batch Records.

 

1.7           “Claims” shall have the
meaning assigned to it in Section 13.1.

 

1.8           “cGMPs” shall mean
then-current Good Manufacturing Practices as specified in ICH Guideline Q7A,
Title 21 of the United States Code of Federal Regulations, 

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request. An unredacted version of this
exhibit has been filed separately with the Commission.

 

3

 

Parts 210 and 211, or equivalent laws, rules, or
regulations of an applicable Regulatory Authority.

 

1.9           “Commercial Launch
Authorization Notice” shall have the meaning assigned to it in Section 3.2.

 

1.10         “Commercial Launch Date”
shall mean the date of first commercial sale in the Territory of the Final Drug
Product by CUSTOMER or its Affiliates or distributors or sublicensees.

 

1.11         “Competitive Offer Notice”
shall have the meaning assigned to it in Section 7.2(ii).

 

1.12         “Confidential Information”
shall mean, with respect to CUSTOMER or POLYPEPTIDE (as the case may be), any
proprietary information or data disclosed (in any form) by such party to the
other party (or parties) under this Agreement, including (without limitation)
with respect to such party’s products, business plans and Intellectual Property
Rights.

 

1.13         “Control,” “Controls,” “Controlled” or “Controlling” shall mean, with respect to Intellectual Property Rights
or Know-How, the ability of a party, whether by ownership, license or
otherwise, to grant a license, sublicense or other rights to a third party.

 

1.14         “CUSTOMER Indemnitees”
shall have the meaning assigned to it in Section 13.2.

 

1.15         “CUSTOMER IP” shall mean
all CUSTOMER Know-How and all Intellectual Property Rights that claim or cover
CUSTOMER Know-How and are Controlled by FOREST and/or IRONWOOD.

 

1.16         “CUSTOMER Know-How” shall
mean Know-How relating to the PRODUCT, which FOREST and/or IRONWOOD Controls as
of the date of the Agreement, or in which FOREST and/or IRONWOOD acquires a
Controlling interest during the term of the Agreement.  Notwithstanding the foregoing, CUSTOMER
Know-How shall not include New Know-How or Development Know-How.

 

1.17         “Customer New IP” shall
have the meaning assigned to it in Section 10.1.

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request. An unredacted version of this
exhibit has been filed separately with the Commission.

 

4

 

1.18         “Development IP” shall
mean all Development Know-How and all Intellectual Property Rights that claim
or cover any Development Know-How.

 

1.19         “Development Know-How”
shall mean Know-How, that was or is conceived of, developed, made and/or
reduced to practice by POLYPEPTIDE, alone or in conjunction with FOREST and/or
IRONWOOD, under the DEVELOPMENT SUPPLY AGREEMENT (i) to the extent
relating to, and used by POLYPEPTIDE in connection with, the manufacture of
linaclotide, or any salts, derivatives, prodrugs or compositions thereof, or (ii) to
the extent relating to and necessary for the manufacture, use or sale of the
Final Drug Product.

 

1.20         “DMF” shall mean the Drug
Master File for PRODUCT in the United States (as such term is defined in 21
C.F.R. Part 314.420), and any equivalent thereof filed elsewhere in the
Territory

 

1.21         “Facility Warranties”
shall have the meaning assigned to it in Section 4.1.

 

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

 

1.23         “FDCA” shall mean the
Federal Food Drug and Cosmetics Act, as amended from time to time, and all
regulations promulgated there under (or any successor law and all regulations
promulgated there under).

 

1.24         “Final Drug Product”
shall mean the pharmaceutical product for which Regulatory Approval has been
obtained, in finished form ready for commercial sale and distribution to, and
use by, patients, incorporating the PRODUCT supplied by POLYPEPTIDE.

 

1.25         “Firm Purchase Order”
shall mean a firm, non-cancellable purchase order in accordance with the terms
of Article 3, binding upon both CUSTOMER and POLYPEPTIDE.

 

1.26         “First Quarter Out” shall
have the meaning assigned to it in Section 3.3.

 

1.27         “First Quarter Out Forecast”
shall have the meaning assigned to it in Section 3.3.

 

1.28         “First Supply Year” shall
have the meaning assigned to it in Section 1.69

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request. An unredacted version of this
exhibit has been filed separately with the Commission.

 

5

 

1.29         “Force Majeure” shall
have the meaning assigned to it in Section 15.1.

 

1.30         “Indemnitee” shall have
the meaning assigned to it in Section 13.3.

 

1.31         “Indemnitor” shall have
the meaning assigned to it in Section 13.3.

 

1.32         “Initial Quarterly Forecast”
shall have the meaning assigned to it in Section 3.2.

 

1.33         “Initial Term” shall have
the meaning assigned to it in Section 8.1.

 

1.34         “Intellectual Property Rights”
shall mean, collectively, all of the following intangible legal rights, whether
or not filed, perfected, registered or recorded and whether now or hereafter
existing, issued, granted or acquired:  (a) patents
or patent applications, including any and all continuations,
continuations-in-part, divisionals, reissues, re-examinations, renewals,
substitutions, utility models, supplemental protection certificates, or any
additions or extensions thereof; (b) rights associated with works of
authorship, including, without limitation, copyrights, copyright applications
and copyright registrations; (c) rights in trademarks, trademark
registrations and applications therefore, trade names, service marks, service
names, logos, or trade dress; and (d) rights relating to the protection of
formulae, trade secrets, know-how and confidential information.

 

1.35         “Joint New IP” shall have
the meaning assigned to it in Section 10.1.

 

1.36         “Know-How” shall mean all
inventions, improvements, discoveries, processes, methods, compositions,
formulae, procedures, protocols, techniques, results of experimentation and
testing, information and data, whether or not patented or patentable.

 

1.37         “Latent Defect” shall
have the meaning assigned to it in Section 5.4.

 

1.38         “Liabilities” shall have
the meaning assigned to it in Section 13.1.

 

1.39         “Manufacturing Warranties”
shall have the meaning assigned to it in Section 4.1.

 

1.40         “Master Batch Record”
shall mean the formal set of instructions for manufacturing the PRODUCT, as
prepared by POLYPEPTIDE and approved in writing by both FOREST and IRONWOOD.

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request. An unredacted version of this
exhibit has been filed separately with the Commission.

 

6

 

1.41         “Material Safety Data Sheet”
or “MSDS” shall mean the material safety data sheet used to comply with
the Occupational Safety and Health Administration’s Hazard Communication
Standard, 29 C.F.R. 1910.1200.

 

1.42         “Minimum Requirement”
shall have the meaning assigned to it in Section 7.2(i).

 

1.43         “NDA” shall mean a New
Drug Application filed with the FDA and any equivalent thereof filed elsewhere
in the Territory.

 

1.44         “New IP” shall mean all
New Know-How and all Intellectual Property Rights covering or claiming any New
Know-How.

 

1.45         “New Know-How” shall mean
Know-How, that is conceived of, developed, made and/or reduced to practice by
POLYPEPTIDE, FOREST and/or IRONWOOD, pursuant to this Agreement (i) to the
extent relating to, and used by POLYPEPTIDE in connection with the manufacture
of linaclotide, or any salts, derivatives, prodrugs or compositions thereof, or
(ii) to the extent relating to and necessary for the manufacture, use or
sale of the Final Drug Product.

 

1.46         “Non-Bankrupt Customer”
shall have the meaning assigned to it in Section 8.5.

 

1.47         “Permits” shall have the
meaning assigned to it in Section 12.1(c).

 

1.48         “Person” shall mean an
individual, corporation, partnership, trust, business trust, association, joint
stock company, joint venture, pool, syndicate, sole proprietorship,
unincorporated organisation, administrative authority or any other form of
entity not specifically listed herein.

 

1.49         “POLYPEPTIDE Indemnitees”
shall have the meaning assigned to it in Section 13.1.

 

1.50         “POLYPEPTIDE IP” shall
mean all POLYPEPTIDE Know-How and all Intellectual Property Rights that claim
or cover the POLYPEPTIDE Know-How and are Controlled by POLYPEPTIDE.  POLYPEPTIDE IP shall not include New IP or
Development IP.

 

1.51         “POLYPEPTIDE Know-How”
shall mean all Know-How that relates to peptide synthesis, processing, purification,
analytical methods and/or documentation, which POLYPEPTIDE Controls as of the
date of the Agreement, or in which 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

7

 

POLYPEPTIDE acquires a Controlling interest during the
term of the Agreement.  Notwithstanding
the foregoing, POLYPEPTIDE Know-How shall not include New Know-How or
Development Know-How.

 

1.52         “PolyPeptide New IP”
shall have the meaning assigned to it in Section 10.1.

 

1.53         “POLYPEPTIDE Release
Documents” shall have the meaning assigned to it in Section 4.3.

 

1.54         “PRODUCT” shall mean
linaclotide active pharmaceutical ingredient, as more specifically described in
Appendix A.

 

1.55         “Quality Agreement” shall
mean that certain Quality Agreement entered into among IRONWOOD, FOREST and
POLYPEPTIDE in connection with this Agreement.

 

1.56         “Recall” shall have the meaning
assigned to it in Section 6.2(a).

 

1.57         “Recall Costs” shall have
the meaning assigned to it in Section 6.4.

 

1.58         “Regulatory Approval”
shall mean an authorization by an appropriate Regulatory Authority necessary
for commercial sale of the Final Drug Product in a jurisdiction in the
Territory, including, without, limitation, approval of labelling and
manufacturing

 

1.59         “Regulatory Authority”
shall mean an agency or authority governing the approval, manufacture,
marketing and sale of the PRODUCT in a jurisdiction in the Territory.

 

1.60         “Release Date” shall have
the meaning assigned to it in Section 5.2.

 

1.61         “Renewal Term” shall have
the meaning assigned to it in Section 8.2.

 

1.62         “Representatives” shall
have the meaning assigned to it in Section 11.1.

 

1.63         “Rolling Quarterly Forecast”
shall have the meaning assigned to it in Section 3.3.

 

1.64         “Second Quarter Out”
shall have the meaning assigned to it in Section 3.3.

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request. An unredacted version of this
exhibit has been filed separately with the Commission.

 

8

 

1.65         “Second Quarter Out Forecast”
shall have the meaning assigned to it in Section 3.3.

 

1.66         “SOPs” shall have the
meaning assigned to it in Section 4.2.

 

1.67         “Specifications” shall
mean the written specifications for the PRODUCT as defined in Appendix A, as
amended from time to time in accordance with this Agreement and/or the Quality
Agreement.

 

1.68         “Supplemental Purchase Order”
shall have the meaning assigned to it in Section 3.6

 

1.69         “Supply Year” shall mean
a twelve (12) consecutive month period during the Initial Term or any Renewal
Term (or any such shorter stub period from the end of such a 12 month period to
the end of the Initial Term or Renewal Term), with the “First Supply Year”
commencing on the first day of the first month of the Initial Quarterly
Forecast.

 

1.70         “Term” shall mean the
Initial Term and the Renewal Term, if any.

 

1.71         “Territory” shall mean
the countries of North America, consisting of the United States, Canada and
Mexico, and their respective territories and possessions (including Puerto
Rico, irrespective of political status).

 

1.72         “Validation Batch” shall
mean a batch of PRODUCT (a) that (i) conforms to the  parameters described in the validation
protocol as agreed in writing between the parties, (ii) is manufactured
according to cGMP, as applicable, (iii) is validated in accordance with
the ICH Q7A Good Manufacturing Practice Guidance for Active Pharmaceutical
Ingredients (the “ICH Guidance”) (including, without limitation, that
such batch, together with two other such sequential batches of PRODUCT,
demonstrates reproducibility of the commercial manufacturing process for
PRODUCT), (iv) supports the NDA (or other filing for Regulatory Approval)
for PRODUCT, (v) may be used to complete the consistency, comparability
and stability studies for PRODUCT in connection with any such filing, and (vi) meets
Specifications; or (b) supports a filing for Regulatory Approval of the
implementation of a subsequent process or equipment change with respect to the
commercial manufacture of PRODUCT.

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

9

 

ARTICLE 2

SUPPLIES; EXCLUSIVE DEALING

 

2.1           Purchase and Supply Obligation.

 

(a)           Subject to the terms and conditions hereof, POLYPEPTIDE agrees to supply
CUSTOMER with such of CUSTOMER’s requirements of the PRODUCT for purposes of
commercialization in the Territory as CUSTOMER shall set forth on Firm Purchase
Orders placed by CUSTOMER in accordance with Article 3. Subject to the
terms and conditions hereof, CUSTOMER agrees to purchase the quantities of
PRODUCT set forth on Firm Purchase Orders placed by CUSTOMER in accordance with
Article 3.

 

(b)           POLYPEPTIDE may, in its discretion, allocate the manufacture of PRODUCT
ordered pursuant to Firm Purchase Orders between its facilities located in
Torrance, California and Malmo, Sweden with the objective of preserving each facility’s
qualification to manufacture the PRODUCT.

 

(c)           POLYPEPTIDE [**] of PRODUCT [**]. 
Thereafter, POLYPEPTIDE agrees that [**].

 

(d)           If, at any time following the execution of this Agreement, POLYPEPTIDE
[**].

 

2.2           Non-Compete.

 

(a)           POLYPEPTIDE
shall not (and shall cause its Affiliates not to), without the prior written
consent of IRONWOOD (and FOREST, to the extent POLYPEPTIDE has not received
written notice that the COLLABORATION AGREEMENT has been terminated and such
manufacture is for purposes of development or commercialization in the
Territory), manufacture or sell for or to any party (other than FOREST and/or
IRONWOOD):

 

(i) any product or intermediate thereof containing
linaclotide or a salt, derivative, prodrug or composition thereof, for a period
beginning on the Effective Date and ending on [**] (A) [**], and (B) the
date [**]; provided, however, that should the Agreement terminate due to
CUSTOMER’s election under Section 8.2 (Renewal 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

10

 

Terms), then POLYPEPTIDE’s restrictions set forth herein
shall terminate on [**] (A) [**], and (B) the date [**];  or

 

(ii) any
product [**] or intermediate thereof [**], for a period beginning on the
Effective Date and ending on (A) [**], or (B) [**].

 

Notwithstanding
anything to the contrary set forth above, [**].

 

ARTICLE 3

PURCHASE ORDERS AND FORECASTS

 

3.1           Validation Batches.  On or before [**], CUSTOMER shall provide to
POLYPEPTIDE a purchase order for Validation Batches from POLYPEPTIDE’s
facilities located in Torrance, CA and Malmo, Sweden, provided that each such
facility is in good standing with Regulatory Authorities to the extent required
for the manufacture of PRODUCT in accordance with the process validation
protocol agreed to by the parties.  At
the time of delivery of a purchase order for the Validation Batches, CUSTOMER
may elect to issue a purchase order for a pre-validation batch.  Neither the purchase orders for the
Validation Batches nor the purchase order for the pre-validation batch, if any,
may contain a delivery date that requires completion of all Validation Batches
that is earlier than [**] months after POLYPEPTIDE’s receipt of
any such purchase order.  Each such
purchase order shall be deemed a Firm Purchase Order.

 

3.2           Initial Quarterly Forecast and
Commercial Launch Authorization Notice.

 

(a)           CUSTOMER shall provide to POLYPEPTIDE a written notice (the “Commercial
Launch Authorization Notice”) containing (i) CUSTOMER’s authorization
for POLYPEPTIDE to commence the manufacture of the initial launch quantities of
PRODUCT, and (ii) an initial, non-binding, forecast of CUSTOMER’s
requirements for delivery of PRODUCT for the first [**] full calendar quarters
(“Initial Quarterly Forecast”). 
CUSTOMER shall provide the Commercial Launch Authorization Notice to
POLYPEPTIDE no later than [**] months prior to the first day of the first full
calendar quarter of the Initial Quarterly Forecast.

 

(b)           From the Effective Date until the date of the Commercial Launch
Authorization Notice, CUSTOMER shall keep POLYPEPTIDE informed of CUSTOMER’s 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

11

 

anticipated
Commercial Launch Date and the quantities of PRODUCT expected to be included in
CUSTOMER’s Initial Quarterly Forecast.

 

(c)           The quantities of PRODUCT specified by CUSTOMER for delivery by
POLYPEPTIDE for the first [**] full calendar quarters of the Initial Quarterly
Forecast shall be firm and binding on CUSTOMER and POLYPEPTIDE, and CUSTOMER
shall issue a Firm Purchase Order to POLYPEPTIDE for the same in accordance
with Section 3.5 simultaneously with the delivery of the Initial Quarterly
Forecast.  All purchases shall be in full
batch quantities; provided, however, that any amounts in excess of the quantity
set forth in the Firm Purchase Order that CUSTOMER purchases as a result of
this requirement shall serve to reduce CUSTOMER’s purchase obligations under
its next Firm Purchase Order.

 

(d)           POLYPEPTIDE shall inform CUSTOMER within [**] days after receiving the
Initial Quarterly Forecast and such Firm Purchase Order of the time required to
produce the PRODUCT quantities set forth in such Firm Purchase Order which time
shall not exceed [**] months from the date of receipt of the Firm Purchase
Order.

 

3.3           Rolling Quarterly Forecast.

 

(a)           No later than [**] days after the beginning of the first calendar quarter
included in the Initial Quarterly Forecast, and continuing on an ongoing basis
each calendar quarter thereafter, CUSTOMER shall provide POLYPEPTIDE not later
than [**] days after the beginning of each calendar quarter, with an updated
non-binding rolling forecast, which commences [**] calendar quarters in the
future and sets forth CUSTOMER’s requirements for [**] full calendar quarters (“Rolling
Quarterly Forecast”).  The first full
calendar quarter of each Rolling Quarterly Forecast shall be referred to as the
“First Quarter Out” and the forecast for each First Quarter Out shall be
referred to as the “First Quarter Out Forecast.”  The second full calendar quarter of each
Rolling Quarterly Forecast shall be referred to as the “Second Quarter Out”
and the forecast for each Second Quarter Out shall be referred to as the “Second
Quarter Out Forecast.”  The third
full calendar quarter of each Rolling Quarterly Forecast shall be referred to
as the “Third Quarter Out” and the forecast for each Third Quarter Out
shall be referred to as the “Third Quarter Out Forecast, “ and so
on.  By way of example, 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

12

 

a
Rolling Quarterly Forecast provided on or before [**] of any year would set
forth CUSTOMER’s requirements for [**] calendar quarters commencing with the
calendar quarter beginning on [**], with such forecast for the calendar quarter
beginning [**] being deemed the First Quarter Out Forecast; the forecast for
the calendar quarter beginning [**] being deemed the Second Quarter Out
Forecast; the forecast for the calendar quarter beginning [**] being deemed the
Third Quarter Out Forecast, and the forecast for the calendar quarter beginning
[**] being deemed the Fourth Quarter Out Forecast.

 

(b)           POLYPEPTIDE agrees that each Rolling Quarterly Forecast submitted by
CUSTOMER will be for general planning purposes only and shall not be binding on
CUSTOMER or POLYPEPTIDE; provided, however,
(i) the First Quarter Out Forecast of each Rolling Quarterly Forecast
shall be firm and binding on CUSTOMER and POLYPEPTIDE (and CUSTOMER shall issue
a purchase order therefore simultaneously with the issuance of the Rolling
Quarterly Forecast), in accordance with Section 3.5 below, and (ii) the
Second Quarter Out Forecast,  Third
Quarter Out Forecast and Fourth Quarter Out Forecast of each Rolling Quarterly
Forecast shall be used to establish the maximum variances in respect of each
such calendar quarter as discussed in Section 3.4 below (as adjusted by,
and subject to the provisions regarding Supplemental Purchase Orders in Section 3.6
below).

 

3.4           Maximum Variance in Rolling
Quarterly Forecast.  When, in the
Rolling Quarterly Forecast, a calendar quarter moves from being the Second
Quarter Out to the First Quarter Out, CUSTOMER may increase or decrease the
quantity of PRODUCT to be delivered in such calendar quarter by no more than
[**] percent ([**]%).  In addition, when
a calendar quarter moves from being the Third Quarter Out to the Second Quarter
Out, CUSTOMER may increase or decrease the quantity of PRODUCT to be delivered
in such calendar quarter by no more than [**] percent ([**]%) and when a
calendar quarter moves from being the Fourth Quarter Out to the Third Quarter
Out, CUSTOMER may increase or decrease the quantity of PRODUCT to be delivered
in such calendar quarter by no more than [**] percent ([**]%).  By way of example, if the Rolling Quarterly
Forecast issued on [**] provides for the delivery of 10 kilograms of PRODUCT
during the calendar quarter commencing [**] (the Second Quarter Out) and the
delivery of 20 kilograms of PRODUCT during the calendar quarter commencing 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

13

 

[**] (the Third Quarter Out), and the delivery of 20
kilograms of PRODUCT during the calendar quarter commencing [**] (the Fourth
Quarter Out) then the Rolling Quarterly Forecast issued [**] (along with the
simultaneously issued Firm Purchase Order) shall (i) provide for the
delivery of no more than [**] kilograms of PRODUCT and no less than [**]
kilograms of PRODUCT during the calendar quarter commencing [**] (now the First
Quarter Out), (ii) provide for the delivery of no more than [**] kilograms
of PRODUCT and no less than [**] kilograms of PRODUCT during the calendar
quarter commencing [**] (now the Second Quarter Out), and (iii) provide
for the delivery of no more than [**] kilograms of PRODUCT and no less than
[**] kilograms of PRODUCT during the calendar quarter commencing [**] (now the
Third Quarter Out).

 

3.5           Purchase Orders. 
Within [**] days of the beginning of each calendar quarter, CUSTOMER
shall provide to POLYPEPTIDE a Firm Purchase Order setting forth CUSTOMER’s
monthly requirements of PRODUCT for each month of the First Quarter Out
Forecast.  Each such Firm Purchase Order
shall be binding upon CUSTOMER and POLYPEPTIDE without further notice or
action.  By way of example, for a Rolling
Quarterly Forecast provided on or before [**] of any year, CUSTOMER shall
submit a Firm Purchase Order to POLYPEPTIDE on or before [**] for monthly delivery
dates in the calendar quarter commencing [**].

 

3.6           Supplemental Purchase Orders. 
In addition to the Firm Purchase Orders described in Section 3.5
above, CUSTOMER may submit purchase orders for additional quantities of PRODUCT
at any time (each a “Supplemental Purchase Order”).  No Supplemental Purchase Order shall be
binding upon POLYPEPTIDE unless and until POLYPEPTIDE accepts the quantities
and delivery dates specified therein in writing after receipt of the
Supplemental Purchase Order.  After acceptance,
the Supplemental Purchase Order shall be a Firm Purchase Order binding upon
CUSTOMER and POLYPEPTIDE. 
Notwithstanding the preceding, POLYPEPTIDE shall use [**] efforts to
accept and fill Supplemental Purchase Orders in accordance with their terms and
will advise CUSTOMER promptly after receipt of a Supplemental Purchase Order of
its anticipated ability to fill such order.

 

3.7           Supply Chain Communication.  Both parties shall communicate on a regular
basis, and act with commercially reasonable discretion and cooperation in the 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

14

 

event of, any unforeseen supply chain situation that may
impact the other party, especially during the period covered by the Initial
Quarterly Forecast.

 

3.8           Delivery of PRODUCT. 
POLYPEPTIDE shall supply CUSTOMER on the delivery dates with the
quantity of PRODUCT ordered by CUSTOMER pursuant to each Firm Purchase
Order.  The supply, purchase, delivery
and sale of PRODUCT, and all rights and obligations of the parties, shall be
governed solely by this Agreement, and any additional or contrary terms or
provisions contained in any Firm Purchase Order or similar form or invoice or
acknowledgement shall be void and have no force or effect, unless otherwise
mutually agreed in writing by CUSTOMER and POLYPEPTIDE.

 

3.9           Penalties for Short Supply. 
POLYPEPTIDE agrees that it will promptly notify CUSTOMER in writing of
any problems, supply or other situations that are likely to adversely affect
the production of PRODUCT, or its timely delivery to CUSTOMER pursuant to a
Firm Purchase Order.  If POLYPEPTIDE (a) provides
CUSTOMER with notice that it will be unable to deliver PRODUCT in the time
frame specified in such Firm Purchase Order, or (b) otherwise fails to
deliver PRODUCT, in the quantities ordered by CUSTOMER in a Firm Purchase
Order, in each case within [**] days of the delivery date as specified in the
Firm Purchase Order, and such failure is not due to Force Majeure, to any act
or omission by CUSTOMER, or previously agreed to by CUSTOMER and POLYPEPTIDE in
writing, then, in addition to all the other rights and remedies available to
CUSTOMER under this Agreement and at law or in equity,  CUSTOMER shall have the right to the
following redress:

 

(i)            CUSTOMER may elect, at its sole discretion, to require POLYPEPTIDE to
supply the PRODUCT (in the quantity specified in such Firm Purchase Order or a
lesser quantity) at a future date, with notice of this election provided in
writing to POLYPEPTIDE within [**] days following (x) CUSTOMER’s receipt
of notice of POLYPEPTIDE’s inability to meet the Firm Purchase Order (pursuant
to clause (a) above), or (y) the end of the [**] day period specified
in clause (b) above (unless, during such [**] day period, POLYPEPTIDE has
demonstrated, to CUSTOMER’s reasonable satisfaction, that POLYPEPTIDE will meet
such Firm Purchase Order within [**] days following such notice to POLYPEPTIDE)
(as the case may be);

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

15

 

(ii)           CUSTOMER may cancel, in whole or in part, any amount of the Firm Purchase
Order that is unfulfilled and CUSTOMER shall have the right to cover with
PRODUCT from a third party the unfulfilled quantities, with notice of this
election provided in writing to POLYPEPTIDE within [**] days following (x) CUSTOMER’s
receipt of notice of POLYPEPTIDE’s inability to meet the Firm Purchase Order
(pursuant to clause (a) above), or (y) the end of the [**] day period
specified in clause (b) above (unless, during such [**] day period,
POLYPEPTIDE has demonstrated, to CUSTOMER’s reasonable satisfaction, that
POLYPEPTIDE will meet such Firm Purchase Order within [**] days following such
notice to POLYPEPTIDE) (as the case may be);

 

3.10         In the event that the delivery
of any quantity of PRODUCT under a Firm Purchase Order is more than [**] days
late from the date of delivery specified in the Firm Purchase Order, then
POLYPEPTIDE shall reduce the price, for that quantity of PRODUCT that is at
least [[**] days late, by an amount equal to [**] percent ([**]%) of the price
of such PRODUCT; and

 

3.11         In the event that the delivery
of any quantity of PRODUCT under a Firm Purchase Order is more than [**] days
late from the date of delivery specified in the Firm Purchase Order, then
POLYPEPTIDE shall make an additional reduction in the price, for that quantity
of PRODUCT that is [**] days late, by an amount equal to an additional [**]
percent ([**]%) of the price of such PRODUCT (so
that the aggregate price reduction for PRODUCT that is [**] days late is [**]
percent ([**]%)).

 

3.12         Regulatory Delay.

 

(a)           If CUSTOMER has reason to believe that Regulatory Approval will be
delayed, CUSTOMER shall provide POLYPEPTIDE with prompt written notice of such
delay.  In such case, if CUSTOMER has
already issued the Commercial Launch Authorization Notice, Initial
Quarterly Forecast and any Firm Purchase Orders (including the first Firm
Purchase Order for quantities of PRODUCT specified by CUSTOMER for delivery by
POLYPEPTIDE for the first [**] full calendar quarters of the Initial Quarterly
Forecast), CUSTOMER may request that POLYPEPTIDE suspend production of PRODUCT
quantities contained in any such Firm Purchase Order.

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

16

 

(b)                                 If CUSTOMER makes a suspension request, POLYPEPTIDE shall as promptly as
possible suspend all production of PRODUCT, and the parties shall discuss in
good faith and determine an efficient process for mitigating related costs,
which process shall be implemented by POLYPEPTIDE in a timely manner.  Subject to such discussion, during any period
of regulatory delay, POLYPEPTIDE may invoice CUSTOMER for [**]; provided that
all such amounts paid by CUSTOMER shall be credited by POLYPEPTIDE against the
purchase price for finished PRODUCT subsequently delivered to CUSTOMER.  If, in accordance with the agreed upon
suspension process and a Firm Purchase Order, POLYPEPTIDE completes any PRODUCT
batches in progress at the time of receipt of notice of regulatory delay,
POLYPEPTIDE shall deliver and invoice CUSTOMER for any such finished PRODUCT no
earlier than [**] months following the delivery date specified in the
applicable Firm Purchase Order.  CUSTOMER
agrees to pay any such invoices within [**] days of its receipt thereof.  In the event that CUSTOMER requests that
POLYPEPTIDE delay delivery of PRODUCT to CUSTOMER, POLYPEPTIDE shall apply such
payment to the purchase price due for the PRODUCT so delayed.  POLYPEPTIDE agrees to use commercially
reasonable efforts to mitigate the costs that are to be borne by CUSTOMER under
this Section 3.12.  Section 5.1
with respect to the transfer of title notwithstanding, in the event of delayed
delivery of PRODUCT at the request of CUSTOMER, CUSTOMER agrees to obtain
insurance for PRODUCT upon delivery of invoices to CUSTOMER under this Section 3.12(b).

 

ARTICLE 4

QUALITY, MANUFACTURING COMPLIANCE AND AUDITS

 

4.1                                 Manufacturing Requirements.

 

(a)                                  POLYPEPTIDE warrants and covenants that it shall manufacture and supply
the PRODUCT in accordance with (i) the Specifications, (ii) all
Applicable Laws, and (iii) all Regulatory Approvals applicable for
manufacture of the PRODUCT in the Territory (the “Manufacturing Warranties”).

 

(b)                                 POLYPEPTIDE further warrants and covenants that at all times during the
Term of this Agreement, it shall, at its own expense, (i) maintain the
necessary permits required for the manufacture and supply of the PRODUCT in
accordance with this Agreement, including all required facility licenses, and (ii) maintain
its 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

17

 

facilities
used for the manufacture of PRODUCT in compliance with all Applicable Laws (the
“Facility Warranties”).

 

4.2                                 Changes in Manufacturing.

 

(a)                                  Prior to implementation,
POLYPEPTIDE shall notify CUSTOMER of any changes to Master Batch Records,
analytical methods or PRODUCT-specific standard operating procedures (“SOPs”)
of POLYPEPTIDE that would have a material impact on the PRODUCT.  POLYPEPTIDE shall implement any such changes
only with the prior written consent of CUSTOMER and in compliance with the
Quality Agreement.

 

(b)                                 If facility, equipment, process
or system changes are required of POLYPEPTIDE as a result of requirements
(including a change in Specifications) set forth by the FDA or any other
Regulatory Authority, then, CUSTOMER and POLYPEPTIDE shall review such
requirements in accordance with the terms of the Quality Agreement.  If POLYPEPTIDE is required to implement
changes solely because of manufacturing processes that are specific to the
PRODUCT (and, in the absence of such specific manufacturing processes
applicable to the PRODUCT, such changes would not be required), then [**] of
the costs thereof, reasonably incurred. 
If POLYPEPTIDE is required to implement changes in order to ensure that
the POLYPEPTIDE facility remains cGMP compliant or for any other reason not
specified in the preceding sentence, then [**] of the costs thereof.  POLYPEPTIDE shall consult with CUSTOMER prior
to incurring any costs for which CUSTOMER is responsible hereunder.  POLYPEPTIDE agrees to use commercially reasonable
efforts to mitigate the costs that are borne by CUSTOMER under this Section 4.2(b).

 

(c)                                  CUSTOMER, may, from time to time
during the Term, request changes to the Specifications for reasons other than
described above.  POLYPEPTIDE agrees that
it shall conduct a good faith review of any requested changes in the
Specifications and will use commercially reasonable efforts to implement the
changes in accordance with the terms of the Quality Agreement.  All changes to the Specifications agreed to
by POLYPEPTIDE shall include a reasonable time period for POLYPEPTIDE to
implement such changes.  In the event of
any dispute with respect to whether or not such proposed changes to the
Specifications can be reasonably implemented, CUSTOMER and POLYPEPTIDE 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

18

 

agree to negotiate in good faith to reach mutual
agreement.  [**]agrees to be [**]
responsible for [**] costs associated with meeting
the changes to the Specifications requested under this Section 4.2(c).

 

4.3                                 Release Documents. 
POLYPEPTIDE shall test the PRODUCT before delivery to CUSTOMER or a
designee thereof in accordance with the Quality Agreement and shall provide to
CUSTOMER in the time frame agreed upon among the parties, but in no event later
than the date on which the PRODUCT is delivered, (i) a Certificate of
Analysis containing the quality control test results for the lot, and
confirming that the lot of PRODUCT conforms to the Specifications, and (ii) a
Certificate of Conformance confirming that the lot of PRODUCT was made in
accordance with cGMPs and the process defined in the approved Master Batch
Record (collectively, (i) and (ii) are the “POLYPEPTIDE Release
Documents”). Simultaneously with the delivery of the POLYPEPTIDE Release
Documents, POLYPEPTIDE shall deliver to CUSTOMER copies of documents detailing
any deviations, investigations or non-conformances from any manufacturing
processes then in effect.  All documents
described in this Section 4.3 shall be in English.

 

4.4                                 Regulatory Support.

 

(a)                                  POLYPEPTIDE agrees to use commercially reasonable efforts to assist
CUSTOMER, in seeking approval of its NDA(s) with respect to PRODUCT.  In furtherance of (and without limiting) the
foregoing, POLPYPEPTIDE agrees to use commercially reasonable efforts to
address feedback from the FDA (whether provided to POLYPEPTIDE or CUSTOMER)
regarding the comparability of registration batches of PRODUCT manufactured by
POLYPEPTIDE (before or after the Effective Date) that are submitted to the FDA
in connection with the NDA filing for the PRODUCT.

 

(b)                                 POLYPEPTIDE agrees to cooperate with any inspection by the FDA or other
Regulatory Authority, including, but not limited to any inspection prior to
approval of a PRODUCT NDA.

 

(c)                                  POLYPEPTIDE agrees to (i) establish and maintain a separate DMF for
each manufacturing site for the PRODUCT in accordance with POLYPEPTIDE’s SOP
and the requirements of applicable Regulatory Authorities; and (ii) provide

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

19

 

CUSTOMER
and their respective licensees in the Territory, with letters of access to, and
rights to reference, each such DMF and any other comparable files.  POLYPEPTIDE shall obtain CUSTOMER’S prior
written approval of the Specifications filed in any DMF.

 

(d)                                 At CUSTOMER’s request,
POLYPEPTIDE agrees to provide such documentation and data as CUSTOMER
reasonably requires to complete and maintain the CMC section of CUSTOMER’s NDA
filings, in addition to, the filing and maintenance of the DMFs.  POLYPEPTIDE shall establish each DMF in a
timely manner to support CUSTOMER’s NDA filings, and shall provide to CUSTOMER
such documentation, data and other information relating to the PRODUCT as
CUSTOMER may require for submission to Regulatory Authorities.

 

(e)                                  POLYPEPTIDE agrees to provide
CUSTOMER with written copies of any
proposed changes to a DMF at least [**] days prior to filing the changes, which
changes shall not be implemented without CUSTOMER’s written consent except to
the extent required to comply with the requirements of a Regulatory Authority
which are indentified to CUSTOMER and implemented in a mutually agreed manner.

 

4.5                                 Quality Inspections and Audits. 
In accordance with the terms of the Quality Agreement, POLYPEPTIDE shall
permit inspections and/or audits by CUSTOMER (and/or designated
representative(s)) of those areas of the facilities where the PRODUCT is being
manufactured, processed, stored or tested, or which could reasonably be
expected to have a bearing on the quality of the PRODUCT.  In addition, POLYPEPTIDE shall permit
governmental inspectors acting pursuant to statutory authority to inspect the
same such areas of the facilities, and to review required documentation
relevant thereto.  If, as a result of any
such inspection or audit, CUSTOMER concludes that POLYPEPTIDE is not in
compliance with any Applicable Laws, the Manufacturing Warranties, the Facility
Warranties and any other obligations under this Agreement, CUSTOMER shall so
notify POLYPEPTIDE in writing, specifying any areas of non-compliance in
reasonable detail.  To the extent
POLYPEPTIDE agrees with such assessment, POLYPEPTIDE shall use its commercially
reasonable efforts to remedy the problems identified as soon as
practicable.  In the event that
POLYPEPTIDE does not agree with such assessment, POLYPEPTIDE and 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

20

 

CUSTOMER shall submit the assessment to an independent
third party expert to determine whether the assessment is correct.  The party against whom the third party expert
rules shall bear the cost of the third party expert.  If the third party agrees with CUSTOMER’s
assessment, POLYPEPTIDE shall use its commercially reasonable efforts to remedy
the problems identified [**].

 

4.6                                 Facility Information. POLYPEPTIDE shall furnish to
CUSTOMER complete and thorough information (redacted to the extent required to
comply with POLYPEPTIDE’s confidentiality obligations to third parties)
regarding pre-Effective Date (i) audits by Regulatory Authorities of the
facilities at which the PRODUCT is manufactured, (ii) inspectional
observations (Form FDA 483); or (iii) warning letters.  During the Term, POLYPEPTIDE will promptly
(and in no case later than [**] days) notify CUSTOMER in writing of, and
forward written copies of any documents relating to (i) future inspections
or requests for inspections of those areas of POLYPEPTIDE’s facilities or those
systems, in either case, that could reasonably be expected to have an impact on
the production of the PRODUCT; (ii) inspectional observations (Form FDA
483) of POLYPEPTIDE’s facilities directly related to the manufacture of the
PRODUCT; (iii) warning letters related to, or that could reasonably be
expected to have an impact on, the manufacture of the PRODUCT by POLYPEPTIDE;
or (iv) recall notices received that relate directly to the PRODUCT
supplied by POLYPEPTIDE hereunder.  In
addition, POLYPEPTIDE shall, whenever possible and permissible, permit CUSTOMER
(and designees) to be present during any inspection by a Regulatory Authority
that relates to or could impact the PRODUCT. 
In addition POLYPEPTIDE shall provide CUSTOMER a reasonable opportunity
to comment upon proposed responses by POLYPEPTIDE to any of the foregoing or to
other communications related directly to PRODUCT or the facilities at which
PRODUCT is manufactured (to the extent related to manufacturing of PRODUCT)
from Regulatory Authorities and the comments of CUSTOMER shall not be
unreasonably rejected.  CUSTOMER shall
provide its comments within [**] days following receipt of POLYPEPTIDE’s
proposed responses to avoid any delay in response time to the Regulatory
Authorities.

 

4.7                                 Material Safety Data Sheet.  CUSTOMER shall provide POLYPEPTIDE with the
appropriate MSDS for the PRODUCT.

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

21

 

ARTICLE 5

DELIVERY, INVOICING AND PRODUCT ACCEPTANCE

 

5.1                                 Delivery and Storage. 
POLYPEPTIDE shall deliver PRODUCT on the delivery dates set forth in the
relevant Firm Purchase Orders.  Delivery
shall be [**] (Incoterms 2000) to a location designated by [**] by a common
carrier [**].  Title to the PRODUCT and
risk of loss shall transfer to CUSTOMER upon [**].  If requested by CUSTOMER, POLYPEPTIDE agrees
to delay delivery of PRODUCT for up to [**] days after the delivery date set
forth in the relevant Firm Purchase Order at [**]; provided however,
POLYPEPTIDE shall issue an invoice for such PRODUCT and title to the PRODUCT
and the risk of loss shall transfer to CUSTOMER [**].

 

5.2                                 Invoice.

 

(a)                                  POLYPEPTIDE shall invoice CUSTOMER with a single invoice concurrently
with shipment of the PRODUCT on the delivery date specified in the applicable
Firm Purchase Order or, in the event CUSTOMER requests a delivery delay
pursuant to Section 5.1, on the day POLYPEPTIDE provides CUSTOMER the
corresponding POLYPEPTIDE Release Documents (as set forth in Section 5.1)
(the “Release Date”).  Invoices
shall be due and payable [**] days from the date of the receipt of the invoice.

 

(b)                                 Notwithstanding the foregoing, with respect to [**], POLYPEPTIDE may
invoice CUSTOMER [**];  provided however,
that if POLYPEPTIDE invoices CUSTOMER for a PRODUCT batch in accordance with
[**].  In making such determination
pursuant to [**].  For the avoidance of
doubt, [**].  In addition, [**].

 

For purposes of clarity,
[**].  If [**].

 

5.3                                 Review of POLYPEPTIDE Release
Documents, Batch Records and Master Batch Records. 
Upon receipt, CUSTOMER, or the designee, shall promptly examine the
POLYPEPTIDE Release Documents (as defined in Section 4.3) for the PRODUCT’s
compliance with the Specifications and POLYPEPTIDE Release Documents.  CUSTOMER shall have the right to also review
the relevant Batch Records and Master Batch Records, and POLYPEPTIDE agrees to
make the Batch 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

22

 

Records and Master Batch Records available for
inspection on site promptly upon request by CUSTOMER.  The Batch Records and Master Batch Records at
POLYPEPTIDE’s facility located in Torrance, CA will be in English.  The Batch Records and Master Batch Records at
POLYPEPTIDE’s facility located in Malmo, Sweden will be in Swedish, and
POLYPEPTIDE shall provide for CUSTOMER’s review, English translations of such
Master Batch Records and English summaries (in a form that is mutually agreed
by the parties and complies with any applicable requirements of Regulatory
Authorities) of such Batch Records. 
CUSTOMER may reject any shipment of PRODUCT (or part thereof) that it
determines does not conform to the Specifications and POLYPEPTIDE Release
Documents.  If CUSTOMER determines that
any such shipment does not comply with the Specifications and POLYPEPTIDE Release
Documents, CUSTOMER shall notify POLYPEPTIDE promptly, but in any event not
later than [**] days after receipt of the POLYPEPTIDE Release Documents.  Any such notice of rejection shall be in
writing and shall indicate the reasons for such rejection.  The invoice for any rejected PRODUCT shall be
cancelled, and any payment previously received for any rejected PRODUCT shall
be promptly returned to CUSTOMER.  If no
such notice of rejection is issued within such [**] day period, CUSTOMER shall
be deemed to have accepted such shipment.

 

5.4                                 Latent Defects.  Notwithstanding the foregoing, CUSTOMER (or
its designee) may further inspect the PRODUCT following the [**] day period set
forth above, for damage, adulteration or other failure to comply with the
Specifications on the Release Date and POLYPEPTIDE Release Documents that would
not reasonably be expected to be detectable in accordance with customary
industry practice during an initial inspection of PRODUCT and the corresponding
POLYPEPTIDE Release Documents (a “Latent Defect”).  CUSTOMER shall have the right to reject any
PRODUCT (including, previously accepted PRODUCT) that it (or its designee)
determines contains a Latent Defect; provided, however,
that CUSTOMER shall submit a rejection notice under this Section 5.4
specifying all such Latent Defects no later than [[**] days of discovery
thereof, but in any event within [**] months of the CUSTOMER’s receipt of the
PRODUCT for PRODUCT delivered any time during the first [**] Supply Years and
within [**] months of the CUSTOMER’s receipt of the PRODUCT for PRODUCT
delivered any time thereafter.  The
invoice for any rejected PRODUCT shall be cancelled, and any 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An unredacted
version of this exhibit has been filed separately with the Commission.

 

23

 

payment previously received for any rejected PRODUCT
shall be promptly returned to CUSTOMER.

 

5.5                                 Disputes. 
Within [**] days after any notice of rejection is received, POLYPEPTIDE
shall notify CUSTOMER, in writing, whether it accepts CUSTOMER’s basis for
rejection.  If POLYPEPTIDE in good faith
disagrees with CUSTOMER’s determination that a PRODUCT rejection was proper
under this Article 5, such PRODUCT shall be submitted to a mutually
acceptable third party laboratory and / or regulatory expert.  The third party shall determine whether such
PRODUCT was or was not properly rejected under this Article 5.  The party against whom the third party tester
or regulatory expert rules shall bear all expenses.  Whether or not POLYPEPTIDE accepts CUSTOMER’s
basis for rejection, promptly on receipt of a notice of rejection of PRODUCT,
POLYPEPTIDE shall replace such rejected PRODUCT, [**] as soon as reasonably
practical, but not later than [**] days of POLYPEPTIDE’s receipt of the notice
or rejection (except for Validation Batches which replacement time line is
subject to Section 5.2(b)). If the third party tester or regulatory expert
rules that the PRODUCT was not appropriately rejected under this Article 5,
CUSTOMER shall purchase the rejected PRODUCT, irrespective of whether
POLYPEPTIDE has already replaced it.  All
replacement PRODUCT shall be subject to the provisions of Sections 5.3 and 5.4
above.  CUSTOMER may not destroy any
PRODUCT until it receives written notification from POLYPEPTIDE that
POLYPEPTIDE does not dispute the rejection of the PRODUCT hereunder and that
POLYPEPTIDE does not request return of the PRODUCT.  Upon authorization from POLYPEPTIDE to do so,
CUSTOMER shall destroy the rejected PRODUCT at POLYPEPTIDE’s cost and shall
provide POLYPEPTIDE with certification of such destruction.  CUSTOMER shall, upon receipt of POLYPEPTIDE’s
request for return, promptly return said PRODUCT [**].

 

ARTICLE 6

COMPLAINTS AND RECALLS

 

6.1                                 PRODUCT Complaints. 
CUSTOMER will correspond with complainants on all complaints associated
with PRODUCT in accordance with the terms of the Quality Agreement.  POLYPEPTIDE will provide reasonable assistance
to CUSTOMER in investigating PRODUCT complaints by analyzing PRODUCT, 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the Commission.

 

24

 

processes and components to determine the cause, if any
of an alleged PRODUCT manufacturing defect or failure, in accordance with the
terms of the Quality Agreement.  In the
event POLYPEPTIDE receives a complaint relating to PRODUCT it shall promptly
(and in no case later than [**] days) inform CUSTOMER in writing thereof.

 

6.2                                 Recalls.

 

(a)                                  In the event any party believes it may be necessary to conduct a recall,
field correction, market withdrawal, stock recovery, or other similar action
with respect to Final Drug Product incorporating PRODUCT sold by POLYPEPTIDE to
CUSTOMER (a “Recall”), POLYPEPTIDE and CUSTOMER shall consult with each
other, to the extent practicable, as to how best to proceed, it being
understood and agreed that the final decision as to any Recall of Final Drug
Product shall be made by CUSTOMER; provided, however, that POLYPEPTIDE
shall not be prohibited hereunder from taking any action that it is required
to take by Applicable Law.

 

(b)                                 In the event of a Recall, POLYPEPTIDE will provide reasonable assistance
to CUSTOMER in an investigation to determine the cause and extent of the
problem, in accordance with the terms of the Quality Agreement.  All FDA or other applicable Regulatory
Authority contacts and coordination of any recall activities will be led by
CUSTOMER unless otherwise required by the FDA or other Regulatory
Authority.  The parties agree that each
party shall consult with the others and shall cooperate in all recalls, but
that CUSTOMER shall be the primary interface with the applicable Regulatory
Authority.

 

6.3                                 Recall Records.  CUSTOMER shall maintain records of all sales
of Final Drug Product and customers sufficient to adequately administer a
Recall for the period required by Applicable Law.  POLYPEPTIDE will maintain complete and
accurate records of all PRODUCT supplied under this Agreement for such periods
as may be required by Applicable Laws, and in accordance with the Quality
Agreement.

 

6.4                                 Recall Expenses.  If the Recall arises from the manufacture,
storage or handling of the PRODUCT by POLYPEPTIDE or POLYPEPTIDE’s breach of
its Manufacturing Warranties, the cost of goods sold, distribution expenses and

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

25

 

third-party recall expenses (collectively, “Recall
Costs”) shall be borne by POLYPEPTIDE. 
CUSTOMER shall bear the Recall Costs for all other Recalls.

 

ARTICLE 7

ALTERNATIVE SUPPLY AND MINIMUM PURCHASE
REQUIREMENTS

 

7.1                                 Alternative Supplier.

 

(i)                                     FOREST and IRONWOOD shall have
the right, at any time, in their sole discretion, to qualify themselves, or one
or more third parties to manufacture PRODUCT (“Alternative Suppliers”).  Subject only to the then-current Minimum
Requirement (as described in Section 7.2 below), CUSTOMER shall have the
right to purchase or acquire PRODUCT from one or more Alternative
Suppliers.  POLYPEPTIDE agrees that it
will promptly notify CUSTOMER in writing of any problems, supply or other
situations that are likely to adversely affect the production of PRODUCT, or
its timely delivery to CUSTOMER in accordance with a Firm Purchase Order
therefore.

 

(ii)                                  POLPYPEPTIDE acknowledges that processes and procedures for the
manufacture of peptides such as the PRODUCT may be similar among different
manufacturers, and accordingly agrees that CUSTOMER’s utilization of Alternative
Suppliers shall not give rise to a presumption that CUSTOMER has improperly
disclosed or used POLYPEPTIDE’s Confidential Information or misappropriated
POLYPEPTIDE’s Intellectual Property Rights, and POLYPEPTIDE shall not assert
any such presumption (under any doctrine of law) in any claim or action by
POLYPEPTIDE against CUSTOMER.

 

7.2                                 Minimum Purchase Requirements.

 

(i)                                     The First Supply Year shall
commence on the first day of the first month included in the Initial Quarterly
Forecast, and shall continue for twelve (12) months thereafter.  During the First Supply Year and for each
Supply Year thereafter until this Agreement expires or is terminated, CUSTOMER
shall purchase from POLYPEPTIDE an amount of PRODUCT to be sold or distributed
in the Territory equal to at least: (a) [**] percent ([**]%) of
CUSTOMER’s demand for the Territory during the Supply Year if the applicable
price for PRODUCT under the Agreement during such Supply Year is at least [**] less
than [**] for 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

26

 

supplying PRODUCT (in each case, in similar quantities
and meeting the Specifications, (b) [**] percent ([**]%) of
CUSTOMER’s demand for the Territory during the Supply Year if the applicable
price for PRODUCT under the Agreement during such Supply Year is less than [**] above
[**] for supplying PRODUCT (in each case, in similar
quantities and meeting the Specifications), or (c) [**]
percent ([**]%) of CUSTOMER’s demand for the Territory during the
Supply Year if (i) the applicable price for PRODUCT under the Agreement
during such Supply Year is [**] above [**] for
supplying PRODUCT (in each case, in similar quantities and meeting the
Specifications), but does not exceed the applicable price set forth on Appendix
D hereto(1), or (ii) if CUSTOMER elects to manufacture PRODUCT internally
or through an Affiliates (as applicable from time to time, the “Minimum
Requirement”); provided, that, in each case, POLYPEPTIDE has demonstrated,
to the satisfaction of CUSTOMER, its ability to produce and sustain the
production of PRODUCT in quantities sufficient to support the applicable
Minimum Requirement.  If POLYPEPTIDE is
unable to make such demonstration to CUSTOMER’s satisfaction, the Minimum
Requirement shall be reduced to a lower percentage of CUSTOMER’s total demand
for the Territory with respect to which POLYPEPTIDE is able to demonstrate its
ability to produce and sustain production. 
Notwithstanding anything to the contrary set forth herein, the Minimum
Requirement shall not exceed [**].

 

(ii)                                  Within [**] days
following the Effective Date, CUSTOMER shall, subject to applicable
confidentiality obligations, provide evidence of third party supplier pricing
or evidence of internal manufacturing costs (as the case may be) for Product
and evidence that the alternative supplier’s commercial product passes release
testing requirements comparable to that required under this Agreement.  Based on such evidence, the parties shall
determine the initial Minimum Requirement. 
No later than [**] days prior to the first day of
each Supply Year, CUSTOMER may notify POLYPEPTIDE (the “Competitive Offer
Notice”) that it can purchase from a reputable third party supplier,
PRODUCT that:  (a) meets 

 

(1)  Volume-based pricing will initially be based
on aggregate supply by POLYPEPTIDE to Customer and its Affiliates and licensees
in the Territory.  In the event that
Ironwood, or its licensees, seek to engage POLYPEPTIDE to manufacture PRODUCT
for sale outside of the Territory, POLYPEPTIDE agrees to negotiate in good
faith pricing schedules under this Agreement and under such additional territory
agreements that fairly reflect the efficiencies associated with the manufacture
of the additional volume of PRODUCT.

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

27

 

the Specifications, and (b) is offered at a price
for similar quantities (taking into consideration any other fees paid to such
third party supplier that affect pricing), that is lower than the then-current
price for PRODUCT purchased under this Agreement by an amount that would result
in a reduction to the then-current Minimum Requirement.  Upon receipt of such notice, CUSTOMER and
POLYPEPTIDE shall meet and discuss whether POLYPEPTIDE can improve its cost
structure within a reasonable period of time in order to match the other
source.  Following issuance of the
Competitive Offer Notice, at the request of POLYPEPTIDE, CUSTOMER shall,
subject to applicable confidentiality obligations, provide evidence of the
third party offer or evidence of internal costs (as the case may be) and
evidence that the alternative supplier’s commercial product passes release
testing requirements comparable to that required under this Agreement.  POLYPEPTIDE shall have [**] days
from its receipt of the Competitive Offer Notice to notify CUSTOMER in writing
that it is willing to reduce its pricing under this Agreement in order to
maintain (or increase) the then-current Minimum Requirement.  If POLYPEPTIDE does not deliver such notice
within such time period, then the Minimum Requirement shall be reduced in
accordance with Section 7.2(i) above. 
Reduced pricing (if applicable) shall apply to any Firm Purchase Orders
issued after CUSTOMER’s receipt of POLYPEPTIDE’s written notice of price
reduction.  This process and its impact
on the Rolling Forecast is illustrated on Appendix B.  If POLYPEPTIDE reduces its pricing under this
Agreement pursuant to a Competitive Bid Notice and the third party supplier
with the competitive pricing fails to obtain regulatory approval for the
PRODUCT or withdraws its application for regulatory approval for PRODUCT,
POLYPEPTIDE’s price reduction shall be null and void and the purchase price for
PRODUCT shall revert back to the purchase price prior to the price
reduction.  [**].

 

(iii)                               In addition to, or in lieu of, the Competitive Offer Notice, no later
than [**] days prior to the first day of each Supply Year, CUSTOMER may notify
POLYPEPTIDE that it intends to commence the manufacture of PRODUCT internally,
or through an Affiliate.  In such case,
the Minimum Requirement shall be reduced to [**] percent [**]%) of CUSTOMER’s
demand for the Territory during the Supply Year as set forth in 7.2(i)(c) above.  This process and its impact on the Rolling
Forecast is illustrated on Appendix B.

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the Commission.

 

28

 

(iv)                              Notwithstanding the above, in
the event that:  (a)   CUSTOMER has placed Firm Purchase Orders
with POLYPEPTIDE consistent with the Minimum Requirement, and during any period
of [**] consecutive months, POLYPEPTIDE is unable to make
timely delivery of the amounts set forth in the Firm Purchase Orders for any
reason, or (b) POLYPEPTIDE becomes bankrupt as set forth in Section 8.5,
then, in either case, the applicable Minimum Requirement shall be reduced to
such amount as CUSTOMER shall, in its sole discretion (but after consultation
with POLYPEPTIDE if practicable in light of the circumstances giving rise to
the failure of timely delivery), determine POLYPEPTIDE is able to provide to
CUSTOMER, and this amount shall become the Minimum Requirement for the
remainder of the Term.  The procedure set
forth herein shall be repeated if the triggering events arise again after
adjustment of the Minimum Requirement.

 

(v)                                 Enabling Alternative Suppliers.  If (i) at any time during the Term,
CUSTOMER’S minimum requirement is reduced pursuant to Section (iv) (but
not pursuant to Section (ii)), (ii) at any time during the Term,
POLYPEPTIDE is unable to make timely delivery of at least [**] percent ([**]%)
of the aggregate quantity of PRODUCT set forth on Firm Purchase Orders placed
in compliance with the terms of this Agreement for any consecutive [**] month
period or at least [**] percent ([**]%) of the aggregate quantity of PRODUCT
set forth on Firm Purchase Orders for any consecutive [**] month period, (iii) at
any time during the Term, POLYPEPTIDE informs CUSTOMER that based upon the
Rolling Quarterly Forecast provided by CUSTOMER, POLYPEPTIDE anticipates that
it will be unable to meet CUSTOMER’s PRODUCT requirements set forth in such
forecast, (iv) at any time during the Term, CUSTOMER elects to qualify
IRONWOOD, FOREST or an Affiliate of either as an Alternative Supplier, or (v) this
Agreement is terminated by CUSTOMER pursuant to Section 8.3, 8.5 or 15.1
or by POLYPEPTIDE pursuant to Section 8.2, then in any such instance an “Alternative
Supply Trigger” shall be deemed to have occurred.  Once an Alternative Supply Trigger has
occurred, POLYPEPTIDE will promptly cooperate with CUSTOMER and use
commercially reasonable efforts to provide full and complete technical
assistance, as needed, to optimize the ability and speed of an Alternative
Supplier to successfully manufacture PRODUCT. 
Such efforts may include (but are not intended to be limited to) the
transfer to CUSTOMER or the Alternative Supplier of POLYPEPTIDE Know-How, 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

29

 

Development
Know-How, New Know-How and other PRODUCT-specific data and information in
POLYPEPTIDE’s possession.  Technical
assistance provided by POLYPEPTIDE shall be at [**] expense except where the
Alternative Supply Trigger is caused by [**], in which case the costs of such
technical assistance shall be [**].  In
the event of an Alternative Supply Trigger, FOREST and IRONWOOD shall each
obtain a co-exclusive, worldwide, irrevocable, perpetual, royalty-free, fully
paid license (with rights to sublicense) under the POLYPEPTIDE IP to develop,
manufacture, have manufactured, formulate, use, sell, have sold, offer for
sale, import and have imported PRODUCT, Final Drug Product, or any salts,
derivatives, prodrugs or compositions of the PRODUCT.

 

ARTICLE 8

TERM AND TERMINATION

 

8.1                                 Term. 
This Agreement shall commence on the Effective Date and, unless
terminated earlier in accordance with this Article 8, shall continue in
effect for a period of five (5) years from the Commercial Launch Date (the
“Initial Term”).

 

8.2                                 Renewal Terms. 
This Agreement will automatically renew upon the expiration of the
Initial Term and shall continue in effect for consecutive three (3) year
periods (each such period being a “Renewal Term”), unless (i) terminated
by twenty-four (24) months advance written notice executed by both FOREST and
IRONWOOD and delivered to POLYPEPTIDE, or (ii) terminated by twenty-four
(24) months advance written notice executed by POLYPEPTIDE and delivered to
both FOREST and IRONWOOD.  Termination
notices issued under this Section 8.2 shall not be effective prior to the
end of the Initial Term.

 

8.3                                 Termination by CUSTOMER for
Cause.  FOREST and IRONWOOD, acting together, but not
separately, may terminate this Agreement at any time if POLYPEPTIDE materially
breaches a provision of this Agreement and fails to cure the breach within [**]
days after POLYPEPTIDE’s receipt of written notice containing details of the
material breach.  With respect to a
particular material default or breach of this Agreement, failure of CUSTOMER to
provide notice to POLYPEPTIDE as required by this Section 8.3 shall not
constitute a waiver of the right to give such notice with respect to any
subsequent default or breach.

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

30

 

8.4                                 Termination by POLYPEPTIDE for
Cause.  In the event that FOREST and/or IRONWOOD
materially breach a provision of this Agreement, POLYPEPTIDE shall provide
written notice containing details of the material breach to both FOREST and
IRONWOOD.  If the breach is not cured
within [**] days of the receipt of the notice, then POLYPEPTIDE shall have the
right to immediately terminate this Agreement, provided however, if the breach
is for failure of CUSTOMER to make timely payment on invoices, then the time period
that CUSTOMER has to cure is [**] days. 
For clarity, if the notice describes a breach of an obligation assigned
hereunder to only one of FOREST or IRONWOOD, either FOREST or IRONWOOD shall
have the right to cure the breach and avoid the termination of this
Agreement.  With respect to a particular
material default or breach of this Agreement, failure of POLYPEPTIDE to provide
notice to FOREST and IRONWOOD as required by this Section 8.4 shall not
constitute a waiver of the right to give such notices with respect to any
subsequent default or breach.

 

8.5                                 Bankruptcy.

 

(a)                                  To the extent permitted under applicable law, FOREST and IRONWOOD acting
together, but not separately, may terminate this Agreement effective
immediately with written notice if POLYPEPTIDE shall file for bankruptcy, shall
be adjudicated bankrupt, shall file a petition under insolvency laws, shall be
dissolved or shall have a receiver appointed for substantially all of its
property.

 

(b)                                 To the extent permitted under applicable law, if either FOREST or
IRONWOOD shall file for bankruptcy, shall be adjudicated bankrupt, shall file a
petition under insolvency laws, shall be dissolved or shall have a receiver
appointed for substantially all of its property (the “Bankrupt Customer”),
POLYPEPTIDE shall have the right to request that the other party (the “Non-Bankrupt
Customer”) assume in writing all rights and obligations of the Bankrupt
Customer under this Agreement and the Agreement shall remain in full force and
effect as an Agreement between POLYPEPTIDE and the Non-Bankrupt Customer.  If the Non-Bankrupt Customer does not agree
to assume the obligations of the Bankrupt Customer, then POLYPEPTIDE shall have
the right to terminate this Agreement effective immediately.

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request. An unredacted version of this
exhibit has been filed separately with the Commission.

 

31

 

(c)                                  All rights and licenses granted under or pursuant to any Section of this
Agreement are, and shall otherwise be deemed to be, for purposes of Section
365(n) of the Bankruptcy Code, licenses of rights to “intellectual property”
as defined under Section 101(35A) of the Bankruptcy Code.  The parties shall retain and may fully
exercise all of their respective rights and elections under the Bankruptcy
Code.

 

8.6                                 Product Discontinuance.

 

(a)                                  FOREST and IRONWOOD, acting together, but not separately, shall have the
right to terminate this Agreement, upon written notice to POLYPEPTIDE, in the
event the PRODUCT fails to receive Regulatory Approval in [**] or in the event
the manufacture and commercial sale of the PRODUCT is discontinued (including,
without limitation due to suspension or revocation of prior Regulatory Approval
in the Territory) in [**] (any such event, a “PRODUCT Termination”).

 

(b)                                 CUSTOMER shall provide POLYPEPTIDE with prompt written notice of the
occurrence of a PRODUCT Termination. 
Following a PRODUCT Termination, CUSTOMER may either (i) exercise its
right to terminate this Agreement pursuant to Section 8.6(a), or (ii) elect to
continue the Agreement but suspend production of PRODUCT (subject to Section
8.6(c) below), in each case by providing written notice of such exercise or
election (as the case may be) to POLYPEPTIDE. 
In either case, at the written request of CUSTOMER (the “Request”),
(A) POLYPEPTIDE shall suspend production of PRODUCT quantities contained in any
Firm Purchase Order or any Rolling Quarterly Forecast and CUSTOMER shall within
[**] days of the date of the Request reimburse POLYPEPTIDE for its fully loaded
internal costs as well as external costs associated with work-in-progress
commenced under any Firm Purchase Order and raw materials and intermediates
purchased for the manufacture of PRODUCT under the Firm Purchase Order, or (B)
POLYPEPTIDE shall suspend production of any PRODUCT quantities contained in any
Rolling Quarterly Forecast and shall complete the manufacture of PRODUCT that
was the subject of an outstanding Firm Purchase Order at the time of the
Request and the delivery, acceptance and payment provisions of this Agreement
shall apply to such PRODUCT.  To the
extent it is reasonably practicable to do so, 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

32

 

POLYPEPTIDE
agrees to use commercially reasonable efforts to mitigate the costs that are
borne by CUSTOMER under this Section 8.6(b).

 

(c)                                  If CUSTOMER elects to continue the Agreement but suspend production of
Product pursuant to Section 8.6(b)(ii), then (i) CUSTOMER may, any time
following such election, terminate this Agreement pursuant to Section 8.6(a),
and (ii) if CUSTOMER has not resumed production of Product (or placed a Firm
Purchase Order) or terminated this Agreement within [**] months following such
election, then, within [**] days following the expiration of such [**] month
period, POLYPEPTIDE shall have the right to provide CUSTOMER a written notice
of termination of this Agreement, which termination shall become effective [**]
days following CUSTOMER’s receipt of such notice if CUSTOMER does not resume
production of Product (or place a Firm Purchase Order) within such [**] day
period.  If CUSTOMER resumes production
of Product (or places a Firm Purchase Order) within such [**] day period, then
this Agreement shall continue in full force and effect.  If CUSTOMER terminates this Agreement
pursuant to Section 8.6(a) or POLYPEPTIDE terminates this Agreement pursuant to
this Section 8.6(c), then the restrictions set forth in Section 2.2 shall
terminate in their entirety as of the effective date of such termination.

 

8.7                                 Termination by FOREST or
Ironwood.  At any time, CUSTOMER may deliver to
POLYPEPTIDE written notice executed by both FOREST and IRONWOOD, informing
POLYPEPTIDE that after the date set forth in the notice, either FOREST or
IRONWOOD shall become the sole customer under this Agreement.  Following its receipt of such notice, and
after the date set forth in the notice, this Agreement shall be deemed amended
such that CUSTOMER shall mean the sole customer designated in the notice, and
POLYPEPTIDE shall thereafter look solely to such entity for performance under
this Agreement.

 

8.8                                 Non-Exclusive Remedy. 
Termination of this Agreement shall be in addition to, and shall not
prejudice, the parties’ remedies at law or in equity, including, without
limitation, the parties’ ability to receive legal damages and/or equitable
relief with respect to any breach of this Agreement, regardless of whether or
not such breach was the reason for the termination.

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request. An unredacted version of this
exhibit has been filed separately with the Commission.

 

33

 

ARTICLE 9

PRICES AND INVOICES

 

9.1                                 Product Prices. 
For Validation Batches supplied hereunder, CUSTOMER will pay POLYPEPTIDE
the price per gram set forth on Appendix C.  For all other PRODUCT supplied hereunder by
POLYPEPTIDE, CUSTOMER will pay to POLYPEPTIDE a price per gram based on the
cumulative volume of actual linaclotide content within PRODUCT ordered for
delivery during any given Supply Year in accordance with the Pricing Schedule
set forth on Appendix D hereto. The pricing set forth on Appendix D
hereto is based on the Specifications set forth on Appendix A hereto as of the
Effective Date.  In the event of a material change to such Specifications,
such pricing shall be adjusted by the parties in good faith to reflect such
change.  The parties agree that for
purposes of determining pricing of PRODUCT to be sold under this Agreement, the
price per gram shall be set at the beginning of the Supply Year based upon the
forecasted amount contained in the most recent Rolling Quarterly Forecast
issued prior to the commencement of the Supply Year.  After each Supply Year, the parties shall
compare the forecasted amount upon which the price per gram was based to the
actual amount of PRODUCT delivered during the Supply Year.  If the actual amount would have resulted in a
different price per gram than that paid by CUSTOMER, than any underpayment
shall be paid to POLYPEPTIDE and any overpayment shall be refunded to CUSTOMER
within [**] days following the completion of the analysis and its acceptance by
CUSTOMER and POLYPEPTIDE.  For clarity,
all quantities of PRODUCT delivered to FOREST or IRONWOOD, or any of their
respective designees, licensees or sublicensees (whether ordered under this
Agreement or under another Agreement with POLYPEPTIDE) shall be aggregated with
amounts purchased by CUSTOMER under this Agreement for the purpose of
determining the price per gram.

 

9.2                                 Invoices.  All invoices issued and payments made
pursuant to this Agreement shall be in United States Dollars.  Each invoice shall identify the Firm Purchase
Order number, Batch numbers and quantities. 
Invoices shall be due and payable [**] days after receipt thereof.

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request. An unredacted version of this
exhibit has been filed separately with the Commission.

 

34

 

9.3                                 Price Adjustments for Inflation. 
POLYPEPTIDE may adjust the prices set forth in the Pricing Schedule [**]
if necessary to reflect an increase in POLYPEPTIDE’s costs, including by way of
example, materials and wages, which costs shall be documented with reasonable
specificity to CUSTOMER in connection with any such adjustment; provided, however, that the annual percentage increase shall
be less than or equal to the Producer Price Index-Pharmaceutical Preparations
(Code PCU2834) published by the US Bureau of Labor Statistics for the most
recent 12 months period for which figures are available or, if the same is no
longer published, an index that is substantially similar thereto, and agreeable
to all parties.  No adjustment pursuant
to this Section shall be made prior to [**].

 

9.4                                 Price Adjustments for
Improvements.  It is the expectation of the parties that
POLYPEPTIDE and the CUSTOMER will achieve improvements in manufacturing that
will result in decreased manufacturing costs, and promptly following the
Effective Date, the Parties will form a working group comprised of an equal
number of representatives from each of POLYPEPTIDE, IRONWOOD and FOREST which
will meet periodically as mutually agreed to explore and discuss such
improvements.  POLYPEPTIDE agrees to use
good faith efforts to achieve such improvements, and further agrees to notify
CUSTOMER when such improvements have been achieved.  Thereafter, the parties will negotiate in
good faith a reduction to future PRODUCT pricing based upon the savings
achieved as a result of the improvement, with [**] percent ([**]%) of such
savings to be allocated to CUSTOMER and [**] percent ([[**]%) to POLYPEPTIDE;
provided that [**].

 

ARTICLE 10

OWNERSHIP AND LICENCES

 

10.1                           Ownership. 
All POLYPEPTIDE IP and Development IP shall be and remain the property
of POLYPEPTIDE.  All CUSTOMER IP shall be
and remain the property of IRONWOOD and/or FOREST.  Ownership of all New IP shall be determined
in accordance with United States patent laws; i.e., all New IP conceived
of or developed (i) solely by IRONWOOD and/or FOREST (“Customer New IP”)
shall be owned by CUSTOMER, (ii) solely by POLYPEPTIDE (“PolyPeptide New IP”)
shall be owned by POLYPEPTIDE, and (iii) jointly by IRONWOOD and/or FOREST (on
the one hand) and POLYPEPTIDE (on the 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

35

 

other hand) (“Joint New IP”) shall be owned
jointly by POLYPEPTIDE and CUSTOMER. 
Further, all records of work performed by POLYPEPTIDE under this
Agreement and all reports required to be delivered by POLYPEPTIDE to CUSTOMER
under this Agreement shall be deemed “works made for hire” and owned by
CUSTOMER.  Notwithstanding the foregoing,
solely to the extent necessary to comply with Applicable Laws, POLYPEPTIDE
shall have the right to keep one (1) copy, or if so required, one (1) original,
of such records and reports.  The
provisions of this Article 10 shall be deemed to supersede any provisions of
the DEVELOPMENT SUPPLY AGREEMENT which are inconsistent with the provisions
hereof.  The COLLABORATION AGREEMENT
shall govern all matters pertaining to the ownership and protection of, any
Intellectual Property Rights as between IRONWOOD and FOREST.

 

10.2                           PolyPeptide New IP.

 

(i)                                     Subject to Section 10.2(ii) below, POLYPEPTIDE shall have the only right
to file patent applications relating to inventions included in the New Know-How
made solely by POLYPEPTIDE.  In the event
that POLYPEPTIDE seeks such patent protection, POLYPEPTIDE shall bear the
costs, including, but not limited to, attorney’s fees associated with
preparing, filing and prosecuting such patent applications and for maintaining
such patent protection as may be granted. 
POLYPEPTIDE shall provide CUSTOMER with a copy of any proposed patent
applications prior to filing and shall afford CUSTOMER a commercially
reasonable period of time to comment on any such applications.  POLYPEPTIDE agrees that CUSTOMER’s comments
shall not be unreasonably rejected. 
POLYPEPTIDE agrees to promptly inform CUSTOMER of any additional
correspondence, office actions or filings associated with patent applications
which claim such New Know-How and shall provide CUSTOMER with a commercially
reasonable period of time to comment on such additional filings.  POLYPEPTIDE agrees that it shall not
unreasonably reject CUSTOMER’s comments.

 

(ii)                                  POLYPEPTIDE agrees not to file
or prosecute a patent application containing any claims or subject matter
covering POLYPEPTIDE New IP without the prior written consent of CUSTOMER.  POLYPEPTIDE
hereby grants to FOREST and IRONWOOD a co-exclusive, worldwide, irrevocable,
perpetual, royalty-free 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

36

 

fully
paid license under the PolyPeptide New IP to develop, manufacture, have
manufactured, formulate, use, sell, have sold, offer for sale, import and have
imported PRODUCT and Final Drug Product, or any salts, derivatives, prodrugs or
compositions of the PRODUCT.  Such
license shall include the right to sublicense to third parties [**].  The co-exclusive license granted in this
Section 10.2(ii) shall not limit POLYPEPTIDE’s right to assign its obligations
under this Agreement to Affiliates in accordance with Section 15.2.

 

10.3                           Customer New IP.

 

(i)                                     CUSTOMER shall have the only right to file patent applications relating
to inventions included in the New Know-How made solely by IRONWOOD and/or
FOREST.  In the event that CUSTOMER seeks
such patent protection, CUSTOMER shall bear the costs, including, but not
limited to, attorney’s fees associated with preparing, filing and prosecuting
such patent applications and for maintaining such patent protection as may be
granted.  CUSTOMER shall provide
POLYPEPTIDE with a copy of any proposed patent applications prior to filing and
shall afford POLYPEPTIDE a commercially reasonable period of time to comment on
any such applications.  CUSTOMER agrees
that POLYPEPTIDE’s comments will not be unreasonably rejected.  CUSTOMER agrees to promptly inform POLYPEPTIDE
of any additional correspondence, office actions or filings associated with
patent applications which claim such New Know-How and shall provide POLYPEPTIDE
with a commercially reasonable period of time to comment on such additional
filings.  CUSTOMER agrees that it shall
not unreasonably reject POLYPEPTIDE’s comments.

 

(ii)                                  CUSTOMER hereby grants to POLYPEPTIDE a non-exclusive, worldwide,
irrevocable, perpetual, royalty-free fully paid license under the Customer New
IP to develop, manufacture, have manufactured, formulate, use, sell, have sold,
offer for sale, import and have imported any product other than (A) the
PRODUCT, Final Drug Product, or any salts, derivatives, prodrugs or
compositions of the PRODUCT and (B) any other product containing an orally
delivered peptide that is a guanylate cyclase C agonist.

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request. An unredacted version of this
exhibit has been filed separately with the Commission.

 

37

 

10.4         Joint New IP.

 

(i)            POLYPEPTIDE and CUSTOMER shall cooperate in the filing of patent
applications relating to inventions included in the New Know-How made jointly
by IRONWOOD and/or FOREST (on the one hand) and POLYPEPTIDE (on the other
hand).  In the event that either CUSTOMER
or POLYPEPTIDE seeks such patent protection, the filing party shall bear the
costs, including, but not limited to, attorney’s fees associated with
preparing, filing and prosecuting such patent applications and for maintaining
such patent protection as may be granted. 
The filing party shall provide the other party with a copy of any
proposed patent applications prior to filing and shall afford the other party a
commercially reasonable period of time to comment on any such applications,
which comments will not be unreasonably rejected.  The filing party agrees to promptly inform
the other party of any additional correspondence, office actions or filings
associated with patent applications which claim such New Know-How and shall provide
the other party with a commercially reasonable period of time to comment on
such additional filings, which comments shall not be unreasonably rejected.

 

(ii)           Except as contemplated by [**], POLYPEPTIDE shall not, during or after
the Term, [**].

 

10.5         Development IP.

 

(i)            POLYPEPTIDE represents and warrants to CUSTOMER that, as of the Effective
Date, it has not filed patent applications which claim Development
Know-How.  In the event that POLYPEPTIDE
elects to file patent applications claiming Development Know-How after the
Effective Date, and subject to POLYPEPTIDE’s obligation to secure prior consent
from CUSTOMER as set forth in Section 10.5(ii), POLYPEPTIDE shall provide
CUSTOMER with a copy of the proposed applications prior to filing and shall
afford CUSTOMER a commercially reasonable period of time to comment on any such
applications.  POLYPEPTIDE agrees that
CUSTOMER’s comments will not be unreasonably rejected.  POLYPEPTIDE agrees to promptly inform
CUSTOMER of any additional correspondence, office actions or filings associated
with patent applications which claim Development Know-How and shall provide
CUSTOMER with a commercially reasonable period of time to comment on such 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

38

 

additional
filings.  POLYPEPTIDE agrees that it
shall not unreasonably reject CUSTOMER’s comments.

 

(ii)           POLYPEPTIDE represents and
warrants that it has not filed patent applications containing claims or subject
matter covering Development IP. POLYPEPTIDE agrees that it shall not file or
prosecute patent applications containing claims or subject matter covering
Development IP without the prior written consent of CUSTOMER.  POLYPEPTIDE
hereby grants to FOREST and IRONWOOD a co-exclusive, worldwide, irrevocable,
perpetual, royalty-free fully paid license under the Development IP to develop,
manufacture, have manufactured, formulate, use, sell, have sold, offer for
sale, import and have imported PRODUCT and Final Drug Product, or any salts,
derivatives, prodrugs or compositions of the PRODUCT.  Such license shall include the right to
sublicense to third parties [**].  The
co-exclusive license granted in this Section 10.5(ii) shall not limit
POLYPEPTIDE’s right to assign its obligations under this Agreement to
Affiliates in accordance with Section 15.2.

 

10.6         Enforcement of IP. In connection with and in
furtherance of the objectives of the license grants to FOREST and IRONWOOD
pursuant to Article 10 and pursuant to Section 7.2(v), POLYPEPTIDE
agrees to cooperate with CUSTOMER, as reasonably requested by CUSTOMER in
connection with CUSTOMER’s development or commercialization of PRODUCT or Final
Drug Product and at CUSTOMER’s expense, to enforce such PolyPeptide New IP,
Joint New IP, Development IP and/or POLYPEPTIDE IP against Third Parties
(including, without limitation, by agreeing to act as a party to enforcement
litigation).

 

10.7         Agreements with Employees,
Consultants and Subcontractors.  Each party
represents that all employees, consultants and authorized subcontractors, who
will participate in carrying out any obligations under this Agreement will have
agreements in place that (a) impose confidentiality obligations on such
employees, consultants and authorized subcontractors comparable to those set
forth in Article 11 of this Agreement; and (b) effectively vest in
POLYPEPTIDE or CUSTOMER, as applicable, any and all rights which such personnel
and authorized subcontractors might otherwise have in the results of their work
relating to this Agreement and are adequate to permit POLYPEPTIDE or 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

39

 

CUSTOMER, as applicable, to transfer such rights and to
grant such licenses as set forth in this Agreement.

 

10.8        License Grant to POLYPEPTIDE for PRODUCT. 
CUSTOMER hereby grants to POLYPEPTIDE a non-exclusive,
non-sublicensable, royalty-free license under the CUSTOMER IP and Customer New
IP to manufacture the PRODUCT for CUSTOMER or for any other third party
approved in writing by IRONWOOD.  This
license shall terminate upon the expiration or early termination of this
Agreement unless POLYPEPTIDE is engaged in the manufacture of PRODUCT for a
third party with the consent of IRONWOOD. 
In such case the license shall terminate at the earlier of, (a) the
time POLYPEPTIDE ceases to manufacture PRODUCT for the third party, or (b) at
such time as IRONWOOD revokes its authorization for POLYPEPTIDE to manufacture
PRODUCT for such third party.

 

ARTICLE 11

CONFIDENTIALITY

 

11.1         Confidentiality Obligations.  CUSTOMER and POLYPEPTIDE each agrees to
retain in strict confidence and not to disclose, divulge or otherwise
communicate to any other person or entity any Confidential Information of the other,
whether disclosed prior to or after the Effective Date, and further agrees not
to use any such Confidential Information for any purpose, except pursuant to,
and in order to carry out, the terms and objectives of this Agreement, provided
that each may disclose Confidential Information of the other to the officers,
directors, employees, agents, consultants, authorized subcontractors or other
representatives of the receiving party or its Affiliates (the “Representatives”),
who, in each case, need to know such Confidential Information for purposes of
the implementation and performance by the receiving party of this Agreement and
will use such Confidential Information only for such limited purposes.  For clarity, all information relating to New
IP and all information, data, results, reports and records prepared by
POLYPEPTIDE in the performance of this Agreement shall be deemed to be CUSTOMER
Confidential Information, and POLYPEPTIDE agrees to treat it as such.  Notwithstanding the above, FOREST and IRONWOOD
shall be permitted to share POLYPEPTIDE’s Confidential Information with each
other.

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request. An unredacted version of this
exhibit has been filed separately with the Commission.

 

40

 

11.2         Standard of Care.  CUSTOMER and POLYPEPTIDE each agree to use
with respect to the other party’s Confidential Information at least the same
standard of care as it uses to protect proprietary or Confidential Information
of its own of comparable sensitivity, and to exercise every reasonable
precaution to prevent and restrain the unauthorized disclosure of the other
party’s Confidential Information by any of its Representatives.

 

11.3         Obligations of Representatives
to Maintain Confidentiality.  CUSTOMER and
POLYPEPTIDE each warrants that each of its Representatives to whom any of the
other party’s Confidential Information is revealed shall previously have been
informed of the confidential nature of the Confidential Information and shall
be under a contractual or other legal obligation to maintain the
confidentiality of the Confidential Information in accordance with terms and
conditions substantially similar to those applicable to the receiving party
under this Article 11.

 

11.4         Exceptions.  The provisions of Section 11.1 shall not
apply to any Confidential Information disclosed hereunder which:

 

(a)           was known by the receiving party prior to its disclosure to the receiving
party by the other party, as evidenced by the prior written records of the
receiving party; or

 

(b)           either before or after the date of disclosure to the receiving party by
the other party is lawfully disclosed to receiving party by an independent,
unaffiliated third party rightfully in possession of the Confidential
Information, provided that disclosure and use is in conformity with the
obligations of confidentiality and non-use imposed by such third party; or

 

(c)           either before or after the date of disclosure to the receiving party by
the other party becomes published or generally known to the public through no
fault or omission on the part of the receiving party or its Representatives; or

 

(d)           is developed independently by the receiving party without use of
Confidential Information of the other Party, as evidenced by the written
records of the receiving party; provided, however, that
this subsection (d) shall not serve to exclude from the definition of
CUSTOMER’s Confidential Information any 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

41

 

information
relating to New IP or any information, data, results, reports and records
prepared by POLYPEPTIDE in the performance of this Agreement.

 

11.5         Required Disclosures.  Confidential Information may be disclosed,
without breaching this Agreement, by the receiving party to the extent
necessary to comply with Applicable Laws, or in response to a valid subpoena or
other judicial order or a request by Regulatory Authorities, or to defend or
prosecute litigation; provided, however, that
to the extent practicable, in each of the foregoing cases, the receiving party
shall provide prior written notice to the other party of any such required
disclosure and shall take, at the disclosing party’s request, such reasonable
and lawful actions to avoid and/or minimize the degree of such disclosure, and
shall provide the disclosing party with the opportunity to seek to obtain
suitable protection to prevent such required disclosure.

 

11.6         Use of Confidential Information
Pursuant to Licenses.  Notwithstanding
anything herein to the contrary, the parties agree that disclosure and use by
FOREST and/or IRONWOOD (including their respective licensees, sublicensees and
designees) of POLYPEPTIDE’s Confidential Information pursuant to the license
granted in Section 7.2(v) shall not be a violation of any term or
condition contained in this Article 11, provided that such disclosure or
use is reasonably necessary in order to exploit the applicable license granted.

 

11.7         Confidentiality of Terms of
Agreement.  Except as may be required to be disclosed
pursuant to Sections 11.4 or 11.9, neither CUSTOMER nor POLYPEPTIDE shall
disclose the terms of this Agreement to any third party without the prior
written consent of the other party, except that (i) the parties may
disclose the terms of this Agreement to their accountants and attorneys, provided
any such attorney or accountant agrees to be bound by the confidentiality
obligations of this Article 11.6, and (ii) each of FOREST and
IRONWOOD may disclose the terms of this Agreement to its collaboration
partners, and potential licensees.

 

11.8         Construction.  Except as otherwise set forth in this
Agreement, nothing herein shall be construed as giving a party any right,
title, interest in or ownership of the Confidential Information of another
party.  For the purposes of this
Agreement, any specific item disclosed as part of Confidential Information
shall not be deemed to be in the public domain or in the prior possession of
the 

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request. An unredacted version of this
exhibit has been filed separately with the Commission.

 

42

 

receiving party merely because more general information
is in the public domain or more general information is in the prior possession
of the receiving party, unless the more general information also discloses or
reflects the specific Confidential Information.

 

11.9         Survival of Confidentiality
Obligations.  The confidentiality obligations of the
parties contained in this Article 11 shall remain binding on the parties
during and after the Term of this Agreement, and shall survive the expiration
or termination of this Agreement, regardless of the cause of such expiration or
termination.  The parties acknowledge
that any breach of this Article 11 will constitute irreparable harm, and
that the non-breaching party shall be entitled to specific performance or
injunctive relief to enforce this Article 11 in addition to whatever
remedies such party may otherwise be entitled to at law or in equity.

 

11.10       Publicity and SEC Filings.  CUSTOMER and POLYPEPTIDE agree that no public
announcement of the execution or terms of this Agreement shall be made without
the prior written consent of POLYPEPTIDE, IRONWOOD and FOREST.  In the event that any of the parties are
obligated to make disclosure in satisfaction of requirements of the Securities
and Exchange Commission or any other governmental or regulatory agencies, the
parties shall cooperate fully and in a timely manner to see that the filings
are made and confidential treatment is sought with respect to Confidential
Information of the parties.

 

ARTICLE 12

WARRANTIES AND CONSEQUENTIAL DAMAGES

 

12.1         Warranties by POLYPEPTIDE. 
POLYPEPTIDE represents, warrants and covenants that:

 

(a)           POLYPEPTIDE shall manufacture PRODUCT in accordance with the
Manufacturing Warranties and that the PRODUCT, when delivered pursuant to the
terms of this Agreement will conform the Specifications and POLYPEPTIDE Release
Documents;

 

(b)           The PRODUCT, when delivered to CUSTOMER pursuant to the terms of this
Agreement, will not be adulterated, misbranded, or otherwise prohibited from
sale within the meaning of the FDCA or any other Applicable Laws;

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request. An unredacted version of this
exhibit has been filed separately with the Commission.

 

43

 

 

(c)                                  As of the Effective Date, POLYPEPTIDE has obtained (or will obtain prior
to manufacturing PRODUCT hereunder), and will remain in compliance with during
the Term of this Agreement, all permits, licenses and other authorizations (the
“Permits”) which are required under Applicable Laws relating to the
manufacturing of the Product;

 

(d)                                 As of the Effective Date, (i) POLYPEPTIDE has not been, and none of
its employees has been, suspended, debarred or subject to temporary denial of
approval by the FDA from working in or providing services, directly or
indirectly, to any applicant for approval of a drug product or any
pharmaceutical or biotechnology company, (ii) to the best of POLYPEPTIDE’s
knowledge, none of its consultants and authorized subcontractors who will
participate in the performance, supervision, management or review of the
manufacturing of PRODUCT supplied under this Agreement has been, suspended,
debarred or subject to temporary denial of approval by the FDA from working in
or providing services, directly or indirectly, to any applicant for approval of
a drug product or any pharmaceutical or biotechnology company, and (iii) to
the best of POLYPEPTIDE’s knowledge, neither it nor its employees nor such
persons referenced in subsection (ii) above are under consideration to be
suspended, debarred or subject to temporary denial of approval, by the FDA from
working in or providing services, directly or indirectly, to any applicant for
approval of a drug product or any pharmaceutical or biotechnology company;

 

(e)                                  [**] use of the POLYPEPTIDE IP for manufacture of PRODUCT (including any
analytic methods used by POLYPEPTIDE) hereunder will not infringe any
Intellectual Property Rights of any third party;

 

(f)                                    All waste generated in the manufacture of the PRODUCT under this
Agreement will be stored, transported and disposed of in a safe and
environmentally sound manner consistent with all Applicable Laws;

 

(g)                                 Any manufacturing facility used by POLYPEPTIDE to manufacture PRODUCT is
in compliance with the Facility Warranties.

 

(h)                                 POLYPEPTIDE will provide CUSTOMER with prompt written notice of any facts
or circumstances (whether occurring prior to or after the Effective Date) which
cause any of the representations and warranties contained in this Section 12.1
not 

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request. An unredacted version of this
exhibit has been filed separately with the Commission.

 

44

 

to be true, accurate, and complete in any material
respect as of the Effective Date or as of any date during the Term of this
Agreement.

 

12.2                           Waiver of Consequential Damages. 
IN NO EVENT SHALL A PARTY HERETO BE LIABLE TO ANOTHER PARTY HERETO FOR
LOSS OF PROFITS, INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL
DAMAGES UNDER THIS AGREEMENT FROM ANY CAUSE WHATSOEVER, EXCEPT TO THE EXTENT
ARISING OUT OF (A) A BREACH OF ARTICLE 11 (CONFIDENTIALITY), (B) A
WILLFUL OR INTENTIONAL BREACH OR MISREPRESENTATION HEREUNDER, OR (C) OBLIGATIONS
TO INDEMNIFY AS SET FORTH IN ARTICLE 13.

 

12.3                           Limitation of Liability.  POLYPEPTIDE’s LIABILITY FOR DIRECT DAMAGES
WILL BE LIMITED TO [**].  THIS LIMITATION
OF LIABILITY SHALL NOT APPLY IN THE EVENT LIABILITY ARISES OUT OF (A) A
BREACH OF ARTICLE 11 (CONFIDENTIALITY), (B) A WILLFUL OR INTENTIONAL
BREACH OR MISREPRESENTATION HEREUNDER OR (C) OBLIGATIONS TO INDEMNIFY AS
SET FORTH IN ARTICE 13.

 

ARTICLE 13

INDEMNIFICATION

 

13.1                           Indemnification by CUSTOMER.  CUSTOMER shall defend, indemnify and hold
harmless POLYPEPTIDE, its directors, officers, employees and agents (“POLYPEPTIDE
Indemnitees”) from and against any loss, costs, damages, judgments,
settlements, interest, fees, or expenses, including, without limitation, all
reasonable attorneys’ fees related to or arising from this Agreement or the
PRODUCT (collectively, “Liabilities”) paid or payable by the POLYPEPTIDE
Indemnitees in connection with any claim, action, suit, demand or other legal
assertion or proceeding brought by a third party (collectively, “Claims”)
to the extent that any such Claims or Liabilities arise out of or result from (i) the
storage (after delivery to CUSTOMER or its designee), use, transfer or sale
including without limitation, the labelling, packaging, distribution, promotion
and marketing of the PRODUCT or any product which incorporates the PRODUCT
(including the Final Drug Product); (ii) the failure by CUSTOMER to comply
with Applicable Laws relating to the PRODUCT; or (iii) any negligent or
wilful act or omission by CUSTOMER in connection with its performance of this 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

45

 

Agreement or any breach by CUSTOMER of any of its
representations, warranties or covenants contained herein;  (iv) any Claim that the marketing,
distribution or sale of the PRODUCT and/or any pharmaceutical compositions
containing the PRODUCT violate the Intellectual Property Rights of any third
party, except to the extent such Claim is subject to  Section 13.2(v) below ; or (v) any
Claim that the use of CUSTOMER IP for manufacture of the PRODUCT and/or any
pharmaceutical compositions containing the PRODUCT violate the Intellectual
Property Rights of any third party.

 

13.2                           Indemnification by POLYPEPTIDE.  POLYPEPTIDE shall defend, indemnify and hold
harmless FOREST and IRONWOOD, and each of their respective directors, officers,
employees and agents (collectively, the “CUSTOMER Indemnitees”) from and
against any Liability paid or payable by the CUSTOMER Indemnitees in connection
with any Claims to the extent that any such Claims or Liabilities arise out of
or result from (i) failure of any PRODUCT to meet Specifications and
POLYPEPTIDE Release Documents; (ii) the failure by POLYPEPTIDE to comply
with Applicable Laws with respect to the manufacture of the PRODUCT; (iii) any
negligent or wilful act or omission by POLYPEPTIDE, including without
limitation negligence in manufacturing PRODUCT in accordance to Specifications
and Manufacturing Warranties; (iv) any breach by POLYPEPTIDE of any of its
representations, warranties or covenants contained herein, or (v) any
Claim that the manufacture of PRODUCT by POLYPEPTIDE infringes the Intellectual
Property Rights of any third party (except to the extent such Claim is subject
to subsection (v) of Section 13.1).

 

13.3                           Prompt Notice Required.  No claim for indemnification hereunder shall
be valid unless notice of the matter which may give rise to such claim is given
in writing by the indemnitee (the “Indemnitee”) to the party against
whom indemnification may be sought (the “Indemnitor”) as soon as
reasonably practicable after such Indemnitee becomes aware of such claim; provided, however, that the failure to notify the Indemnitor
shall not relieve it from any liability that it may have to the Indemnitee
otherwise unless the Indemnitor demonstrates that the defense of the underlying
Claim has been materially prejudiced by such failure to provide timely
notice.  Such notice shall request
indemnification and describe the Liability and Claim giving rise to the request
for indemnification, and provide relevant details thereof.  The Indemnitor shall notify the Indemnitee no
later than 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

46

 

thirty (30) days from such notice of its intention to
assume the defense of any such Claim.  If
the Indemnitor fails to give Indemnitee notice of its intention to defend any
such Claim as provided in this Section 13.3, the Indemnitee involved shall
have the right to assume the defense thereof with counsel of its choice, at the
Indemnitor’s expense, and defend, settle or otherwise dispose of such Claim
with the consent of the Indemnitor, not to be unreasonably withheld or delayed.

 

13.4                           Indemnitor May Settle.  Subject to the terms of this Section 13.4,
the Indemnitor shall at its expense, have the right to settle and defend,
through counsel reasonably satisfactory to the Indemnitee, any Claim or
Liability which is or may be brought in connection with all matters for which
indemnification is provided hereunder. 
In such event the Indemnitee of the Claim or Liability in question and
any successor thereto shall permit Indemnitor’s counsel and independent
auditors, to the extent relevant, full and free access to its books and records
and otherwise fully cooperate with the Indemnitor in connection with such Claim
or Liability; provided, however, that (i) the
Indemnitee shall have the right fully to participate in such defense at its own
expense; (ii) the Indemnitor’s counsel and independent auditors shall not
disclose any Confidential Information of the Indemnitee to the Indemnitor
without the Indemnitee’s consent; (iii) access shall only be given to the
books and records that are relevant to the Claim or Liability at issue.  The defense by the Indemnitor of any such
actions shall not be deemed a waiver by the Indemnitor of its right to assert a
claim with respect to the responsibility of the Indemnitor with respect to the
Claim or Liability in question.  The
Indemnitor shall have the right to settle or compromise any Claim against the
Indemnitee without the consent of the Indemnitee provided that the terms
thereof: (a) provide for the unconditional release of the Indemnitee; (b) require
the payment of compensatory monetary damages by Indemnitor only; and (c) expressly
state that neither the fact of settlement nor the settlement agreement shall
constitute, or be construed or interpreted as, an admission by the Indemnitee
of any issue, fact, allegation or any other aspect of the Claim being
settled.  In all other cases, the
Indemnitee and Indemnitor must agree to enter into any proposed settlement,
such agreement not be unreasonably withheld. 
No Indemnitee shall pay or voluntarily permit the determination of any
Liability which is subject to any such Claim while the Indemnitor is
negotiating the settlement thereof or contesting the matter, except with the
prior written consent of the Indemnitor, which consent shall not be
unreasonably withheld or delayed.

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request. An unredacted version of this
exhibit has been filed separately with the Commission.

 

47

 

13.5                           Assistance.  Each party shall provide all information in
its possession and reasonable assistance to another party as necessary to
enable another party to defend any Claim. 
The Indemnitee shall provide reasonable cooperation to the Indemnitor in
defense of any Claim or Liability, including, but not limited to, affording
complete access to all relevant records. 
Nothing herein shall prevent the Indemnitee from retaining counsel of
its choice, at such party’s expense, to monitor the defense, trial, or
settlement of this matter, and the Indemnitor and its counsel shall reasonably
cooperate with such Indemnitee counsel.

 

ARTICLE 14

INSURANCE

 

14.1                           Amounts.  Each party shall maintain during the Term
insurance in such amounts and against such risks as is customary by companies engaged
in the same or similar business and similarly located, and shall, upon request,
furnish evidence of such insurance.

 

14.2                           POLYPEPTIDE Insurance.  Without prejudice to any rights or remedies
CUSTOMER may have under this Agreement or otherwise at law generally,
POLYPEPTIDE shall (at POLYPEPTIDE’s sole cost and expense) maintain in full
force and effect, during the Term of this Agreement and for a period of [**]
years after the expiration or termination hereof, adequate commercial general
liability insurance, including product liability insurance, covering the risks
and Liabilities arising out of any breach by POLYPEPTIDE of its obligations
under this Agreement and POLYPEPTIDE’s indemnification obligations
hereunder.  Such insurance shall be
written by a reputable insurance company with an A.M. Best rating of “A,”
and shall list FOREST and IRONWOOD as additional named insureds thereunder, and
shall require [**] days written notice to be given to each of FOREST and
IRONWOOD prior to any cancellation or material change thereof.  The limits of such insurance shall not be
less than [**] per occurrence with an aggregate of [**] for personal injury,
including death, and property damage. 
Upon request, POLYPEPTIDE shall provide FOREST and/or IRONWOOD with a
certificate of insurance evidencing the same.

 

14.3                           FOREST and IRONWOOD Insurance.  Without prejudice to any rights or remedies
POLYPEPTIDE may have under this Agreement or otherwise at law generally, each
of FOREST and IRONWOOD shall (at their own sole cost and 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

48

 

expense) maintain in full force and effect, during the
Term of this Agreement and for a period of [**] years after the expiration or
termination hereof, adequate commercial general liability insurance, including
product liability insurance, covering the risks and Liabilities that may arise
from its breach of its obligations under this Agreement and from its  indemnification obligations to POLYPEPTIDE
hereunder.  Such insurance shall be
written by a reputable insurance company with an A.M. Best rating of “A,”
and shall list POLYPEPTIDE as an additional named insured thereunder, and shall
require [**] days written notice to be given to POLYPEPTIDE prior to any
cancellation or material change thereof. 
The limits of such insurance shall not be less than [**] per occurrence
with an aggregate of [**] for personal injury, including death, and property
damage.  Upon request, each of FOREST and
IRONWOOD shall provide POLYPEPTIDE with a certificate of insurance evidencing
the same.

 

ARTICLE 15

GENERAL PROVISIONS

 

15.1                           Force Majeure.  Failure of any party to perform its obligations under
this Agreement shall not subject such Party to any liability or place them in
breach of any term or condition of this Agreement to the other party if such
failure is due to any cause beyond the reasonable control of such
non-performing party (“Force Majeure”), unless conclusive evidence to
the contrary is provided.  Causes of
non-performance constituting Force Majeure shall include, without limitation,
acts of God, fire, explosion, flood, drought, war, riot, sabotage, embargo,
strikes or other labor trouble, interruption of or delay in transportation, a
national health emergency or compliance with any order or regulation of any
government entity acting with color of right. 
The party affected shall promptly notify the other party of the
condition constituting force majeure as defined herein and shall exert
commercially reasonable efforts to eliminate, cure and overcome any such causes
and to resume performance of its obligations with all possible speed; provided
that nothing herein shall obligate a party to settle on terms unsatisfactory to
such party any strike, lockout or other labor difficulty, any investigation or
other proceeding by any public authority or any litigation by any third party.  If POLYPEPTIDE experiences a condition
constituting force majeure as defined herein for more than [**] consecutive
days, then (a) CUSTOMER may request that the parties consult with each
other to negotiate a mutually 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

49

 

satisfactory resolution to the problem, if practicable,
and (b) if after such consultations POLYPEPTIDE continues to experience a
condition constituting force majeure as defined herein for more than an
additional [**] consecutive days, then an Alternative Supply Trigger shall be
deemed to have occurred under Section 7.2(v), and Customer may purchase
PRODUCT from a third party (without regard to the Minimum Requirement) and
cancel any unfulfilled Firm Purchase Orders. 
If such force majeure continues for more than [**] consecutive days,
then FOREST and IRONWOOD, together, but not separately, may terminate this
Agreement.

 

15.2                           Assignment.  No party shall, without the prior written
consent (not to be unreasonably withheld or delayed) of the other parties,
assign or transfer this Agreement to any person or entity, in whole or in
part.  In addition, POLYPEPTIDE agrees
that it shall not subcontract or delegate any of its obligations hereunder
without the prior written consent of FOREST and IRONWOOD, which shall not be
unreasonably withheld.  Notwithstanding
the foregoing, (a) a party may, without such consent, assign this
Agreement (or any of its rights or obligations hereunder) to an Affiliate of
such party; provided that no assignment to an Affiliate shall relieve any party
of responsibility for the performance of its obligations hereunder; (b) each
of FOREST, IRONWOOD and POLYPEPTIDE may assign this Agreement without the
prior written consent of another party to any successor in connection with a
merger or acquisition by such third party of a controlling interest in the
equity securities, or a substantial portion of the assets to which this
Agreement relates, of FOREST, IRONWOOD or POLYPEPTIDE, as the case may be,
provided (x) in such case, that the successor or assignee assumes all of
the assignee’s  obligations under this
Agreement and (y) in the event of assignment by POLYPEPTIDE under this
subsection 15.2(b), that unless prior consent for the assignment has been
obtained from FOREST and IRONWOOD, then FOREST and IRONWOOD, together, but not
separately, may terminate this Agreement by providing [**] months written
notice to POLYPEPTIDE or its successor if they have reasonable objective
grounds to conclude that the assignee’s performance under this Agreement will
not be substantially similar to that of POLYPEPTIDE.  Upon POLYPEPTIDE’s request, CUSTOMER agrees
to provide and discuss in good faith such objective grounds. All of the terms
and provisions of this Agreement shall be binding 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

50

 

upon and inure to the benefit of and be enforceable by
the parties hereto and their respective successors and assigns.

 

15.3                           Relationship with CUSTOMER. 
Following the Effective Date, FOREST and IRONWOOD shall provide
POLYPEPTIDE with a written notice signed by each of FOREST and IRONWOOD which
shall identify the party that will be providing POLYPEPTIDE with all forecasts
and orders required or permitted to be furnished hereunder.  POLYPEPTIDE shall be entitled to rely upon
such written notice until it receives a written notice containing contrary
instructions signed by both FOREST and IRONWOOD.

 

15.4                           Entire Agreement.  This Agreement, together with the Quality
Agreement, shall constitute the entire Agreement between the parties hereto and
shall supersede any other agreements, whether oral or written, express or
implied, as they pertain to the subject matter of this Agreement, which
generally pertains to the commercial supply of PRODUCT.

 

15.5                           Quality Agreement.  The parties shall negotiate in good faith the
Quality Agreement and shall execute the Quality Agreement no later than ninety
(90) days following the Effective Date. 
To the extent there is any conflict between the provisions of the
Quality Agreement and this Agreement, the provisions of this Agreement shall
apply.

 

15.6                           Independent Relationship.  Nothing herein contained shall be deemed to
create an employment, agency, joint venture or partnership relationship between
the parties hereto or any of their agents or employees, or any other legal
arrangement that would impose liability upon one party for the act or failure
to act of another party.  No party shall
have any power to enter into any contracts or commitments or to incur any
liabilities in the name of, or on behalf of, the another party, or to bind
another party in any respect whatsoever.

 

15.7                           Notice.  All notices and other communications required
or permitted to be given or made pursuant to this Agreement shall be in writing
signed by the sender and shall be deemed duly given (a) on the date
delivered, if personally delivered, (b) on the date sent by telecopier
with automatic confirmation by the transmitting machine showing the proper
number of pages were transmitted without error, (c) on the business
day after being sent by Federal Express or another recognized 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

51

 

overnight mail service which utilizes a written form of
receipt for next day or next business day delivery, or (d) two (2) business
days after mailing, if mailed by United States postage-prepaid certified or
registered mail, return receipt requested, in each case addressed to the
applicable party at the address set forth below; provided that a party may
change its address for receiving notice by the proper giving of notice
hereunder:

 

If to IRONWOOD:

 

Ironwood Pharmaceuticals, Inc.

320 Bent Street

Cambridge, MA  02141

Attn:  Chief Operating Officer

Fax:  617.494.0480

 

With a copy to:

 

Ironwood Pharmaceuticals, Inc.

320 Bent Street

Cambridge, MA  02141

Attn: General Counsel

Fax: 617.494.0480

 

If to FOREST:

 

Forest Laboratories, Inc.

909 Third Avenue

New York, New York  10022

Attn:  General Counsel

Fax: [**]

 

If to POLYPEPTIDE

 

PolyPeptide Laboratories, Inc.

365 Maple Avenue

Torrance, CA  90503

Attn: Chief Operating Officer

Fax: (310) 782-3645

 

With a copy to:

 

PolyPeptide Laboratories (SWEDEN) AB

PO Box 30089

SE20061 Limhamn

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

52

 

 

Sweden

Attn: Managing Director

Fax:+46 40 36 63 85

 

Notices to IRONWOOD or FOREST shall not be deemed
effective unless and until a copy of such notice is furnished to both such
parties.

 

15.8         Waiver.  Any delay or failure in enforcing a party’s
rights under this Agreement or any waiver as to a particular default or other
matter shall not constitute a waiver of such party’s rights to the future
enforcement of its rights under this Agreement, nor operate to bar the exercise
or enforcement thereof at any time or times thereafter, excepting only as to an
express written and signed waiver as to a particular matter for a particular
period of time.

 

15.9         Headings.  Section headings contained in this
Agreement are included for convenience only and form no part of the agreement
between the parties.

 

15.10       Severability.  If any provision of this Agreement or the
application of any such provision to any person or circumstance shall be held
invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provisions hereof.  The parties
shall consult and use good faith efforts to agree upon a valid and enforceable
provision, which shall be a reasonable substitute for such invalid provision in
light of the intent of this Agreement.

 

15.11       Counterparts.  This Agreement may be executed in any number
of separate counterparts, each of which shall be deemed to be an original, but
which together shall constitute one and the same instrument.  Facsimile or telecopy versions of manual
signatures of this Agreement shall be considered original manual signatures.

 

15.12       Governing Law.  This Agreement and any and all matters
arising directly or indirectly herefrom shall be governed by and construed and
enforced in accordance with the internal laws of the [**] applicable to
agreements made and to be performed entirely in such state, without giving
effect to the conflict of law principles thereof which would dictate that the
laws of another jurisdiction would apply. 
The parties expressly agree that the United Nations Convention on
Contracts for the International Sale of Goods shall not apply to this Agreement
or 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

53

 

any party’s performance hereunder.  Matters of inventorship shall be determined
in accordance with the principles of United States patent law.

 

15.13       Informal Dispute Resolution.  Unless otherwise expressly provided for
herein, any claim or controversy between the parties arising out of or relating
to the execution, interpretation and performance of this Agreement (including
the validity, scope and enforceability of this provision) shall be identified
in writing and presented to the other parties. 
Within fourteen (14) days after delivery of such notice of dispute, the
a senior business officer of each party shall meet at a mutually acceptable
time and place, and thereafter as often as they reasonably deem necessary, to
attempt to resolve the dispute in good faith. 
All reasonable requests for information made by one party to the others
shall be honored.  All negotiations
pursuant to this clause are confidential and shall be treated as compromise and
settlement negotiations for purposes of applicable rules of evidence.  If such Executive Officers cannot resolve
such dispute within fourteen (14) days after such meeting, then each party
reserves its right to any and all remedies available under law or equity with
respect to any other dispute.

 

15.14       Arbitration.

 

(a)           If any claim or controversy is not resolved pursuant to Section 15.13,
then such claim or controversy shall be resolved by arbitration in accordance
with the rules of the American Arbitration Association. There shall be
three conflict-free, unbiased arbitrators, at least one of which shall be
knowledgeable in peptide chemistry and the manufacture thereof, and at least
one of which shall be knowledgeable in FDA requirements for the manufacture of
active pharmaceutical ingredients (who shall be separate from the individual
knowledgeable in peptide chemistry), and all of which shall have significant experience
relating to the pharmaceutical/ biotechnology industry relevant to the matters
being arbitrated.

 

(b)           A demand for arbitration must be filed with the American Arbitration
Association within one year of the date the claim or controversy arises. The
arbitration hearing shall be held as soon as practicable but in any event no
later than three (3) months after the initial demand for arbitration is
filed with the American Arbitration Association.

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request. An unredacted version of this
exhibit has been filed separately with the Commission.

 

54

 

(c)           The arbitration hearing shall be
held in [**].

 

15.15       Injunctive Relief. Any party may seek immediate
injunctive or other interim equitable relief as necessary to Agreement, but no
such action for such relief shall waive the arbitration provisions set forth in
Section 15.14 or act to remove or otherwise prevent the arbitration of any
disputes under this Agreement as contemplated by Section 15.14.

 

15.16       Amendments.  This Agreement may not be amended except by
an instrument in writing signed on behalf of each of the Parties.

 

15.17       Further Actions and Documents.  Each Party agrees to execute, acknowledge and
deliver all such further instruments, and to do all such further acts, as may
be reasonably necessary or appropriate to carry out the intent and purposes of
this Agreement.

 

15.18       Survival.  The
parties’ respective rights and obligations under the following Sections and
Articles (and all associated definitions) shall survive the termination or
expiration of this Agreement:  Articles
1, 6, 10, 11, 12, 13, 14, 15 and Section 2.2.

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

55

 

IN
WITNESS WHEREOF, the parties have executed this Commercial Supply
Agreement as of the Effective Date.

 

 

	
  PolyPeptide
  Laboratories, Inc.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Jane Salik

  	
   

  
	
   

  	
  Name:

  	
  Jane Salik

  	
   

  
	
   

  	
  Title:

  	
  CEO

  	
   

  
	
   

  	
   

  	
   

  
	
  PolyPeptide Laboratories (SWEDEN) AB

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Alain Scarso

  	
   

  
	
   

  	
  Name:

  	
  Alain Scarso

  	
   

  
	
   

  	
  Title:

  	
  Managing Director

  	
   

  
	
   

  	
   

  	
   

  
	
  Ironwood
  Pharmaceuticals, Inc.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Michael J. Higgins

  	
   

  
	
   

  	
  Name: 

  	
  Michael J. Higgins

  	
   

  
	
   

  	
  Title:

  	
  COO

  	
   

  
	
   

  	
   

  	
   

  
	
  Forest Laboratories, Inc.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Lawrence Olanoff

  	
   

  
	
   

  	
  Name:

  	
  Lawrence Olanoff

  	
   

  
	
   

  	
  Title:

  	
  President and Chief Operating Officer

  	
   

  

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

56

 

 

APPENDIX A

 

PRODUCT
SPECIFICATIONS

 

	
  Attributes

  	
   

  	
  Analytical Procedure

  	
   

  	
  Specifications

  
	
   

  	
   

  	
  (Test ID) 

  	
  PPL Torrance

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  PPL Sweden

  	
   

  	
   

  
	
  [**]

  	
   

  	
  [**]

  [**]

  	
   

  	
  [**]

  
	
  [**]

  	
   

  	
  [**]

  [**]

  	
   

  	
  [**]

  
	
  Identity:

  	
   

  	
   

  	
   

  	
   

  
	
  [**]

  	
   

  	
  [**]

  [**]

  	
   

  	
  [**] to [**]

  
	
  [**]

  	
   

  	
  [**]

   

   

  [**]

  	
   

  	
  [**] to [**]  

  [**]  to
  [**]  

  [**] to [**]  

  [**] to [**]  

  [**] to [**]  

  [**] to [**]  

  [**] to [**]  

  [**] to  [**]

  
	
  [**]

  	
   

  	
  [**]

  [**]

  	
   

  	
  [**]

  
	
  Assay:

  	
   

  	
   

  	
   

  	
   

  
	
  [**]

  	
   

  	
  [**]

  [**]

  	
   

  	
  [**] to [**]

  
	
  [**]

  	
   

  	
  [**]

  [**]

  	
   

  	
  [**] to [**]

  
	
  [**]

  	
   

  	
  [**]

  [**]

  	
   

  	
  [**] to [**]

  
	
  [**]

  	
   

  	
  [**]

  [**]

  	
   

  	
  [**]

  
	
  [**]

  	
   

  	
  [**]

  	
   

  	
  [**]

  

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request. An unredacted version of this
exhibit has been filed separately with the Commission.

 

57

 

	
  Attributes

  	
   

  	
  Analytical Procedure

  	
   

  	
  Specifications

  
	
   

  	
   

  	
  (Test ID) 

  	
  PPL Torrance

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  PPL Sweden

  	
   

  	
   

  
	
   

  	
   

  	
  [**]

  	
   

  	
   

  
	
  [**]

  	
   

  	
  [**]

  [**]

  	
   

  	
  [**]

  
	
  [**]

  	
   

  	
  [**]

  [**]

  	
   

  	
  [**]

  
	
  [**]

  	
   

  	
  [**]

  [**]

  	
   

  	
  [**]

  
	
  [**]

  	
   

  	
  [**]

  [**]

  	
   

  	
  [**]

  
	
  [**]

  	
   

  	
  [**]

  [**]

  	
   

  	
  [**]

  
	
  [**]

  	
   

  	
  [**]

  [**]

  	
   

  	
  [**]

  
	
  [**]

  	
   

  	
  [**]

  [**]

  	
   

  	
  [**]

  
	
  [**]

  	
   

  	
  [**]

  [**]

  	
   

  	
  [**] to [**]

  
	
  [**]

  	
   

  	
  [**]

  [**]

  	
   

  	
  [**]

  
	
  Microbiological Control

  	
   

  	
   

  	
   

  	
   

  
	
  [**]

  	
   

  	
  [**]

  	
   

  	
  [**]

  

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request. An unredacted version of this
exhibit has been filed separately with the Commission.

 

58

 

	
  Attributes

  	
   

  	
  Analytical Procedure

  	
   

  	
  Specifications

  
	
   

  	
   

  	
  (Test ID) 

  	
  PPL Torrance

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  PPL Sweden

  	
   

  	
   

  
	
   

  	
   

  	
  [**]

  	
   

  	
   

  
	
  [**]

  	
   

  	
  [**]

  [**]

  	
   

  	
  [**]

  
	
  [**]

  	
   

  	
  [**]

  [**]

  	
   

  	
  [**]

  

 

[**]

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

59

 

APPENDIX B

 

ILLUSTRATION OF ADJUSTMENTS TO MINIMUM PURCHASE
OBLIGATIONS AND THE 

IMPACT ON THE ROLLING FORECAST

 

[**]

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request. An unredacted version of this
exhibit has been filed separately with the Commission.

 

60

 

APPENDIX C

 

PRICING FOR VALIDATION BATCHES

 

The following pricing schedule is for the validation
package for Malmo and Torrance.   The
commercial batch size for Malmo will be at [**] (gross weigh) and Torrance will
be at [**] (gross weigh).  The prices
below include a mutually agreed stability program for each batch. The minimum
requirements for such stability program are set forth on the stability protocol
attached as Schedule 1 to this Appendix C.

 

Malmo

 

	
  Process
  validation 1

  	
   

  	
  [**]

  	
   

  	
  [**]
  per gram*

  
	
  Process validation 2

  	
   

  	
  [**]

  	
   

  	
  [**] per gram*

  
	
  Process validation 3

  	
   

  	
  [**]

  	
   

  	
  [**] per gram*

  

 

Torrance

 

	
  Pre-validation

  	
   

  	
  [**]

  	
   

  	
  [**] per gram *

  
	
  Process validation 1

  	
   

  	
  [**]

  	
   

  	
  [**] per gram *

  
	
  Process validation 2

  	
   

  	
  [**]

  	
   

  	
  [**] per gram *

  
	
  Process validation 3

  	
   

  	
  [**]

  	
   

  	
  [**] per gram *

  

 

*Batch sizes listed above are based on gross weight but
all fees shall be calculated on the basis of actual Linaclotide content.

 

Any excess material generated from production of the
pre-validation and validation batches will be available for purchase by
CUSTOMER (at CUSTOMER’S sole discretion) at [**] per gram (net linaclotide).

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request. An unredacted version of this
exhibit has been filed separately with the Commission.

 

61

 

SCHEDULE 1 TO APPENDIX C

 

STABILITY PROTOCOL

 

[**]

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request. An unredacted version of this
exhibit has been filed separately with the Commission.

 

62

 

APPENDIX D

 

PRODUCT PRICING

 

	
  Annual Quantity 

  (net linaclotide)

  	
   

  	
  Price per gram (net 

  linaclotide) in USD

  
	
  [**] kg

  	
   

  	
  [**]

  
	
  [**] kg

  	
   

  	
  [**]

  
	
  [**] kg

  	
   

  	
  [**]

  
	
  [**] kg

  	
   

  	
  [**]

  
	
  [**] kg

  	
   

  	
  [**]

  
	
  [**] kg

  	
   

  	
  [**]

  
	
  [**] kg

  	
   

  	
  [**]

  
	
  [**] kg

  	
   

  	
  [**]

  
	
  [**] kg

  	
   

  	
  [**]

  
	
  [**] kg

  	
   

  	
  [**]

  

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request. An unredacted version of this
exhibit has been filed separately with the Commission.

 

63Exhibit
10.72

 

INVENTURE FOODS, INC.

PERFORMANCE SHARE RESTRICTED STOCK AGREEMENT

 

Inventure
Foods, Inc. (the “Company”) hereby grants you,
                      
(“Employee”), a grant of Performance Shares of Restricted Stock. The date of
this Agreement is                          .  Subject to the provisions set forth in this
Agreement and the provisions of the Company’s Amended and Restated 2005 Equity
Incentive Plan, a copy of which is attached hereto as Exhibit A (the “Plan”),
the principal features of this grant are as follows:

 

	
  NUMBER
  OF PERFORMANCE SHARES:

  	
   

  
	
   

  	
   

  
	
  PERFORMANCE
  PERIOD

  	
   

  
	
   

  	
   

  
	
  PURCHASE
  PRICE PER SHARE:

  	
  $0.01

  
	
   

  	
   

  
	
  PURCHASE
  DATE:

  	
  On
  or before

  
	
   

  	
   

  
	
  PERFORMANCE-BASED
  VESTING SCHEDULE:

  	
   

  

 

Unless accelerated as provided below, Performance Shares vest on
                    
(the “Vesting Date”) based upon achievement of cumulative Board-approved annual
EBITDA targets, as follows                                                                                                 .
 Except as specifically provided below,
Employee must remain employed by the Company through the Vesting Date for any
Performance Shares to vest.

 

The
number of Performance Shares that vest on the Vesting Date will be determined
linearly from a baseline of $                   from zero to
100%, and will be determined using the Company’s audited financial statements.

 

Vesting
will accelerate in the following manner:

 

·                  If Employee’s
employment is terminated by the Company during the Performance Period without “Cause”
as defined below, or if Employee resigns for “Good Reason” as defined below,
then, for each full fiscal year of the Performance Period completed prior to such
termination,            of
the Performance Shares shall be eligible for vesting, proportionately based
upon cumulative performance for such completed periods, measured against the
base line.  All unvested Performance
Shares shall automatically be forfeited.

 

·                  If Employee’s
employment ends for any other reason prior to completion of the Performance
Period, then none of the Performance Shares will be eligible for vesting and
all of the Performance Shares shall automatically be forfeited.

 

·                  If the Company
is involved in a significant acquisition or divestiture that does not
constitute a “Change in Control” as defined below, then a portion of the
Performance Shares shall be vested as if Employee had been terminated by the
Company without Cause as of the closing date of such transaction, and vesting
of the remaining portion of the Performance Shares shall be subject to a
revised vesting formula determined by the Committee.

 

 

·                  Upon the
occurrence of a “Change in Control” as defined below, all unvested Performance
Shares shall be eligible for immediate vesting proportionately based upon the
cumulative performance for the most recently completed fiscal year during the
period, except to the extent that the vesting would cause a “280G Event” as
defined below.

 

·                  The Committee
retains the ability, in its discretion, to adjust the targets based upon excess
capital expenditures or other material unforeseen events or changes, but there
are no commitments or assurances that any changes will be made.

 

·                  “Change of
Control” means the consummation of any of the following:

 

·                  Any transaction or series of transactions,
whereby any person (as that term is used in Section 13(d) and 14(d) of
the Exchange Act), is or becomes the beneficial owner (as that term is defined
in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly,
of securities of the Company representing more than eighty percent (80%) of the
combined voting power of the Company’s then outstanding securities entitled to
vote generally in the election of directors; provided, that for purposes of
this paragraph, the term “person” shall exclude (A) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company or a
Subsidiary, (B) a corporation owned directly or indirectly by the
stockholders of the Company in substantially the same proportions as their
ownership in the Company, and (C) any such person in connection with a
Non-Control Transaction defined below;

 

·                  Other than a Non-Control Transaction, any
merger, consolidation, or any other corporate reorganization of the Company
pursuant to which shares of Stock would be converted into cash, securities, or
other property (other than a merger, consolidation or other reorganization with
a wholly owned Subsidiary), if more than eighty percent (80%) of the combined
voting power of the continuing or surviving entity’s securities entitled to
vote in the election of directors outstanding immediately after such merger,
consolidation, or other reorganization is owned by persons who were not
stockholders of the Company immediately prior to such merger, consolidation, or
other reorganization;

 

·                  The sale, exchange, transfer, or other
disposition of all or substantially all of the assets of the Company (other
than a sale, exchange, transfer or other disposition to one or more
Subsidiaries, or under conditions that would constitute a Non-Control
Transaction), provided that such assets represent at least eighty percent (80%)
of the Company’s consolidated revenue for the preceding twelve months and at
least eighty percent (80%) of the Company’s consolidated net income for the
preceding twelve months; or

 

·                  The liquidation or dissolution of the
Company.

 

2

 

·                  A “Non-Control
Transaction” means any transaction the sole purpose of which is to change the
jurisdiction of incorporation of the Company or to create a holding company
that will be owned in substantially the same proportions by the persons who
held the Company’s securities immediately before such transaction.

 

·                  “280G Event”
means any payment on account of acceleration under this Agreement to the extent
that such payment or portion thereof made in accordance with this Agreement,
when considered in combination with any other “payments in the nature of
compensation contingent on a change in the ownership or control” of the Company
(as defined in Section 280G of the Internal Revenue Code and the
regulations adopted thereunder) payable to or for the benefit of Employee under
this Agreement, or under any other bonus plan, agreement or arrangement, shall
exceed the maximum amount which the Company may pay without loss of deduction
under Section 280G of the Internal Revenue Code or which Employee may
receive without becoming subject to the tax imposed by Section 4999 of the
Internal Revenue Code. Nothing in this provision, however, is intended to imply
that the benefits contemplated by this Agreement in fact constitute “payments
in the nature of compensation contingent on a change in the ownership or
effective control” of the Company, the nature of and the amount of which,
either solely or in combination with any other benefits, would exceed amounts
that the Company may pay without loss of deduction under Section 280G of
the Internal Revenue Code or which Employee may receive without becoming
subject to the tax imposed by Section 4999 of the Internal Revenue Code.

 

·                  “Cause” means (i) an
act of fraud, intentional dishonesty or theft adversely affecting the Company
by Employee, (ii) noncompliance by Employee with the reasonable directives
of the Board or its designees (except by reason of death or Disability), (iii) an
allegation against Employee of discrimination by Employee based on race, sex,
national origin, religion, handicap or age which is prohibited by applicable
law if the Company has reason to believe any material portion of the
allegations after an investigation conducted in accordance with any applicable
Company policy, (iv) material violation by Employee of previously
published Company policies and procedures or the Plan or Employee’s agreements
with the Company, or (v) Employee’s conviction of a felony; provided,
however, in the case of (ii) or (iv) above, Employee shall be
provided with thirty (30) days written notice of such event, and Employee shall
have ten (10) days to respond and/or propose a cure in writing.  If such noncompliance or material violations
are not capable of cure, or if such noncompliance or material violations have
not been cured within fifteen (15) days after the date of such written proposal
by Employee, Cause shall be deemed to exist.

 

·                  “Good Reason”
means any of the following: (i) a material reduction in Employee’s title,
status, authority, or responsibility at the Company; or (ii) a material
reduction in the benefits in effect for Employee, and comparable reductions
have not been made in the benefit of the other members of senior management of
the Company; or (iii) except with Employee’s prior written consent,
relocation of Employee’s principal place of employment to a location more than
30 miles from the Company’s executive offices in Phoenix, Arizona; or (iv) any
breach by the Company of its material obligations under Employee’s agreements
with the Company unless such breach is cured within 30 days after written
notice of breach from Employee.

 

3

 

Employee understands that under Section 83 of the Internal Revenue
Code of 1986, as amended (the “Code”), as the Shares vest, the fair value of
such Shares will be reportable as ordinary income at that time.  Employee further understands that instead of
being taxed when and as the Shares vest, Employee may elect to be taxed as of
the Purchase Date of the Shares with respect to the fair value of all Shares on
such date less the purchase price paid for the Shares.  Such election may only be made under Section 83(b) of
the Code with the I.R.S. within thirty (30) days after the Purchase Date.  The form for making this election may be
provided by the Company for Employee’s convenience only.  Employee understands that failure to make
this filing within the thirty (30) day period will result in the recognition of
ordinary income as the Shares vest. 
EMPLOYEE ACKNOWLEDGES THAT IT IS EMPLOYEE’S SOLE RESPONSIBILITY, AND NOT
THE COMPANY’S, TO FILE A TIMELY ELECTION UNDER SECTION 83(b), EVEN IF
EMPLOYEE REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON
EMPLOYEE’S BEHALF.  EMPLOYEE IS RELYING
SOLELY ON EMPLOYEE’S ADVISORS WITH RESPECT TO THE DECISION AS TO WHETHER OR NOT
TO FILE AN 83(b) ELECTION.

 

Employee’s
signature below indicates Employee’s agreement and understanding that this
grant is subject to all of the terms and conditions contained in this Agreement
and the Plan attached hereto as Exhibit A, including without limitation
provisions relating to vesting and forfeiture of shares covered by this
grant.  PLEASE BE SURE TO READ THIS
AGREEMENT AND THE PLAN IN THEIR ENTIRETY.

 

	
  INVENTURE
  FOODS, INC.

  	
   

  	
  EMPLOYEE

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Print
  Name:

  	
   

  	
   

  	
  Print
  Name:

  	
   

  
	
  Print
  Title:

  	
   

  	
   

  	
  Date:

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  

 

4

 

TERMS AND CONDITIONS

 

1.             Incorporation of the Plan.  The Plan attached hereto is incorporated by
reference into this Agreement, and any capitalized term not defined in this
Agreement shall have the meaning ascribed to such term under the Plan.  To the extent that any provisions of this
Agreement violates or is inconsistent with the Plan, the Plan shall govern and
any inconsistent provision in this Agreement shall be of no force or effect.

 

2.             Grant.  The Company hereby grants to the Employee
       Performance Shares (the “Shares”) of the
Company’s Common Stock, $0.01 par value per share (the “Common Stock”) at a
purchase price of $0.01 per Share, subject to all of the terms and conditions
in this Agreement. The Employee has until
                          
to make such purchase after which date Employee will have no further right to
purchase the Shares under this Agreement. 
The date on which Employee timely purchases the Shares hereunder shall
be referred to as the “Purchase Date”.

 

3.             Shares Held in Escrow.
Unless and until the Shares have vested in the manner set forth in paragraphs 4
or 5, such Shares will be issued in the name of the Employee and held by the
Secretary of the Company as escrow agent (the “Escrow Agent”), and cannot be
sold, transferred or otherwise disposed of, nor pledged or otherwise
hypothecated. The Company may instruct the transfer agent for its Common Stock
to place a legend on the certificates representing the Shares or otherwise note
its records as to the restrictions on transfer set forth in this Agreement. The
certificate or certificates representing such Shares will not be delivered by
the Escrow Agent to the Employee unless and until the Shares have vested and
all other terms and conditions in this Agreement have been satisfied.

 

4.             Vesting Schedule. Except as
provided in Section 5, and subject to Section 6, Shares subject to
this grant will vest in accordance with the Performance-Based Vesting Schedule
set forth on the facing page hereof.

 

5.             Board Discretion. The Board,
in its discretion, may accelerate the vesting of the balance, or some lesser
portion of the balance, of the unvested Shares at any time. If so accelerated,
such Shares will be considered as having vested as of the date specified by the
Board.

 

6.             Forfeiture.  Notwithstanding any contrary provision of
this Agreement, the balance of the Shares that have not vested pursuant to paragraphs
4 or 5 will thereupon be forfeited and automatically transferred to and
reacquired by the Company at no cost to the Company upon the date the Employee’s
employment with the Company terminates for any reason. The Employee will not be
entitled to a refund of the price paid for any Shares returned to the Company
pursuant to this paragraph 6. The Employee hereby appoints the Escrow Agent
with full power of substitution, as the Employee’s true and lawful
attorney-in-fact with irrevocable power and authority in the name and on behalf
of the Employee to take any action and execute all documents and instruments,
including, without limitation, stock powers which may be necessary to transfer
the certificate or certificates evidencing such unvested Shares to the Company
upon such termination.

 

7.             Death of Employee. Any
distribution or delivery to be made to the Employee under this Agreement will,
if the Employee is then deceased, be made to the Employee’s designated
beneficiary, or if no beneficiary survives the Employee, to the administrator
or executor of the Employee’s estate. Any such transferee must furnish the
Company with (a) written notice of his or her status as transferee, and (b) evidence
satisfactory to the Company to establish the validity of the transfer and
compliance with any laws or regulations pertaining to said transfer.

 

5

 

8.             Withholding.  Notwithstanding any contrary provision of
this Agreement, no certificate representing the Shares may be released from the
escrow established pursuant to paragraph 3 unless and until satisfactory
arrangements (as determined by the Board) will have been made by the Employee
with respect to the payment of income and employment taxes which the Company
determines must be withheld with respect to such Shares.

 

9.             Rights as Shareholder. 
Employee shall have all rights of a shareholder prior to the vesting of the
Shares, including the right to vote the Shares and receive all dividends and
other distributions paid or made with respect thereto.

 

10.           No Effect on Employment.  Only the terms of any written employment
agreement between the Company and Employee (and not this Agreement) shall
govern the terms of Employee’s employment, and nothing in this Agreement shall
constitute any assurance of employment of Employee by the Company for any
period, including any period necessary for the Shares to vest.  The Company will have the right, which is
hereby expressly reserved, to terminate or change the terms of the employment
of the Employee at any time for any reason whatsoever, with or without good
cause, subject to the terms of any such written employment agreement.

 

11.           Entire Agreement;  Amendment. 
This Agreement embodies the entire understanding and agreement of the parties
in relation to the subject matter hereof, and no promise, condition,
representation or warranty, expressed or implied, not herein stated, shall bind
either party hereto.  This Agreement may
be amended only by a writing executed by the Company and Employee that
specifically states that it is amending this Agreement.  Notwithstanding
the foregoing, this Agreement may be amended solely by the Board by a writing
which specifically states that it is amending this Agreement, so long as a copy
of such amendment is delivered to Employee, and provided that no such amendment
adversely affects the rights of Employee hereunder without Employee’s written
consent.  Without limiting the foregoing, the Board reserves the right to
change, by written notice to Employee, the provisions of the Shares or this
Agreement in any way it may deem necessary or advisable to carry out the
purpose of the grant as a result of any change in applicable laws or
regulations or any future law, regulation, ruling or judicial decisions,
provided that any such change shall be applicable only to the Shares which are
then subject to restrictions as provided herein.

 

12.           Severability.  If all or
any part of this Agreement is declared by any court or government authority to
be unlawful or invalid, such unlawfulness or invalidity shall not invalidate
any portion of this Agreement not declared to be unlawful or invalid.  Any
Section of this Agreement so declared to be unlawful or invalid shall, if
possible, be construed in a manner that will give effect to the terms of such Section to
the fullest extent possible while remaining lawful and valid.

 

13.           Binding Effect and Benefit. 
This Agreement shall be binding upon and, subject to the conditions hereof,
inure to the benefit of the Company, its successors and assigns, and Employee
and Employee’s successors and assigns.

 

14.           Governing Law.  This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of Arizona without regard to principles of conflicts of law.

 

6

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