10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

__________________________________________

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended December 31, 2013

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  to 

Commission File Number: 1-5438

FOREST LABORATORIES, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	11-1798614 (I.R.S. Employer Identification No.)
909 Third Avenue New York, New York (Address of principal executive offices)	10022-4731 (Zip Code)

(212) 421-7850

(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x      No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x      No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o       No  x

Number of shares outstanding of Registrant's Common Stock as of February 5, 2014: 270,960,901

TABLE OF CONTENTS

(Quick Links)

PART I - FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS (UNAUDITED):
		CONDENSED CONSOLIDATED BALANCE SHEETS
		CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
		CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
		CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II - OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS
	ITEM 1A. RISK FACTORS
	ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
	ITEM 6. EXHIBITS
	EXHIBIT 31.1
	EXHIBIT 31.2
	EXHIBIT 32.1
	EXHIBIT 32.2
	EXHIBIT 101.INS
	EXHIBIT 101.SCH
	EXHIBIT 101.PRE
	EXHIBIT 101.CAL
	EXHIBIT 101.LAB
	EXHIBIT 101.DEF

PART I –FINANCIAL INFORMATION

Item 1.  Financial Statements

FOREST LABORATORIES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)	December 31, 2013		March 31, 2013
Assets
Current assets:
Cash (including cash equivalent investments of $1,731,817 at
December 31, 2013 and $867,112 at March 31, 2013)	$	2,322,433	$	935,675
Marketable securities		701,671		739,198
Accounts receivable, less allowance for doubtful accounts of
$2,040 at December 31, 2013 and $2,003 at March 31, 2013		369,881		478,032
Inventories, net		438,002		393,901
Deferred income taxes		274,980		266,455
Prepaid and other current assets		186,151		134,525
Total current assets		4,293,118		2,947,786
Non-current assets:
Marketable securities and investments		1,463,818		1,349,424
Property, plant and equipment, less accumulated depreciation of
$388,901 at December 31, 2013 and $362,742 at March 31, 2013		395,573		376,960
Goodwill		713,091		713,091
License agreements, product rights and other intangibles, less
accumulated amortization of $425,740 at December 31, 2013
and $322,689 at March 31, 2013		2,072,079		2,127,639
Other assets		121,063		114,682
Total assets	$	9,058,742	$	7,629,582

See notes to condensed consolidated financial statements.

FOREST LABORATORIES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except par values)	December 31, 2013			March 31, 2013
Liabilities and Stockholders' equity
Current liabilities:
Accounts payable	$	77,467		$	157,349
Accrued expenses and other liabilities		962,563			840,342
Total current liabilities		1,040,030			997,691
Long-term liabilities:
Long-term debt		1,200,000			–
Income tax liabilities		528,447			567,311
Deferred tax liabilities		257,031			283,245
Other long-term liabilities		39,903			36,080
Total liabilities		3,065,411			1,884,327
Contingencies (Note 11)
Stockholders' equity:
Preferred stock, $1.00 par; shares authorized 1,000; no shares
issued or outstanding
Common stock, $.10 par; shares authorized 1,000,000; 433,995
and 430,385 shares issued at December 31, 2013 and
March 31, 2013, respectively		43,400			43,039
Additional paid-in capital		1,951,124			1,799,071
Retained earnings		9,166,570			9,055,344
Accumulated other comprehensive income		3,887			10,116
Treasury stock, at cost (164,044 shares at December 31, 2013 and
163,886 shares at March 31, 2013)		(5,171,650	)		(5,162,315	)
Total stockholders' equity		5,993,331			5,745,255
Total liabilities and stockholders' equity	$	9,058,742		$	7,629,582

See notes to condensed consolidated financial statements.

FOREST LABORATORIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)

	Three Months Ended					Nine Months Ended
(In thousands, except per share amounts)	December 31,					December 31,
	2013		2012			2013		2012
Net revenue
Net sales	$	846,784	$	677,967		$	2,455,066	$	2,121,750
Contract revenue		31,612		38,314			99,555		158,426
Total revenue		878,396		716,281			2,554,621		2,280,176
Cost of goods sold		182,270		153,311			511,355		471,257
Gross profit		696,126		562,970			2,043,266		1,808,919
Operating expenses
Selling, general and administrative		454,981		428,380			1,307,408		1,185,578
Research and development		219,506		325,290			596,288		723,295
Total operating expenses		674,487		753,670			1,903,696		1,908,873
Operating income (loss)		21,639		(190,700	)		139,570		(99,954	)
Interest and other income (expense), net		683		6,409			12,648		24,278
Income (loss) before income taxes		22,322		(184,291	)		152,218		(75,676	)
Income tax expense (benefit)		4,361		(30,683	)		40,992		1,870
Net income (loss)	$	17,961	$	(153,608	)	$	111,226	$	(77,546	)
Net income (loss) per common share:
Basic	$	0.07	$	(0.58	)	$	0.41	$	(0.29	)
Diluted	$	0.07	$	(0.58	)	$	0.41	$	(0.29	)
Weighted average number of common shares
outstanding:
Basic		269,481		266,018			268,385		266,967
Diluted		272,901		266,018			270,832		266,967

See notes to condensed consolidated financial statements.

FOREST LABORATORIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

	Three Months Ended					Nine Months Ended
(In thousands)	December 31,					December 31,
	2013		2012			2013			2012
Net income (loss)	$	17,961	$	(153,608	)	$	111,226		$	(77,546	)
Other comprehensive income (loss):
Foreign currency translation gains (losses)		2,946		2,933			8,997			(3,569	)
Pension liability adjustment, net of tax		–		108			(1,444	)		3,468
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising
during the period, net of tax		269		3,937			(13,782	)		4,732
Other comprehensive income (loss):		3,215		6,978			(6,229	)		4,631
Comprehensive income (loss)	$	21,176	$	(146,630	)	$	104,997		$	(72,915	)

See notes to condensed consolidated financial statements.

FOREST LABORATORIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended
(In thousands)	December 31,
	2013			2012
Cash flows from operating activities:
Net income (loss)	$	111,226		$	(77,546	)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation		41,908			34,496
Amortization		100,758			73,695
Stock-based compensation expense		58,614			53,259
Deferred income tax benefit		(34,739	)		(39,260	)
Net change in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable, net		108,151			73,875
Inventories, net		(44,101	)		(83,728	)
Prepaid and other current assets		(49,322	)		33,546
Increase (decrease) in:
Accounts payable		(79,882	)		(84,992	)
Accrued expenses		122,221			101,673
Income tax liabilities		(38,864	)		3,517
Other liabilities		12,287			–
Other		22,615			1,766
Net cash provided by operating activities		330,872			90,301
Cash flows from investing activities:
Purchase of property, plant and equipment		(75,932	)		(50,557	)
Sale of property, plant and equipment		13,750			–
Purchase of marketable securities		(911,986	)		(2,982,108	)
Redemption of marketable securities		851,202			2,526,325
Purchase of trademarks		(44,500	)		(125,000	)
Other investing activities		(49,231	)		(108,077	)
Net cash used in investing activities		(216,697	)		(739,417	)
Cash flows from financing activities:
Proceeds from long-term debt		1,200,000			–
Net proceeds from common stock options exercised by
employees under stock option plans		86,096			19,729
Tax benefit related to stock-based compensation		7,704			1,867
Treasury stock transactions		(9,335	)		(10,841	)
Other financing activities		(18,468	)		–
Net cash provided by financing activities		1,265,997			10,755
Effect of exchange rate changes on cash		6,586			7,749
Increase (decrease) in cash and cash equivalents		1,386,758			(630,612	)
Cash and cash equivalents, beginning of period		935,675			1,579,515
Cash and cash equivalents, end of period	$	2,322,433		$	948,903

See notes to condensed consolidated financial statements.

FOREST LABORATORIES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.   Basis of presentation:

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information, Accounting Standards Codification (ASC) Topic 270-10 and with the instructions to Form 10-Q.  Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.  In management’s opinion, all adjustments considered necessary for a fair presentation have been included in the interim periods presented and all adjustments are of a normal recurring nature.  The Company has evaluated subsequent events through the date of this filing.  Operating results for the three and nine-month periods ended December 31, 2013 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2014.  When used in these notes, the terms “Forest” or “the Company” mean Forest Laboratories, Inc. and subsidiaries.  The March 31, 2013 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP.  You should read these unaudited interim condensed consolidated financial statements in conjunction with the consolidated financial statements and footnotes hereto incorporated by reference in the Company's Annual Report on Form  10-K for the fiscal year ended March 31, 2013.

For the third quarter of fiscal 2014, the Company modified the presentation of its Consolidated Statements of Operations effective for all periods presented, whereby Interest income, interest expense and other miscellaneous income/expense is presented in the ‘Interest and other income (expense)’ caption below Operating income (loss).  The modified presentation is consistent with industry practice and conforms with the requirements of Regulation S-X 5.03.  There were no changes in the Company’s accounting policies, methodology for estimates or the activity included in the respective captions in the Consolidated Statements of Operations.

2.   Accounts receivable:

Accounts receivable, net, consist of the following:

(In thousands)

	December 31, 2013		March 31, 2013
Trade	$	312,008	$	403,331
Other		57,873		74,701
	$	369,881	$	478,032

FOREST LABORATORIES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

3. Inventories:

Inventories, net of reserves for obsolescence, consist of the following:

(In thousands)

	December 31, 2013		March 31, 2013
Raw materials	$	158,641	$	127,508
Work in process		1,028		1,333
Finished goods		278,333		265,060
	$	438,002	$	393,901

4. Fair value measurements:

The following table presents the levels within the fair value hierarchy at which the Company’s financial assets are carried at fair value and measured on a recurring basis:

(In thousands)
Description	Fair value at  December 31, 2013			Quoted prices in active markets for identical assets (Level 1)			Significant other observable market inputs (Level 2)			Unobservable market inputs (Level 3)
Money market accounts		$	1,329,814		$	1,329,814		$	–		$	–
Municipal bonds and notes			12,484			–			12,484			–
Commercial paper			483,082			2,850			480,232			–
Variable rate demand notes			33,970			–			33,970			–
Auction rate securities			3,198			–			–			3,198
Certificates of deposit			73,443			–			73,443			–
Corporate bonds			1,661,037			–			1,661,037			–
Government agency bonds			246,091			–			246,091			–
Description	Fair value at  March 31, 2013			Quoted prices in active markets for identical assets (Level 1)			Significant other observable market inputs (Level 2)			Unobservable market inputs  (Level 3)
Money market accounts		$	818,474		$	818,474		$	–		$	–
Municipal bonds and notes			46,877			–			46,877			–
Commercial paper			168,639			31,815			136,824			–
Variable rate demand notes			1,500			–			1,500			–
Auction rate securities			3,198			–			–			3,198
Certificates of deposit			90,268			5,981			84,287			–
Corporate bonds			1,509,870			–			1,509,870			–
Government agency bonds			278,804			–			278,804			–

The Company determines fair value based on a market approach using quoted market values, significant other observable inputs for identical or comparable assets or liabilities, or discounted cash flow analyses. The Company determines the value of its auction rate securities portfolio based upon a discounted cash flow model.  The assumptions used in the valuation model include estimates for interest rates, timing and amount of cash flows, and expected holding periods for the auction rate securities.

There were no purchases or sales of Level 3 investments during the three and nine-month periods ended December 31, 2013.

The Company also issued long-term debt with a carrying value of $1.2 billion during the three months ended December 31, 2013.  See Note 12 for further information.

The majority of the Company’s non-financial assets and liabilities are not required to be carried at fair value on a recurring basis.  However, the Company is required on a non-recurring basis to use fair value measurements when assessing asset impairment as it relates to goodwill, license agreements, product rights, other intangible assets and other long-lived assets.  The carrying amount of cash, accounts receivable and accounts payable and other short-term financial instruments approximate their fair value due to their short-term nature.

FOREST LABORATORIES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

5. Marketable securities:

Available-for-sale debt securities consist of the following:

(In thousands)	December 31, 2013
	Estimated fair value		Gains in accumulated other comprehensive income		Losses in accumulated other comprehensive income
Current:
Municipal bonds and notes	$	7,146	$	11	$	–
Government agency bonds		90,746		141		(1	)
Commercial paper		104,363		–		–
Certificates of deposit		43,453		5		(8	)
Corporate bonds		455,963		709		(62	)
Total current securities		701,671		866		(71	)
Non-current:
Municipal bonds and notes		5,338		22		–
Government agency bonds		155,345		172		(267	)
Commercial paper		5,834		–		–
Certificates of deposit		3,000		–		–
Corporate bonds		1,202,946		3,678		(5,358	)
Auction rate securities		3,198		–		(752	)
Variable rate demand notes		33,970		–		–
Total non-current securities		1,409,631		3,872		(6,377	)
Total available-for-sale debt securities	$	2,111,302	$	4,738	$	(6,448	)

FOREST LABORATORIES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands)	March 31, 2013
	Estimated fair value		Gains in accumulated other comprehensive income		Losses in accumulated other comprehensive income
Current:
Municipal bonds and notes	$	34,025	$	34	$	–
Government agency bonds		87,227		125		(10	)
Commercial paper		144,293		–		–
Certificates of deposit		47,977		–		(2	)
Corporate bonds		425,676		1,286		(33	)
Total current securities		739,198		1,445		(45	)
Non-current:
Municipal bonds and notes		12,852		37		–
Government agency bonds		186,577		434		(19	)
Certificates of deposit		22,999		–		–
Corporate bonds		1,084,194		5,290		(2,150	)
Auction rate securities		3,198		–		(752	)
Variable rate demand notes		1,500		–		–
Total non-current securities		1,311,320		5,761		(2,921	)
Total available-for-sale debt securities	$	2,050,518	$	7,206	$	(2,966	)

Proceeds from the sale of available-for-sale debt securities were $851.2 million and $2.5 billion for the nine months ended December 31, 2013 and December 31, 2012, respectively.  Gross realized gains on those sales were $0.5 million and $1.1 million, respectively.  In order to determine gross realized gains and losses, the Company uses average cost.  The Company records holding gains and losses on available for sale securities in the ‘Accumulated other comprehensive income’ caption in the condensed consolidated Balance Sheet.  The Company had a net unrealized holding loss of $1.7 million at December 31, 2013 and a net unrealized holding gain of $4.2 million at March 31, 2013.  The preceding tables do not include the Company’s equity securities for Ironwood Pharmaceuticals, Inc. (Ironwood) and Trevena, Inc. (Trevena).  The carrying value of the Company’s equity securities in Ironwood, which were measured at fair market value based on quoted market prices for the related security, was $24.2 million and $38.1 million at December 31, 2013 and March 31, 2013, respectively.  The Company purchased $30 million of Trevena preferred stock during the first quarter of fiscal 2014.  Refer to Note 6 for additional information.

FOREST LABORATORIES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Contractual maturities of available-for-sale debt securities at December 31, 2013 are as follows:

(In thousands)

	Estimated FV
Within one year	$	701,671
1-5 years		1,367,236
5-10 years		2,400
After 10 years		39,995
	$	2,111,302

Actual maturities may differ from stated maturities because some borrowers have the right to call or prepay obligations with or without call penalties.

The Company invests funds in variable rate demand notes that have major bank liquidity agreements, municipal bonds and notes, government agency bonds, commercial paper, corporate bonds, certificates of deposit, and auction rate securities.  Certain securities are subject to a hard-put option(s) where the principal amount is contractually assured by the issuer and any resistance to the exercise of these options would be deemed as a default by the issuer.  Such a potential default would be reflected in the issuer’s respective credit rating, for which the Company maintains investment grade requirements pursuant to its corporate investment guidelines.  While the Company believes its investments that have net unrealized losses are temporary, declines in the value of these investments may be deemed other-than-temporary if the credit and capital markets were to deteriorate in future periods.  The Company has the ability and intends to hold its investments until a recovery of fair value, which may be at maturity.  The Company does not consider these investments to be other-than-temporarily impaired and will continue to monitor global market conditions to minimize the risk of impairments in future periods.

6.  License and collaboration agreements:

Saphris license

On November 29, 2013, the Company entered into an Asset Purchase Agreement (APA) with Merck Sharp & Dohme B.V., a wholly owned subsidiary of Merck & Co., Inc. (Merck) pursuant to which the Company purchased exclusive rights in the United States (U.S.) for Saphris® (asenapine) sublingual tablets, a treatment for adult patients with schizophrenia and, as monotherapy or adjunctive therapy, of manic or mixed episodes associated with bipolar I disorder.  Upon the closing of the transaction on January 10, 2014, the Company paid Merck $155 million and entered into a supply agreement pursuant to which it will purchase the product from Merck at an agreed purchase price.

In addition, the Company is obligated to pay up to an additional $85 million to Merck for costs and expenses incurred in connection with post-marketing clinical trials conducted for Saphris during calendar 2013 which is expected to be paid during the fourth quarter of fiscal 2014.  The agreement also includes certain sales milestone payments to Merck upon the achievement of certain net sales thresholds.

Saphris is an atypical antipsychotic approved by the U.S. Food and Drug Administration (FDA) and launched in 2009.

Fetzimaapproval

In July 2013, the Company received FDA approval for FetzimaTM (levomilnacipran extended-release capsules), a once-daily serotonin and norepinephrine reuptake inhibitor for the treatment of Major Depressive Disorder in adults.  The product was launched in December 2013 and recorded sales of $8.0 million of initial trade stocking for the three months ended December 31, 2013.  The Company licensed the rights to levomilnacipran in the U.S. and Canada from Pierre Fabre Laboratories, and was obligated to pay a milestone payment of $30 million upon FDA approval.  Such milestone payment was capitalized as an intangible asset and is currently being amortized over the life of the patent for Fetzima.

Trevena

On May 9, 2013, the Company entered into a collaborative licensing option agreement with Trevena for the development of TRV027, a novel beta-arrestin biased ligand of the angiotensin II type 1 receptor for the treatment of acute decompensated heart failure.  Pursuant to the agreement, the Company purchased $30 million of Trevena preferred stock in a round of private placement financing which is recorded in the non-current ‘Marketable securities and investments’ caption in the condensed consolidated Balance Sheet.  This investment is accounted for using the cost method and will be reviewed for impairment annually or more frequently if a triggering event is deemed to have occurred.

Ironwood collaboration

In September 2007, the Company entered into a collaboration agreement with Ironwood to jointly develop and commercialize Linzess® (linaclotide) for the treatment of irritable bowel syndrome with constipation (IBS-C) and chronic idiopathic constipation (CIC).  Under the terms of the agreement, the Company shares equally with Ironwood all profits and losses from the development and commercialization of Linzess in the U.S.  In addition, Forest obtained exclusive rights to the linaclotide license in Canada and Mexico, for which the Company will pay royalties to Ironwood based on net sales in those territories, subject to receiving regulatory approval.

The agreement included contingent milestone payments as well as a contingent equity investment based onthe achievement of specific clinical and commercial milestones.  As of December 31, 2013, payments totaling $230 million relating to development and approval milestones have been made.  The Company may be obligated to pay up to an additional $100 million if certain sales milestones are achieved.

Linzess received FDA approval as a once-daily treatment for adult men and women suffering from    IBS-C and CIC in August 2012.  For the three and nine-month periods ended December 31, 2013, Linzess sales in the U.S. totaled $51.0 million and $114.3 million, respectively.

Based on the nature of the arrangement (including its contractual terms), the nature of the payments and applicable guidance, the Company records receipts from and payments to Ironwood in two pools: the Development pool, which consists of research and development (R&D) expenses, and the Commercialization pool, which consists of revenue, cost of sales and selling, general and administrative (SG&A) expense.  The net payment to or receipt from Ironwood for the Development pool is recorded in R&D expense and the net payment to or receipt from Ironwood for the Commercialization pool is recorded in SG&A expense.

The following illustrates activity related to the Ironwood collaboration agreement for the periods presented:

(In thousands)

	Three Months Ended					Nine Months Ended
	December 31,					December 31,
	2013		2012			2013			2012
Revenue
Net Sales attributed to the Ironwood
collaboration agreement	$	51,044	$	19,227		$	114,251		$	19,227
Cost of sales
Cost of sales attributed to the
Ironwood collaboration agreement		2,133		770			5,539			770
Selling, general and administrative
Payment to/ (receipt from) Ironwood
for the Commercialization pool		3,968		(8,369	)		(13,799	)		(13,884	)
Research and development
Payment to/ (receipt from) Ironwood
for the Development pool		595		(949	)		1,602			(2,350	)

moksha8

On October 22, 2012, the Company announced an agreement with moksha8, a privately-held pharmaceutical company which markets products in Latin America.  The agreement included an exclusive license from Forest to moksha8 to commercialize Viibryd, and potentially other Forest products, in Latin America.  In addition, the Company agreed to provide up to $125 million in debt financing to moksha8 in several tranches over a two-year period, conditioned upon moksha8 achieving certain business goals.  The agreement also included an option for Forest to acquire moksha8 at a fixed price of $157 million at the end of the two year period, subsequent to which the shareholders of moksha8 had an option to put to Forest all interests of moksha8 at a fixed price of $144 million.

As of December 31, 2013, a total of $101.9 million has been funded of which $19.2 million was funded during the nine months ended December 31, 2013.  The loan, which has a term of 6 years from the date of initial funding, is collateralized by the assets of moksha8.  The Company has recorded a loan receivable as a long term asset in the Company’s condensed consolidated Balance Sheet which is included in the ‘Other assets’ caption.

The Company accounts for the loan using the cost method and performed an impairment analysis during the third quarter of fiscal 2014 with the fair value of the loan being determined based on the fair value of the collateral.  The loan is a level 3 financial instrument and the fair value was determined using a discounted cash flow model with the key inputs including revenue projections, weighted average cost of capital and discount rates.  Based on the analysis performed, the value of the loan was deemed to be appropriate.

In January 2014, the Company and moksha8 amended the terms the original agreement which terminated Forest’s obligation to provide additional funding to moksha8. The amendment also terminated Forest’s option to acquire moksha8 as well as the shareholders of moksha8’s option to put to Forest all interests of moksha8.  moksha8 retains the exclusive license to commercialize Viibryd and continues to work with the Company to obtain licenses to additional products in Latin America.

7. Net income (loss) per share:

A reconciliation of shares used in calculating basic and diluted net income per share follows:

(In thousands)

	Three Months Ended			Nine Months Ended
	December 31,			December 31,
	2013		2012	2013		2012
Basic		269,481	266,018		268,385	266,967
Incremental shares attributable to share
based compensation plans		3,420	–		2,447	–
Diluted		272,901	266,018		270,832	266,967

Options to purchase approximately 1.8 million shares of common stock at exercise prices ranging from $42.61 to $59.05 per share and options to purchase approximately 5.0 million shares of common stock at exercise prices ranging from $35.63 to $59.05 per share were not included in the computation of diluted shares for three and nine-month periods ended December 31, 2013, respectively, because their effect would be anti-dilutive.  These options expire through 2023.  Options to purchase approximately 16.6 million shares at exercise prices ranging from $20.55 to $59.05 per share were not included in the computation of diluted shares for the three and nine-month periods ended December 31, 2012, respectively, because their effect would be anti-dilutive.  The weighted average number of diluted common shares outstanding is reduced by the treasury stock method which, in accordance with the provisions of ASC 718-10 Compensation–Stock Compensation, takes into consideration the compensation cost attributed to future services not yet recognized.

On November 26, 2013, the Board terminated the previously outstanding 50 million share repurchase authorization and authorized the repurchase of up to $1 billion of shares of common stock based on prevailing prices from time to time. The new authorization became effective immediately and has no set expiration date.

8. Stockholders’ equity:

Stock based compensation: In August 2013, the Company’s stockholders approved an amendment to the Company’s 2007 Equity Incentive Plan (the 2007 Plan) whereby an additional 28 million shares were authorized to be issued to employees of the Company.  Under the 2007 Plan, as amended, a total of 57 million shares have been authorized to be issued.  The 2007 Plan provides for the granting of incentive and nonqualified stock options, restricted stock, stock appreciation rights and stock equivalent units.  These awards generally vest in three to five years.  Stock options, granted at prices not less than the fair market value of the common stock at the date of the grant, may be exercisable for up to ten years from the date of issuance.  As of December 31, 2013, 30.3 million shares were available for grant under the amended 2007 Plan.  Stock based compensation expense of $24.1 million ($16.3 million net of tax) and $58.6 million ($39.5 million net of tax) was recorded for the three and nine-month periods ended December 31, 2013, respectively.  For the three and nine-month periods ended December 31, 2012, compensation expense of $24.8 million ($17.5 million net of tax) and $53.3 million ($37.9 million net of tax) respectively, was recorded.  This expense is charged to Cost of sales, SG&A expense and R&D expense, as appropriate.

9. Business segment information:

The Company operates in only one segment.  Net sales by therapeutic class is as follows:

	Three Months Ended				Nine Months Ended
(In thousands)	December 31,				December 31,
	2013		2012		2013		2012
Central nervous system	$	512,806	$	441,871	$	1,538,579	$	1,479,574
Cardiovascular		136,202		116,429		404,954		345,661
Gastrointestinal		51,044		19,227		114,251		19,227
Respiratory		56,698		29,647		145,085		66,961
Other		90,034		70,793		252,197		210,327
	$	846,784	$	677,967	$	2,455,066	$	2,121,750

10.  Income taxes:

The Company’s income tax returns for fiscal years prior to 2003 in most jurisdictions and prior to 2008 in Ireland are no longer subject to review as such fiscal years are generally closed.  Tax authorities in various jurisdictions are in the process of reviewing the Company’s income tax returns for various post-2002 fiscal years, including the Internal Revenue Service (IRS), which has recently concluded its examination of the Company’s U.S. federal income tax returns for fiscal years 2004, 2005 and 2006.

In connection with that examination, the Company agreed to an assessment related to intercompany transfer pricing.  Such assessment resulted in additional U.S. federal and state corporation tax within previously established tax reserves and did not have a material impact on the Company’s results of operations.

Fiscal years 2007, 2008 and 2009 are currently under review by the IRS.  It is unlikely that the outcome will be determined within the next 12 months.  Potential claims for years under review could be material.

The Company’s continuing practice is to recognize net interest related to income tax matters in income tax expense.  For the nine months ended December 31, 2013, the Company accrued an additional $13.2 million in interest for a total of $63.5 million related to the resolution of various income tax matters.

Our effective tax rate was 19.5% and 26.9% for the three and nine-month periods ended December 31, 2013, respectively, as compared to 16.6% and (2.5%) for the same periods last year.  The increase in the current three and nine-month periods compared to last year was primarily due to a change in the mix of earnings by jurisdiction, the expiration of the U.S. Research & Experimentation Tax Credit as of December 31, 2013, the write-off of a note receivable related to the termination of the Nabriva development program, partially offset by the impact of Project Rejuvenate.

11. Contingencies:

The Company is a defendant in three federal actions filed on behalf of individuals who purchased Celexa and/or Lexapro for pediatric use, all of which have been consolidated for pretrial purposes in a MDL proceeding in the U.S. District Court for the District of Massachusetts under the caption “In re Celexa and Lexapro Marketing and Sales Practices Litigation.”  These actions, two of which were originally filed as putative nationwide class actions, and one of which is a putative California-wide class action, allege that the Company marketed Celexa and/or Lexapro for off-label pediatric use and paid illegal kickbacks to physicians to induce prescriptions of Celexa and Lexapro.  The complaints assert various similar claims, including claims under the Missouri and California consumer protection statutes, respectively, and state common laws.  On February 5, 2013, the district judge overseeing the MDL denied all plaintiffs’ motions for class certification.  On February 18, 2013, the plaintiff in the California action filed a petition seeking leave to appeal this decision to the U.S. Court of Appeals for the First Circuit.  On April 16, 2013, the First Circuit denied the petition.  On April 30, 2013, plaintiffs in the other two actions filed an amended complaint seeking to certify state-wide class actions in Illinois, Missouri, and New York under those states’ consumer protection statutes.  Plaintiffs moved for class certification in all these three states on June 28, 2013.  On January 13, 2014, the district judge denied plaintiffs’ motion with respect to the proposed Illinois and New York classes and allowed it with respect to the proposed Missouri class.  Forest filed a petition seeking leave to appeal this decision to the U.S. Court of Appeals for the First Circuit on January 27, 2014.

On May 3, 2013, an action was filed in the U.S. District Court for the Central District of California on behalf of individuals who purchased Lexapro for adolescent use, seeking to certify a state-wide class action in California and alleging that our promotion of Lexapro for adolescent depression has been deceptive.  This action was transferred to the MDL mentioned in the preceding paragraph and, on July 29, 2013, the Company moved to dismiss the complaint.  The motion was argued before the Court on September 20, 2013, and a decision is pending.

On November 13, 2013, an action was filed in the U.S. District Court for the District of Minnesota seeking to certify a nationwide class of third-party payor entities that purchased Celexa and Lexapro for pediatric use.  The complaint asserts claims under the federal Racketeer Influenced and Corrupt Organizations Act, alleging that Forest engaged in an off-label marketing scheme and paid illegal kickbacks to physicians to induce prescriptions of Celexa and Lexapro.  This action was transferred to the MDL mentioned in the preceding paragraphs, and the Company filed a motion to dismiss the complaint on January 15, 2014.

The Company intends to continue to vigorously defend against these cases.  At this time, the Company believes an unfavorable outcome is less than probable and are unable to estimate the reasonably possible loss or range of possible loss, but do not believe losses, if any, would have a material effect on the results of operations or financial position taken as a whole.

The Company is also named as defendants in two actions filed on behalf of entities or individuals who purchased or reimbursed certain purchases of Celexa or Lexapro for pediatric use pending in the Missouri Circuit Court, Twenty-Second Judicial Circuit, and arising from similar allegations as those contained in the federal actions described in the preceding paragraphs.  The first action, filed on November 6, 2009 under the caption “St. Louis Labor Healthcare Network et al. v. Forest Pharmaceuticals, Inc. and Forest Laboratories, Inc.,” is brought by two entities that purchased or reimbursed certain purchases of Celexa and/or Lexapro.  The complaint asserts claims under the Missouri consumer protection statute and Missouri common law, and seeks unspecified damages and attorneys’ fees.  The Company has reached an agreement with the plaintiffs to resolve this action for payments that are not material to our financial condition or results of operations.  The second action, filed on July 22, 2009 under the caption “Crawford v. Forest Pharmaceuticals, Inc.,” and now known as “Luster v. Forest Pharmaceuticals, Inc.,” is a putative class action on behalf of a class of Missouri citizens who purchased Celexa for pediatric use.  Only Forest Pharmaceuticals, Inc., which is headquartered in Missouri, is named as a defendant.  The complaint asserts claims under the Missouri consumer protection statute and Missouri common law, and seeks unspecified damages and attorneys’ fees.  In October 2010, the court certified a class of Missouri domiciliary citizens who purchased Celexa for pediatric use at any time prior to the date of the class certification order, but who do not have a claim for personal injury.  Discovery is currently ongoing and a trial date has been set in March 2014.  On December 9, 2013, the Company filed a motion for summary judgment, which was argued on January 8, 2014.  A decision on this motion is pending.  The Company intends to continue to vigorously defend against this action.  At this time, the Company believes an unfavorable outcome is less than probable and are unable to estimate the reasonably possible loss or range of possible loss, but do not believe losses, if any, would have a material effect on the results of operations or financial position taken as a whole.

Forest is currently defending approximately 195 product liability lawsuits.  Thirteen of the lawsuits allege that Celexa or Lexapro caused or contributed to individuals committing or attempting suicide.  The remainder of the lawsuits allege that Celexa or Lexapro caused various birth defects.  Each lawsuit seeks substantial compensatory and punitive damages.  The Company is vigorously defending these suits.

An MDL was established for the majority of the suicidality-related litigation, with the federal court cases being transferred to Judge Rodney Sippel in the U.S. District Court for the Eastern District of Missouri.  The MDL has concluded and the remaining twelve cases have been remanded to the federal district courts in which they were filed originally.  Several trials involving completed suicides have been scheduled in those federal district courts in 2014 and 2015 and Forest expects more trial dates to be established.  A state court case involving a young woman who allegedly attempted suicide is set for trial in February 2014 in Montgomery, Alabama.

The majority of the birth defect cases are consolidated for pretrial purposes in Cole County Circuit Court in Missouri.  Two cases are set for trial in Cole County in May 2014 and September 2014.  Nineteen cases are pending in the U.S. District Court for the District of New Jersey.  Fact discovery closes in March 2014.  One case is pending in Orange County, California and is set for trial in June 2014.  The Company expects that the state court consolidation will ease the burden of defending these cases.  The Company believes that the consolidated proceedings will promote the economical and efficient resolution of these lawsuits and provides the Company with a meaningful opportunity to vindicate our products.  However, litigation is inherently subject to uncertainty and the Company cannot predict or determine the outcome of this litigation.  Forest generally maintains $140 million of product liability coverage (annually, per “occurrence” on a claims-made basis, and in the aggregate).

In December 2013, the Company was named as a defendant in an action brought by Teva Pharmaceuticals USA, Inc. and Mayne Pharma International Pty Ltd. in the U.S. District Court for the District of Delaware under the caption “Teva Pharmaceuticals USA, Inc. and Mayne Pharma International Pty Ltd. v. Forest Laboratories, Inc.”  The complaint alleges that Forest infringes U.S. Patent No. 6,194,000 by making, using, selling, offering to sell, and importing Namenda XR.  The relief requested includes preliminary and permanent injunctive relief, and damages.  The Company intends to vigorously defend against this action.  At this time, the Company believes an unfavorable outcome is less than probable and are unable to estimate the reasonably possible loss or range of possible loss, but do not believe losses, if any, would have a material effect on the results of operations or financial position taken as a whole.

In January 2014, Forest and its licensors for Namenda XR, Merz Pharma GmbH & Co. KgaA (Merz) and Adamas Pharmaceuticals, Inc. (Adamas), brought actions for infringement of certain patents in the U.S. District Court for the District of Delaware against Wockhardt USA LLC (Wockhardt), Teva Pharmaceuticals USA, Inc. (Teva), Sun Pharma Global FZE (Sun), and related subsidiaries and affiliates thereof.  These companies have notified Forest that they have filed ANDAs with the FDA seeking to obtain approval to market generic versions of Namenda XR before these certain patents expire.  Specifically, the lawsuits allege that Wockhardt’s, Teva’s, and Sun’s ANDA submissions infringe some or all of U.S. Patent No. 5,061,703 (the ‘703 patent), U.S. Patent No. 8,168,209 (the ‘209 patent), U.S. Patent No. 8,173,708 (the ‘708 patent), U.S. Patent No. 8,283,379 (the ‘379 patent), U.S. Patent No. 8,329,752 (the ‘752 patent), U.S. Patent No. 8,362,085 (the ‘085 patent), and U.S. Patent No. 8,598,233 (the ‘233 patent).  (The ‘703 patent expires in April 2015, the ‘009 patent expires in March 2029, and the ‘209, ‘708, ‘379, ‘752, ‘085, and ‘233 patents expire in November 2025.)  This lawsuit triggered an automatic stay of approval of the applicable ANDAs that expires no earlier than June 2016 (unless a court issues a decision adverse to the Company, Merz, and Adamas sooner).

The Company is also subject to various legal proceedings that arise from time to time in the ordinary course of its business.  Litigation is subject to many factors which are difficult to predict and there can be no assurance that the Company will not incur material costs in the resolution of these matters.

12. Debt:

On December 10, 2013 the Company issued $1.2 billion of 5.00% Senior Notes (the 5.00% Senior Notes), which mature on December 15, 2021.  The 5.00% Senior Notes accrue interest per annum, payable semi-annually in arrears on June 15 and December 15, commencing on June 15, 2014.  The Company incurred $18.5 million in deferred financing costs associated with the 5.00% Senior Notes which will be amortized over the term of the notes.   For the three months ended December 31, 2013, the Company recorded $3.5 million of interest expense and $0.1 million of  amortization of deferred financing fees related to the 5.00% Senior Notes.  The 5.00% Senior Notes have a fair value of $1.2 billion which is based on a market approach using Level 2 inputs.

13. Restructuring initiative:

During the third quarter of fiscal 2014, the Company announced Project Rejuvenate, a $500 million cost savings initiative with a goal of streamlining operations and reducing the Company’s operating cost base.  Project Rejuvenate is focused on three areas: flattening and broadening the organization to reduce layers and increase spans of control, increase the Company’s productivity and profitability by decreasing costs and streamlining work to reduce low value activities.

The Company expects annualized savings of approximately $270 million associated with the streamlining and realigning the R&D organization, $150 million in savings associated with the reduction of marketing expenses and $80 million in cost savings from a reduction in general and administrative expenses.  Forest currently estimates that approximately $110 million of the cost savings will result from a reduction in headcount.  The Company expects to achieve 65%-75% of the cost savings from Project Rejuvenate by the end of fiscal 2015 and the remainder by the end of fiscal 2016.

The Company expects the total cost to implement Project Rejuvenate to be in the range of $150 million to $200 million.  During the three months ended December 31, 2013, Forest recorded $45 million in pre-tax restructuring expenses relating to post-employment benefits.  These expenses were recorded in R&D expense and SG&A expense, as appropriate.

The liability balance for the cost savings initiative as of December 31, 2013 is as follows:

(In thousands)

	December 31, 2013
Beginning Balance as of October 1, 2013	$	–
Charges		45,000
Adjustments		–
Cash Payments		–
Balance	$	45,000

14. Subsequent events:

Aptalis acquisition

On January 7, 2014, Forest Laboratories, Inc. (FLI), FRX Churchill Holdings, Inc., a wholly owned subsidiary of FLI (Holdings), FRX Churchill Sub, LLC, a wholly owned subsidiary of Holdings (Merger Sub), and Aptalis Holdings, Inc. (Aptalis), entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which the Company would acquire Aptalis for $2.9 billion minus Aptalis’ existing indebtedness and related fees and costs, minus certain of Aptalis’ expenses, plus the aggregate exercise price applicable to Aptalis’ outstanding options immediately prior to the effective time of the Aptalis Acquisition (the “Effective Time”) and plus certain cash amounts, all as further described in the Merger Agreement.  On January 31, 2014, pursuant to the terms of the Merger Agreement, Merger Sub merged with and into Aptalis, with Aptalis

continuing as the surviving corporation and indirect wholly owned subsidiary of Holdings (the “Merger”).  The Company funded the Merger using $1.2 billion of cash on hand, including $650.0 million in cash from a foreign subsidiary, and the proceeds from the issuance of aggregate principal $1.8 billion of Senior Notes on January 31, 2014.

Upon the effectiveness of the Merger, each share of Aptalis common stock, par value $0.001 per share, issued and outstanding immediately prior to the Effective Time, other than any dissenting shares and any shares held by Aptalis, Holdings or any of their respective subsidiaries, was converted into the right to receive its pro rata share (the “Per Share Merger Consideration”), without interest and less applicable income or employment tax withholding, of an aggregate purchase price equal to $2.9 billion, minus Aptalis’ existing indebtedness and related fees and costs, minus certain of Aptalis’ expenses, plus the aggregate exercise price applicable to Aptalis’ outstanding options immediately prior to the Effective Time and plus certain cash amounts, all as further described in the Merger Agreement.

Aptalis is an international, specialty pharmaceutical company that focuses on developing, manufacturing, licensing and marketing therapies for certain cystic fibrosis- and gastrointestinal -related disorders.  Aptalis’ business focuses on therapeutic areas that are currently underserved by large pharmaceutical companies and are characterized by products used for chronic conditions. Aptalis has manufacturing and commercial operations in the U.S., Europe and Canada, and its products include Zenpep®, Canasa®, Carafate®, Pylera®, Rectiv®, Viokace®, Ultresa®, Lacteol®, Delursan®, Panzytrat® and Salofalk®.  Aptalis also formulates and develops enhanced pharmaceutical and biopharmaceutical products through the use of its proprietary technology platforms.

With this acquisition, the Company gained numerous strategic benefits, including an increased presence both domestically and internationally, expansion of its key therapeutic areas and customer base, a positive impact on its financial condition in the current period and moving forward and an opportunity to realize greater efficiencies in its operations.

The acquisition of Aptalis had no impact on the Company’s Condensed Consolidated Financial Statements as of and for the periods ended December 31, 2013 and 2012.  The preparation of the closing balance sheet for Aptalis is currently underway and the Company will perform valuation procedures to determine the fair value of assets acquired and liabilities assumed upon completion of the closing balance sheet. As such, the information necessary to determine the fair value of assets acquired and liabilities assumed is not yet available.

 $1.8 billion aggregate principal senior unsecured notes

In conjunction with the acquisition of Aptalis, the Company issued a private placement offering of $1.8 billion aggregate principal amount of senior unsecured notes on January 31, 2014 to fund the acquisition.  This comprised of $1.05 billion aggregate principal amount of its 4.375% senior unsecured notes due 2019 and $750 million aggregate principal amount of its 4.875% senior unsecured notes due 2021.

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Summary

Forest Laboratories, Inc. (herein referred to as “the Company,” “we” or “our”) is a leading, fully integrated, speciality pharmaceutical company that develops, manufactures, and sells branded forms of ethical drug products, most of which require a physician's prescription.  Our primary and most important products in the United States (U.S.) are marketed directly, or “detailed,” to physicians by our salesforces.  We emphasize detailing to physicians those branded ethical drugs which we believe have the most benefit to patients and potential for growth.  We also focus on the development and introduction of new products, including products developed in collaboration with our licensing partners.  Our products include those developed by us, those developed in conjunction with our partners and those acquired from other pharmaceutical companies and integrated into our marketing and distribution systems.

The following is a summary of transactions and key events that occurred during fiscal 2014:

·   On January 7, 2014, we entered into a definitive agreement to acquire Aptalis Holdings, Inc. (Aptalis) for $2.9 billion minus Aptalis’ existing debt and related fees and costs, minus certain of Aptalis’ expenses, plus the aggregate exercise price applicable to Aptalis’ outstanding options immediately prior to effective time of the Aptalis Acquisition and plus certain cash amounts.  Aptalis is a privately held leading specialty pharmaceutical company largely focused on the gastrointestinal and cystic fibrosis markets.  Aptalis has manufacturing and commercial operations in the U.S., Europe and Canada.  The products acquired will diversify and advance the Company’s strategies within the respective therapeutic classes.  On January 31, 2014, the Company consummated the acquisition using a combination of cash on hand and the proceeds from the issuance of an aggregate $1.8 billion principal amount of senior unsecured notes (the $1.8 billion Senior Notes).

·   In December 2013, we announced Project Rejuvenate, a $500 million cost savings initiative with the goal of streamlining operations and reducing our operating cost base.  Project Rejuvenate is focused on three areas: flattening and broadening the organization to reduce layers and increase spans of control, increase our productivity and profitability by decreasing costs, and streamlining work to reduce low value activities.  The Company expects the total cost of Project Rejuvenate to be in the range of $150 million to $200 million.  For the three months ended December 31, 2013, we recorded $45 million in pre-tax restructuring expenses related to post-employment benefits.

·   In December 2013 the Company issued $1.2 billion of 5.00% Senior Notes (the 5.00% Senior Notes), which mature on December 15, 2021.  In January 2014, in conjunction with the acquisition of Aptalis, the Company issued the $1.8 billion Senior Notes, comprised of $1.05 billion aggregate principal amount of its 4.375% senior unsecured notes due 2019 and $750 million aggregate principal amount of its 4.875% senior unsecured notes due 2021.

·   In November 2013, we entered into an Asset Purchase Agreement (APA) with Merck Sharp & Dohme B.V., a wholly owned subsidiary of Merck & Co., Inc. (Merck) to purchase exclusive rights in the U.S. for Saphris® (asenapine) sublingual tablets, a treatment for adult patients with schizophrenia and, as monotherapy or adjunctive therapy, of manic or mixed episodes associated with bipolar I disorder.  Upon the closing of the transaction on January 10, 2014, the Company made a payment of $155 million and entered into a supply agreement pursuant to which it will purchase the product from Merck at an agreed purchase price.  The Company is obligated to pay up to an additional $85 million to Merck for costs and expenses incurred in connection with post-marketing clinical trials for Saphris conducted during calendar 2013 and the agreement also includes certain sales milestone payments to Merck upon the achievement of certain net sales thresholds.

·   During November 2013, we and our partner Gedeon Richter Ltd. received a complete response letter from the U.S. Food and Drug Administration (FDA) regarding our New Drug Application (NDA) for cariprazine, an atypical antipsychotic for the treatment of schizophrenia and acute mania associated with bipolar disorder, bipolar depression and as an adjunct treatment for Major Depressive Disorder (MDD).  The FDA acknowledged that cariprazine demonstrated effectiveness in the treatment of schizophrenia and mania associated with bipolar disorder and requested further information on the drug, including additional clinical trial data to better define the optimal dosing regimen to maintain the demonstrated efficacy, while minimizing the potential for the development of adverse events generally associated with this class of drug.

·   In October 2013, Brenton L. Saunders replaced Howard Solomon as President and Chief Executive Officer of Forest Laboratories pursuant to a letter agreement he signed with the Company on September 11, 2013.  Mr. Saunders has been a member of our Board since August 2011 and was formerly the Chief Executive Officer of Bausch + Lomb.

·   In July 2013, we and our partner Pierre Fabre Laboratories received FDA approval for FetzimaTM (levomilnacipran extended-release capsules), a once-daily serotonin and norepinephrine reuptake inhibitor for the treatment of MDD in adults.  Fetzima was launched during the third quarter of fiscal 2014 and recorded sales of $8.0 million of initial trade stocking in the period.

Financial Performance

The Company modified the presentation of its Consolidated Statements of Operations effective for all periods presented.  Interest income, interest expense and other miscellaneous income/expense is now presented in the Interest and other income (expense) caption below Operating income (loss).

The following table provides a summary of our financial performance:

	Three Months Ended					Nine Months Ended
(In thousands, except per share amounts)	December 31,					December 31,
	2013		2012			2013		2012
Total revenue	$	878,396	$	716,281		$	2,554,621	$	2,280,176
Selling, general and administrative		454,981		428,380			1,307,408		1,185,578
Research and development		219,506		325,290			596,288		723,295
Net income (loss)	$	17,961	$	(153,608	)	$	111,226	$	(77,546	)
Diluted income (loss) per share:	$	0.07	$	(0.58	)	$	0.41	$	(0.29	)

·   Total revenue: Total revenue increased $162.1 million and $274.4 million for the three and nine months ended December 31, 2013, respectively, compared to prior year periods.  The increase was driven by sales of our next generation products, Bystolic®, Viibryd ®, Linzess®, Savella®, Daliresp®, Tudorza®, Teflaro®, Namenda XR® and Fetzima, which increased to $375.4 million and $972.4 million for the three and nine months ended December 31, 2013, respectively, compared to $235.4 million and $636.6 million for the same periods last year.  In addition, Namenda® sales increased $17.9 million and $75.8 million for the three and nine months ended December 31, 2013, respectively, compared to the same periods last year.  The increases for the nine months ended December 31, 2013 were partially offset by decreases in Lexapro® sales of $104.0 million and decreases in Lexapro contract revenue of $51.3 million.

·   Selling, general and administrative (SG&A): SG&A expense increased 6.2% to $455.0 million and 10.3% to $1,307.4 million for the three and nine months ended December 31, 2013, respectively, compared to the prior year periods.  The three and nine months ended December 31, 2013 included $18 million of expenses related to Project Rejuvenate for post-employment benefits.  SG&A spending for the current period reflects those resources and activities required to support our currently marketed products, particularly our newest products: Fetzima, Namenda XR, Linzess, Tudorza, Viibryd, Daliresp and Teflaro.

·   Research and development (R&D): R&D expense decreased 32.5% to $219.5 million and 17.6% to $596.3 million for the three and nine months ended December 31, 2013, respectively, from the same periods last year.  The three and nine months ended December 31, 2013 included $27 million of expenses related to Project Rejuvenate for post-employment benefits.  The decrease was due to lower third party development costs and milestone and upfront payments in the current year periods.  Excluding the milestone payments, upfront licensing payments, and Project Rejuvenate, R&D expense decreased $52.3 million or 25.5% and $101.5 million or 16.8% for the three and nine months ended December 31, 2013, respectively.

Business Environment

The pharmaceutical industry is highly competitive and subject to numerous government regulations.

There is competition as to the sale of products, research for new or improved products and the development and application of competitive drug formulation and delivery technologies.  There are many pharmaceutical companies in the U.S. and abroad engaged in the manufacture and sale of both proprietary and generic drugs of the kind which we sell, many of which have substantially greater financial resources than we do.

We also face competition for the acquisition or licensing of new product opportunities from other companies.  In addition, the marketing of pharmaceutical products is increasingly affected by the growing role of managed care organizations in the provision of health services.

Further competitive challenges arise from generic pharmaceutical manufacturers.  Upon the expiration or loss of patent protection for a product, we may lose a major portion of sales of such product in a very short period.  Generic pharmaceutical manufacturers also challenge product patents before their expiry.

We are also subject to government regulation which substantially increases the difficulty and cost incurred in obtaining the approval to market newly proposed drug products and maintaining the approval to market existing drugs.

For additional information, refer to “Item 1- Competition” and “Item 1 - Government Regulations” in the Company’s Annual Report on Form 10-K for the year ended March 31, 2013.

R   Results of Operations

Revenue

Three months ended December 31, 2013 compared to three months ended December 31, 2012

Net sales increased $168.8 million or 24.9% to $846.8 million for the three months ended December 31, 2013 primarily due to increases in sales of our next generation products and Namenda®. Our next generation products include Bystolic, Viibryd, Linzess, Namenda XR, Daliresp, Savella, Teflaro, Tudorza, and Fetzima. The following table and commentary presents net sales of our products compared to the prior year:

	Three Months Ended
(In thousands)	December 31,
	2013		2012		Change		% Change
Key Marketed Products
Namenda	$	363,718	$	345,832	$	17,886		5.2	%
Bystolic		130,741		108,828		21,913		20.1
Viibryd		52,689		40,628		12,061		29.7
Linzess		51,044		19,227		31,817		165.5
Namenda XR		37,752		–		37,752		–
Daliresp		26,771		17,456		9,315		53.4
Savella		25,604		25,559		45		0.2
Teflaro		22,303		11,546		10,757		93.2
Tudorza		20,422		12,191		8,231		67.5
Fetzima		8,036		–		8,036		–
Lexapro		21,073		20,332		741		3.6
Other Products		86,631		76,368		10,263		13.4
Total	$	846,784	$	677,967	$	168,817		24.9	%

Sales of Namenda (memantine HCl), our N-methyl-D-aspartate receptor antagonist for the treatment of moderate to severe dementia of the Alzheimer’s type increased $17.9 million to $363.7 million for the three months ended December 31, 2013 as compared to $345.8 million in the same period last year.  This increase was driven by price increases partially offset by a decline in volume attributable to patient conversion to Namenda XR.  Namenda’s patent expires in April 2015 and agreements with multiple parties allow generic entry in January 2015.  In January 2014, the Company submitted to the FDA data from its pediatric program to extend the Namenda patent.  If the FDA finds the submission meets the requirements of the Pediatric Written Request, the Company would be entitled to a six-month extension of marketing exclusivity for Namenda.  The new patent expiration date would be October 2015 with generic entry in July 2015.  

Namenda XR, a once-daily extended-release formulation of Namenda for the treatment of moderate to severe dementia of the Alzheimer’s type, recorded sales of $37.8 million for the three months ended December 31, 2013.  Namenda XR was launched in June 2013 and recorded sales of $11.5 million during the second quarter of fiscal year 2014.  

Bystolic (nebivolol HCl), our beta-blocker indicated for the treatment of hypertension, had an increase in sales of 20.1% or $21.9 million for the three months ended December 31, 2013 compared to the same period last year.  The increase was driven by price increases and modest volume growth.

Sales of Viibryd (vilazodone HCl), our selective serotonin reuptake inhibitor (SSRI) and a 5-HT1A receptor partial agonist for the treatment of adults with MDD totaled $52.7 million for the three months ended December 31, 2013 and $40.6 million in the same period last year.  The increase year over year was driven by increased volume and price increases.  

Linzess (linaclotide), our guanylate cyclase agonist for the treatment of irritable bowel syndrome with constipation and chronic idiopathic constipation in adults, recorded sales of $51.0 million for the three months ended December 31, 2013 and $19.2 million in the same period last year.  The increase was due to increased volume.  Linzess was launched in December 2012.

Daliresp (roflumilast), our selective phosphodiesterase 4 (PDE4) enzyme inhibitor indicated for the treatment to reduce the risk of exacerbations in patients with severe chronic obstructive pulmonary disease (COPD) associated with chronic bronchitis and a history of exacerbations, achieved sales of $26.8 million for the three months ended December 31, 2013 and $17.5 million in the same period last year.  The increase year over year was driven by increased volume and price increases.

Teflaro (ceftaroline fosamil), a broad-spectrum hospital-based injectable cephalosporin antibiotic for the treatment of adults with acute bacterial skin and skin structure infections and community acquired bacterial pneumonia, achieved sales of $22.3 million and $11.5 million for the three months ended December 31, 2013 and December 31, 2012, respectively.  The increase year over year was due primarily to increased volume.

Tudorza (aclidinium bromide inhalation powder), a long-acting antimuscarinic agent indicated for the long-term maintenance treatment of bronchospasm associated with COPD, recorded sales of $20.4 million for the three months ended December 31, 2013 and $12.2 million in the same period last year.  The increase was due to increased volume.  Tudorza was launched in December 2012.

In December 2013, we launched our newest product Fetzima, a once-daily serotonin and norepinephrine reuptake inhibitor for the treatment of MDD.  Fetzima recorded initial trade stocking of $8.0 million for the three months ended December 31, 2013. Contract revenue for the three months ended December 31, 2013 decreased to $31.6 million as compared to $38.3 million in the same period last year.  

Contract revenue included Benicar® (olmesartan medoxomil) co-promotion income of $30.2 million for the three months ended December 31, 2013 and $36.0 million for the three months ended December 31, 2012.  We will continue to earn Benicar co-promotion income through March 2014.

Revenue

Nine months ended December 31, 2013 compared to nine months ended December 31, 2012

Net sales increased $333.3 million or 15.7% to $2,455.1 million during the nine months ended December 31, 2013 primarily due to increases in sales of our next generation products including Bystolic, Viibryd, Linzess, Daliresp, Namenda XR, Tudorza, Teflaro and Fetzima, partially offset by the decline in Lexapro sales.  Excluding Lexapro sales, net sales increased $437.3 million or 22.5% for the nine months ended December 31, 2013 compared to the prior year period.  The following table and commentary presents net sales of our products compared to the prior year:

	Nine Months Ended
(In thousands)	December 31,
	2013		2012		Change			% Change
Key Marketed Products
Namenda	$	1,157,581	$	1,081,818	$	75,763			7.0	%
Bystolic		386,740		323,132		63,608			19.7
Viibryd		146,251		117,930		28,321			24.0
Linzess		114,251		19,227		95,024			494.2
Daliresp		75,319		54,770		20,549			37.5
Savella		74,153		78,459		(4,306	)		(5.5	)
Namenda XR		63,229		–		63,229			–
Tudorza		53,062		12,191		40,871			335.3
Teflaro		51,398		30,906		20,492			66.3
Fetzima		8,036		–		8,036			–
Lexapro		71,060		175,039		(103,979	)		(59.4	)
Other Products		253,986		228,278		25,708			11.3
Total	$	2,455,066	$	2,121,750	$	333,316			15.7	%

Sales of Namenda increased $75.8 million or 7.0% to $1,157.6 million for the nine months ended December 31, 2013 as compared to same period last year.  This increase was driven by price increases partially offset by a decline in volume attributable to the conversion to Namenda XR.

In June 2013 we launched our newest product Namenda XR, which recorded sales of $63.2 million for the nine months ended December 31, 2013.

Bystolic sales increased 19.7% or $63.6 million for the nine months ended December 31, 2013 compared to the same period last year, driven by price increases and modest volume growth.

Sales of Viibryd totaled $146.3 million for the nine months ended December 31, 2013 and $117.9 million in the same period last year.  The increase year over year was driven primarily by increased volume.

Linzess recorded sales of $114.3 million for the nine months ended December 31, 2013 compared to $19.2 million in the same period last year.  The increase year over year was driven by increased volume.  Linzess launched in December 2012.

Daliresp achieved sales of $75.3 million for the nine months ended December 31, 2013 and $54.8 million in the same period last year.  The increase year over year was driven by increased volume.

Tudorza achieved sales of $53.1 million for the nine months ended December 31, 2013 and $12.2 million in the same prior year period.  The increase year over year was driven by increased volume.   Tudorza launched in December 2012.

Teflaro achieved sales of $51.4 million and $30.9 million for the nine months ended December 31, 2013 and December 31, 2012, respectively.  The increase year over year was due to increased volume.

Fetzima was launched during the current period and recorded sales of $8.0 million of initial trade stocking.

Sales of Lexapro (escitalopram oxalate), our SSRI for the initial and maintenance treatment of MDD in adults and adolescents and generalized anxiety disorder in adults, totalled $71.1 million for the nine months ended December 31, 2013, a decrease of $104.0 million from the same prior year period.  The decrease in Lexapro sales was due to the expected continued deterioration of sales of the product after the expiration of its market exclusivity in March 2012.

Contract revenue for the nine months ended December 31, 2013 decreased to $99.6 million as compared to $158.4 million in the same period last year.  Contract revenue in the prior year included $51.3 million of income from a distribution agreement with Mylan pursuant to which Mylan was authorized to sell a generic version of Lexapro and we received a portion of profits on those sales.  There was no contribution from generic Lexapro royalties this year due to the full genericization of Lexapro.  Contract revenue also included Benicar co-promotion income of $93.2 million and $101.6 million for the nine months ended December 31, 2013 and 2012, respectively.  We will continue to earn Benicar co-promotion income through March 2014.

Cost of Goods Sold / Gross Margin

Three and nine months ended December 31, 2013 compared to three and nine months ended December 31, 2012

Cost of goods sold was $182.3 million and $511.4 million for the three and nine months ended December 31, 2013, respectively, as compared to $153.3 million and $471.3 million for the three and nine months ended December 31, 2012, respectively.  Cost of sales as a percentage of total revenue was 20.8% and 20.0% for the three and nine months ended December 31, 2013, respectively, as compared to 21.4% and 20.7% for the three and nine months ended December 31, 2012.  The decrease in the current year periods was due to a change in product mix and more favorable margins for certain products.  Cost of sales includes royalties related to our products.  In the case of our principal products subject to royalties, which includes the Namenda franchise, these royalties are in the range of 15% to 25%.

Expenses

Three and nine months ended December 31, 2013 compared to three and nine months ended December 31, 2012

    (In thousands)

 

	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2013			2012			2013			2012
Selling, general and administrative		$	454,981		$	428,380		$	1,307,408		$	1,185,578
Research and development			219,506			325,290			596,288			723,295
Total		$	674,487		$	753,670		$	1,903,696		$	1,908,873

SG&A expense increased 6.2% to $455.0 million for the three months ended December 31, 2013 from $428.4 million for the same period last year.  For the nine months ended December 31, 2013, SG&A expense increased 10.3% to $1,307.4 million compared to $1,185.6 million for the same prior year period.  During December 2013 we commenced Project Rejuvenate, a cost savings initiative with a goal of streamlining operations and reducing operating expenses.  For the three and nine month periods, the Company recorded $18 million of expenses in SG&A related to Project Rejuvenate for post-employment benefits.  SG&A expense for the nine months ended December 31, 2013 also includes the write-off of the $26.2 million note receivable related to the termination of the Nabriva development program.  Excluding these charges, total SG&A expense for the three and nine months ended December 31, 2013 increased 2.0% and 6.5%, respectively, compared to same periods last year.  Our current level of spending reflects the resources and activities required to support our currently marketed products, particularly our newest products, Fetzima, Namenda XR, Linzess, Tudorza, Viibryd, Daliresp and Teflaro.

R&D expense decreased 32.5% to $219.5 million and 17.6% to $596.3 million for the three and nine months ended December 31, 2013, respectively, from $325.3 million and $723.3 million, respectively, for the same periods last year.  R&D expense includes $27 million in expense associated with Project Rejuvenate for the three and nine months ended December 31, 2013. R&D expense comprises third party development costs, internal and other development costs and milestone and upfront charges.  Excluding milestone payments, upfront licensing payments, and Project Rejuvenate, R&D expense decreased $52.3 million or 25.5% and $101.5 million or 16.8% for the three and nine months ended December 31, 2013, respectively, compared to the prior year periods.

For the three and nine months ended December 31, 2013 and 2012, R&D expense by category was as follows:

(In thousands)

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2013		2012		2013		2012
Category
Third party development costs	$	71,809	$	114,600	$	247,490	$	335,347
Internal and other development costs		80,697		90,221		253,798		267,479
Milestone and upfront payments		40,000		120,469		68,000		120,469
Project Rejuvenate		27,000		–		27,000		–
Total research and development expense	$	219,506	$	325,290	$	596,288	$	723,295

Third party development costs are incurred for clinical trials performed by third parties on our behalf with respect to products in various stages of development.  For the three and nine months ended December 31, 2013, third party development costs were largely related to clinical trials for nebivolol/valsartan, aclidinium/formoterol, vilazodone, memantine and ceftazidime/avibactam.  For the same period last year, third party development costs were largely related to clinical trials for nebivolol/valsartan, aclidinium/formoterol, vilazodone, cariprazine and roflumilast.  Internal and other development costs are primarily associated with activities performed by internal research personnel.

Milestone and upfront charges are incurred upon consummation of new licensing agreements and achievement of certain development milestones.  The three and nine months ended December 31, 2013 included $40.0 million and $68.0 million, respectively, in        milestone payments and no upfront payments.  The three and nine months ended December 31, 2012, included $44.5 million in milestone payments and $76.0 million in upfront payments.  During the quarter ended December 31, 2012, we made an upfront   payment of $65.0 million to Adamas Pharmaceuticals, Inc. (Adamas) for the development and commercialization of a FDC of Namenda XRand donepezil CHI which will be a daily therapy for the treatment of moderate to severe dementia of the Alzheimer’s type.

R&D expense reflects the following:

·   In November 2004, we entered into an agreement with Gedeon Richter Ltd. for the North American rights to cariprazine, an oral D3/D2 partial agonist, and related compounds, being developed as an atypical antipsychotic for the treatment of schizophrenia and acute mania associated with bipolar disorder, bipolar depression and as an adjunct treatment for MDD.  In October 2011 and February 2012, we reported preliminary top-line results from two Phase III studies of cariprazine in patients with acute mania associated with bipolar disorder.  The data from both studies showed that cariprazine-treated patients with acute manic episodes experienced significant symptom improvement compared to placebo-treated patients.  Also in February 2012, we reported the results of two Phase III studies of cariprazine in patients with schizophrenia showing that cariprazine-treated patients with schizophrenia experienced significant symptom improvement compared to placebo-treated patients.  In November 2012, we filed a NDA with the FDA for cariprazine for those two indications.  In November 2013, we received a Complete Response Letter in which the FDA acknowledged that cariprazine demonstrated effectiveness in the treatment of schizophrenia and mania associated with bipolar disorder and requested further information on the drug, including additional clinical trial data to better define the optimal dosing regimen to maintain the demonstrated efficacy, while minimizing the potential for the development of adverse events generally associated with this class of drug.  Cariprazine is also in Phase II development for bipolar depression and as an adjunct treatment for MDD.  We expect to report the top-line results of these Phase II studies during the first half of calendar 2014.

            · We licensed the exclusive U.S. marketing rights to Tudorza from Almirall, S.A. (Almirall), a pharmaceutical company headquartered in Barcelona, Spain.  Pursuant to our agreement, Almirall also granted us certain rights of first negotiation for other Almirall respiratory products involving combinations with aclidinium (aclidinium bromide).  Pursuant to such rights, we conducted the development of a fixed dose combination (FDC) of aclidinium and the long acting beta-agonist, formoterol, for the treatment of COPD.  In the second quarter of calendar 2013, we announced positive top-line Phase III clinical trial results from two studies of two dosage forms of this FDC; a 400/6mcg FDC and a 400/12mcg FDC.  Both doses of the FDC were well tolerated in the studies.  Based on comments provided by the FDA at a pre-NDA meeting, we have delayed our planned submission of an NDA for the FDC.  We completed analysis and have submitted responses to the FDA’s comments and anticipate a response during the fourth quarter of fiscal 2014.

·   In June 2013, we reported positive topline results from an 8-week pivotal Phase III clinical trial evaluating the efficacy and safety of an FDC of Bystolic, our proprietary beta-blocker launched in January 2008, and the market’s leading angiotensin II receptor blocker valsartan for the treatment of patients with hypertension.  We anticipate filing an NDA with the FDA in the first quarter of calendar 2014.

·   In November 2012, we entered into an agreement with Adamas for the development and commercialization of an FDC of Namenda XR (memantine HCl extended release) and donepezil HCl which will be a once a day therapy for the treatment of moderate to severe dementia of the Alzheimer’s type.  We anticipate filing an NDA with the FDA during the first quarter of calendar 2014 and contingent upon FDA approval, the FDC is expected to launch in calendar year 2015.  In January 2014, the Company submitted to the FDA results from the clinical studies performed to evaluate the safety and effectiveness of Namenda in the treatment of autism pursuant to the requirements of the FDA’s pediatric program.  We anticipate receiving a response from the FDA in the third quarter of calendar year 2014.  If the FDA’s response is positive, we would be entitled to a six-month extension of marketing exclusivity for Namenda after the expiration of the patent on April 11, 2015 to October 11, 2015.

· In December 2009, we entered into an agreement with AstraZeneca AB (AstraZeneca) to acquire additional rights to avibactam including co-development and exclusive commercialization rights in the U.S. and Canada to products containing avibactam including the ceftazidime/avibactam combination.  Avibactam is a novel broad-spectrum beta-lactamase inhibitor designed to be co-administered intravenously with select antibiotics to enhance their spectrum of activity by overcoming beta-lactamase related antibacterial resistance.  Avibactam is currently being developed in combination with ceftazidime, a cephalosporin antibiotic.   Data from two Phase II trials for ceftazidime/avibactam in patients with complicated intra-abdominal infections (cIAI) and complicated urinary tract infections (cUTI) demonstrated that ceftazidime/avibactam achieved high clinical cure rates and was well tolerated in patients with cIAI and cUTI.  Based on the results of these studies, we and AstraZeneca initiated Phase III studies for ceftazidime/avibactam in patients with cIAI in December 2011 and in patients with cUTI in July 2012 which are currently ongoing.  We expect results from the Phase III studies during the middle of calendar year 2014.  In September 2013, the FDA designated ceftazidime/avibactam as a qualified infectious disease product (QIDP).  QIDP designation provides us certain incentives including priority review and eligibility with the FDA’s fast track program, as well as five-year extension of exclusivity under the Hatch-Waxman act.  We anticipate filing an NDA based on the phase II studies in the middle of calendar 2014.

·   In December 2010, we entered into a license agreement with Grünenthal GmbH (Grünenthal) for the co-development and commercialization of GRT 6005 (cebranopadol) and its follow-on compound GRT 6006, both being small molecule analgesic compounds in development for the treatment of moderate to severe chronic pain conditions.  Cebranopadol and GRT 6006 are novel first-in-class compounds with unique pharmacological and pharmacokinetic profiles that may enhance their effect in certain pain conditions.  The unique mode of action of these compounds builds on the nociceptin receptor (NOP, also known as ORL-1) and, supported by the established mu opioid receptor, is believed to be particularly suitable for the treatment of moderate to severe chronic pain.  Cebranopadol has successfully completed initial proof-of-concept studies in nociceptive and neuropathic pain with further Phase II studies currently ongoing prior to initiation of Phase III studies.

Many of our agreements require us to participate in joint activities and committees, the purpose of which is to make decisions along with our partners in the development of products.  In addition, we have entered into several arrangements to conduct pre-clinical drug discovery.

From time to time, the Company performs a review of all developmental projects and re-evaluates our development priorities based on the regulatory and commercial prospects of the products in development.   The Company considers the commercial potential of the products as well as the development and commercialization costs necessary to achieve approval and successful launch.  In certain situations we may discontinue a development program based on this review.

In June 2012, the Company entered into an agreement with Nabriva Therapeutics (Nabriva) for the development of Nabriva’s novel antibacterial agent, BC-3781.  Pursuant to this agreement, the Company conducted in collaboration with Nabriva, certain development activities related to BC-3781.   During the first quarter of fiscal 2014 after a review of this development program, the Company discontinued its collaborative development with Nabriva.

Interest and other income (expense), net

Interest and other income (expense), net, was $0.7 million and $12.6 million for the three and nine months ended December 31, 2013, respectively, as compared to $6.4 million and $24.3 million for the same prior year periods.  Interest and other income (expense), net, primarily consists of interest income on our cash and investments offset by our interest expense associated with our $1.2 billion 5.00% Senior Notes issued on December 10, 2013.  The notes accrue interest per annum, payable semi-annually in arrears on June 15 and December 15, commencing on June 15, 2014, and for the three and nine months ended December 31, 2013, the Company recorded $3.5 million of interest expense.

Income tax expense (benefit)

Our effective tax rate was 19.5% and 26.9% for the three and nine months ended December 31, 2013, respectively, as compared to 16.6% and (2.5%)  for the same periods last year.  The increase in the current three and nine-month periods compared to last year was primarily due to a change in the mix of earnings by jurisdiction, the expiration of the U.S. Research & Experimentation Tax Credit as of December 31, 2013 , the write-off of a note receivable related to the termination of the Nabriva development program, partially offset by the impact the of Project Rejuvenate.

Inflation has not had a material effect on our operations for the periods presented.

Non-GAAP Financial Measures

Forest provides Non-GAAP financial measures as alternative views of the Company’s performance.  These measures exclude certain items (including costs, expenses, gains/ (losses) and other specified items) due to their significant and/or unusual individual nature and the impact they have on the analysis of underlying business performance and trends.  Management reviews these items individually and believes excluding these items provides information that enhances investors’ understanding of the Company’s financial performance.  Non-GAAP financial measures should be considered in addition to, but not in lieu of, net income and its components and Earnings Per Share (EPS) prepared in accordance with accounting principles generally accepted in the United States (GAAP).  Non-GAAP financial measures have no standardized meaning prescribed by GAAP and therefore have limits in their usefulness to investors. Because of the non-standardized definitions, Non-GAAP adjusted income and its components and Non-GAAP EPS (unlike GAAP net income and its components and EPS) may not be comparable to the calculation of similar measures of other companies.  Non-GAAP adjusted income and its components and Non-GAAP EPS are presented solely to permit investors to more fully understand how management assesses performance.  A reconciliation between GAAP financial measures and Non-GAAP financial measures follows:

Specified Items
	Three Months Ended					Nine Months Ended
	December 31,					December 31,
(In thousands)	2013			2012		2013			2012
Amortization arising from business combinations
and acquisitions of product rights	$	11,912		$	9,473	$	35,659		$	27,257
Impact of specified items on Cost
of goods sold		11,912			9,473		35,659			27,257
Amortization arising from business combinations
and acquisitions of product rights		15,920			10,991		44,857			32,896
Project Rejuvenate		18,000			–		18,000			–
Write-off of Nabriva note receivable		–			–		26,182			–
Impact of specified items on Selling,
general and administrative		33,920			10,991		89,039			32,896
Project Rejuvenate		27,000			–		27,000			–
Upfront payment to Adamas		–			65,000		–			65,000
Other licensing agreement payments		–			11,000		–			11,000
Impact of specified items on Research and development		27,000			76,000		27,000			76,000
Increase to pre-tax income		72,832			96,464		151,698			136,153
Income tax impact of specified items		(16,821	)		–		(16,821	)		–
Increase to net earnings	$	56,011		$	96,464	$	134,877		$	136,153

Reconciliation of Certain GAAP Line Items to Non-GAAP Line Items
	Three Months Ended
	December 31, 2013
(In thousands)	GAAP Reported		Specified Items		Non-GAAP Adjusted
Gross profit	$	696,126	$	11,912	$	708,038
Selling, general and administrative		454,981		33,920		421,061
Research and development		219,506		27,000		192,506
Operating income		21,639		72,832		94,471
Interest and other income (expense), net		683		–		683
Earnings before provision for taxes		22,322		72,832		95,154
Provision for taxes		4,361		16,821		21,182
Earnings after taxes	$	17,961	$	56,011	$	73,972
Weighted average number of shares outstanding (diluted):		272,901		–		272,901

	Three Months Ended
	December 31, 2012
(In thousands)	GAAP Reported			Specified Items		Non-GAAP Adjusted
Gross profit	$	562,970		$	9,473	$	572,443
Selling, general and administrative		428,380			10,991		417,389
Research and development		325,290			76,000		249,290
Operating loss		(190,700	)		96,464		(94,236	)
Interest and other income (expense), net		6,409			–		6,409
Losses before provision for taxes		(184,291	)		96,464		(87,827	)
Provision for benefit		(30,683	)		–		(30,683	)
Losses after provision for taxes	$	(153,608	)	$	96,464	$	(57,144	)
Weighted average number of shares outstanding (diluted):		266,018			–		266,018

	Nine Months Ended
	December 31, 2013
(In thousands)	GAAP Reported		Specified Items		Non-GAAP Adjusted
Gross profit	$	2,043,266	$	35,659	$	2,078,925
Selling, general and administrative		1,307,408		89,039		1,218,369
Research and development		596,288		27,000		569,288
Operating income		139,570		151,698		291,268
Interest and other income (expense), net		12,648		–		12,648
Earnings before provision for taxes		152,218		151,698		303,916
Provision for taxes		40,992		16,821		57,813
Earnings after taxes	$	111,226	$	134,877	$	246,103
Weighted average number of shares outstanding (diluted):		270,832		–		270,832

	Nine Months Ended
	December 31, 2012
(In thousands)	GAAP Reported			Specified Items		Non-GAAP Adjusted
Gross profit	$	1,808,919		$	27,257	$	1,836,176
Selling, general and administrative		1,185,578			32,896		1,152,682
Research and development		723,295			76,000		647,295
Operating income (loss)		(99,954	)		136,153		36,199
Interest and other income (expense), net		24,278			–		24,278
Earnings (losses) before provision for taxes		(75,676	)		136,153		60,477
Provision for benefit		1,870			–		1,870
Earnings (losses) after provision for taxes	$	(77,546	)	$	136,153	$	58,607
Weighted average number of shares outstanding (diluted):		266,967			–		266,967

Reconciliation of GAAP EPS to Non-GAAP EPS
	Three Months Ended						Nine Months Ended
	December 31,						December 31,
(In thousands, except per share amounts)	2013			2012			2013			2012
Reported Net income (loss):	$	17,961		$	(153,608	)	$	111,226		$	(77,546	)
Specified items:
Amortization arising from business combinations
and acquisitions of product rights
Recorded in Cost of sales		11,912			9,473			35,659			27,257
Recorded in Selling, general
and administrative		15,920			10,991			44,857			32,896
Project Rejuvenate		45,000			–			45,000			–
Write-off of Nabriva note receivable		–			–			26,182			–
Upfront payment to Adamas		–			65,000			–			65,000
Other licensing agreement payments		–			11,000			–			11,000
Impact of specified items on provision for
income taxes		(16,821	)		–			(16,821	)		–
Adjusted Non-GAAP earnings (losses):	$	73,972		$	(57,144	)	$	246,103		$	58,607
Reported Diluted earnings (losses) per share:	$	0.07		$	(0.58	)	$	0.41		$	(0.29	)
Specified items:
Amortization arising from business combinations
and acquisitions of product rights
Recorded in Cost of sales		0.04			0.04			0.13			0.10
Recorded in Selling, general
and administrative		0.06			0.04			0.17			0.12
Project rejuvenate		0.16			–			0.17			–
Write-off of Nabriva note receivable		–			–			0.10			–
Upfront payment to Adamas		–			0.24			–			0.24
Other licensing agreement payments		–			0.04			–			0.04
Impact of specified items on provision for
income taxes		(0.06	)		–			(0.06	)		–
Rounding		–			0.01			(0.01	)		0.01
Adjusted Non-GAAP earnings (losses) per share:	$	0.27		$	(0.21	)	$	0.91		$	0.22

Financial Condition and Liquidity

The following is a discussion of financial condition and liquidity with respect to working capital:

	As of
(In millions)	December 31, 2013			March 31, 2013
Working capital		$	3,253		$	1,950

Net current assets increased $1,303.0 million from March 31, 2013 due to an increase in cash and cash equivalents of $1,386.8 million, an increase in inventory of $44.1 million and an increase in prepaid and other current assets of $51.6 million.  These increases were offset by a decrease in accounts receivable of $108.2 million, a decrease in short term marketable securities of $37.5 million and an increase in net current liabilities of $42.3 million.   The increase in cash and cash equivalents was driven by cash proceeds from the issuance of our $1.2 billion 5.00% Senior Notes during the third quarter of fiscal 2014.  Also driving the increase in cash and cash equivalents was cash provided by operating activities of $330.9 million, cash generated by financing activities excluding the proceeds from the notes of $66.0 million and the sale of property, plant and equipment of $13.8 million.  These increases were partially offset by purchases of plant, property and equipment of $75.9 million, net purchases of marketable securities of $60.8 million, trademark purchases of $44.5 million, the purchase of $30.0 million of Trevena Inc. preferred stock, and $19.2 million of funding to moksha8.   Cash, cash equivalents and investments collectively increased by $1,463.6 million.  

Of our total cash and cash equivalents and marketable securities position at December 31, 2013 and March 31, 2013, approximately 35% or $1,550.5 million and 4% or $134.2 million, respectively, were domiciled domestically with the remainder held by our international subsidiaries.  Approximately $2.9 billion at December 31, 2013 and March 31, 2013 was held in low tax jurisdictions and are attributable to earnings that are expected to be indefinitely reinvested offshore.  We invest funds in variable rate demand notes that have major bank liquidity agreements, municipal bonds and notes, government agency bonds, commercial paper, corporate bonds, certificates of deposit, and auction rate securities.  Cash repatriations are subject to restrictions in certain jurisdictions and may be subject to withholding and other taxes.  We continue to actively seek opportunities to further develop foreign operations through strategic alliances, business acquisitions, collaboration agreements, and other investing activities including working capital and capital expenditures.  We expect cash generated by our U.S. operations, together with existing cash, cash equivalents, marketable securities, the proceeds from our debt offerings, our $750 million revolving credit facility and access to capital markets to be sufficient to cover cash needs for our U.S. operations including common stock repurchases, strategic alliances and acquisitions, milestone payments, working capital and capital expenditures.

Accounts receivable decreased $108.2 million primarily due to lower trade receivables.  The Company’s trade receivable policy is 30 days.  At December 31, 2013, there were four weeks of open receivables compared to five weeks of open receivables at March 31, 2013.  The extra week of open receivables at March 31, 2013 was attributable to the timing of customer purchases at the end of February 2013.  Also contributing to the decline was a decrease in the collaboration receivable from Ironwood Pharmaceuticals, Inc., our collaboration partner for the development and commercialization of Linzess.  Net inventories increased $44.1 million in order to support continued demand for our products, as well as the launch of Fetzima and Namenda XR during fiscal year 2014.  We believe that current inventory levels are adequate to support continued demand for our products.  Prepaid and other current assets increased $51.6 million due to the increase in prepaid taxes.  Net current liabilities increased $42.3 million primarily due $45 million recorded for post-employment benefits associated with Project Rejuvenate.

Net property, plant and equipment increased as we continued to invest in our technology and facilities. This increase was partially offset by the sale of one of our Long Island, New York facilities during the second quarter of fiscal year 2014.

On November 26, 2013, the Board terminated the previously outstanding 50 million share repurchase authorization (2010 Share Repurchase Program) and authorized the repurchase of up to $1 billion of shares of our common stock (2013 Share Repurchase Program) based on prevailing prices from time to time. The new authorization became effective immediately and has no set expiration date.

Off-Balance Sheet Arrangements

At December 31, 2013, the Company had no off-balance sheet arrangements.

Critical Accounting Policies

The following accounting policies are important in understanding our financial condition and results of operations and should be considered an integral part of the financial review.  Refer to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2013 for additional policies.

Business combinations

The Company accounts for business combinations under the acquisition method of accounting, which requires the assets acquired and liabilities assumed to be recorded at their respective fair values as of the acquisition date in the Company’s Consolidated Financial Statements.  The determination of estimated fair value may require management to make significant estimates and assumptions.  The purchase price is the fair value of the total consideration conveyed to the seller and the excess of the purchase price over the fair value of the acquired net assets, where applicable, is recorded as goodwill.  The results of operations of an acquired business are included in our Consolidated Financial Statements from the date of acquisition.  Costs associated with the acquisition of a business are expensed in the period incurred.

Collaboration arrangements

The Company accounts for collaboration arrangements in accordance with Accounting Standards Codification Topic808 - “Collaborative Arrangements” pursuant to which payments to and receipts from our collaboration partners are presented in our Statement of Operations based on the nature of the arrangement (including its contractual terms), the nature of the payments and applicable guidance.

Estimates and Assumptions

The financial statements are prepared in conformity with GAAP which require the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the end of each period and of revenues and expenses during the reporting periods.  Situations where estimates are required to be made include, but are not limited to, accounting for business combinations,  sales allowances, returns, rebates and other pricing adjustments, depreciation, amortization, tax assets and liabilities, restructuring reserves and certain contingencies.  Actual results may vary from estimates.  The Company reviews all significant estimates affecting the financial statements on a recurring basis and records the effect of any adjustments necessary.

Goodwill and Intangible Assets

Goodwill and intangible assets are evaluated for impairment periodically or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the estimated undiscounted future cash flows from the use of these assets.  When any such impairment exists, a charge is recorded in the Statement of Operations in that period, to adjust the carrying value of the related asset.  Additionally, goodwill is subject to an impairment test at least annually.

Revenue Recognition

Revenues are recorded in the period the merchandise is shipped.  As is typical in the pharmaceutical industry, gross product sales are subject to a variety of deductions, primarily representing rebates and discounts to government agencies, wholesalers and managed care organizations.  These deductions represent estimates of the related liabilities and, as such, judgment is required when estimating the impact of these sales deductions on gross sales for a reporting period.  Historically, our adjustments for actual settlements have not been material.  If estimates are not representative of actual settlements, results could be materially affected.

Provisions for estimated sales allowances, returns, rebates and other pricing adjustments are accrued at the time revenues are recognized as a direct reduction of such revenue.  These accruals are estimated based on available information including third party data regarding the portion of sales on which rebates and discounts can be earned, adjusted as appropriate for specific known events and the prevailing contractual discount rate.  Provisions are reflected either as a direct reduction to accounts receivable or, to the extent that they are due to entities other than customers, as accrued expenses.  Adjustments to estimates are recorded when Management becomes aware of a change of circumstances or when customer credits are issued or payments are made to third parties.  There were no material adjustments to these estimates in the periods presented.

Deductions for chargebacks (primarily discounts to group purchasing organizations and federal government agencies) closely approximate actual deductions as these deductions are settled generally within 2-3 weeks of incurring the liability.

The sensitivity of estimates can vary by program and type of customer.  However, estimates associated with Medicaid and contract rebates are most at risk for adjustment because of the extensive time delay between the recording of the accrual and its ultimate settlement, generally an interval that can range up to one year.  Because of this time lag, in any given quarter, adjustments to actuals may incorporate revisions of prior quarters.

Provisions for Medicaid and contract rebates during a period are recorded based upon the actual historical experience ratio of rebates paid and actual prescriptions written.  The experience ratio is applied to the period's sales to determine the rebate accrual and related expense.  This experience ratio is evaluated regularly to ensure that the experience ratios used are as current as practicable.  As appropriate, we will adjust the ratio to more closely match the current experience or expected future experience.  In assessing this ratio, we consider current contract terms, such as the effect of changes in formulary status, discount rate and utilization trends.  Periodically, the accrual is adjusted based upon actual payments made for rebates.  If the ratio is not indicative of future experience, results could be affected.  Rebate accruals for Medicaid were $39.0 million at December 31, 2013 and $38.4 million at March 31, 2013.  Commercial discounts and other rebate accruals were $250.9 million at December 31, 2013 and $191.8 million at March 31, 2013.  Accruals for chargebacks, discounts and returns were $71.2 million at December 31, 2013 and $63.2 million at March 31, 2013.

The following table summarizes the activity in the accounts related to accrued rebates, sales returns and discounts:

	December 31,
(In thousands)	2013			2012
Beginning balance	$	293,411		$	270,505
Provision for rebates		557,301			503,985
Settlements		(497,700	)		(453,882	)
		59,601			50,103
Provision for returns		27,887			16,572
Settlements		(20,603	)		(11,469	)
		7,284			5,103
Provision for chargebacks and discounts		265,889			259,176
Settlements		(265,047	)		(254,222	)
		842			4,954
Ending balance	$	361,138		$	330,665

Forest’s policy relating to the supply of inventory at wholesalers is to maintain stocking levels of up to 3 weeks and to keep monthly levels consistent from year to year, based on patterns of utilization.  We have historically closely monitored wholesale customer stocking levels by purchasing information directly from customers and by obtaining other third party information.  Unusual or unexpected variations in buying patterns or utilizations are investigated.

Sales incentives are generally given in connection with a new product launch.  These sales incentives are recorded as a reduction of revenues and are based on terms fixed at the time goods are shipped.  New product launches may result in expected temporary increases in wholesaler inventories, which as described above, are closely monitored and historically have not resulted in increased product returns.

Income taxes

The Company accounts for income taxes using the liability method.  Under the liability method, deferred income taxes are provided on the differences in bases of assets and liabilities between financial reporting and tax returns using enacted tax rates.

Uncertain tax positions

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.  The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate resolution.

Special Note Regarding Forward-Looking Statements

Except for the historical information contained herein, the Management Discussion and other portions of this Form 10-Q contain forward-looking statements that involve a number of risks and uncertainties, including the difficulty of predicting FDA approvals, acceptance and demand for new pharmaceutical products, the impact of competitive products and pricing, the timely development and launch of new products, changes in laws and regulations affecting the healthcare industry, and the risk factors listed from time to time in our filings with the SEC, including our Annual Report on Form 10-K for the fiscal year ended March 31, 2013.  We assume no obligation to update forward-looking statements contained in this Form 10-Q to reflect new information or future events or developments.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business, operations may be exposed to fluctuations in currency values and interest rates.  These fluctuations can vary the costs of financing, investing and operating transactions. Because we have senior notes with fixed coupon rates and only minimal foreign currency transactions, there was no material impact on earnings due to fluctuations in interest and currency exchange rates.

Item 4.  Controls and Procedures

As of the end of the period covered by this report, the Company conducted an evaluation, under the supervision and with the participation of the principal executive officer and principal financial officer, of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act).  Based on this evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.  There was no change in the Company’s internal control over financial reporting during the Company’s most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II – Other Information

Item 1. Legal Proceedings

Forest is party to certain legal proceedings described in our Annual Report on Form 10-K for the fiscal year ended March 31, 2013 (the 2013 10-K) and our Quarterly Reports on Form 10-Q for the quarters ended June 30, 2013 and September 30, 2013.

We are defendants in three federal actions filed on behalf of individuals who purchased Celexa and/or Lexapro for pediatric use, all of which have been consolidated for pretrial purposes in a MDL proceeding in the U.S. District Court for the District of Massachusetts under the caption “In re Celexa and Lexapro Marketing and Sales Practices Litigation.”  These actions, two of which were originally filed as putative nationwide class actions, and one of which is a putative California-wide class action, allege that we marketed Celexa and/or Lexapro for off-label pediatric use and paid illegal kickbacks to physicians to induce prescriptions of Celexa and Lexapro.  The complaints assert various similar claims, including claims under the Missouri and California consumer protection statutes, respectively, and state common laws.  On February 5, 2013, the district judge overseeing the MDL denied all plaintiffs’ motions for class certification.  On February 18, 2013, the plaintiff in the California action filed a petition seeking leave to appeal this decision to the U.S. Court of Appeals for the First Circuit.  On April 16, 2013, the First Circuit denied the petition.  On April 30, 2013, plaintiffs in the other two actions filed an amended complaint seeking to certify state-wide class actions in Illinois, Missouri, and New York under those states’ consumer protection statutes.  Plaintiffs moved for class certification in all these three states on June 28, 2013.  On January 13, 2014, the district judge denied plaintiffs’ motion with respect to the proposed Illinois and New York classes and allowed it with respect to the proposed Missouri class.  We filed a petition seeking leave to appeal this decision to the U.S. Court of Appeals for the First Circuit on January 27, 2014.

On May 3, 2013, an action was filed in the U.S. District Court for the Central District of California on behalf of individuals who purchased Lexapro for adolescent use, seeking to certify a state-wide class action in California and alleging that our promotion of Lexapro for adolescent depression has been deceptive.  This action was transferred to the MDL mentioned in the preceding paragraph and, on July 29, 2013, we moved to dismiss the complaint.  The motion was argued before the Court on September 20, 2013, and a decision is pending.

On November 13, 2013, an action was filed in the U.S. District Court for the District of Minnesota seeking to certify a nationwide class of third-party payor entities that purchased Celexa and Lexapro for pediatric use.  The complaint asserts claims under the federal Racketeer Influenced and Corrupt Organizations Act, alleging that Forest engaged in an off-label marketing scheme and paid illegal kickbacks to physicians to induce prescriptions of Celexa and Lexapro.  This action was transferred to the MDL mentioned in the preceding paragraphs, and we filed a motion to dismiss the complaint on January 15, 2014.

We intend to continue to vigorously defend against these cases.  At this time, we believe an unfavorable outcome is less than probable and are unable to estimate the reasonably possible loss or range of possible loss, but do not believe losses, if any, would have a material effect on the results of operations or financial position taken as a whole.

We are also named as defendants in two actions filed on behalf of entities or individuals who purchased or reimbursed certain purchases of Celexa or Lexapro for pediatric use pending in the Missouri Circuit Court, Twenty-Second Judicial Circuit, and arising from similar allegations as those contained in the federal actions described in the preceding paragraphs.  The first action, filed on November 6, 2009 under the caption “St. Louis Labor Healthcare Network et al. v. Forest Pharmaceuticals, Inc. and Forest Laboratories, Inc.,” is brought by two entities that purchased or reimbursed certain purchases of Celexa and/or Lexapro.  The complaint asserts claims under the Missouri consumer protection statute and Missouri common law, and seeks unspecified damages and attorneys’ fees.  We have reached an agreement with the plaintiffs to resolve this action for payments that are not material to our financial condition or results of operations.  The second action, filed on July 22, 2009 under the caption “Crawford v. Forest Pharmaceuticals, Inc.,” and now known as “Luster v. Forest Pharmaceuticals, Inc.,” is a putative class action on behalf of a class of Missouri citizens who purchased Celexa for pediatric use.  Only Forest Pharmaceuticals, Inc., which is headquartered in Missouri, is named as a defendant.  The complaint asserts claims under the Missouri consumer protection statute and Missouri common law, and seeks unspecified damages and attorneys’ fees.  In October 2010, the court certified a class of Missouri domiciliary citizens who purchased Celexa for pediatric use at any time prior to the date of the class certification order, but who do not have a claim for personal injury.  Discovery is currently ongoing and a trial date has been set in March 2014.  On December 9, 2013, we filed a motion for summary judgment, which was argued on January 8, 2014.  A decision on this motion is pending.  We intend to continue to vigorously defend against this action.  At this time, we believe an unfavorable outcome is less than probable and are unable to estimate the reasonably possible loss or range of possible loss, but do not believe losses, if any, would have a material effect on the results of operations or financial position taken as a whole.

We currently are defending approximately 195 product liability lawsuits.  Thirteen of the lawsuits allege that Celexa or Lexapro caused or contributed to individuals committing or attempting suicide.  The remainder of the lawsuits allege that Celexa or Lexapro caused various birth defects.  Each lawsuit seeks substantial compensatory and punitive damages.  We are vigorously defending these suits.

An MDL was established for the majority of the suicidality-related litigation, with the federal court cases being transferred to Judge Rodney Sippel in the U.S. District Court for the Eastern District of Missouri.  The MDL has concluded and the remaining twelve cases have been remanded to the federal district courts in which they were filed originally.  Several trials involving completed suicides have been scheduled in those federal district courts in 2014 and 2015 and we expect more trial dates to be established.  A state court case involving a young woman who allegedly attempted suicide is set for trial in February 2014 in Montgomery, Alabama.

The majority of the birth defect cases are consolidated for pretrial purposes in Cole County Circuit Court in Missouri.  Two cases are set for trial in Cole County in May 2014 and September 2014.  Nineteen cases are pending in the U.S. District Court for the District of New Jersey.  Fact discovery closes in March 2014.  One case is pending in Orange County, California and is set for trial in June 2014.  We expect that the state court consolidation will ease the burden of defending these cases.  We believe that the consolidated proceedings will promote the economical and efficient resolution of these lawsuits and provide us with a meaningful opportunity to vindicate our products.  However, litigation is inherently subject to uncertainty and we cannot predict or determine the outcome of this litigation.  We generally maintain $140 million of product liability coverage (annually, per “occurrence” on a claims-made basis, and in the aggregate).

In December 2013, the Company was named as a defendant in an action brought by Teva Pharmaceuticals USA, Inc. and Mayne Pharma International Pty Ltd. in the U.S. District Court for the District of Delaware under the caption “Teva Pharmaceuticals USA, Inc. and Mayne Pharma International Pty Ltd. v. Forest Laboratories, Inc.”  The complaint alleges that Forest infringes U.S. Patent No. 6,194,000 by making, using, selling, offering to sell, and importing Namenda XR.  The relief requested includes preliminary and permanent injunctive relief, and damages.  We intend to vigorously defend against this action.  At this time, we believe an unfavorable outcome is less than probable and are unable to estimate the reasonably possible loss or range of possible loss, but do not believe losses, if any, would have a material effect on the results of operations or financial position taken as a whole.

In January 2014, we and our licensors for Namenda XR, Merz Pharma GmbH & Co. KgaA (Merz) and Adamas Pharmaceuticals, Inc. (Adamas), brought actions for infringement of certain patents in the U.S. District Court for the District of Delaware against Wockhardt USA LLC (Wockhardt), Teva Pharmaceuticals USA, Inc. (Teva), Sun Pharma Global FZE (Sun), and related subsidiaries and affiliates thereof.  These companies have notified us that they have filed ANDAs with the FDA seeking to obtain approval to market generic versions of Namenda XR before these certain patents expire.  Specifically, the lawsuit alleges that Wockhardt’s, Teva’s, and Sun’s ANDA submissions infringe some or all of U.S. Patent No. 5,061,703 (the ‘703 patent), U.S. Patent No. 8,168,209 (the ‘209 patent), U.S. Patent No. 8,173,708 (the ‘708 patent), U.S. Patent No. 8,283,379 (the ‘379 patent), U.S. Patent No. 8,329,752 (the ‘752 patent), U.S. Patent No. 8,362,085 (the ‘085 patent), and U.S. Patent No. 8,598,233 (the ‘233 patent).  (The ‘703 patent expires in April 2015, the ‘009 patent expires in March 2029, and the ‘209, ‘708, ‘379, ‘752, ‘085, and ‘233 patents expire in November 2025.)  This lawsuit triggered an automatic stay of approval of the applicable ANDAs that expires no earlier than June 2016 (unless a court issues a decision adverse to us, Merz, and Adamas sooner).

We are also subject to various legal proceedings that arise from time to time in the ordinary course of our business.   Litigation is subject to many factors which are difficult to predict and there can be no assurance that we will not incur material costs in the resolution of these matters.

Item 1A.  Risk Factors

The following risk factors update and supersede the risk factors described in our Annual Report on Form 10-K for the fiscal year ended March 31, 2013, as amended by the revised risk factor disclosed in Item 1A of our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 7, 2013.  The risks, uncertainties and other factors described below are not the only ones facing Forest.  Additional risks, uncertainties and other factors not presently known to us or that we currently deem immaterial may also have a material impact on our business operations, financial condition or operating results.

Our major products face generic competition upon patent expiration.

We depend upon patents to provide exclusive marketing rights for products. As product patents expire, we face strong competition from lower priced generic products, which frequently leads to a rapid loss of sales for that product. In the case of products that contribute significantly to sales, the loss of patent protection can have a material adverse effect on our business, results of operations, financial position and cash flow. Although in the past we have successfully received new patent protection or extended exclusivity by enhancing existing products, we cannot guarantee that we will be able to do so in the future or that we will otherwise be able to offset the loss of sales when our product patents expire.

Listed below are our significant patent-protected products which, in total, contributed 74% of consolidated net sales for the year ended March 31, 2013 and 69% of consolidated net sales for the nine months ended December 31, 2013.

(Amounts in thousands, except percentages)
	Fiscal Year Ended March 31, 2013					Nine Months Ended December 31, 2013
Product	Net Sales		% of Total Net Sales			Net Sales		% of Total Net Sales			Date of Last  U.S. Patent(1) Exclusivity
Namenda	$	1,520,640		52	%	$	1,157,581		47	%		2015
Bystolic	$	455,092		16	%	$	386,740		16	%		2021
Viibryd	$	162,511		6	%	$	146,251		6	%		2022

(1) Patents referenced are Orange Book listed.

Our Business Depends on Intellectual Property Protection and the loss of or inability to enforce such intellectual property could materially adversely affect our business.

Our ability to generate the revenue necessary to support our investment in acquiring and developing new product opportunities, as well as the commitment of resources to successfully market our products greatly depends on effective intellectual property protection to ensure we can take advantage of lawful market exclusivity. Manufacturers of generic products have strong incentives to challenge the patents which cover our principal products. While we believe that our patent portfolio, together with data exclusivity periods granted by the Drug Price Competition and Patent Term Restoration Act of 1984 (Hatch-Waxman Act), offers adequate exclusivity protection for our current products, there can be no assurance that some of our patents, including our partners’ patents upon which we rely, will not be determined to be invalid or unenforceable, resulting in unanticipated early generic competition for the affected product. For example, we, along with our licensor, Royalty Pharma Collection Trust, recently brought actions against certain manufacturers of generic drugs for infringement of several patents covering Savella ® (milnacipran HCl) (Savella), our SNRI for the management of fibromyalgia. Similarly, we, along with our licensors, Merz Pharma GmbH & Co. KgaA (Merz) and Adamas Pharmaceuticals, Inc. (Adamas), initiated patent actions in January 2014 against certain manufacturers of generic drugs that have filed Abbreviated New Drug Applications (ANDAs) seeking approval to manufacture generic versions of Nameda XR. Aptalis is also currently involved (and expects to continue to be involved from time to time) in patent litigation relating to ANDAs filed by potential competitors seeking to market generic versions of its products. For example, in July 2013, Aptalis filed patent infringement lawsuits against certain generic drug manufacturers who filed ANDAs seeking approval to market a generic version of Canasa. Aptalis believes ANDAs were filed before the patents covering Canasa were listed in the Orange Book, which generally means that Aptalis is not entitled to the 30-month stay of the approval of these ANDAs provided for by the Hatch-Waxman Act. While we intend to vigorously defend these and other patents and pursue our legal rights, we can offer no assurance as to when the pending or any future litigation will be decided, whether such lawsuits will be successful or that a generic equivalent of one or more of our products will not be approved and enter the market.

Loss of patent protection for a product typically is followed promptly by generic substitutes, reducing our sales of that product. If any third party is able to demonstrate that it is not infringing our patents or that our patents are invalid or unenforceable, including our partners’ patents upon which we rely, then we may not be able to stop them (or other third parties) from competing with us or launching competitive products. Even with patent protection, we may face reduced product sales since generic manufacturers may choose in some cases to launch a generic product “at risk” before the expiration of the applicable patent(s) or before the final resolution of related patent litigation. Availability of generic substitutes for our drugs may adversely affect our results of operations and cash flows. In addition, proposals emerge from time to time in the United States and other countries in which we sell our products for legislation to further encourage the early and rapid approval of generic drugs.

Certain of our products or products that we may acquire may have limited or no patent protection. For instance, Canasa has limited patent protection, and Carafate has no patent protection. While we believe these products benefit from a variety of intellectual property, regulatory, clinical, sourcing and manufacturing barriers to competitive entry, there can be no assurance that these barriers will be effective in preventing generic versions of our products from being approved. In addition, because Aptalis’ strategy has in part been to in-license or acquire pharmaceutical products that typically have been discovered and initially researched by others, future products might have limited or no remaining patent protection due to the time elapsed since their discovery. For example, Aptalis licenses the patents relevant to Rectiv, which will expire in May 2014.

We also rely on trade secrets and proprietary know-how that we seek to protect, in part, through confidentiality agreements with our partners, customers, employees and consultants. It is possible that these agreements could be breached or that they will not be enforceable, and that we will not have adequate remedies for any such breach. It is also possible that our trade secrets will become known or independently developed by our competitors.

We own or exclusively license various trademarks and trade names which we believe are of significant benefit to our business. We cannot provide any assurances that these trademarks and trade names will be sufficient to prevent competitors from adopting similar names. The adoption of similar names by competitors could impede our ability to build brand identity and lead to customer confusion, which could adversely affect our sales or profitability.

Legal proceedings may be necessary to enforce any intellectual property we own or to which we have rights, which could result in substantial cost to us, be time consuming and divert resources and attention of management and key personnel, whether or not we are successful. Any adverse outcome could result in the narrowing of our intellectual property rights. If we are unable to adequately protect our technology, trademarks, trade secrets or proprietary know-how, or enforce our patents, or if our partners do not adequately enforce the patents of theirs upon which we rely, our results of operations, financial condition and cash flows could suffer.

Our business presents risk of antitrust litigation.

In the United States, it has become increasingly common for patent infringement actions to prompt claims that antitrust laws have been violated during the prosecution of the patent or during litigation involving the defense of that patent. Such claims by direct and indirect purchasers and other payers are typically filed as class actions. The relief sought may include treble damages and restitution claims. Similarly, antitrust claims may be brought by government entities or private parties following settlement of patent litigation, alleging that such settlements are anti-competitive and in violation of antitrust laws. For example, our recent settlements with certain manufacturers of generic drugs for infringement of the U.S. pharmaceutical composition-of-matter patent covering Bystolic® (nebivolol HCl) (Bystolic) are subject to review by the Federal Trade Commission (FTC). In the United States and Europe, regulatory authorities have continued to challenge as anti-competitive so-called “reverse payment” settlements between branded and generic drug manufacturers. We may also be subject to other antitrust litigation involving competition claims unrelated to patent infringement and prosecution. A successful antitrust claim by a private party or government entity against us could materially and adversely affect our financial results.

Third parties may claim that we infringe their intellectual property rights, which could subject us to significant costs and disrupt our products and business.

We cannot be certain that the conduct of our business, including the development, manufacture and sale of products, does not and will not infringe intellectual property or other proprietary rights of others. From time to time, we may become subject to claims, allegations and legal proceedings, including by means of counterclaims, that we infringe or misappropriate intellectual property or other proprietary rights of others. In addition, as we continue to in-license and develop new products, we may face third-party infringement claims or face a need to challenge the intellectual property rights of others, which may limit our ability to commercialize such products.

Legal proceedings involving intellectual property rights are highly uncertain and can involve complex legal and scientific questions. The defense of patent and intellectual property claims is both costly and time consuming, even if the outcome is favorable. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during any such litigation. Addressing intellectual property claims, regardless of merit, could be time consuming, disruptive, and expensive to litigate or settle, and could divert resources and attention of management and key personnel. Our failure to prevail in such matters could result in judgments awarding substantial damages, including possible treble damages and attorneys’ fees, and injunctive or other equitable relief against us. Furthermore, judgments that result in equitable or injunctive relief could cause us to delay or cease selling certain products or other otherwise harm our operations. An adverse judgment also could result in loss of reputation or may force us to take costly remediation actions, such as redesigning our products and services. We also may have to seek third party licenses to intellectual property, which may be unavailable, or require payment of significant royalties, or available only at commercially unreasonable, unfavorable or otherwise unacceptable terms.

We may be subject to claims that we or our employees have wrongfully used or disclosed alleged trade secrets of former employers.

As is commonplace in the pharmaceutical industry, we employ now, and may hire in the future, individuals who were previously employed at other pharmaceutical companies, including competitors or potential competitors. Although there are no claims currently pending against us, we may be subject to claims that we or certain employees have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and would be a significant distraction to management.

We may be unable to realize anticipated cost savings or may incur additional and/or unexpected costs in order to realize them.

We anticipate cost savings of approximately $500 million over the next two fiscal years as part of our recently announced Project Rejuvenate to be achieved primarily from (i) rationalizing our R&D platform; (ii) re-prioritizing our marketing spending; (iii) reducing headcount; and (iv) other cost savings. Cost savings expectations are inherently estimates that are difficult to predict and are necessarily speculative in nature, and we cannot provide assurance that we will achieve expected or any actual cost savings. A variety of factors could cause us not to realize some or all of the expected cost savings, including, among others, delays in the anticipated timing of activities related to our cost savings programs, lack of sustainability in cost savings over time, unexpected costs associated with operating our business, our ability to reduce headcount and our ability to achieve the efficiencies contemplated by the cost savings initiative. We may be unable to realize all of these cost savings within the expected timeframe, or at all, and we may incur additional or unexpected costs in order to realize them. In such event, we may have difficulty complying with the terms of our $750 million Credit Agreement with JPMorgan Chase Bank, N.A. (the Credit Agreement).

These cost savings are based upon a number of assumptions and estimates that are in turn based on our analysis of the various factors which currently, and could in the future, impact our business. These assumptions and estimates are inherently uncertain and subject to significant business, operational, economic and competitive uncertainties and contingencies. Certain of the assumptions relate to business decisions that are subject to change, including, among others, our anticipated business strategies, our marketing strategies, our product development and licensing strategies and our ability to anticipate and react to business trends. Other assumptions relate to risks and uncertainties beyond our control, including, among others, the economic environment in which we operate, healthcare regulation and other developments in our industry as well as capital markets conditions from time to time. The actual results of implementing the various cost savings initiatives may differ materially from the estimates set out in our periodic reports and prior disclosures if any of these assumptions prove incorrect. Moreover, our continued efforts to implement these cost savings may divert management attention from the rest of our business and may preclude us from seeking attractive in-licensing or new product opportunities, any of which may materially and adversely affect our business.

We may need to raise additional funds in the future which may not be available on acceptable terms or at all.

We expect cash generated by our operations, together with existing cash, cash equivalents, marketable securities, availability under our Credit Agreement and the proceeds from the offering of $1.2 billion in Senior Notes in December 2013 and the offering of $1.8 billion in Senior Notes in January 2014 to be sufficient to cover cash needs for our operations. However, we may consider issuing additional debt or equity securities in the future to fund common stock repurchases, debt refinancings, strategic alliances and acquisitions, milestone payments, working capital and capital expenditures. If we issue equity or convertible debt securities to raise additional funds, our existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders. If we incur additional debt, it may increase our leverage relative to our earnings or to our equity capitalization, requiring us to pay additional interest expenses, potentially lowering our credit ratings and possibly causing us to become non-compliant with the terms of our Credit Agreement. We may not be able to market such issuances on favorable terms, or at all, in which case, we may not be able to develop or enhance our products, execute our business plan, take advantage of future opportunities, or respond to competitive pressures or unanticipated customer requirements.

The Credit Agreement permits us to adjust the calculation of Consolidated EBITDA (as defined in the Credit Agreement) for certain cost savings. See “—We may be unable to realize anticipated cost savings or may incur additional and/or unexpected costs in order to realize them.” Our Credit Agreement allows us to include these projected cost savings in calculating Consolidated EBITDA for the first six consecutive quarters from the announcement of Project Rejuvenate for purposes of our leverage ratio and interest coverage ratio as if such savings had occurred on the first day of the period for which Consolidated EBITDA is being calculated. If our cost savings are lower than anticipated, or we reduce our projected cost savings, our Consolidated EBITDA as calculated under the Credit Agreement may not be sufficient for us to be able to borrow the maximum amount under the facility, resulting in limited borrowing capability until we achieve sufficient cost savings and we may have difficulty refinancing the Credit Agreement on terms that would allow us to increase our borrowing capability prior to termination, or at all. Additionally, any failure to comply with our maintenance covenants may result in our lenders choosing to terminate the Credit Agreement and we may have difficulty entering into a new credit facility with the same borrowing capability or on favorable terms to us, or at all.

Our company has become increasingly dependent on information technology.

We are increasingly dependent on information technology systems and infrastructure. Due to the size and complexity of these systems, any breakdown or unauthorized access to these systems could negatively impact our operations. Also, confidential information or any privacy breaches by employees could expose trade secrets, personal information or other sensitive data. Any of these situations can cause business interruption and adversely affect our business. We have invested heavily in the protection of our information technology and infrastructure. We cannot, however, guarantee that our efforts can prevent such breakdown or breaches in our systems.

Our business model currently depends on the successful in-licensing or acquisition of new product opportunities.

In order to remain competitive, we must continue to develop and launch new pharmaceutical products. Our pipeline of new products is currently dependent on the licensing and acquisition of new product opportunities. To successfully accomplish these transactions, we commit substantial effort and expense to seeking out, evaluating and negotiating collaboration arrangements and acquisitions. The competition for attractive product opportunities may require us to devote substantial resources to an opportunity with no assurance that such efforts will result in a commercially successful product.

There is intense competition for alliance and acquisition candidates in the pharmaceutical industry, and, as such, we may be unable to make these deals on acceptable terms or at all. In acquiring or forming alliances with companies, we may assume significant debt, become subject to unknown or contingent liabilities or fail to realize the benefits expected from these transactions. The assumption of debt or unknown or contingent liabilities or the failure to realize the expected benefits may materially and adversely affect our financial results. The process of integrating companies we may acquire, including Aptalis, may result in disruption to the ongoing business as the effort of integrating organizations in different locations and with, among other things, differing systems and corporate cultures may divert attention and resources, result in the loss of key employees, or have other adverse consequences, any of which may materially and adversely affect our financial results.

Acquisitions may require significant resources and/or result in significant losses, costs or liabilities.

Any future acquisitions will depend on the ability to identify suitable acquisition candidates, to negotiate acceptable terms for their acquisition and to finance those acquisitions. We also face competition for suitable acquisition candidates that may increase costs. In addition, acquisitions require significant managerial attention, which may be diverted from current operations. Furthermore, acquisitions of businesses or facilities entail a number of additional risks, including: problems with effective integration of operations; the inability to maintain key pre-acquisition customer, supplier and employee relationships; the potential that expected benefits or synergies are not realized and operating costs increase; and exposure to unanticipated liabilities. Subject to the terms of our indebtedness, we may finance future acquisitions with cash from operations, additional indebtedness and/or by issuing additional equity securities. These commitments may impair the operation of our businesses. In addition, we could face financial risks associated with incurring additional indebtedness such as reducing liquidity and access to financing markets and increasing the amount of cash flow required to service such indebtedness.

The growth of our business depends on our ability to retain and recruit key executives and qualified personnel.

The success of our commercial, research and development and external growth objectives is dependent on our ability to retain and recruit qualified scientific, manufacturing, sales and marketing and executive personnel. If we do not actively retain and recruit these personnel, our business could be adversely impacted.

Failure to implement our international business strategy could impact our growth and profitability.

While we currently operate primarily in the U.S. and European markets, we expect to continue to expand into other international markets in the future. In this regard, we have established a wholly-owned Canadian subsidiary and entered into a distribution agreement with a privately-held pharmaceutical company which markets products in Latin America.

There is no assurance that our international expansion strategy will be successful. International operations are subject to inherent risks that could adversely affect our operating results, including the risk that our marketing strategies will not translate well to other markets, and that we will need to expend resources to adapt those strategies for such new markets; the need to comply with additional foreign laws and regulations to the extent applicable, including restrictions on advertising practices, consumer protection laws, enforcement of intellectual property rights, and restrictions on pricing or discounts; and unexpected changes in international regulatory requirements and tariffs.

Our business could be negatively affected by the performance of our licensors or partners, or any disputes or early termination of our agreements with such licensors or partners.

Our principal products, as well as certain of our principal product development opportunities, involve strategic alliances with other companies. Our collaborative partners typically possess significant patents or other technology which are licensed to us. These partners also remain significantly involved in product research and development activities and in the exclusive manufacture and supply of active pharmaceutical ingredients upon which our products are based. While some of our partners are large well-established companies, others may be smaller companies in the “start-up” stage. A failure or inability of our partners to perform their obligations, financial or otherwise, could materially negatively affect our operations or business plans. We cannot guarantee that any of these relationships will continue. Failure to make or maintain these arrangements or a delay in or failure of a collaborative partner’s performance or such partner’s attempt to terminate its partnership agreement with us before the end of its term (for example, by claiming that we have breached such agreement) may materially adversely affect our business, financial condition, cash flows and results of operations. Further, the reputation of our partners may affect our own reputation. If one of our partners was to have an increase in negative publicity resulting in a lowered reputation, our reputation could similarly be affected.

Our collaborative partners could merge with or be acquired by another company or experience financial or other setbacks unrelated to our collaboration that could, nevertheless, materially adversely affect our business, financial condition, cash flows and results of operations.

The proprietary rights in certain products we acquired from Aptalis, such as Rectiv, and in certain know-how related to certain of its products, such as APT-1016, are also held by third parties, from whom Aptalis licenses rights relating to the use, manufacture or sale of products. Aptalis also enters into development agreements, including related licensing arrangements, with third parties for a variety of purposes, including life-cycle management and creation of potential new products. We cannot guarantee the successful outcome of such efforts, nor that they will result in any intellectual property rights or products that inure to our benefit. In connection with licenses and development agreements with third parties, Aptalis has agreed and may agree to pay royalties or other forms of compensation, for example, on existing or potential products, which can impact profitability of such products or operations.

While our relationships with our strategic partners have been good, differences of opinion on significant matters arise from time to time. Any such differences of opinion, as well as disputes or conflicting corporate priorities, could be a source of delay or uncertainty as to the expected benefits of the alliance or result in expensive arbitration or litigation, which may not be resolved in our favor. Because we license significant intellectual property with respect to certain of our principal products (for example, Namenda ® (memantine HCl) (Namenda IR), Namenda XR™ (memantine HCI extended release) (Namenda XR) and Viibryd® (vilazodone HCl) (Viibryd)), any loss or suspension of our rights to such intellectual property could materially adversely affect our business, financial condition, cash flows and results of operations.

We may experience delays or inability to successfully develop, obtain approval of or commercialize new products which can cause our operating results to suffer.

Our future results of operations will depend to a significant degree upon our ability to successfully develop, obtain approval of and/or commercialize new products. We may experience difficulties and delays in the development, approval or commercialization of new products. New product development is subject to a great deal of uncertainty, risk and expense. Promising pharmaceutical candidates may fail at various stages of the research and development process, often after a great deal of financial and other resources have been invested in their exploration and development. Even where pharmaceutical development is successfully completed, a product may fail to reach the market or have limited commercial success because the safety and efficacy profile achieved during the course of development is not as favorable as originally anticipated or is viewed by the marketplace as less favorable in comparison to new and competing therapies which may become available during the lengthy period of drug development. In addition, decisions by regulatory authorities regarding labeling and other matters could adversely affect the availability or commercial potential of our products.

We cannot state with certainty when or whether any of our products now under development will be approved or launched; whether we will be able to develop, license or otherwise acquire compounds, product candidates or products; or whether any products, once launched, will be commercially successful. We must maintain a continuous flow of successful new products and successful new indications or brand extensions for existing products sufficient both to cover our substantial research and development costs and to replace sales that are lost as profitable products lose patent protection or are displaced by competing products or therapies. Failure to do so in the short-term or long-term would have a material adverse effect on our business, results of operations, cash flows, financial position and prospects.

Certain of Aptalis’ employees outside the United States are represented by collective bargaining or other labor agreements and we could face disruptions that would interfere with our operations as a result.

Certain of Aptalis’ employees located in Canada and most of Aptalis’ employees in Europe are represented by collective bargaining or other labor agreements or arrangements that provide bargaining or other rights to employees. Such employment rights require us to expend greater time and expense in making changes to employees’ terms of employment or carrying out staff reductions. In addition, any national or other labor disputes in these regions could result in a work stoppage or strike by Aptalis employees that could delay or interrupt our ability to supply products and conduct operations. Due to the nature of these collective bargaining agreements, we will have no control over such work stoppages or strikes by Aptalis employees, and a strike may occur even if Aptalis employees do not have any grievances against us. Any interruption in manufacturing or operations could interfere with our business and could have a material adverse effect on our revenues.

Many of our principal products and active pharmaceutical ingredients are only available from a single manufacturing source.

Many of the proprietary active ingredients in our principal products are available to us only pursuant to contractual supply arrangements with our collaboration partners or single third party sources. In addition, our manufacturing facilities in the Republic of Ireland are the exclusive qualified manufacturing facilities for finished dosage forms of many of our principal products, including Namenda IR, Bystolic, and Savella. Difficulties or delays in the product supply chain, both within and outside of our control, or the inability to locate and qualify third-party alternative sources, if necessary, in a timely manner, could lead to shortages or long-term product unavailability, which could have a material adverse effect on our results of operations, financial condition and cash flows.

Regulatory procedures may require that we obtain prior approval of a change of third-party manufacturers, location of manufacturing facility, or supplier of raw material for our product or products by the relevant regulatory agency. This regulatory approval process typically takes a minimum of 12 to18 months, and could take longer and involve significant costs if new clinical trials are required. During the period of any such transition, we could face a shortage of supply of the affected product(s). Some of our contracts with our current providers prohibit us from using alternative providers for the products supplied under these contracts. As a result of these factors, it is difficult for us to reduce our dependence on single sources of supply, and, even where that is not the case, there are a limited number of manufacturers capable of manufacturing our marketed products and our product candidates. In addition, some of our contracts contain purchase commitments that require us to make minimum purchases that might exceed our needs or limit our ability to negotiate with other manufacturers, which might increase costs.

We may fail to realize revenue growth and the cost–savings synergies estimated as a result of the Aptalis Acquisition.

The success of the Aptalis Acquisition will depend, in part, on our ability to realize the anticipated cost-savings synergies, business opportunities and growth prospects from combining the businesses of Forest and Aptalis. Our revenue growth and cost-savings synergies estimates may differ materially from realizable cost-savings synergies or we may never realize these anticipated synergies, business opportunities and growth prospects. Integrating operations will be complex and will require significant efforts and expenditures on the part of both Forest and Aptalis. We may incur significant costs in achieving cost savings synergies. We may be unable to retain our employees. Our management may divert too many financial and other resources and pay too much attention to trying to integrate operations and corporate and administrative infrastructures. We might experience increased competition that limits our ability to expand our business, and we may not be able to capitalize on expected business opportunities, including retaining current business relationships. Moreover, assumptions underlying estimates of expected revenue growth and cost-savings synergies as a result of the Aptalis Acquisition may be inaccurate and general industry and business conditions may deteriorate. If any of these factors limit our ability to integrate the operations of Forest and Aptalis successfully or on a timely basis, the expectations of future results of operations, including certain revenue growth and cost-savings synergies expected to result from the Aptalis Acquisition, could negatively impact our results of operations. In addition, we may incur significant unexpected liabilities in connection with the Aptalis Acquisition.

In addition, prior to the completion of the Aptalis Acquisition, Forest and Aptalis operated as independent businesses. It is possible that the integration process could result in the disruption of each company’s ongoing businesses, tax costs or inefficiencies, or inconsistencies in standards, controls, information technology systems, procedures and policies, any of which could adversely affect our ability to maintain relationships with business partners, employees or other third parties or our ability to achieve the anticipated benefits of the Aptalis Acquisition, or could reduce our earnings.

Clinical trials for our product candidates are expensive and their outcome is uncertain.

Conducting clinical trials is a lengthy, time-consuming and expensive process. Before obtaining regulatory approvals for the commercial sale of any products, we or our partners must demonstrate, through clinical trials and other testing, that our product candidates are safe and effective for use in humans. We have incurred, and we will continue to incur, substantial expense for clinical trials and other testing.

Product development efforts performed by us may not be successfully completed. Completion of clinical trials may take several years or more. The length of time can vary substantially with the type, complexity, novelty and intended use of the product candidate. The commencement and rate of completion of clinical trials may be delayed by many factors, including:

• the potential delay by a collaborative partner in beginning the clinical trial;

• the inability to recruit and retain clinical trial participants at the expected rate;

• the failure of clinical trials to demonstrate a product candidate’s safety or efficacy;

• unforeseen safety issues;

• the inability to manufacture sufficient quantities of materials used for clinical trials; and

• unforeseen governmental or regulatory delays

The results from preclinical testing and early clinical trials often have not predicted results of later clinical trials. A number of new drugs have shown promising results in early clinical trials, but subsequently failed to establish sufficient safety and efficacy data to obtain necessary regulatory approvals. Clinical trials conducted by us, by our collaborative partners or by third parties on our behalf, may not demonstrate sufficient safety and efficacy to obtain the requisite regulatory approvals for our product candidates.

If a product candidate fails to demonstrate safety and efficacy in clinical trials, this failure may delay development of other product candidates and hinder our ability to conduct related preclinical testing and clinical trials. As a result of these failures, we may then be unable to find additional collaborative partners or to obtain additional financing. Our business, financial condition, cash flows and results of operations may be materially adversely affected by any delays in, or termination of, our clinical trials.

The commercial use of our products may be associated with unintended side effects or adverse reactions or incidence of misuse may occur.

We cannot predict whether the commercial use of products will be associated with undesirable or unintended side effects that have not been evident in the use of, or in clinical trials conducted for, such products to date. Additionally, incidents of product misuse may occur. These events, among others, could result in product recalls, product liability actions or withdrawals or additional regulatory controls (including additional regulatory scrutiny and requirements for additional labeling), all of which could have a material adverse effect on our profitability, business, financial position and results of operations. In addition, the reporting of adverse safety events involving our products and public rumors about such events could cause our stock price to decline or experience periods of volatility.

We often depend on third parties in the conduct of our clinical trials, and any failure of those parties to fulfill their obligations could adversely affect our development and commercialization plans.

We depend on independent clinical investigators, contract research organizations and other third party service providers and our collaborators in the conduct of clinical trials for our product candidates. We rely heavily on these parties for successful execution of our clinical trials but do not control many aspects of their activities. For example, the investigators are not our employees. However, we are responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Third parties may not complete activities on schedule or may not conduct our clinical trials in accordance with regulatory requirements or our stated protocols. The failure of these third parties to carry out their obligations could delay or prevent the development, approval and commercialization of our product candidates.

Post-approval clinical trials and developments could adversely affect the sales of our products.

As a condition to granting marketing approval of a product, the FDA may require a company to conduct additional clinical trials. The results generated in these trials could result in loss of marketing approval, changes in product labeling or new or increased concerns about side effects or efficacy of a product.

The FDA Amendments Act of 2007 (FDAAA) gives the FDA enhanced post-market authority, including the explicit authority to require post-market studies and clinical trials, labeling changes based on new safety information and compliance with FDA-approved risk evaluation and mitigation strategies. The FDA’s exercise of its authority under the FDAAA could result in delays or increased costs during product development, clinical trials and regulatory review, increased costs to comply with additional post-approval regulatory requirements and potential restrictions on sales of approved products.

The FDAAA established authority and procedures for safety-related changes to product labeling and provided the FDA with expanded authority to require the adoption of a Risk Evaluation and Mitigation Strategy (REMS) which could delay approval of these products and increase the cost, burden and liability associated with the commercialization of these product candidates, either as a condition of product candidate approval or on the basis of new safety information. The REMS may include medication guides for patients, special communication plans to health care professionals or elements to assure safe uses such as restricted distribution methods, patient registries and/or other risk minimization tools. We cannot predict the specific REMS to be required as part of the FDA’s approval of our product candidates. Any of these limitations on approval, labeling or marketing could restrict the commercial promotion, distribution, prescription or dispensing of our product candidates, if approved. Depending on the extent of the REMS requirements, these requirements may significantly increase our costs to commercialize these product candidates. Furthermore, risks of our product candidates that are not adequately addressed through proposed REMS for such product candidates may also prevent or delay their approval for commercialization. These situations, should they occur, could have a material adverse effect on our results of operations, financial condition and cash flows.

Post-marketing studies, whether conducted by us or by others, or mandated by regulatory agencies, or voluntary, and other emerging data about marketed products, such as adverse event reports, may also adversely affect sales of our products. Further, the discovery of significant problems with a product similar to one of our products that implicate (or are perceived to implicate) an entire class of products could have an adverse effect on sales of our products. Accordingly, new data about our products, or products similar to our products, could negatively impact demand for our products due to real or perceived side effects or uncertainty regarding efficacy and, in some cases, could result in product withdrawal. Furthermore, new data and information, including information about product misuse, may lead government agencies, professional societies, practice management groups or organizations involved with various diseases to publish guidelines or recommendations related to the use of our products or the use of related therapies or place restrictions on sales. Such guidelines or recommendations may lead to lower sales of our products. A violation of the law may result in substantial civil and criminal monetary and other penalties.

Our customer base is highly concentrated.

Our principal customers are wholesale drug distributors and comprise a significant part of the distribution network for the pharmaceutical industry in the United States. For fiscal 2013 and the nine months ended December 31, 2013, three key wholesale customers, Cardinal Health Inc., McKesson Corporation and AmerisourceBergen Corporation, collectively accounted for 87% and 83%, respectively, of our total consolidated net sales. Fluctuations in the buying patterns of these key customers could be the result of wholesaler buying decisions, or other factors outside our control, which could significantly impact our net sales. Also, if one of these customers experiences financial difficulties, the customer may decrease the amount of business it does with us. This could potentially cause an issue collecting all the amounts the wholesaler may owe us. These factors could negatively impact our results of operations.

Regulatory compliance issues could materially affect our financial position and results of operations.

The marketing and promotional practices of pharmaceutical manufacturers, as well as the manner in which manufacturers interact with prescribers of pharmaceutical products and other healthcare decision makers, are subject to extensive regulation by numerous federal, state and local governmental authorities in the United States, including the FDA, and by foreign regulatory authorities in our markets outside the United States. Such regulation takes the form of explicit governmental regulation and guidance; acceptable practices are also established by healthcare and industry codes of conduct. In addition, federal, state, local and foreign governmental authorities actively seek to enforce such regulations and can assert both civil and criminal theories of enforcement often with little objective guidance to permit voluntary industry compliance. Such enforcement can include actions initially commenced by “whistleblowers” under the Federal False Claims Act, which provides incentives to whistleblowers based upon penalties successfully imposed as a result of the investigation or related legal proceedings or settlements. There can be no assurance that the resolution of pending or future claims, as well as the resolution of private party (such as consumers or third-party payer) litigation which may be associated with any such claims or their resolution, will not entail material fines, penalties or settlement payments.

In connection with a previously disclosed settlement of certain claims brought by the United States government, we are now operating under a Corporate Integrity Agreement (CIA) with the Office of Inspector General of Health and Human Services that requires us to maintain our current compliance program and to undertake a set of defined corporate integrity obligations until September 2015. The CIA also provides for an independent third-party review organization to assess and report on our compliance program. While we expect to fully and timely comply with all of our obligations under the CIA, the failure to do so could result in substantial penalties and our being excluded from government healthcare programs. In addition, the manufacture, testing, storage and shipment of pharmaceutical products are highly regulated and the failure to comply with regulatory standards can lead to product withdrawals, seizures, injunctions or civil or criminal penalties, or to delays in FDA approval of products pending resolution of such issues. Moreover, even when a manufacturer has fully complied with applicable regulatory standards, products may ultimately fail to comply with applicable specifications, leading to product withdrawals or recalls.

Pharmaceutical cost-containment initiatives may negatively affect our net income and future results.

Pharmaceutical products are subject to increasing price pressures and other restrictions within the United States and internationally. More specifically, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 included a prescription drug benefit for Medicare participants. Companies that negotiate prices on behalf of Medicare drug plans have a significant degree of purchasing power and we experience pricing pressure as a result. Our net sales also continue to be impacted by cost-containment initiatives adopted by managed care organizations and pharmaceutical benefit managers, which negotiate discounted prices from pharmaceutical manufacturers in order to secure placement on formularies adopted by such organizations or their health plan or employer customers, and from efforts to encourage the prescription of generic drugs. In addition, some states have implemented, and other states are considering, price controls or patient-access constraints under the Medicaid program and some states are considering price-control regimes that would apply to broader segments of their populations that are not Medicaid eligible. Failure to be included in such formularies or to achieve favorable formulary status may negatively impact the utilization of our products, which may negatively affect our net income. Under the federal and state Medicaid rebate programs, we pay a rebate to each state for a product that is reimbursed by those programs. The amount of the rebate for each unit of product is set by law, based on reported pricing data. The rebate amount may also include a penalty if our prices increase faster than the rate of inflation. Additionally, changes in government regulations or private third-party payers’ reimbursement policies may reduce reimbursement for our products and adversely affect our future results.

Healthcare reform in the United States may adversely affect our revenues.

The U.S. healthcare industry has been, and will likely continue to be, subject to increasing regulation as well as political and legal action. Recently, major U.S. healthcare reform has been adopted into law which, in addition to other measures, impacts, directly or indirectly, rebates paid to public and private payers and affects, directly or indirectly, patient access to pharmaceutical products. The reform measures call for, among other things, an increase in certain Medicare and Medicaid drug discounts or rebates offered or paid by pharmaceutical manufacturers and an industry fee imposed on pharmaceutical manufacturers according to the individual manufacturer’s relative percentage of total industry sales to specified government programs. These measures, or any other measures included in the reform acts, may have an adverse effect on our revenues in the future.

Our business presents risk of product liability claims.

We are subject to legal actions asserting product liability claims. We currently maintain $140 million of product liability insurance coverage “per occurrence” and in the aggregate, which amount may not be sufficient to satisfy individual or aggregate occurrences. There is no assurance that potential future claims asserted against us will be covered by our present insurance coverage. As product liability claims continue to increase in the pharmaceutical industry, we could experience increased insurance premium costs.

As of February 1, 2014, we were subject to approximately 195 legal actions asserting product liability claims relating to the use of Celexa® (citalopram HBr) (Celexa) or Lexapro® (escitalopram oxalate) (Lexapro). These cases include claims for wrongful death from suicide or injury from suicide attempts while using Celexa or Lexapro as well as claims that Celexa or Lexapro caused various birth defects in newborns. While we believe there is no merit to these cases, litigation is inherently subject to uncertainties and we may be required to expend substantial amounts in the defense or resolution of certain of these matters.

Manufacturing or quality control problems may damage our reputation for high quality production, result in product recalls and costly remedial activities, and negatively impact our financial results.

Our customers rely on us to provide high quality products. We have implemented measures in our manufacturing process that are designed to prevent and detect defects in our products and ensure that our products meet their specifications. However, such measures may not prevent or reveal defects in our products, which may not become apparent until the products have been distributed and sold. In these instances we may voluntarily or be required to recall our products. For instance, in November 2013, we voluntarily recalled three package lots of Namenda XR because dissolution testing revealed failure to meet specification throughout shelf life; and we may in the future be required to recall this or one of our other products. Recalls and subsequent remediation efforts may be costly to implement. In addition, product recalls or other manufacturing problems may result in negative publicity or concerns regarding the safety or acceptance of our products. Any resulting costs or harm to our reputation could have a material adverse effect on our business, financial position and results of operations.

We face increased regulatory scrutiny of our manufacturing processes.

Recently, there has been increasing regulatory scrutiny of pharmaceutical manufacturers. We must register our facilities, whether located in the United States or elsewhere, with the FDA and similar regulators and our products must be made in a manner consistent with current good manufacturing practices (cGMP), or similar standards in each territory in which we manufacture. In addition, the FDA and other agencies periodically inspect our manufacturing facilities. Following an inspection, an agency may issue a notice listing conditions that are believed to violate cGMP or other regulations, or a warning letter for violations of “regulatory significance” that may result in enforcement action if not promptly and adequately corrected. Compliance with production and quality control regulations requires substantial expenditure of resources. If any regulatory body were to require one of our manufacturing facilities to cease or limit production, our business could be adversely affected. In addition, because regulatory approval to manufacture a drug is site-specific, the delay and cost of obtaining approval to manufacture at a different facility also could have a material adverse effect on our business, financial position and results of operations.

We are involved in a number of legal proceedings. We cannot predict the outcome of litigation and other contingencies with certainty.

Our business may be adversely affected by the outcome of legal proceedings and other contingencies that cannot be predicted with certainty. As required by GAAP, we estimate loss contingencies and establish reserves based on our assessment of contingencies where liability is deemed probable and reasonably estimable in light of the facts and circumstances known to us at a particular point in time. Assessing and predicting the outcome of these matters involves substantial uncertainties. Unexpected outcomes in these legal proceedings, or changes in management’s evaluations or predictions and accompanying changes in established reserves, could have a material adverse impact on our financial results.

Our suppliers may use hazardous and biological materials in their businesses. Any claims relating to improper handling, storage or disposal of these materials could be time-consuming and costly to us, and we are not insured against such claims.

Our product candidates and processes involve the controlled storage, use and disposal by our suppliers of certain hazardous and biological materials and waste products. We and our suppliers and other collaborators are subject to federal, state and local regulations governing the use, manufacture, storage, handling and disposal of materials and waste products. Even if we and these suppliers and collaborators comply with the standards prescribed by law and regulation, the risk of accidental contamination or injury from hazardous materials cannot be completely eliminated. In the event of an accident, we could be held liable for any damages that result, and we do not carry insurance for this type of claim. We may also incur significant costs to comply with current or future environmental laws and regulations.

Our approved products may not achieve expected levels of market acceptance, which could have a material adverse effect on our profitability, business, financial position and results of operations and could cause the market value of our common stock to decline.

Even if we are able to obtain regulatory approvals for our new pharmaceutical products, generic or branded, the success of those products is dependent upon market acceptance. Levels of market acceptance for our new products could be impacted by several factors, including but not limited to:

• the acceptance of our product by physicians;

• the availability of alternative products from our competitors;

• the price of our products relative to that of our competitors;

• the timing of our market entry;

• the ability to market our products effectively to the retail level; and

• the acceptance of our product by government and private formularies.

If our approved products do not achieve expected levels of market acceptance due to these or other factors, our profitability, business, financial position and results of operations could be materially and adversely affected.

We face substantial competition from other pharmaceutical manufacturers and generic product distributors.

Our industry is characterized by significant technological innovation and change. Many of our competitors are conducting research and development activities in therapeutic areas served by our products and our product-development candidates. The introduction of novel therapies as alternatives to our products may negatively impact our revenues or reduce the value of specific product development programs. In addition, generic alternatives to branded products, including alternatives to brands of other manufacturers in therapeutic categories where we market products, may be preferred by doctors, patients or third-party payers.

The effective rate of taxation upon our results of operations is dependent on multi-national tax considerations.

We earn a substantial portion of our income in foreign countries. A portion of our earnings is taxed at more favorable rates applicable to the activities undertaken by our subsidiaries based or incorporated in Europe. If our capital or financing needs in the United States require us to repatriate earnings from foreign jurisdictions above our current levels, our effective income tax rates for the affected periods could be negatively impacted. Current economic and political conditions make tax rules in any jurisdiction, including the United States, subject to significant change. Changes in tax laws or in their application or interpretation, such as to the transfer pricing between our U.S. and non-U.S. operations, could increase our effective tax rate and negatively affect our results of operations. Cash repatriations are subject to restrictions in certain jurisdictions and may be subject to withholding and other taxes. There have been proposals to reform U.S. tax laws that could significantly impact how U.S. multinational corporations are taxed on foreign earnings. Although we cannot predict whether or in what form these proposals will pass, several of the proposals being considered, if enacted into law, could have an adverse impact on our income tax expense and cash flows.

Our effective income tax rate in the future could be adversely affected by a number of factors, including changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws, the outcome of income tax audits in various jurisdictions around the world, and any repatriation of non-U.S. earnings for which we have not previously provided for U.S. taxes. We are also subject to the examination of our tax returns by the U.S. Internal Revenue Service (IRS) and other tax authorities. For example, our transfer pricing has been the subject of IRS audits, and may be the subject of future audits by the IRS or other tax authorities and we may be subject to tax assessments or the reallocation of income among our subsidiaries. We regularly assess all of these matters to determine the adequacy of our tax provisions, which are subject to significant discretion. Although we believe our tax provisions are adequate, the final determination of tax audits and any related disputes could be materially different from our historical income tax provisions and accruals. The results of audits or related disputes could have an adverse effect on our financial statements for the period or periods for which the applicable final determinations are made.

Foreign currency exchange rates may affect our revenues.

We conduct a portion of our business in international markets and keep a significant amount of our earnings in our foreign subsidiaries. Any need to convert earnings between currencies subjects us to currency fluctuation risk. An increase in the U.S. dollar relative to other currencies in which we have revenues will cause our foreign revenues to be lower than with a stable exchange rate. A large increase in the value of the U.S. dollar relative to such foreign currencies could have a material adverse effect on our revenues.

Our consolidated financial statements may be impacted in future periods based on the accuracy of our valuations of our acquired businesses and other agreements.

Accounting for business combinations and other agreements may involve complex and subjective valuations of the assets and liabilities recorded as a result of the business combination or other agreement, and in some instances contingent consideration, which is recorded in the our consolidated financial statements pursuant to the standards applicable for business combinations in accordance with GAAP. Differences between the inputs and assumptions used in the valuations and actual results could have a material effect on our consolidated financial statements in future periods.

We may be subject to periodic litigation and regulatory proceedings, including Fair Labor Standards Act and state wage and hour class action lawsuits, which may adversely affect our business and financial performance.

We employ individuals on a temporary basis. We incur a risk of liability for various workplace events, including claims for personal injury, wage and hour violations, discrimination or harassment, and other actions or inactions of our temporary workers. In addition, some or all of these claims may give rise to litigation including class action litigation under the Fair Labor Standards Act and state wage and hour lawsuits. We cannot be certain that our insurance will be sufficient in amount or scope to cover all claims that may be asserted against us. Should the ultimate judgments or settlements exceed our insurance coverage, they could have a material effect on our business. We cannot be certain we will be able to obtain appropriate types or levels of insurance in the future, that adequate replacement policies will be available on acceptable terms or that the companies from which we have obtained insurance will be able to pay claims we make under such policies.

We have significant goodwill and other intangible assets. Consequently, potential impairment of goodwill and other intangibles may significantly impact our profitability.

As of March 31, 2013 and December 31, 2013, goodwill and other intangibles represented approximately 37% and 31%, respectively, of our total assets. Goodwill and other intangible assets are subject to an impairment analysis whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. Additionally, goodwill is subject to an impairment test at least annually.

Events giving rise to impairment are an inherent risk in the pharmaceutical industry and cannot be predicted. As a result of the significance of goodwill and other intangible assets, our results of operations and financial position in a future period could be negatively impacted should an impairment of goodwill or other intangible assets occur.

We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws.

The U.S. Foreign Corrupt Practices Act (the FCPA) prohibits certain individuals and entities, including U.S. publicly traded companies, from promising, offering or giving anything of value to foreign officials with the corrupt intent of influencing the foreign official for the purpose of helping the company obtain or retain business or gain any improper advantage. The FCPA also imposes specific recordkeeping and internal controls requirements on U.S. publicly traded companies. As noted above, our business is heavily regulated and therefore involves significant interaction with government officials, including officials of foreign governments. Additionally, in many countries outside the United States, the healthcare providers who prescribe pharmaceuticals are employed by the government and the purchasers of pharmaceuticals are government entities; therefore, our payments to these prescribers and purchasers are subject to regulation under the FCPA. Recently the SEC and the U.S. Department of Justice have increased their FCPA enforcement activities with respect to pharmaceutical companies.

If we fail to comply with federal and state healthcare laws, including fraud and abuse and health information privacy and security laws, we could face substantial penalties and our business, results of operations, financial condition and prospects could be adversely affected.

As a pharmaceutical company, even though we do not and will not control referrals for healthcare services or bill directly to Medicare, Medicaid or other third-party payers, certain federal and state healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are and will be applicable to our business. We could be subject to healthcare fraud and abuse and patient privacy regulation by both the federal government and the states in which we conduct our business. The laws that may affect our ability to operate include: (i) the U.S. Anti-Kickback Statute, which constrains our marketing practices, educational programs, pricing policies and relationships with healthcare providers or other entities, by prohibiting, among other things, soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce, or in return for, either the referral of an individual or the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs; (ii) federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other third-party payers that are false or fraudulent; (iii) the U.S. Health Insurance Portability and Accountability Act of 1996, (HIPAA), which among other things created new federal criminal statutes that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; (iv) the U.S. Physician Payments Sunshine Act, which among other things, requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under a federal healthcare program to report annually information related to “payments or other transfers of value” made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, and ownership and investment interests held by certain healthcare professionals and their immediate family members; (v) HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and its implementing regulations, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information and places restrictions on use of such information for marketing communications; and (vi) state and foreign law equivalents of each of the above U.S. laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payer, including commercial insurers, and state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. Because of the breadth of these laws and the narrowness of available statutory and regulatory exceptions, it is possible that some of our business activities could be subject to challenge under one or more of such laws. To the extent that any of our product candidates are ultimately sold in countries other than the United States, we may be subject to similar laws and regulations in those countries. If we or our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil, criminal and administrative penalties, damages, fines, disgorgement, exclusion from participating in government healthcare programs, contractual damages, reputational harm and the curtailment or restructuring of our operations. Any penalties, damages, fines, curtailment or restructuring of our operations could materially adversely affect our ability to operate our business and our financial results. Although compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, the risks cannot be entirely eliminated. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. Moreover, achieving and sustaining compliance with applicable federal and state privacy, security and fraud laws may prove costly.

The illegal distribution of our products or counterfeit versions of our products could have a negative impact to our business and reputation.

The drug supply has been increasingly challenged by the vulnerability of distribution channels to illegal counterfeiting and the presence of counterfeit products in a growing number of markets and over the Internet. The World Health Organization estimates that more than 10%, and as much as 30% in some countries, of medications being sold globally are counterfeit.

Any third party distribution or sale of counterfeit versions of our products by third parties could jeopardize the health of many individuals. These counterfeit products do not go through our rigorous manufacturing and testing standards and may not be stored the proper warehouse conditions. To distributors and users, counterfeit products may be visually indistinguishable from the authentic version, which could impact our brand and reputation. Reports of adverse reactions to counterfeit drugs or increased levels of counterfeiting could materially affect patient confidence in the authentic product. It is possible that adverse events caused by unsafe counterfeit products will mistakenly be attributed to the authentic product. In addition, thefts of inventory at warehouses, plants or while in-transit, which are not properly stored and which are sold through unauthorized channels could adversely impact patient safety, our reputation and our business. Public loss of confidence in the integrity of pharmaceutical products as a result of counterfeiting or theft could have a material adverse effect on our business, financial position and results of operations.

We have substantial debt obligations that could restrict our operations and limit our ability to compete.

As of December 31, 2013, after giving effect to the issuance of $1.8 billion in Senior Notes in our January 2014 offering, we would have had approximately $4.9 billion of indebtedness. Excluding $5.6 million of issued letters of credit, no amounts have been drawn from our Credit Agreement to date. We may also incur additional indebtedness in the future. Our substantial indebtedness could have adverse consequences, including:

• making it more difficult for us to satisfy our financial obligations, including our obligations with respect to the Senior Notes;

• increasing our vulnerability to adverse economic, regulatory and industry conditions, and placing us at a disadvantage compared to our competitors that are less leveraged;

• limiting our ability to compete and our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

• limiting our ability to borrow additional funds for working capital, capital expenditures, acquisitions and general corporate or other purposes; and

• exposing us to greater interest rate risk since the interest rate on borrowings under our Credit Agreement is variable.

Our debt service obligations will require us to use a portion of our operating cash flow to pay interest and principal on indebtedness instead of for other corporate purposes, including funding future expansion of our business and ongoing capital expenditures, which could impede our growth. If our operating cash flow and capital resources are insufficient to comply with the financial covenants in the Credit Agreement or to service our debt obligations, including the Senior Notes, we may be forced to sell assets, seek additional equity or debt financing or restructure our debt, which could harm our long-term business prospects. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our debts, including the notes.

Despite our current level of indebtedness, we and our subsidiaries may still be able to incur substantially more debt.

We may be able to incur substantial additional indebtedness, including additional notes and other secured indebtedness, in the future. The indenture governing the notes will not fully prohibit us or our subsidiaries from incurring additional indebtedness, and any limitations will be subject to a number of significant qualifications and exceptions. As of December 31, 2013, the total availability under our Credit Agreement was $750 million, excluding $5.6 million of issued letters of credit. If new debt is added to our existing debt levels, the related risks that we now face would intensify and we may not be able to meet all our debt obligations, including the repayment of the notes. In addition, the indenture governing the notes and the agreements governing our other senior indebtedness will not prevent us from incurring obligations that do not constitute indebtedness under the agreements governing such debt. See “Description of Other Debt.”

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

On October 27, 2013, the Company entered into a letter agreement with A. Robert D. Bailey in connection with his appointment as Senior Vice President, Chief Legal Officer, General Counsel and Secretary of the Company (the “Letter Agreement”), which among other things provided for Mr. Bailey to purchase shares of the Company’s common stock, par value $0.10 per share (“Common Stock”) having an aggregate purchase price of $535,000 (the “Shares”), and for the Company to sell to Mr. Bailey, at his request, some or all of the Shares at the then fair market value of the Common Stock.  In accordance with the terms and conditions of the Letter Agreement, Mr. Bailey and the Company entered into a stock purchase agreement (the “SPA”) on November 12, 2013, pursuant to which Mr. Bailey purchased 10,914 shares of Common Stock directly from the Company at a per share price of $49.02 (which was the average of the high and low price of a share of Common Stock on the New York Stock Exchange (“NYSE”) on November 12, 2013) and for an aggregate purchase price of $535,004.28, subject to NYSE approval of the Company’s supplemental listing application filed with respect to the Shares to be issued pursuant to the SPA.  The transaction was exempt from registration with the SEC pursuant to Section 4(a)(2) of the Securities Act of 1933, and the Shares were issued to Mr. Bailey on November 19, 2013 following NYSE’s approval of the supplemental listing application.

The following table summarizes the surrenders and repurchases of our equity securities during the three month period ended December 31, 2013:

Period	Total Number of Shares Purchased (a)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b), (c)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
October 1 to 31, 2013	–	$	–	–	$	614,185,752	b
November 1 to 30, 2013	701	$	51.36	–	$	1,000,000,000	c
December 1 to 31, 2013	213,507	$	55.92	–	$	1,000,000,000	c
Three months ended December 31, 2013	214,208			–

(a)   The total number of shares purchased and the total number of shares purchased as part of publicly announced plans is different because shares of common stock may be withheld by us from employee restricted stock awards in order to satisfy tax withholding obligations.

(b)   In May 2010, the Board of Directors authorized the 2010 Share Repurchase Program for up to 50 million shares of common stock (the 2010 Share Repurchase Program).  In November 2013, the Board of Directors terminated the 2010 Share Repurchase Program.

(c)   In November 2013, the Board of Directors authorized the 2013 Share Repurchase Program for up to $1 billion of shares of common stock (2013 Share Repurchase Program).  The authorization became effective immediately and has no set expiration date.  

On November 26, 2013, the Board terminated the outstanding share repurchase authorization and authorized the repurchase of up to $1 billion of shares of common stock based on prevailing prices from time to time. The new authorization became effective immediately and has no set expiration date. The Board authorized the repurchases through one or more accelerated share repurchases, open market transactions, derivative transactions, privately negotiated transactions and otherwise.

As of February 5, 2014, $1 billion of shares were available for repurchase under the 2013 Share Repurchase Program.  We may make share repurchases from time to time in the open market or through private transactions, including accelerated share repurchase transactions.

Item 6.	Exhibits
	Exhibit 2.1	Agreement and Plan of Merger, dated as of January 7, 2014, by and among FRX Churchill Holdings, Inc., FRX Churchill Sub, Inc., Forest Laboratories, Inc. and Aptalis Holdings, Inc. Incorporated by reference to Forest’s Current Report on Form 8-K (Commission File No. 1-5438) filed January 8, 2014 (January 8, 2014 8-K).
	Exhibit 4.1	Indenture, dated as of December 10, 2013, by and among Forest Laboratories, Inc. and Wells Fargo Bank, National Association, as trustee. Incorporated by reference to Forest’s Current Report on Form 8-K (Commission File No. 1-5438) filed December 11, 2013 (December 11, 2013 8-K).
	Exhibit 10.1	Stock Purchase Agreement between Forest and Brenton L. Saunders dated October 1, 2013. Incorporated by reference to Forest’s Current Report on Form 8-K (Commission File No. 1-5438) filed October 4, 2013 (October 4, 2013 8-K).
	Exhibit 10.2	Employee Restricted Stock Agreement (Time-Based) granted to Brenton L. Saunders on October 1, 2013. Incorporated by reference to the October 4, 2013 8-K.
	Exhibit 10.3	Change of Control Employment Agreement between Forest and Brenton L. Saunders dated October 1, 2013. Incorporated by reference to the October 4, 2013 8-K.
	Exhibit 10.4	Forest Corporate Officer Severance Benefit Plan and Summary Plan Description. Incorporated by reference to Forest’s Current Report on Form 8-K (Commission File No. 1-5438) filed November 4, 2013.
	Exhibit 10.5	First Amendment dated as of December 2, 2013 to Credit Agreement, dated December 2, 2013, to the $750 million Credit Agreement dated as of December 4, 2012, by and among Forest Laboratories, Inc., Forest Laboratories Holdings Limited, Forest Laboratories Ireland Limited, Forest Finance B.V., Forest Laboratories UK Limited, Forest Laboratories Canada Inc., JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders from time to time party thereto. Incorporated by reference to Forest’s Current Report on Form 8-K (Commission File No. 1-5438) filed December 2, 2013.
	Exhibit 10.6	Registration Rights Agreement, dated as of December 10, 2013, by and among Forest Laboratories, Inc. and Morgan Stanley & Co. LLC, as representative of the initial purchasers. Incorporated by reference to the December 11, 2013 8-K.
	Exhibit 10.7	Commitment Letter, dated as of January 7, 2014, among Forest Laboratories, Inc. and Morgan Stanley Senior Funding, Inc. Incorporated by reference to the January 8, 2014 8-K.
	Exhibit 10.8	Asset Purchase Agreement, dated as of November 29, 2013, as amended on January 9, 2014, by and between Merck Sharp & Dohme BV, and Forest Laboratories Holdings Limited.**†
	Exhibit 10.9	License Agreement, dated as of January 10, 2014, by and between Merck Sharp & Dohme BV, and Forest Laboratories Holdings Limited.**
	Exhibit 10.10	Supply Agreement, dated as of January 10, 2014, by and between Merck Sharp & Dohme BV, and Forest Laboratories Ireland Limited.**
	Exhibit 10.11	Amended and Restated Patent and Know-How License Agreement, dated December 17, 2013, by and between Pierre Fabre Médicament SAS, and Forest Laboratories Holdings Limited.**
	Exhibit 10.12	Amended and Restated Trademark License Agreement, dated December 17, 2013, between Pierre Fabre Médicament SAS, and Forest Laboratories Holdings Limited.**
	Exhibit 10.13	Amended and Restated Purchase and Supply Agreement, dated December 17, 2013, between Pierre Fabre Médicament SAS, and Forest Laboratories Holdings Limited.**
	Exhibit 10.14	Letter Agreement, dated October 27, 2013, between Forest and A. Robert D. Bailey.
	Exhibit 10.15	Change of Control Employment Agreement, dated November 12, 2013, between Forest and A. Robert D. Bailey.
	Exhibit 10.16	Stock Purchase Agreement between Forest and A. Robert D. Bailey dated November 12, 2013.
	Exhibit 10.17	Letter Agreement, dated October 11, 2013, between Forest and John Alex Kelly.
	Exhibit 10.18	Change of Control Employment Agreement, dated October 24, 2013, between Forest and John Alex Kelly.
	Exhibit 10.19	Amended and Restated Change of Control Employment Agreement, dated October 29, 2008, between Forest and William Meury.
	Exhibit 10.20	Letter Agreement, dated March 12, 2003, between Forest and Kevin Walsh.
	Exhibit 10.21	Amended and Restated Change of Control Employment Agreement, dated October 29, 2008, between Forest and Kevin Walsh.
	Exhibit 10.22	Change of Control Employment Agreement, dated January 1, 2011, between Forest and Joseph Zimmerman.
	Exhibit 10.23	Letter Agreement, dated December 19, 2013, between Forest and Karen Ling.
	Exhibit 31.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	Exhibit 31.2	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	Exhibit 32.1	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	Exhibit 32.2	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	101.INS	XBRL Instance Document*
	101.SCH	XBRL Taxonomy Extension Schema Document*
	101.PRE	XBRL Taxonomy Presentation Linkbase Document*
	101.CAL	XBRL Taxonomy Calculation Linkbase Document*
	101.LAB	XBRL Taxonomy Label Linkbase Document*
		*Attached as Exhibit 101 to this Quarterly Report on Form 10-Q for the quarter ended December 31, 2013 are the following materials, formatted in eXtensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Income, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Cash Flows and (v) the Notes to the Consolidated Financial Statements.
		**Confidential treatment has been requested for certain portions of the Exhibit pursuant to Rule 24-b2 promulgated under the Securities Exchange Act of 1934.  Such portions have been omitted and filed separately with the Securities and Exchange Commission.
		† Schedules omitted pursuant to Item 601(b)(2) of Regulation S-K.  The Company agrees to furnish a supplemental copy of any omitted schedule to the Securities and Exchange Commission upon request.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: February 6, 2014

Forest Laboratories, Inc.

(Registrant)

/s/ Brenton L. Saunders

Brenton L. Saunders

Chief Executive Officer and President

/s/ Francis I. Perier, Jr.

Francis I. Perier, Jr.

Executive Vice President, Chief Financial Officer

/s/ Rita Weinberger

Rita Weinberger

V.P. Controller and Principal Accounting Officer

EX-10.8

[***] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

ASSET PURCHASE AGREEMENT

By and between

Merck Sharp & Dohme BV

and

Forest Laboratories Holdings Limited

Dated as of November 29, 2013

TABLE OF CONTENTS

ARTICLE 1 DEFINITIONS

1.1 Certain Defined Terms

1.2 Construction

ARTICLE 2 SALE AND PURCHASE OF ASSETS; LIABILITIES

2.1 Sale of Purchased Assets

2.2 Liabilities

2.3 Consideration

2.4 Closing

ARTICLE 3 REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of Seller

3.2 Representations and Warranties of Buyer

3.3 Exclusivity of Representations

ARTICLE 4 PRE-CLOSING COVENANTS

4.1 Access and Information

4.2 Ordinary Course of Business

4.3 Obligation to Consummate the Transaction

4.4 Competition Filings

4.5 Notices

4.6 No Negotiation

4.7 Paragraph IV Notices

4.8 Clinical Supply Agreement

4.9 Incentive Plan

ARTICLE 5 ADDITIONAL COVENANTS

5.1 Cooperation in Litigation and Investigations

5.2 Further Assurances

5.3 Publicity

5.4 Confidentiality

5.5 FDA Letters

5.6 Regulatory Responsibilities

5.7 Access to Regulatory Approvals and Documentation

5.8 Pharmacovigilance Obligations

5.9 Medical and Other Inquiries

5.10 Commercialization

5.11 Returned Products, Chargebacks, Rebates, Health Care Reform Fees and Coupons

5.12 Post-Closing Responsibility for Product

5.13 Certain Tax Matters

5.14 Accounts Receivable and Payable

5.15 Net Sales Reports; Audit Rights

5.16 Covenant Not to Sue

5.17 Exclusivity

5.18 Insurance

5.19 Exchange Act Filings

5.20 Assignment of Certain Intellectual Property

ARTICLE 6 CONDITIONS PRECEDENT

6.1 Conditions to Obligations of Buyer and Seller

6.2 Conditions to Obligations of Buyer

6.3 Conditions to Obligations of Seller

6.4 Frustration of Closing Conditions

ARTICLE 7 INDEMNIFICATION

7.1 Indemnification

7.2 Claim Procedure

7.3 Limitations on Indemnification

7.4 Tax Treatment of Indemnification Payments

7.5 Exclusive Remedy

7.6 Setoff Rights

ARTICLE 8 TERMINATION

8.1 Termination

8.2 Procedure and Effect of Termination

ARTICLE 9 MISCELLANEOUS

9.1 Governing Law, Jurisdiction, Venue and Service

9.2 Notices

9.3 No Benefit to Third Parties

9.4 Waiver and Non-Exclusion of Remedies

9.5 Expenses

9.6 Assignment

9.7 Amendment

9.8 Severability

9.9 Equitable Relief

9.10 Dispute Resolution

9.11 Use of Affiliates

9.12 English Language

9.13 Bulk Sales Statutes

9.14 Counterparts

9.15 Entire Agreement

EXHIBITS

Exhibit A Form of License Agreement

Exhibit B Form of Supply Agreement

Exhibit C Form of Transition Services Agreement

Exhibit D Form of Seller FDA Letters

Exhibit E Form of Parent Guaranty

SCHEDULES

Schedule ‎1.1.74        In-License Agreements

Schedule ‎1.1.79        Licensed Copyrights

Schedule ‎1.1.80        Licensed Domain Names

Schedule ‎1.1.82        Licensed Know-How

Schedule ‎1.1.83        Licensed Patents

Schedule ‎1.1.86        Licensed Trademarks

Schedule ‎1.1.90        Material Adverse Effect Exceptions

Schedule ‎1.1.103      Other Agreements

Schedule ‎1.1.109      Permitted Encumbrances

Schedule ‎1.1.112      Phase IV Commitments

Schedule ‎1.1.113      Phase IV 2013 Funded Amount Calculation

Schedule ‎1.1.137      Retained Phase IV Commitments

Schedule ‎1.1.145      Seller’s Knowledge

Schedule ‎1.1.157      Transferred Phase IV Commitments

Schedule ‎2.1.1(a)(i)  Purchased Contracts

Schedule 2.1.1(a)(ii) Assigned Contract Rights and Interests

Schedule ‎2.1.1(b)     Purchased Regulatory Approvals

Schedule ‎4.2             Ordinary Course of Business Exceptions

ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement (this “Agreement”) is made and executed as of November 29, 2013 (the “Execution Date”), by and between Merck Sharp & Dohme BV, a limited liability company (a Besloten Vennootschap) organized and existing under the Laws of the Netherlands (“Seller”), and Forest Laboratories Holdings Limited, an Irish corporation (“Buyer”).  Seller and Buyer are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

RECITALS

WHEREAS, Seller and certain of its Affiliates are engaged in business operations and activities involving or related to the sourcing, research, development, registration, transportation, use, promotion, marketing, distribution, sale and other commercialization of the Product in the Buyer Territory (collectively, the “Product Business”); and

WHEREAS, Seller wishes to sell and license to Buyer, and Buyer desires to purchase and license from Seller, certain assets and rights comprising or associated with the Product Business, upon the terms and conditions hereinafter set forth and set forth in the License Agreement; and

WHEREAS, at the Closing, Seller and Buyer intend to enter into the Ancillary Agreements.

NOW, THEREFORE, in consideration of the mutual benefits to be derived from this Agreement and of the representations, warranties, conditions, agreements and promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

                        ARTICLE 1                      

 DEFINITIONS

1.1Certain Defined Terms.  As used herein, the following terms shall have the following meanings:

1.1.1“2.5 mg Clinical Trials” means the clinical trials for the 2.5 mg Dosage Strength conducted by or on behalf of Seller or any of its Affiliates prior to or as of the Execution Date or the Closing Date.

1.1.2“2.5 mg Dosage Strength” means a pharmaceutical product containing the 2.5 mg dosage strengthof asenapine in the formulation described in IND #70329 and IND #51641, as accepted by the FDA.

1.1.3“AAA” has the meaning set forth in Section ‎9.10.1.

1.1.4“Accountants” means an accounting firm of national reputation (excluding each of Seller’s and Buyer’s respective regular outside accounting firms) as may be mutually acceptable to Seller and Buyer; provided, however, if Seller and Buyer are unable to agree on such accounting firm within 10 days or any such mutually selected accounting firm is unwilling or unable to serve, then Seller shall deliver to Buyer a list of three other accounting firms of national reputation that have not performed services for Seller or Buyer in the preceding three-year period, and Buyer shall select one of such three accounting firms.

1.1.5“Accounts Receivable” means all accounts receivable, notes receivable and other indebtedness due and owed by any Third Party to Seller or any of its Affiliates arising from sales of the Product by or on behalf of Seller or its Affiliates prior to the Closing Date.

1.1.6“Act” means the United States Federal Food, Drug, and Cosmetic Act.

1.1.7“Adverse Event” means, with respect to a Product, any undesirable, untoward or noxious event or experience associated with the use, or occurring during or following the administration, of such product in humans, occurring at any dose, whether expected and whether considered related to or caused by such Product, including such an event or experience as occurs in the course of the use of such Product in professional practice, in a clinical trial, from overdose, whether accidental or intentional, from abuse, from withdrawal or from a failure of expected pharmacological or biological therapeutic action of such Product, and including those events or experiences that are required to be reported to the FDA under 21 C.F.R. sections 312.32, 314.80 or 600.80, as applicable, or to foreign Governmental Authorities under corresponding applicable Law outside the United States.

1.1.8“Affiliate” means, with respect to a Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such first Person.  For purposes of this definition, “control” and, with correlative meanings, the terms “controlled by” and “under common control with” means (a) the possession, directly or indirectly, of the power to direct the management or policies of a business entity, whether through the ownership of voting securities, by contract relating to voting rights or corporate governance, or otherwise or (b) the ownership, directly or indirectly, of more than 50% of the voting securities or other ownership interest of a business entity (or, with respect to a limited partnership or other similar entity, its general partner or controlling entity).

1.1.9“Agreed Amount” has the meaning set forth in Section ‎7.2.1.

1.1.10“Agreement” has the meaning set forth in the preamble hereto.

1.1.11"Allocation" has the meaning set forth in Section 2.3.4.

1.1.12“Ancillary Agreements” means the Supply Agreement, the Bill of Sale, the License Agreement, the Transition Services Agreement, the Quality Agreement, the Pharmacovigilance Agreement, the Clinical Supply Agreement and the Patent Assignment Agreement.

1.1.13“ANDA” has the meaning set forth in Section 3.1.5(d).

1.1.14“Apportioned Obligations”has the meaning set forth in Section ‎5.13.1(b).

1.1.15“Assumed Liabilities” has the meaning set forth in Section ‎2.2.1.

1.1.16“Authorization” means any consent, approval, order, license, permit and other similar authorization of or from any Governmental Authority, together with any renewals, extensions, or modifications thereof and additions thereto.

1.1.17“Authorized or Owned Generic Product” means a Generic Product marketed, distributed and sold in the Buyer Territory by or on behalf of or under a license or sublicense from Buyer or any of its Affiliates.

1.1.18“Bill of Sale” means one or more Bill of Sale and Assignment and Assumption Agreements, in a standard and customary form reasonably acceptable to the parties.

1.1.19“Business Day” means any day other than Saturday, Sunday or a day on which banking institutions in New York, New York are permitted or obligated by Law to remain closed.

1.1.20“Buyer” has the meaning set forth in the preamble hereto.

1.1.21“Buyer Confidential Information” has the meaning set forth in Section ‎5.4.2.

1.1.22“Buyer FDA Letters” shall mean a letter or letters, in a standard and customary form and reasonably acceptable to Seller, to the FDA from Buyer accepting the transfer of rights to the Purchased Regulatory Approvals from Seller.

1.1.23“Buyer Indemnitees” has the meaning set forth in Section ‎7.1.1.

1.1.24“Buyer Material Adverse Effect” means any event, fact, condition, occurrence, change or effect that prevents or materially impedes or materially delays the consummation by Buyer of the Transactions.

1.1.25“Buyer Permitted Purpose” has the meaning set forth in Section ‎5.4.3.

1.1.26“Buyer Regulatory Approvals and Documentation” means any and all Regulatory Approvals and other Regulatory Documentation related to the Product, or any Other Product, in each case, that are Controlled by Buyer or any of its Affiliates, licensees, sublicensees or distributors effective as of and following the Closing, including the Purchased Regulatory Approvals and any other Regulatory Documentation included in the Purchased Assets.

1.1.27“Buyer Territory” means the United States and its territories and possessions.

1.1.28“Calendar Month” means each partial or whole successive period of one calendar month commencing on the Closing Date.

1.1.29“Calendar Quarter” means each successive period of three Calendar Months commencing on January 1, April 1, July 1 and October 1, except that the first Calendar Quarter of this Agreement shall commence on the Closing Date and end on the day immediately prior to the first to occur of January 1, April 1, July 1 or October 1 after the Closing Date.

1.1.30“Calendar Year” means each successive period of 12 Calendar Months commencing on January 1 and ending on December 31, except that the first Calendar Year of the this Agreement shall commence on the Closing Date and end on December 31 of the year in which the Closing Date occurs.

1.1.31“cGCP” means the ethical, scientific, and quality standards required by FDA for designing, conducting, recording, and reporting human clinical trials, as set forth in FDA regulations in 21 C.F.R. Parts 50, 54, 56, and 312 and by the International Conference on Harmonization E6: Good Clinical Practices Consolidated Guideline, or as otherwise required by applicable Law.

1.1.32“cGMP” means standards and methods requiredto be used in, and the facilities or controls to be used for, the Manufacture of a drug, as set forth in FDA regulations in 21 C.F.R. Parts 210 and 211.

1.1.33“Claim Notice” has the meaning set forth in Section ‎7.2.2.

1.1.34  “Clinical Supply Agreement” means the Clinical Supply Agreement in form and substance satisfactory to Seller and Buyer to be entered into by Seller and Buyer (or their respective Affiliates) at the Closing and pursuant to which Seller (or its Affiliate) will supply Product to Buyer (or its Affiliate) for use in the Phase IV Commitments at a purchase price equal to [***].

1.1.35“Closing” has the meaning set forth in Section ‎2.4.1.

1.1.36“Closing Date” means the date on which the Closing occurs.

1.1.37“Closing Inventory” means inventory of finished Product (together with any Product packaging materials thereon) labeled and held for sale in the Buyer Territory, owned as of the Closing by Seller or any of Seller’s Affiliates that has not been shipped to a wholesaler or distributor.

1.1.38“Closing Payment” has the meaning set forth in Section ‎2.3.1.

1.1.39“Code” means the Internal Revenue Code of 1986.

1.1.40“Combination Product” means any prescription pharmaceutical product containing as active ingredients asenapine and one or more other pharmaceutically active ingredients to the extent that the Regulatory Approval for such product uses or is based on a reference to any of the Purchased Regulatory Approvals, the Regulatory Documentation included in the Purchased Assets, the Licensed Regulatory Documentation or the proprietary and confidential data in the Licensed Intellectual Property.

1.1.41“Commercially Reasonable Efforts” means the carrying out of activities in a sustained and diligent manner and using efforts and resources that are comparable to the efforts and resources commonly used in the pharmaceutical industry by companies with resources similar to those of Buyer for products of similar market potential at a similar stage of product life.

1.1.42“Confidential Information” has the meaning set forth in Section ‎5.4.1.

1.1.43“Confidentiality Agreement” means that certain Confidentiality Agreement, dated November 18, 2013, by and between Merck Sharp & Dohme Corp. and Buyer.

1.1.44“Contract” means any written or oral, contract, agreement, lease, sublease, license, sublicense instrument, note, guaranty, deed, assignment, purchase order, or other legally binding commitment or arrangement.

1.1.45“Control” means, with respect to any Licensed Intellectual Property, Regulatory Approval or Regulatory Documentation, possession of the right, whether directly or indirectly, and whether by ownership, license or otherwise (other than by operation of the licenses and other grants set forth in the License Agreement), to assign or grant a license, sublicense or other right to or under such Licensed Intellectual Property, Regulatory Approval or Regulatory Documentation as provided for herein or in any of the Ancillary Agreements without violating the terms of any Contract with any Third Party.

1.1.46“Controlling Party” has the meaning set forth in Section ‎7.2.2.

1.1.47“Copyright” means copyrights and rights in copyrightable works, copyright registrations, or any application therefor and all extensions, restorations, reversions and renewals of any of the foregoing, in each case, in the Buyer Territory.

1.1.48“Disclosing Party” has the meaning set forth in Section ‎5.4.1.

1.1.49“Disclosure Schedules” means the disclosure schedules of Seller related to the representations and warranties of Seller set forth in Section ‎3.1.

1.1.50“Dispute” means any dispute, controversy or claim (of any and every kind or type, whether based on contract, tort, statute, regulation, or otherwise) arising out of, relating to, or in connection with this Agreement or any Ancillary Agreement or the activities carried out hereunder or thereunder, including any dispute as to the construction, validity, interpretation, enforceability or breach hereof or thereof, but, in each case, excludes any Excluded Dispute.

1.1.51“Domain Names” means any and all internet or global computing network addresses or locations, including all generic top-level domains (“gTLDs”) and country code top-level domains (“ccTLDs”).

1.1.52“Encumbrance” means any mortgage, lien, hypothecation, charge, license, pledge, security interest, encumbrance, trust, equitable interest, claim, preference, imperfection of title, or right of possession.

1.1.53“End Date” has the meaning set forth in Section ‎8.1.2.

1.1.54“Environmental Laws” means all Laws related to the protection of the environment or human health and safety or the release, presence of, exposure to, or the management, manufacture, use, containment, storage, recycling, reclamation, monitoring, reuse, treatment, generation, discharge, transportation, processing, production, disposal, leaching, migration, emission or remediation of Hazardous Substances, including the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9901 et seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C. § 6901 et seq., the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. § 11001 et seq., the Clean Air Act, 42 U.S.C. § 7401 et seq., the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq., the Toxic Substance Control Act, 15 U.S.C. § 2601 et seq., the Safe Drinking Water Act, U.S.C. § 300f et seq., the Occupational Safety and Health Act, 42 U.S.C. § 1801 et seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. § 136 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. § 1801 et seq.

1.1.55“Exchange Act” means the Securities Exchange Act of 1934.

1.1.56“Excluded Assets” means all assets, property, rights and interests of Seller and its Affiliates other than the Purchased Assets, including (a) all intellectual property and Intellectual Property Rights of Seller and its Affiliates, (b) all rights with respect to the Product in the Seller Territory, (c) all tangible personal property of Seller or any of its Affiliates (other than the Closing Inventory and other tangible Purchased Assets), (b) all Accounts Receivable, and (c) all Manufacturing-related assets of Seller or any of its Affiliates.

1.1.57“Excluded Dispute” means a dispute, controversy or claim between Buyer and Seller or an Affiliate of either that concerns (a) the validity or infringement of any Patent Rights, Trademark (other than any dispute, controversy or claim relating to Seller’s rights or Buyer’s obligations under Article 6 of the License Agreement) or Copyright; or (b) any antitrust, anti-monopoly or competition law or regulation, whether or not statutory.

1.1.58“Excluded Liabilities” means all Liabilities of Seller or any of its Affiliates other than the Assumed Liabilities.

1.1.59“Execution Date” has the meaning set forth in the preamble hereto.

1.1.60“Exploit” means to make, have made, import, export, use, have used, sell, offer for sale, have sold, research, develop (including seeking, obtaining and maintaining Regulatory Approval), commercialize, hold or keep (whether for disposal or otherwise), transport, distribute, promote, market, or otherwise dispose of, but excludes to Manufacture or have Manufactured.

1.1.61“FDA” means the United States Food and Drug Administration and any successor agency thereto.

1.1.62“Financial Information” has the meaning set forth in Section ‎3.1.14.

1.1.63“Fundamental Reps” means the representations and warranties set forth in [***].

1.1.64“GAAP” means generally accepted accounting principles in the United States.

1.1.65“Generic Product” means a pharmaceutical product that is distributed under a Regulatory Approval approved by FDA expressly in reliance on the prior approval of the Product pursuant to 21 U.S.C. 355(j) and (b) under applicable Law is substitutable for the Product as administered to patients without the intervention of a physician or other health care provider with prescribing authority.

1.1.66“Governmental Authority” means any supranational, international, nation, commonwealth, province, territory, county, municipality, district, federal, state or local court (or any arbitrator or other tribunal having competent jurisdiction), administrative agency or commission or other governmental authority, instrumentality, domestic or foreign, including the FDA and any corresponding foreign agency, or any self-regulated organization or quasi-governmental authority.

1.1.67“Hazardous Substance” means any: contaminant or pollutant; toxic, radioactive or hazardous waste, chemical, substance, material or constituent; asbestos; polychlorinated byphenyls (PCBs); paint containing lead or mercury; fixtures containing mercury or urea formaldehyde; natural or liquefied gas; flammable, explosive, corrosive, radioactive, medical and infectious waste; and oil or other petroleum product, all as defined in applicable Environmental Laws.

1.1.68“Health Care Reform Fees” means the fees described in Section 9008 of the Patient Protection and Affordable Care Act, Pub. L. No. 111-148, as amended by Section 1404 of the Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152.

1.1.69“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

1.1.70“IND” means an Investigational New Drug Application as defined in the Act.

1.1.71“Indemnification Certificate” has the meaning set forth in Section ‎7.2.1.

1.1.72“Indemnified Party” has the meaning set forth in Section ‎7.2.1.

1.1.73“Indemnifying Party” has the meaning set forth in Section ‎7.2.1.

1.1.74“In-License Agreements” means the license agreements set forth in Schedule ‎1.1.74.

1.1.75“Intellectual Property Rights” means any and all of the following: Copyrights, Domain Names, Patent Rights, Trademarks, rights to protect confidential or proprietary information, and Trade Secrets.

1.1.76“Law” means any domestic or foreign, federal, state or local statute, law, treaty, judgment, ordinance, rule, administrative interpretation, regulation, order or other requirement of any Governmental Authority.

1.1.77“Liabilities” means any debts, liabilities, obligations, commitments, claims or complaints, whether accrued or fixed, known or unknown, fixed or contingent, determined or determinable (including all adverse reactions, recalls, product and packaging complaints and other liabilities) and whether or not the same would be required to be reflected in financial statements or disclosed in the notes thereto.

1.1.78“License Agreement” means that certain License Agreement, in substantially the form of Exhibit A.

1.1.79“Licensed Copyrights” means all Copyrights in the Buyer Territory that are Controlled by Seller and that are used by Seller or any of Seller’s Affiliates in connection with the Product Business, including those Copyrights listed on Schedule ‎1.1.79.

1.1.80“Licensed Domain Names” means the Domain Names listed on Schedule ‎1.1.80.

1.1.81“Licensed Intellectual Property” means the Licensed Copyrights, the Licensed Domain Names, the Licensed Patents, the Licensed Trademarks and the Licensed Know-How.

1.1.82“Licensed Know-How” means all data, know-how and other information that is not generally known, is Controlled by Seller or its Affiliates, and:

(a)as of the Execution Date is actually used by or on behalf of Seller to Exploit the Product and Other Products in the Buyer Territory or for the Manufacture of the Product and Other Products for sale in the Buyer Territory, is not a Purchased Asset, and which is identified on Schedule ‎1.1.82; or

(b)after the Execution Date is actually used by or on behalf of Seller to Exploit the Product and Other Products in the Buyer Territory or for the Manufacture of the Product and Other Products for sale in the Buyer Territory;

provided, that if such data, information or know-how becomes publicly disclosed (other than as a result of any disclosure by Buyer in breach of its obligations under Section 5.4 or any other provision of this Agreement or any Ancillary Agreement), such data, information or know-how shall no longer be deemed Licensed Know-How.

1.1.83"Licensed Patents” means all Patent Rights listed on Schedule ‎1.1.83, including provisional and non-provisional patent applications, design registrations, design registration applications, industrial designs, industrial design applications and industrial design registrations, and including any and all divisions, continuations, continuations in part, extensions, substitutions, renewals, registrations, revalidations, reversions, reexaminations, reissues or additions, of or with respect to such listed Patent Rights, and all rights and priorities afforded under any applicable Law with respect thereto.

1.1.84“Licensed Registered Product IP” has the meaning set forth in Section ‎3.1.12(c).

1.1.85“Licensed Regulatory Documentation” means any and all Regulatory Documentation related to the Product, in each case, Controlled by Seller or any of its Affiliates as of and following the Closing, excluding the Regulatory Documentation included in the Purchased Assets.

1.1.86“Licensed Trademarks” means all Trademarks Controlled by Seller that are actually used by the Seller or an Affiliate to Exploit the Product in the Buyer Territory as of the Execution Date, as listed in Schedule ‎1.1.86.

1.1.87“Litigation” means any claim, action, arbitration, mediation, hearing, investigation, proceeding, litigation, suit, warning letter, inquiry, audit, examination, finding of deficiency or non-compliance, notice of violation or request for recall (whether civil, criminal, administrative, investigative, appellate or informal).

1.1.88“Loss” or “Losses” means any Liabilities, losses, damages, judgments, fines, penalties, awards, Taxes, amounts paid in settlement, reasonable fees (including costs and expenses in connection with investigations, suits and proceedings, expert fees, accounting fees, advisory fees and legal fees), charges and costs.

1.1.89“Manufacture”and“Manufacturing”means all activities related to the production, manufacture, processing, filling, finishing, packaging, labeling, and shipping and holding (prior to distribution) of the Product or any intermediate thereof, including process development, process qualification and validation, scale-up, pre-clinical, clinical and commercial manufacture and analytic development, product characterization, stability testing, quality assurance and quality control.

1.1.90“Material Adverse Effect” means an event, fact, condition, occurrence, circumstance, change or effect (“Effect”) that, considered together with all other Effects is, or would reasonably be expected to (i) be materially adverse to the business, results of operations or condition (financial or otherwise) of the Product Business, the Purchased Assets, the Licensed Intellectual Property and the Assumed Liabilities, taken as a whole, or (ii) prevent or materially impede or delay the consummation by Seller of any of the Transactions; provided, however, that, except as provided in the last sentence of this definition, none of the following, and no Effects resulting from the following, shall be deemed (individually or in combination) to constitute, or shall be taken into account in determining whether there has been, a “Material Adverse Effect”: (a) political or economic conditions in the Buyer Territory or conditions affecting the capital or financial markets generally; (b) conditions generally affecting any industry or industry sector in which the Product Business operates or competes; (c) any change in accounting requirements or applicable Law; (d) any hostility, act of war, sabotage, terrorism or military actions, or any escalation of any of the foregoing; (e) any hurricane, flood, tornado, earthquake or other natural disaster or force majeure event; (f) the public announcement, execution or delivery of the Agreement or the pendency or consummation of the transactions contemplated hereby; (g) the failure of the Product Business to achieve any financial projections, predictions or forecasts in and of itself (provided, that the underlying causes of such failure shall not be excluded); and (h) the matters set forth in Schedule ‎1.1.90; except, in each of clauses (a) through (e), for those conditions that have a disproportionate effect on the Product Business, the Purchased Assets, the Licensed Intellectual Property and Assumed Liabilities, taken as a whole, relative to other Persons operating businesses similar to the Product Business in the Buyer Territory.

1.1.91“Milestone Event” has the meaning set forth in Section ‎2.3.2(a).

1.1.92“Milestone Information” has the meaning set forth in Section ‎2.3.2(d).

1.1.93“Milestone Payment” has the meaning set forth in Section ‎2.3.2(a).

1.1.94“Milestone Termination Date” has the meaning set forth in Section ‎2.3.2(c).

1.1.95 “NDA” means a New Drug Application as defined in the Act.

1.1.96 “NDC” means “National Drug Code,” which is the eleven digit code registered by a company with the FDA with respect to a pharmaceutical product.

1.1.97 “Net Sales” means the aggregate gross amounts invoiced on sales of the Product and any Other Product, during the applicable period by or on behalf of Buyer or any of its Affiliates in the Buyer Territory to a Third Party (but not including sales between Buyer and its Affiliates where the Product or Other Product is intended for resale) less the following deductions as relating to such sales (in accordance with GAAP, consistently applied, and as reported in the financial statements included in Buyer’s filings with the U.S. Securities and Exchange Commission):

[***]

With respect to sales of Combination Products, Net Sales shall be calculated on the basis [***]. In the event that only Combination Product is sold in any period (and not the Product of the same strength), Net Sales shall first be calculated on the basis of [***].  Inventory cost shall be determined in accordance with Buyer’s regular accounting methods, consistently applied.  The deductions set forth above will be applied in calculating Net Sales for a Combination Product.  In the event that a Combination Product is sold in any period and either Party reasonably believes that the applicable calculation set forth above in this paragraph does not fairly reflect the market value of asenapine in such Combination Product relative to the market value of the other active ingredients in such Combination Product, [***].

Notwithstanding the foregoing, transfers or dispositions of Product by or on behalf of Buyer or any of its Affiliates in the Buyer Territory for patient assistance programs, compassionate use, research or development or complimentary samples shall not in each case be deemed “sales” for the purposes of calculating Net Sales.

1.1.98“Net Sales Reports” has the meaning set forth in Section ‎5.15.1.

1.1.99“Non-Controlling Party” has the meaning set forth in Section ‎7.2.2.

1.1.100“[***] Product” means [***], under development by Seller or any of its Affiliates as of the Execution Date or the Closing Date.

1.1.101“Notice” has the meaning set forth in Section ‎9.2.1.

1.1.102“Objection Notice” has the meaning set forth in Section ‎7.2.1.

1.1.103“Other Agreements” means the agreements set forth in Schedule ‎1.1.103.

1.1.104“Other Product” means any (a) pharmaceutical product, other than the Product, containing asenapine as its sole active ingredient (including any Authorized or Owned Generic Product) or (b) Combination Product.

1.1.105“Owned Registered Product IP” has the meaning set forth in Section ‎3.1.12(b).

1.1.106“Paragraph IV Claim” has the meaning set forth in Section ‎4.7.

1.1.107“Party(ies)” has the meaning set forth in the preamble hereto.

1.1.108“Patent Rights” means all patents and filed patent applications, including provisional and non-provisional patent applications, design registrations, design registration applications, industrial designs, industrial design applications and industrial design registrations, and including any and all divisions, continuations, continuations in part, extensions, substitutions, renewals, registrations, revalidations, reversions, reexaminations, reissues or additions, of or to any of the foregoing items, and all rights and priorities afforded under any applicable Law with respect thereto.

1.1.109“Permitted Encumbrance” means any (a) Encumbrance for Taxes not yet due or delinquent; (b) Encumbrance caused byLaw for amounts not material or overdue that does not or would not be reasonably expected to detract from the current value of, or interfere with, the present use and enjoyment of any Purchased Asset subject thereto or affected thereby in the ordinary course of business of the Product Business; (c) right, title or interest of a licensor or licensee under a license disclosed in Section 3.1.12(a) of the Disclosure Schedules and right of reference retained by Seller under Section 2.1.4; and (d) any Encumbrance disclosed on Schedule ‎1.1.109.

                                                        1.1.110“Person” means any individual, partnership, limited partnership, limited liability company, joint venture, syndicate, sole proprietorship, corporation, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, or any other legal entity, including a Governmental Authority.

1.1.111 “Pharmacovigilance Agreement” has the meaning set forth in Section ‎5.8.1.

1.1.112“Phase IV Commitments” means the post-marketing clinical trial commitments as set forth on Schedule ‎1.1.112.

1.1.113“Phase IV 2013 Funded Amount” means the aggregate actual amount of costs and expenses incurred by Seller and its Affiliates during Calendar Year 2013 to fund activities related to the Phase IV Commitments, including [***], which amount has been calculated in accordance with Schedule ‎1.1.113; provided, that the Phase IV 2013 Funded Amount shall not exceed $85,000,000.

1.1.114 “Post-Closing Tax Period” has the meaning set forth in Section ‎5.13.1(b).

1.1.115“Pre-Closing Period” has the meaning set forth in Section ‎4.1.1.

1.1.116“Pre-Closing Tax Period” has the meaning set forth in Section ‎5.13.1(b).

1.1.117“Product” means the strengths and package sizes and types of the pharmaceutical product containing a formulation of asenapine described in NDA #022-117 and administered as sublingual tablets, which has been commercialized prior to the Closing by Seller or its Affiliates in the Buyer Territory under the brand name SAPHRIS®.

1.1.118“Product ANDA Litigation” has the meaning set forth in Section ‎4.7.

1.1.119“Product Business” has the meaning set forth in the first recital hereto.

1.1.120“Product Business Employee” means any employee of Seller or any of its Affiliates who is identified by Seller or its Affiliates, as applicable, as actively engaged in promotion or sales activities with respect to, or the management of, the Product Business in the ordinary course of such employee’s duties.

1.1.121“Product Promotional Materials” means all SAPHRIS materials submitted to FDA under FDA Form 2253 and the final versions of advertising, promotional and media materials, sales training materials (including related quizzes and answers, if any), existing customer lists, other marketing materials, trade show materials (including displays) and videos, including materials containing clinical data, if any, in each case, to the extent used exclusively for the commercialization of the Product in the Buyer Territory as of the Closing Date and transferable by Seller or its Affiliates.

1.1.122“Product Records” means all books and records relating exclusively to, and reasonably necessary to Exploit, the Product, or to perform research and development activities with respect to the 2.5 mg Dosage Strength or the [***] Product, in each case, in the Buyer Territory, or to conduct the Product Business, as Exploited, performed or conducted (as applicable) as of the Closing Date and other than the Regulatory Documentation, to the extent owned and maintained by Seller or any of its Affiliates, but excluding, in all cases, (a) all books, documents, records and files prepared in connection with or relating to the transactions contemplated under this Agreement, including bids received from Third Parties and strategic, financial or Tax analyses relating to the divestiture of the Purchased Assets, the Assumed Liabilities, the Product, the 2.5 mg Dosage Strength, the [***] Product or the Product Business, (b) all books, documents, records and files related solely to the Manufacture of the Product, the 2.5 mg Dosage Strength or the [***] Product, (c)trade secrets of Third Parties (other than Licensed Know-How), (d) any attorney work product, attorney-client communications and other items protected by established legal privilege, unless the books and records can be transferred without losing such privilege, (e) human resources and any other employee books and records, other than any such books and records relating solely to any Product Business Employee who accepts an offer of employment with Buyer, (f) any financial, Tax and accounting records to the extent not related to the Product, the 2.5 mg Dosage Strength or the [***] Product and (g) any items to the extent applicable Law prohibits their transfer or where transfer thereof would subject Seller or any of its Affiliates to any Liability.  It is understood and agreed that new books and records relating exclusively to, and reasonably necessary to Exploit, the Product or to perform research and development activities with respect to the 2.5 mg Dosage Strength in the Buyer Territory  may arise after the Closing Date, and such items will be deemed to fall within the definition of Products Records, as appropriate. It is hereby clarified that a particular book or record may include information that does not constitute Product Records as well as information that constitutes Product Records and Seller may redact the portion of such book or record that does not constitute Product Records before delivering to Buyer the portion of such book or record that constitutes Product Records.

1.1.123 “Prohibited Transaction” means any transaction involving, directly or indirectly, the sale, transfer or disposition by Seller or its Affiliates to a Third Party of all or any of the Purchased Assets or any portion of the Licensed Intellectual Property owned by Seller or any of its Affiliates or the grant by Seller or any of its Affiliates to a Third Party of any license in the Buyer Territory to any portion of the Licensed Intellectual Property, in each case, other than the sale of inventory or use or other disposition of Product Promotional Materials in the ordinary course of business and any merger, consolidation or other change of control event with respect to Seller or any of its Affiliates.

1.1.124“Purchase Price” means the Closing Payment, plus, to the extent actually paid by Buyer in accordance with Section ‎2.3.2, the Milestone Payment or Milestone Payments.

1.1.125“Purchased Assets” has the meaning set forth in Section ‎2.1.1.

1.1.126“Purchased Contracts” has the meaning set forth in Section ‎2.1.1(a).

1.1.127 “Purchased Regulatory Approvals” has the meaning set forth in Section ‎2.1.1(b).

1.1.128“Quality Agreement” means that certain Quality Agreement, dated as of the Closing Date, in a standard and customary form reasonably acceptable to the parties.

1.1.129 “Rebates” means rebates, price reductions and administrative fees and related adjustments charged by or payments to state Medicaid and other federal, state and local governmental programs and their participants, and by  health plans, insurance companies, Medicare Part D prescription drug plans, pharmacy benefits managers, mail service pharmacies, long term care providers, specialty pharmacies and other health care providers based upon the utilization and sales of the Product, and service, administrative and inventory management fees due to wholesalers, distributors and group purchasing organizations based on sales of the Product in the Buyer Territory (in each case, other than chargeback claims).

1.1.130“Receiving Party” has the meaning set forth in Section ‎5.4.1.

1.1.131“Regulatory Approval”means, with respect to the Product, a Combination Product, Other Product or 2.5 mg Dosage Strength product, any and all approvals (including NDAs and supplements and amendments thereto and active INDs), licenses, registrations (except manufacturing establishment registrations) or authorizations of any Governmental Authority necessary to conduct clinical trials, commercially distribute, sell or market such product in the Buyer Territory, including, where applicable, (a) pre- and post-approval marketing authorizations and (b) labeling approvals.

1.1.132“Regulatory Authority” means any Governmental Authority that is concerned with the safety, efficacy, reliability, Manufacture, investigation, sale or marketing of pharmaceutical products, medical products, biologics or biopharmaceuticals, including the FDA and the Public Health Service.

1.1.133“Regulatory Documentation”means all (a) documentation comprising the Regulatory Approvals for the Product, the 2.5 mg Dosage Strength and the [***] Product, (b) correspondence and reports necessary to, or otherwise describing the ability to, commercially distribute, sell or market the Product in the Buyer Territory submitted to or received from Governmental Authorities in the Buyer Territory (including minutes and official contact reports relating to any communications with any Governmental Authority) and relevant supporting documents submitted to or received from Governmental Authorities with respect thereto, including all regulatory drug lists, final versions of advertising and promotion documents, adverse event files and complaint files, and (c) data (including clinical and pre-clinical data) contained in any of the foregoing.  Regulatory Documentation excludes the Product core data sheet, which shall be retained by Seller or an Affiliate, but which shall be made available to Buyer together with the Regulatory Documentation if necessary or required for the Product Business.

1.1.134“Reporting Period” means the period commencing on the Closing Date and ending on the first date on which all of the following have occurred:  (a) the Supply Agreement has terminated, (b) Buyer and its Affiliates, licensees and sublicensees are not obligated to pay royalties under Article 4 of the License Agreement and (c) the Milestone Termination Date has occurred; provided, that the Reporting Period shall re-commence on the first day of any period with respect to which Buyer or any of its Affiliates, licensees or sublicensees are obligated to pay royalties under Article 4 of the License Agreement (in which case, Buyer’s obligations and Seller’s rights under Section 5.15 shall be restored on such date).

1.1.135“Representatives” has the meaning set forth in Section ‎4.1.1.

1.1.136“Response Period” has the meaning set forth in Section ‎7.2.1.

1.1.137“Retained Phase IV Commitments” means the clinical trials within the Phase IV Commitments set forth on Schedule ‎1.1.137.

1.1.138 “Section 505(b)(2) NDA” has the meaning set forth in Section ‎3.1.5(d).

1.1.139“Seller” has the meaning set forth in the preamble hereto.

1.1.140“Seller Confidential Information” has the meaning set forth in Section 5.4.3.

1.1.141“Seller FDA Letters” has the meaning set forth in Section ‎2.4.2(a)(iv).

1.1.142“Seller Indemnitees” has the meaning set forth in Section ‎7.1.2.

1.1.143“Seller Permitted Purpose” has the meaning set forth in Section ‎5.4.2.

1.1.144 “Seller Territory” means worldwide, excluding the Buyer Territory.

1.1.145“Seller’s Knowledge” means the collective actual knowledge, after reasonable inquiry in the course of performing their respective duties, of the individuals listed on Schedule ‎1.1.145.

1.1.146“SKU” means stock keeping unit.

1.1.147“Specified Affiliate” has the meaning set forth in Section ‎3.1.1.

1.1.148“Specified Reps” means the representations and warranties set forth in Section ‎3.1.9 (Regulatory Matters) and Section ‎3.1.12 (Intellectual Property).

1.1.149“Supply Agreement” means that certain Supply Agreement, in substantially the form attached as Exhibit B.

1.1.150“Tax Return” means any return, declaration, report, claim for refund, information return or statement relating to Taxes, including any schedule or attachment thereto, filed or maintained, or required to be filed or maintained, in connection with the calculation, determination, assessment or collection of any Tax and includes any amended returns required as a result of examination adjustments made by the Internal Revenue Service or other Tax authority.

1.1.151“Taxes” means all taxes of any kind including all U.S. federal, state, local or non-U.S. net income, capital gains, gross income, gross receipt, property, franchise, sales, use, excise, withholding, payroll, employment, social security, worker’s compensation, unemployment, occupation, capital stock, transfer, gains, windfall profits, net worth, asset, transaction and other taxes, and any interest, penalties or additions to tax with respect thereto, imposed upon any Person by any taxing authority or other Governmental Authority under applicable Law.

1.1.152“Third Party” means any Person other than Seller, Buyer and their respective Affiliates and permitted successors and assigns.

1.1.153“Trade Secrets” means information that derives independent economic value from not being generally known to, and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use.

1.1.154“Trademark” means any word, name, symbol, color, product shape, designation or device or any combination thereof that functions as a source identifier, including any trademark, trade dress, brand mark, service mark, trade name, brand name, trade dress rights, slogans, product configuration, logo or business symbol, whether or not registered, and any registrations or applications for registration to use any of the foregoing.

1.1.155“Transactions” means all of the transactions contemplated by this Agreement and each of the Ancillary Agreements.

1.1.156 [Intentionally Omitted].

1.1.157“Transferred Phase IV Commitments” means the clinical trials within the Phase IV Commitments set forth on Schedule ‎1.1.157.

1.1.158 “Transition Services Agreement” means that certain Transition Services Agreement, in substantially the form attached as Exhibit C.

1.1.159“Valid Claim”means (a) an unexpired claim of an issued patent within the Licensed Patents which has not been found to be unpatentable, invalid or unenforceable by a court or other Governmental Authority of competent jurisdiction in the subject country, from which decision no appeal is taken or can be taken; or (b) a claim of a pending application within the Licensed Patents, which application [***].

1.2Construction.  Except where the context otherwise requires, wherever used, the singular includes the plural, the plural the singular, the use of any gender shall be applicable to all genders and the word “or” is used in the inclusive sense (and/or).  The captions of this Agreement are for convenience of reference only and in no way define, describe, extend or limit the scope or intent of this Agreement or the intent of any provision contained in this Agreement.  The term “including” and “include” and variations thereof shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “without limitation.” The language of this Agreement shall be deemed to be the language mutually chosen by the Parties and no rule of strict construction shall be applied against any Party.  Unless otherwise specified or where the context otherwise requires, (a) references in this Agreement to any Article, Section, Schedule or Exhibit are references to such Article, Section, Schedule or Exhibit of this Agreement; (b) references in any Section to any clause are references to such clause of such Section; (c) “hereof,” “hereto,” “hereby,” “herein” and “hereunder” and words of similar import when used in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement; (d) references to a Person are also to its permitted successors and assigns; (e) references to a Law include any amendment or modification to such Law and any rules or regulations issued thereunder, in each case, as in effect at the relevant time of reference thereto; (f) references to any agreement, instrument or other document in this Agreement refer to such agreement, instrument or other document as originally executed or, if subsequently amended, replaced or supplemented from time to time, as so amended, replaced or supplemented and in effect at the relevant time of reference thereto; and (g) references to monetary amounts are denominated in United States Dollars.

                      ARTICLE 2                      

SALE AND PURCHASE OF ASSETS; LIABILITIES

2.1Sale of Purchased Assets.

          2.1.1Purchase and Sale of Purchased Assets.  Upon the terms and subject to the conditions of this Agreement, at and effective as of the Closing, Seller shall (or shall cause its applicable Affiliates to) sell, transfer, convey, assign and deliver to Buyer free and clear of all Encumbrances other than Permitted Encumbrances, all right, title and interest of Seller and its Affiliates in and to all of the following properties, rights, interests and tangible and intangible assets, as existing as of the Execution Date or acquired during the Pre-Closing Period (collectively, the “Purchased Assets”) and Buyer shall purchase and accept from Seller (or such Affiliates) the Purchased Assets:

(a)(i) all rights of Seller or its Affiliates under the Contracts set forth on Schedule ‎2.1.1(a)(i) and (ii) those certain rights and interests of Seller or its Affiliates set forth on Schedule ‎2.1.1(a)(ii) under the Contracts listed on Schedule ‎2.1.1(a)(ii), in each case ((i) and (ii)), as such Schedule may be updated by Seller not less than [***] Business Days prior to the Closing Date to include rights and interests under any Contracts exclusively relating to the Product Business or the 2.5 mg Dosage Strength entered into by Seller or its Affiliates during the Pre-Closing Period in accordance with Section ‎4.2, excluding, in each case, all rights to any Accounts Receivable and any other rights, claims or causes of action (including warranty claims) of or involving Seller or any of its Affiliates relating to any of items (i) or (ii) thereunder or related to products supplied or services provided by or to Seller or its Affiliates prior to the Closing that are not included in the Purchased Assets (the “Purchased Contracts”);

(b)all rights and interests of Seller and its Affiliates to or in all Regulatory Approvals listed on Schedule ‎2.1.1(b) from and after the Closing (the “Purchased Regulatory Approvals”);

(c)all Regulatory Documentation exclusively relating to the Product, the 2.5 mg Dosage Strength and/or the [***] Product in the Buyer Territory to the extent in the possession of Seller or any of its Affiliates, agents or attorneys;

(d)all Product Records;  and

(e)all Product Promotional Materials.

2.1.2Excluded Assets.  Buyer shall not acquire pursuant to this Agreement or any Ancillary Agreement, and Seller shall retain following the Closing Date, the Excluded Assets.

2.1.3No Rights in the Seller Territory.  Buyer acknowledges and agrees that, except for the license and Manufacturing rights granted to Buyer pursuant to the License Agreement, the Supply Agreement and the Clinical Supply Agreement, Buyer shall not receive any rights by virtue of this Agreement or any Ancillary Agreement in the Seller Territory.

2.1.4Retention of Rights.  Notwithstanding anything to the contrary in this Agreement or any Ancillary Agreement, Seller retains, on behalf of itself and its Affiliates, licensees, sublicensees, licensors and distributors, a right of reference to the Regulatory Approvals and Regulatory Documentation included in the Purchased Assets, in each case, as may be necessary or useful to (a) perform Seller’s or its Affiliates’ obligations under this Agreement or any Ancillary Agreement, the In-License Agreements and the Other Agreements, (b) Manufacture or have Manufactured the Product or any Other Product worldwide, (c) export or import the Product or any Other Product anywhere in the world  in connection with the Exploitation of the Product or any Other Product in or to the Seller Territory, (d) Exploit the Product or any Other Product in the Seller Territory, (e) perform research and development activities with respect to asenapine in the Seller Territory and, subject to coordination with Buyer, to perform research and development activities with respect to asenapine (but excluding the Product) in the Buyer Territory and (f) Manufacture, have Manufactured, Exploit or have Exploited products for use in humans on a non-prescription basis and for use in animals worldwide.  Except as expressly granted herein or in any Ancillary Agreement, Seller grants no other right or license to any assets or rights, including intellectual property rights, of Seller and its Affiliates.  Notwithstanding clause (f) above, Seller shall not, and it shall cause its Affiliates not to, market, sell, distribute or otherwise commercialize in the Buyer Territory a version of the Product that is available for use by humans on a non-prescription basis prior to the later of (x) the last to expire of the Valid Claims covering the Product under the Licensed Patents and (y) the Milestone Termination Date.

2.2Liabilities.

2.2.1Assumed Liabilities.  Upon the terms and subject to the conditions of this Agreement, at the Closing, Seller shall assign and Buyer shall assume and agree to pay and discharge when due (a) all Liabilities of Seller and its Affiliates pursuant to the Retained Phase IV Commitments and the Purchased Regulatory Approvals and (b) all Liabilities of Seller or, if applicable, the applicable Affiliate of Seller, under or relating to the Purchased Contracts and Transferred Phase IV Commitments, but, in the case of each of clauses (a) and (b), only to the extent the facts or circumstances giving rise to such Liabilities arise [***] and excluding any Liabilities arising out of any breach, willful misconduct or negligence by Seller ((a) and (b), collectively, the “Assumed Liabilities”).

2.2.2Excluded Liabilities.  Notwithstanding anything to the contrary herein, neither Buyer nor any of its Affiliates shall assume any Liabilities of Seller or any of its Affiliates (whether or not related to the Product Business) other than the Assumed Liabilities, and the Excluded Liabilities shall remain the sole obligation and responsibility of Seller and its Affiliates.  For the purposes of clarity (and notwithstanding Section ‎2.2.1), neither Buyer nor any Affiliate of Buyer shall assume the following Liabilities of Seller or any of its Affiliates: (a) Liabilities of Seller or any of its Affiliates (i) for income Taxes; (ii) for or relating to Taxes or other Liabilities arising from the activities of Seller or its Affiliates unrelated to the Product Business or the Purchased Assets, whether arising prior to or after the Closing Date, or (iii) for or relating to Taxes with respect to the Product Business or the Purchased Assets for any Pre-Closing Tax Period, provided that, in each case ((i) through (iii)), responsibility for Apportioned Obligations shall be determined in accordance with Section 5.13.1; (b) any Liabilities of Seller or any of its Affiliates relating to accounts payable, indebtedness, legal services, accounting services, financial advisory services, investment banking services or other professional services performed in connection with the sale of the Purchased Assets; (c) any wages, salaries, severance payments or other Liabilities relating to any employee of Seller or any Affiliate of Seller, including any employees hired by Buyer, except for wages, salaries and liabilities incurred for employees hired by Buyer commencing after the Closing Date; or (d) any Liabilities under or relating to Environmental Laws.

2.3Consideration.

   2.3.1Purchase Price.  In consideration of the conveyances contemplated under Section ‎2.1, and the rights granted to Buyer under the License Agreement, Buyer shall pay to Seller (a) on the Closing Date an amount equal to the sum of (i) $155,000,000, and (ii) the Phase IV 2013 Funded Amount (collectively, the “Closing Payment”), by wire transfer of immediately available funds to the account designated by Seller by notice to Buyer at least three Business Days prior to the Closing Date, and (b) the Milestone Payment(s), as and to the extent provided in Section 2.3.2.

                                                       2.3.2Milestone Payments.

(a)In addition to the Closing Payment, subject to this Section ‎2.3.2, Buyer shall pay or cause to be paid to Seller the following additional amounts (each, a “Milestone Payment”) upon the achievement prior to the Milestone Termination Date by or on behalf of Buyer or its Affiliates, licensees, sublicensees or transferees, if any, of the following events with respect to the Product, any Authorized or Owned Generic Product, the 2.5 mg Dosage Strength and any [***] Product (each, a “Milestone Event”):

(i)$[***] upon aggregate Net Sales in a single Calendar Year in the Buyer Territory attributable to the Product, any Authorized or Owned Generic Product, the 2.5 mg Dosage Strength and any [***] Product first reaching $[***];

(ii)$[***] upon aggregate Net Sales in a single Calendar Year in the Buyer Territory attributable to the Product, any Authorized or Owned Generic Product, the 2.5 mg Dosage Strength and any [***] Product first reaching $[***]; and

(iii)$[***] upon aggregate Net Sales in a single Calendar Year in the Buyer Territory attributable to the Product, any Authorized or Owned Generic Product, the 2.5 mg Dosage Strength and any [***] Product first reaching $[***].

For the avoidance of doubt, notwithstanding anything to the contrary herein, each Milestone Payment set forth above shall be due and payable only once, [***].

(b)All Milestone Payments due and payable under this Section ‎2.3.2 shall be paid by Buyer to Seller promptly (but no more than [***] days) following the end of the Calendar Year in which the applicable Milestone Event occurred or in which it is to be paid pursuant to Section ‎2.3.2(a), by wire transfer of immediately available funds to the account designated by Seller by notice to Buyer.

(c) Commencing upon the Closing and ending upon the earlier to occur of [***], Buyer shall and shall cause each of its Affiliates, licensees, sublicensees or transferee, if any, to use its and their, as applicable, Commercially Reasonable Efforts to (A)(1) actively promote the Product in the Buyer Territory to seek to increase and maintain demand for the Product and (2) fulfill such demand for the Product in the Buyer Territory, and (B) attain the Milestone Events.

(d)Buyer shall, and shall cause its Affiliates, licensees and sublicensees engaged in the Exploitation of the Product and any Authorized or Owned Generic Product to, keep reasonable, correct and complete books and records substantiating  the Net Sales amounts recognized in each Calendar Quarter, as related to achieving the Milestone Events (the “Milestone Information”) and shall maintain such Milestone Information until the third anniversary of the Milestone Termination Date. Until the first Calendar Quarter following the Calendar Quarter in which the Milestone Termination Date occurs, Buyer shall provide Seller, on a quarterly basis, not later than [***] days after the end of each Calendar Quarter, the quarterly Net Sales Reports, as provided in Section ‎5.14.3.  Buyer’s inspection and audit rights with respect to the Milestone Information and Net Sales Reports are set forth in Section ‎5.14.3.

(e)Prior to the Milestone Termination Date, if Buyer and its Affiliates transfer, sell, license, convey or otherwise dispose of any material rights of Seller and its Affiliates (including Intellectual Property Rights licensed to Buyer under the License Agreement) in the Product Business, Buyer shall (i) [***].

2.3.3Phase IV Reimbursement Payment.  No more than [***] Business Days nor less than [***] Business Days prior to the Closing Date, Seller shall cause to be prepared and delivered to Buyer a statement setting forth the Phase IV 2013 Funded Amount, which statement shall be accompanied by reasonable documentation supporting Seller’s calculation of the Phase IV 2013 Funded Amount set forth therein.

2.3.4Allocation of Consideration.  Buyer shall allocate the Purchase Price (including the Assumed Liabilities, to the extent properly taken into account under Section 1060 of the Code) among the Licensed Intellectual Property and the Purchased Assets in accordance with Section 1060 of the Code (the “Allocation”) prior to or within [***] days following the Closing and shall deliver to Seller a copy of such Allocation (IRS Form 8594) promptly after such determination.  Seller shall have the right to review and raise any objections in writing to the Allocation during the [***]-day period after its receipt thereof.  If Seller disagrees with respect to any item in the Allocation, the Parties shall negotiate in good faith to resolve the dispute.  If the Parties are unable to agree on the Allocation within [***] days after the commencement of such good faith negotiations (or such longer period as Seller and Buyer may mutually agree in writing), then the Accountants shall be engaged at that time to review the Allocation, and shall make a determination as to the resolution of such Allocation.  The determination of the Accountants regarding the Allocation shall be delivered as soon as practicable following engagement of the Accountants, but in no event more than [***] days thereafter, and shall be final, conclusive and binding upon Seller and Buyer, and Buyer shall revise the Allocation accordingly.  Seller, on the one hand, and Buyer on the other hand, shall [***].  The Parties agree to file all Tax Returns (including IRS Form 8594 and, if required, supplemental Forms 8594, in accordance with the instructions to Form 8594) and any other forms, reports or information statements required to be filed pursuant to Section 1060 of the Code and the applicable regulations thereunder, and any similar or corresponding provision of U.S. state, local or non-U.S. Tax Law, in a manner that is consistent with the finalized Allocation and to refrain from taking any position inconsistent therewith unless required by applicable Law.

2.4Closing.

2.4.1Closing.  Pursuant to the terms and subject to the conditions of this Agreement, the closing of the transactions contemplated hereby (the “Closing”) shall take place at the offices of Covington & Burling LLP, 1201 Pennsylvania Avenue, N.W., Washington, D.C., at 10:00 a.m., local time, on a Business Day on a date not later than two Business Days following satisfaction of all conditions (other than those that by their terms are to be satisfied or taken at the Closing) set forth in Article 6 (or, to the extent permitted by applicable Law, waived by the Party entitled to the benefits thereof), or such other time and place as Buyer and Seller may agree to in writing.  The Closing shall be deemed to have occurred at 12:00 a.m., eastern time, on the Closing Date, such that Buyer shall be deemed the owner of the Purchased Assets on and after the Closing Date.

2.4.2Closing Deliveries.

(a)Except as otherwise indicated below, at the Closing, Seller shall deliver the following to Buyer:

(i)each of the Ancillary Agreements to which Seller is a party, validly executed by a duly authorized officer of Seller;

(ii)a certificate, executed by an officer of Seller and dated the Closing Date, confirming on behalf of Seller that the conditions set forth in Sections ‎6.2.1 and ‎6.2.2 have been satisfied;

(iii)the Purchased Assets; provided, that (A) with respect to tangible Purchased Assets, delivery shall, unless the Parties otherwise mutually agree, be in accordance with the Transition Services Agreement and to a place within the continental United States specified by Buyer by notice to Seller at least five Business Days prior to Closing, (B) Seller may retain one copy of the Product Records included within the Purchased Assets and the Purchased Contracts (and, for clarity, prior to delivering or making available any files, documents, instruments, papers, books and records containing Product Records to Buyer, Seller shall be entitled to redact from such files, documents, instruments, papers, books and records any information to the extent that it does not relate to the Product Business), and (C) the Closing Inventory shall be delivered in accordance with the terms of the Transition Services Agreement;

(iv)letters to the FDA in the form of Exhibit D, transferring the rights to the Purchased Regulatory Approvals to Buyer (the “Seller FDA Letters”); and

(v)a schedule setting forth in reasonable detail the Closing Inventory.

(b)At the Closing, Buyer shall deliver the following to Seller:

(i)each of the Ancillary Agreements to which Buyer is a party, validly executed by a duly authorized officer of Buyer;

(ii)a certificate, executed by an officer of Buyer and dated the Closing Date, confirming on behalf of Buyer that the conditions set forth in Sections ‎6.3.1 and ‎6.3.2 have been satisfied;

(iii)the Buyer FDA Letters; and

(iv)a guaranty, substantially in the form of Exhibit E, from the Buyer’s parent company for fulfillment of Buyer’s and its Affiliates’ financial obligations under this Agreement and the Ancillary Agreements to which Buyer's parent is not a party.

             2.4.3Withholding.  If applicable Laws require withholding of Taxes imposed upon any payments made by Buyer to Seller pursuant to this Agreement, Buyer shall make such withholding payments as may be required and shall subtract such withholding payments from such payments.  To the extent such amounts are so deducted or withheld, such amounts will be treated for all purposes under this Agreement as having been paid to Seller.  Buyer shall submit appropriate proof of payment of the withholding Taxes to Seller within a reasonable period of time.

                     ARTICLE 3                      

REPRESENTATIONS AND WARRANTIES

3.1Representations and Warranties of Seller.   Seller represents and warrants to Buyer as follows, with each such representation and warranty subject to such exceptions, if any, as are set forth in the Disclosure Schedules.  Disclosures in any section or paragraph or cross-referenced in the particular section of the Disclosure Schedules address the corresponding section or paragraph of this Agreement and other sections or paragraphs of this Agreement to the extent that it is reasonably apparent that such disclosure is applicable to such other sections or paragraphs (provided, that the mere listing of an agreement shall not provide reasonably apparent disclosure, except to the extent that only a listing is required by the representation and warranty).

3.1.1Entity Status.  Seller is a limited liability company (a Besloten Vennootschap) duly organized, validly existing and in good standing under the Laws of the Netherlands.  Each Affiliate of Seller that owns any Purchased Assets (“Specified Affiliate”) is duly organized, validly existing and in good standing under the Laws of the jurisdiction of its organization. Seller and its Affiliates have all requisite corporate power and authority to own, use and operate the Purchased Assets and to carry on the Product Business as now being conducted.

                3.1.2Authority.

(a)Seller has the requisite limited liability company power and authority to enter into and deliver this Agreement and the Ancillary Agreements, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby.  The execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary limited liability company actions of Seller, its board of directors (or other equivalent body) and, as applicable, its members. This Agreement constitutes, and each Ancillary Agreement, when executed and delivered by Seller, will constitute, the valid and legally binding obligation of Seller, enforceable against Seller in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or similar Laws of general application affecting or relating to the enforcement of creditors rights generally, and subject to equitable principles of general applicability, whether considered in a proceeding at law or in equity.

(b)Each Affiliate of Seller that will enter into an Ancillary Agreement will have the requisite entity power and authority to enter into, deliver and perform its obligations under each Ancillary Agreement to which it is a party and to consummate the transactions contemplated thereby.  The execution and delivery of the Ancillary Agreements to which any Affiliate of Seller is a party and the consummation of the transactions contemplated thereby have been duly authorized by all necessary organizational actions of such Affiliate and its board of directors (or other equivalent body).  Each Ancillary Agreement, when executed and delivered by an Affiliate of Seller, will constitute the valid and legally binding obligation of such Affiliate, enforceable against such Affiliate in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or similar Laws of general application affecting or relating to the enforcement of creditors rights generally, and subject to equitable principles of general applicability, whether considered in a proceeding at law or in equity.

3.1.3Non-Contravention.  The execution, delivery, consummation and performance by Seller of this Agreement and each Ancillary Agreement to which it is a party, and the execution, delivery, consummation and performance by each Affiliate of Seller of each Ancillary Agreement to which it is a party, do not and will not (a) contravene, conflict with or violate the certificate of incorporation or bylaws or comparable organizational documents; or  contravene or conflict with  any resolution adopted by the stockholders or members, board of directors and any committee of the board of directors (or other equivalent bodies) of Seller or such Affiliate of Seller, (b) subject to compliance with the HSR Act, contravene, conflict with or violate any Law applicable to Seller or such Affiliates of Seller, the Product Business, the Purchased Assets or the Licensed Intellectual Property, (c) subject to obtaining the consents referred to in Section ‎3.1.5(c), contravene, conflict with, violate, breach or constitute a default under, result in the loss of rights under, or result in the termination of, or give rise to a right of termination, cancellation or acceleration of any right or obligation under, any Contract used in the conduct of the Product Business to which Seller or such Affiliate is a party, including any Purchased Contract, or any Contract to which the Purchased Assets or any Licensed Intellectual Property is subject, or (d) result in the imposition of creation of any Encumbrance other than a Permitted Encumbrance upon or with respect to any Purchased Asset, except, in the case of (b) and (c), for such violations, breaches, defaults, accelerations, cancellations or terminations that would not reasonably be expected to materially affect the Product Business, the Purchased Assets or the Licensed Intellectual Property.

3.1.4No Broker.  There is no broker, finder, investment banker or financial advisor acting or who has acted on behalf of or based upon arrangements made by Seller or any of its Affiliates, who is entitled to receive any brokerage or finder’s or other fee or commission in connection with the transactions contemplated by this Agreement.

3.1.5No Litigation; Consents.

(a)As of the Execution Date, there is no Litigation (other than any investigation, inquiry, audit, examination or finding of deficiency or noncompliance) pending or, to Seller’s Knowledge, threatened against Seller or any of its Affiliates before any Governmental Authority, and to Seller’s Knowledge, there are no investigations, inquiries, audits, examinations or findings of deficiency or noncompliance pending or threatened by or before any Governmental Authority, in each case, that (i) involves or otherwise relates to the Product Business, the Purchased Assets, or the Licensed Intellectual Property, or (ii) challenges or, if resolved against Seller, would prevent, delay or make illegal any of the Transactions.  There is no order or judgment of a Governmental Authority to which Seller or any of its Affiliates is subject that involves or otherwise relates to the Product Business, the Purchased Assets or the Licensed Intellectual Property or that prevents, delays or makes illegal any of the Transactions.

(b)Seller has not, in the [***] years prior to the Execution Date, received any written notice, claim or complaint from any other Person alleging a violation of, or failure to comply with, or any liability under, any Laws relating to the Product Business, the Purchased Assets or the Licensed Intellectual Property as a result of Seller’s and its Affiliates’ operation of the Product Business, except for any such notice relating to a failure to comply that has since been cured.

(c)Except for (i) if required, the filings under the HSR Act and the expiration or termination of the waiting periods thereunder, (ii) consents, permits or authorizations that if not received, or declarations, filings or registrations that if not made, would not reasonably be expected to materially affect the Product Business, the Purchased Assets or the Licensed Intellectual Property (iii) consents, permits, authorizations, declarations, filings or registrations that have become applicable solely as a result of the specific regulatory status of Buyer or its Affiliates and (iv) items disclosed in Section ‎3.1.5(c) of the Disclosure Schedules, no notice to, filing with or Authorization of, any Governmental Authority or other Person is required for Seller or any of its Affiliates to consummate the Transactions.

(d)As of the Execution Date, neither Seller nor any Affiliate of Seller has received or been notified in writing of any Paragraph IV certification notice in accordance with 21 U.S.C. §355(j)(2)(B)(ii) or 21 U.S.C. §355(b)(3)(B) advising Seller or any of its Affiliates of the filing of an Abbreviated New Drug Application (“ANDA”) or NDA pursuant to Section 505(b)(2) of the Act (a “Section 505(b)(2) NDA”) with respect to the Product.  To Seller’s Knowledge, as of the Execution Date, no filing by a Third Party of an ANDA or Section 505(b)(2) NDA with respect to the Product has been threatened with respect to the Product.

3.1.6Title to the Purchased Assets.  Seller, or its Affiliates, owns and has good and valid title to, or valid contract rights in, as applicable, the Purchased Assets, free and clear of all Encumbrances other than Permitted Encumbrances.

3.1.7Contracts.  Each of the Purchased Contracts is in effect and constitutes a legal, valid and binding agreement of Seller or an Affiliate of Seller, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or similar Laws of general application affecting or relating to the enforcement of creditors rights generally, and subject to equitable principles of general applicability, whether considered in a proceeding at law or in equity.  Neither Seller nor any of its Affiliates, nor, to Seller’s Knowledge, any other party thereto is in breach or default in the performance, observance or fulfillment of any material obligation or material covenant contained in any Purchased Contract.  Neither Seller nor any of its Affiliates has given or received written notice to or from any Person relating to any such actual or alleged, breach or default.  As of the Execution Date, neither Seller nor any of its Affiliates has received any written notice from a Third Party stating that such Third Party intends to terminate any Purchased Contract and, to Seller’s Knowledge, Seller has not waived any right under the Purchased Contracts.  True and complete copies of all Purchased Contracts have been made available to Buyer, except to the extent such Contracts have been redacted to (a) enable compliance with Laws relating to antitrust or the safeguarding of data privacy, (b) comply with confidentiality obligations owed to Third Parties, or (c) exclude information not related to the Product Business.

3.1.8Compliance with Law.

(a)Seller and its Affiliates, with respect to the operation of the Product Business or the ownership of and use of the Purchased Assets, are and during the [***] years prior to the Execution Date have been, in compliance with all applicable Laws in the Buyer Territory and in each country in which the Product is Manufactured, including (i) any applicable Laws governing the research, development, approval, Manufacture, sale, advertising, marketing, promotion, pricing, pharmacovigilance, recordkeeping or distribution of drugs and the purchase or prescription of or reimbursement for drugs by any Governmental Authority, private health plan or entity, or individual, and (ii) all applicable Laws regulating the pharmaceutical industry, including the federal Anti-Kickback Statute (42 U.S.C. §1320a-7b(b)), the criminal False Claims Act (42 U.S.C. §1320a-7b(a)), the civil False Claims Act (31 U.S.C. §§3729 et seq.), the Civil Monetary Penalties Law (42 U.S.C. §1320a-7a), the federal Physician Payment Sunshine Act (42 U.S.C.§1320a-7h), the federal health care program exclusion laws (42 U.S.C. §1320a-7), the Act, the Controlled Substances Act (21 U.S.C. 801 et seq.), the Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. §1320d et. seq.) as amended by the Health Information Technology for Economic and Clinical Health Act (42 U.S.C. §§17921 et seq.), the Foreign Corrupt Practices Act (15 U.S.C. §§78dd-1 et seq.), and the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010, and any comparable state or local Laws, in each case, except for such noncompliance that would not reasonably be expected to have a Material Adverse Effect.

(b)Each of Seller and its Affiliates possesses, and is in compliance in all material respects with, all material Authorizations (other than Regulatory Approvals, which are the subject of Section ‎3.1.9(a)) necessary for the conduct of the Product Business as it is currently conducted and the ownership of or use of the Purchased Assets.

(c)Seller, or an Affiliate of Seller, has established and maintains a corporate compliance program that addresses the material Laws of the Buyer Territory with respect to the Product Business and each country in which the Product is Manufactured.

(d)To Seller’s Knowledge, neither Seller nor any of its Affiliates engaged in the Product Business have [***].

3.1.9Regulatory Matters.

(a)Seller, or an Affiliate of Seller, possesses, and during the [***] years prior to the Execution Date has possessed, or has a right of reference to all material Regulatory Approvals necessary to conduct the Product Business as currently or then conducted or develop the 2.5 mg Dosage Strength or [***] Product in the Buyer Territory and the Regulatory Approvals necessary to conduct the Product Business in the Buyer Territory as currently conducted or to develop the 2.5 mg Dosage Strength or [***] Product in the Buyer Territory as currently being developed are in full force and effect.  During the [***] years prior to the Execution Date, neither Seller nor its Affiliates have received any written communication from any Governmental Authority threatening to revoke, withdraw, modify, suspend, cancel or terminate any such Regulatory Approvals.  No proceeding is pending or, to Seller’s Knowledge, threatened regarding the suspension or revocation of any such Regulatory Approval.  During the [***] years prior to the Execution Date, Seller has not received any written notice that the FDA or any other Governmental Authority has commenced, or threatened to initiate, any action to request a recall of the Product, or commenced, or threatened to initiate, any action to enjoin production at any facility at which the Product is Manufactured.  Seller has not voluntarily or involuntarily surrendered, terminated or permitted to lapse or expire any Regulatory Approval used or maintained by Seller in the conduct of the Product Business or the development of the 2.5 mg Dosage Strength or [***] Product in the Buyer Territory, except where any such Regulatory Approval has been not renewed in the ordinary course of business.  During the [***] years prior to the Execution Date, Seller or its Affiliates have timely filed with the applicable Governmental Authority all required filings, declarations, listings, registrations, reports or submissions that are material to conduct of the Product Business and the development of the [***] Product in the Buyer Territory, including adverse event reports.  All such filings, declarations, listings, registrations, reports or submissions were in compliance in all material respects with all applicable Laws when filed, and no material deficiencies have been asserted by any applicable Governmental Authority with respect to any such filings, declarations, listings, registrations, reports or submissions. Neither Seller nor its Affiliates is in violation of the terms of any Regulatory Approval related to the Product, the 2.5 mg Dosage Strength or [***] Product.

(b)During the [***] years prior to the Execution Date, there has not been any product recall, dear doctor letter or market withdrawal or replacement conducted by or on behalf of Seller concerning the Product in the Buyer Territory or any product recall, dear doctor letter, market withdrawal or replacement conducted by or on behalf of any Third Party as a result of any alleged defect in the Product in the Buyer Territory.  Seller has made available to Buyer true and correct summary reports regarding material complaints and notices of alleged defect or adverse reaction with respect to the Product in the Buyer Territory that have been received in writing by Seller and its Affiliates during the [***] years prior to the Execution Date,.

(c)During the [***] years prior to the Execution Date, the Product in the Buyer Territory has been Manufactured in compliance with applicable Law, including cGMP, and applicable Regulatory Approvals.

(d)The (i) Phase IV clinical trials required pursuant to the Phase IV Commitments for the Product being conducted by or on behalf of Seller or its Affiliates and (ii) the 2.5 mg Clinical Trials, in each case ((i) and (ii)), are being conducted in all material respects in accordance with cGCP and all applicable Laws.  Seller and its Affiliates have made all necessary material filings and received all necessary material approvals and consents for the conduct of such Phase IV clinical trials and 2.5 mg Clinical Trials from the necessary Governmental Authorities and, to Seller’s Knowledge, there is no Litigation pending or threatened by such Governmental Authorities to suspend or terminate any ongoing clinical trials for the Product or the 2.5 mg Dosage Strength in the Buyer Territory.  Seller has not received any written notice, charge, subpoena or other request for information, which has not been complied with or withdrawn, by a Governmental Authority asserting any material breach of the conditions for approval of any ongoing clinical trials for the Product or the 2.5 mg Dosage Strength in the Buyer Territory.  Seller and its Affiliates have conducted all Phase IV clinical trials required pursuant to the Phase IV Commitments for the Product in the Buyer Territory and all 2.5 mg Clinical Trials pursuant to valid protocols.

(e)Seller has calculated and reported all prices reported to or used to calculate pricing or discounts under the Medicaid Program (42 U.S.C. § 1396r-8), the 340B Drug Discount Program (42 U.S.C. § 256b), and Section 603 of the Veterans Healthcare Act of 1993 (Pub. L. 102-585) for the Product in compliance in all material respects with applicable Law.

                                                      3.1.10Taxes.   Neither Seller nor any of its Affiliates has any materialLiability for Taxes for which Buyer would reasonably be expected to become liable or that would reasonably be expected to adversely affect (a) the interests to be acquired by Buyer hereunder and under the Ancillary Agreements or (b) Buyer’s right to use or enjoy (free and clear of any Encumbrances, including liens for Taxes, other than Permitted Encumbrances) any Purchased Asset or Licensed Intellectual Property.

                                                      3.1.11Debarred Personnel.  Neither Seller nor any of its Affiliates, nor to Seller’s Knowledge, any of their respective officers, directors, employees, clinical consultants or agents who has undertaken activities in connection with the Product Business, was debarred or deemed subject to debarment pursuant to Section 306 of the Act nor, to Seller’s Knowledge, are any such Persons the subject of a conviction described in such section, at the time such Persons performed such activities in connection with the Product.

                                                      3.1.12Intellectual Property.

(a)Seller or one of its Affiliates owns, or otherwise has the exclusive rights to and to use, the Licensed Intellectual Property and has the right to license the Licensed Intellectual Property to Buyer in the Buyer Territory in accordance with the License Agreement. Section ‎3.1.12‎(a) of the Disclosure Schedules sets forth a true and complete list of all Contracts to which Seller or any of its Affiliates is a party and under which Seller or any of its Affiliates is a licensor or licensee of any Licensed Intellectual Property that is material to the Product Business (collectively, the “Seller License Agreements”).  Seller has made available to Buyer a complete and accurate copy of each such Seller License Agreement, except to the extent such Contracts have been redacted solely to exclude (i) financial information related to the sourcing of Product by Seller or its Affiliates or (ii) information that is not related in any way to the Product Business.  Each of the Seller License Agreements is in full force and effect.  Seller and its Affiliates are not in breach of any material obligation under any Seller License Agreement and, as of the Execution Date and the Closing Date, have not received any written notice of termination of any such Contract.  To Seller’s Knowledge, no other party to any Seller License Agreement is in breach of any material obligation under such Contract.

(b)Section ‎3.1.12(b) of the Disclosure Schedules sets forth a true and complete list of all Licensed Intellectual Property owned by Seller that has not expired or been abandoned and has issued, been registered or granted or that is the subject of an application for registration, issuance or grant in the Buyer Territory (“Owned Registered Product IP”). All registrations and applications for the Owned Registered Product IP in the Buyer Territory have been duly filed or registered (as applicable) with the applicable Governmental Authority and maintained in accordance with applicable Law, including the timely submission  of all necessary filings and payment of fees in accordance with applicable Laws in the appropriate jurisdictions, such that, except as set forth on Section 3.1.12(b) of the Disclosure Schedules, the Owned Registered Product IP has not lapsed, expired or been abandoned.

(c)Section ‎3.1.12(c) of the Disclosure Schedules sets forth a true and complete list of Licensed Intellectual Property licensed to Seller that has issued, been registered or granted or that is the subject of an application for registration, issuance or grant in the Buyer Territory and that has not expired or been abandoned (“Licensed Registered Product IP”).  To Seller’s Knowledge, all registrations and applications for the Licensed Registered Product IP in the Buyer Territory have been duly filed or registered (as applicable) with the applicable Governmental Authority and maintained in accordance with applicable Law, including the timely submission of all necessary filings and payment of fees in accordance with applicable Laws in the appropriate jurisdictions, such that, except as set forth on Section 3.1.12(c) of the Disclosure Schedules, the Licensed Registered IP has not lapsed, expired or been abandoned.

(d)Seller or one of its Affiliates owns or otherwise has exclusive rights to use all Intellectual Property Rights necessary to conduct the Product Business as presently conducted (and not currently contemplating changes in that conduct that would require additional Intellectual Property Rights) as of the Effective Date.  The Licensed Intellectual Property, together with any Intellectual Property Rights of Seller or its Affiliates that are not uniquely related to, or are not used primarily with respect to, the Product, the 2.5 mg Dosage Strength or the [***] Product and, in each case, that otherwise may be obtained by Buyer on reasonable commercial terms, includes all Intellectual Property Rights necessary to conduct the Product Business or develop the 2.5 mg Dosage Strength or the [***] Product in all material respects as currently conducted or developed, as applicable.  To Seller’s Knowledge, other than the Licensed Intellectual Property, Seller and its Affiliates do not own or have license rights to any Intellectual Property Rights in the Buyer Territory that would be infringed, violated or misappropriated by use, offer for sale or sale (by an unauthorized Third Party) of Product the 2.5 mg Dosage Strength or the [***] Product in the Buyer Territory, as the Product Business is currently being conducted.

(e)As of the Execution Date and the Closing Date, none of the Licensed Patents owned by Seller is involved in any Litigation (other than any investigation, inquiry, audit, examination or finding of deficiency or noncompliance), reissue, interference, reexamination or opposition proceeding, or, to Seller’s Knowledge, any investigation, inquiry, audit, examination or finding of deficiency or noncompliance, and, to Seller’s Knowledge, no such Litigation, reissue, interference, reexamination or opposition proceeding is threatened.  To Seller’s Knowledge, as of the Execution Date and Closing Date, none of the Licensed Patents licensed to Seller is involved in any Litigation, reissue, interference, reexamination or opposition proceeding nor is any such Litigation, reissue, interference, reexamination or opposition proceeding threatened.

(f)As of the Execution Date and Closing Date, none of the Licensed Trademarks or Licensed Copyrights owned by Seller, or any registrations or applications to use or register such items, is involved in any Litigation (other than any investigation, inquiry, audit, examination or finding of deficiency or noncompliance), cancellation, nullification, interference, concurrent use or opposition proceeding, or, to Seller’s Knowledge, any investigation, inquiry, audit, examination or finding of deficiency or noncompliance, and, to Seller’s Knowledge, no such Litigation, cancellation, nullification, interference, concurrent use or opposition proceeding is threatened.  To Seller’s Knowledge, as of the Execution Date and Closing Date, none of the Licensed Trademarks or Licensed Copyrights licensed to Seller, or any registrations or applications to use or register such items, is involved in any Litigation, cancellation, nullification, interference, concurrent use or opposition proceeding nor is any such Litigation, cancellation, nullification, interference, concurrent use or opposition proceeding threatened.

(g)To Seller’s Knowledge, the conduct of the Product Business as conducted as of the Execution Date, and as contemplated to be Exploited by Buyer with respect to the Product, 2.5 mg Dosage Strength and the [***] Product as of the Closing Date, does not infringe or misappropriate any Third Party’s intellectual property rights in the Buyer Territory or constitute unfair competition or an unfair trade practice under applicable Law.  To Seller’s Knowledge, the Manufacturing of the Product as Manufactured on the Execution Date does not and will not infringe or misappropriate any Third Party’s intellectual property rights in the Buyer Territory or in the location(s) where Product is Manufactured as of the Execution Date or constitute unfair competition or an unfair trade practice under applicable Law.   Section 3.1.12(g) of the Disclosure Schedules accurately identifies (and Seller has provided to Buyer a complete and accurate copy of) each letter or other written or electronic communication or correspondence that has been received by Seller or any of its Affiliates or any of their Representatives regarding any actual, alleged, or suspected infringement or misappropriation of any Third Party’s intellectual property rights or unfair competition or unfair trade practice under any applicable Law in connection with the conduct of the Product Business .  To Seller’s Knowledge, no Litigation is pending or threatened against Seller  [***].

(h)To Seller’s Knowledge, no Person is currently infringing or misappropriating in any material respect any Licensed Intellectual Property in the Buyer Territory.  Section 3.1.12(h) of the Disclosure Schedules accurately identifies (and Seller has provided to Buyer a complete and accurate copy of) each letter or other written or electronic communication or correspondence that has been sent by Seller or any of its Affiliates or any of their Representatives regarding any actual, alleged, or suspected infringement or misappropriation of any Licensed Intellectual Property in the Buyer Territory or unfair competition or unfair trade practice under any applicable Law in connection with the conduct of the Product Business.

(i)Neither Seller nor any other Person acting on Seller’s behalf has granted any licenses, sublicenses or other rights in or with respect to the Licensed Intellectual Property in the Buyer Territory to any Third Parties.

(j)Seller and, as applicable, Seller’s Affiliates, have taken reasonable measures to maintain in confidence all Trade Secrets and other material confidential information included in the Licensed Know-How.  To Seller’s Knowledge, none of such Trade Secrets or material confidential information have been disclosed to any Person by Seller or its Affiliates except pursuant to reasonable non-disclosure or license agreements.  To Seller’s Knowledge, no current or former employee, consultant or independent contractor of Seller or any of its Affiliates has any claim of ownership in or to any Licensed Intellectual Property owned by Seller or any of its Affiliates.

(k)To Seller’s Knowledge, (i) all registrations of Licensed Intellectual Property included in the Licensed Registered Product IP or the Owned Registered Product IP, are valid, subsisting (or in the case of applications, applied for), and enforceable and (ii) all applications for registration of Licensed Intellectual Property included in the Licensed Registered Product IP or in the Owned Registered Product IP are subsisting.  To Seller’s Knowledge, Seller and its Affiliates have complied in all material respects with applicable Law regarding the duty to disclose and duties of candor in the filing, maintaining and prosecution of the patents and patent applications included in the Licensed Intellectual Property.

(l)All material fees, annuities and royalties that are due and properly payable to a licensor of the Licensed Intellectual Property by Seller have been paid.

                                                        3.1.13Inventory.  In the [***] prior to the Execution Date, other than in the ordinary course of business, Seller has not materially altered its activities and practices with respect to inventory levels of the Product maintained at the wholesale, chain or institutional levels in the Buyer Territory.

3.1.14Product Financial Information.  Seller or an Affiliate of Seller has made available to Buyer or its Representatives the annual gross sales and net sales (and certain components thereof) for the Product in the Buyer Territory for the [***] (the “Financial Information”).  The Financial Information was prepared from the books and records of Seller or an Affiliate of Seller, as applicable, and fairly presents in all material respects the annual gross sales and net sales for the Product in the Buyer Territory for the periods indicated.

3.1.15Sufficiency of Purchased Assets.  The Purchased Assets, together with (a) the rights granted, Product supplied and services provided to Buyer pursuant to the Ancillary Agreements, (b) those assets, properties and rights that are not directly or specifically related to the Product Business in any material respect, and (c) those assets, properties and rights set forth in Section ‎3.1.15 of the Disclosure Schedules, collectively constitute all of the properties, rights, interests and other tangible and intangible assets necessary to enable Buyer to conduct the Product Business in all material respects in the manner in which the Product Business is currently being conducted.

3.1.16Products.  Each Product sold by or on behalf of Seller or its Affiliates in the Buyer Territory prior to the Closing Date was Manufactured in accordance with applicable Product specifications and applicable Law.

3.1.17Exclusivity of Representations. SELLER ACKNOWLEDGES AND AGREES THAT, EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES CONTAINED IN SECTION ‎3.2, THE ANCILLARY AGREEMENTS TO BE ENTERED INTO AT THE CLOSING AND THE CERTIFICATE DELIVERED BY BUYER PURSUANT TO SECTION 2.4.2(b)(ii), BUYER HAS MADE NO REPRESENTATION OR WARRANTY WHATSOEVER RELATED TO THE TRANSACTIONS CONTEMPLATED HEREBY AND SELLER HAS NOT RELIED ON ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED.

3.2Representations and Warranties of Buyer.   Buyer represents and warrants to Seller as follows:

3.2.1Corporate Status.  Buyer is a corporation duly organized, validly existing and in good standing under the Laws of Ireland.

3.2.2Authority.  Buyer has the requisite corporate power and authority to enter into this Agreement and the Ancillary Agreements to which it is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby.  The execution and delivery of this Agreement and Ancillary Agreements to which Buyer is a party and the consummation of the transactions contemplated hereby and thereby have been duly authorized by the necessary corporate actions of Buyer.  This Agreement constitutes and each Ancillary Agreement to which Buyer is a party, when executed and delivered by Buyer will constitute, the valid and legally binding obligation of Buyer, enforceable against Buyer in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or similar Laws of general application affecting or relating to the enforcement of creditors rights generally, and subject to equitable principles of general applicability, whether considered in a proceeding at law or in equity.

3.2.3Non-Contravention.  The execution, delivery, consummation and performance by Buyer of this Agreement and of each Ancillary Agreement to which it is a party do not and will not (a) violate the certificate of incorporation or bylaws, or comparable organization documents, of Buyer, (b) subject to compliance with the HSR Act, contravene, conflict with or violate any Law or other restriction of any Governmental Authority applicable to Buyer or (c) contravene, conflict with, violate, breach or constitute a default under or result in the termination of any material Contract to which Buyer is a party, except with respect to clause “(c)” for violations or breaches that do not constitute a Buyer Material Adverse Effect.

3.2.4No Broker.  There is no broker, finder, financial advisor or other Person acting or who has acted on behalf of Buyer or its Affiliates, who is entitled to receive any brokerage or finder’s or financial advisory fee from Seller or any of its Affiliates in connection with the transactions contemplated by this Agreement.

3.2.5Litigation; Consents.

(a)There is no (i) Litigation (other than any investigation, inquiry, audit or examination) pending or, to the knowledge of Buyer, threatened against Buyer or any of its Affiliates by or before any Governmental Authority and to Buyer’s knowledge, there are no investigations, inquiries, audits or examinations pending or threatened against Buyer or any of its Affiliates by or before any Governmental Authority, or (ii) order or judgment of a Governmental Authority to which Buyer or any of its Affiliates is subject, in each case, except for such Litigation, orders or judgments that would not reasonably be expected to have a Buyer Material Adverse Effect.

(b)Except for (a) if required, the filings under the HSR Act and the expiration or termination of the waiting periods thereunder, and (b) consents, permits or authorizations that if not received, or declarations, filings or registrations that if not made, would not reasonably be expected to have a Buyer Material Adverse Effect, no notice to, filing with, permit of, authorization of, exemption by, or consent of, Governmental Authority or other Person is required for Buyer to consummate the Transactions.

3.2.6Debarred Personnel. Neither Buyer nor, to Buyer's knowledge, any of its employees or consultants has been debarred or deemed subject to debarment pursuant to Section 306 of the Act nor, to the knowledge of Buyer, are any such Persons the subject of a conviction described in such section.

3.2.7Financial Capacity.  On the Closing Date, Buyer will have immediately available cash that is sufficient to enable it to consummate the transactions contemplated hereby and by the Ancillary Agreements and perform its obligations hereunder and thereunder.

 3.3Exclusivity of Representations. BUYER ACKNOWLEDGES AND AGREES THAT, EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES CONTAINED IN SECTION 3.1, THE ANCILLARY AGREEMENTS TO BE ENTERED INTO AT THE CLOSING AND THE CERTIFICATE DELIVERED BY SELLER PURSUANT TO SECTION 2.4.2(a)(ii), SELLER HAS MADE NO REPRESENTATION OR WARRANTY WHATSOEVER RELATED TO THE TRANSACTIONS CONTEMPLATED HEREBY AND BUYER HAS NOT RELIED ON ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED.

                   ARTICLE 4                      

 PRE-CLOSING COVENANTS

4.1Access and Information.

4.1.1During the period commencing on the Execution Date and ending on the earlier to occur of (a) the Closing and (b) the termination of this Agreement in accordance with Article 8 (the “Pre-Closing Period”), Seller shall afford Buyer and its officers, employees, agents, attorneys, consultants, advisors and other representatives (collectively, “Representatives”), continued reasonable access to the Representatives and, through an electronic data room, the books and records of Seller, including the Product Promotional Materials, to the extent related to the Product Business, the Purchased Assets, the Assumed Liabilities, and the Licensed Intellectual Property, and during such period, shall provide to Buyer such information, books and records to the extent that they relate to the Product Business, the Purchased Assets, the Assumed Liabilities, the Closing Inventory or the Licensed Intellectual Property, as Buyer may reasonably request (provided that Seller shall only be required to use its commercially reasonable efforts to provide Buyer any such information, books and records that are in the possession or control of a Third Party), in each case for the purpose of enabling Buyer to verify the accuracy of Seller’s representations and warranties contained in this Agreement, and to continue conducting due diligence in connection with the Transactions, and as may be agreed by Buyer and Seller as useful and allowable for post-Closing integration planning; provided, however, that such access shall not unreasonably disrupt Seller’s ordinary course operations.  Notwithstanding anything to the contrary contained in this Agreement, Seller shall not be required to disclose any information or provide any such access if such disclosure or access would reasonably be expected, in Seller’s reasonable judgment, (i) violate applicable Law, including applicable antitrust Laws, (ii) jeopardize any attorney/client privilege or other established legal privilege, or (iii) disclose any trade secrets not included in the Licensed Intellectual Property.

4.1.2As soon as reasonably practicable after the Execution Date, Seller shall request the written consent of the Product Business Employees to the disclosure of their respective official personnel files to Buyer and, as soon as practicable after the Execution Date and during the Pre-Closing Period, Seller shall afford Buyer and its Representatives access to the personnel files of those Product Business Employees who provide such written consent.  To the extent reasonably requested by Buyer, Seller shall arrange to permit Buyer to conduct interviews of any of the Product Business Employees as soon as reasonably practicable after the Execution Date and during the Pre-Closing Period; provided, however, that such access to Product Business Employees shall not unreasonably disrupt Seller’s ordinary course operations.

4.1.3During the Pre-Closing Period, Buyer hereby agrees that, except as agreed upon by Buyer and Seller, neither it nor any of its Affiliates or Representatives shall contact any licensor, competitor, supplier, distributor or customer of Seller for the purpose of discussing the Product, the Purchased Assets, the Licensed Intellectual Property, the Product Business, this Agreement, the Ancillary Agreements or the Transactions.

4.1.4During the Pre-Closing Period, Seller shall provide Buyer with copies of its Product Promotional Materials for review and approval by Buyer's promotional review committee in accordance with Buyer's standard operating procedures for its products.

4.2Ordinary Course of Business.  From and after September 1, 2013 and during the Pre-Closing Period, except (a) as set forth in Schedule ‎4.2 or as otherwise contemplated by this Agreement or any Ancillary Agreement, (b) as required by applicable Law, (c) for any actions as expressly contemplated by this Agreement, or (d) as Buyer shall otherwise consent in writing, which consent shall not be unreasonably withheld, conditioned or delayed, Seller has, and shall and shall cause each of its Affiliates to:

4.2.1conduct the Product Business in substantially the same manner as heretofore conducted and in the ordinary course;

4.2.2use all commercially reasonable efforts to: (a) preserve the Product Business and its goodwill and maintain its relations and goodwill with material suppliers, customers, licensors and licensees and other Persons having business relationships with the Product Business; and (b) prosecute in good faith and maintain all the Patent Rights and other Intellectual Property Rights in the Purchased Assets or Licensed Intellectual Property;

4.2.3not sell, transfer, lease, license or otherwise dispose of or encumber (other than with a Permitted Encumbrance) any of the Purchased Assets or the Licensed Intellectual Property, other than in connection with the use of Product Promotional Materials in the ordinary course of business;

4.2.4not (a) terminate, amend in any material way, grant a license under or assign any of the Purchased Contracts or any Contract granting rights in, to, or under the Licensed Intellectual Property in the Buyer Territory or (b) enter into any material Contract relating to the Product Business, other than (i) commercial Contracts that do not relate to the Licensed Intellectual Property that (1) are renewals of existing agreements, or (2) do not adversely affect the value of the Licensed Intellectual Property or the Product Business, or (ii) Contracts with respect to the sale of inventory, in each case ((i) and (ii)), in the ordinary course of business consistent with past practice; provided, that notwithstanding anything herein to the contrary, no Contract subject to this Section 4.2.4 entered into by Seller during the Pre-Closing Period shall be added to Schedule 2.1.1(a)(i) or (ii) as a "Purchased Contract" without the consent of Buyer;

4.2.5not commence or settle any action, suit or proceeding material to the Product Business, the Purchased Assets or the Licensed Intellectual Property;

4.2.6other than in the ordinary course of business, not materially alter its activities and practices with respect to inventory levels of the Product maintained at the wholesale, chain or institutional levels in the Buyer Territory; and

4.2.7not agree, commit or offer (in writing or otherwise) to take any of the actions described in Sections ‎4.2.3 through 4.2.6.

4.3Obligation to Consummate the Transaction.  Each of the Parties agrees that, subject to this Section ‎4.3 and Section ‎4.4, it shall use its reasonable best efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper or advisable to the extent permissible under applicable Law, to consummate and make effective the transactions contemplated by this Agreement and to ensure that the conditions set forth in Article 6 are satisfied, insofar as such matters are within the control of either of them.  Without limiting the generality of the foregoing, as soon as reasonably practicable after the Execution Date, Seller shall use its commercially reasonable efforts [***] to obtain the consents referred to in Section ‎3.1.5(c).

4.4Competition Filings.

4.4.1If required pursuant to applicable Law, each of Buyer and Seller shall file or cause to be filed as soon as practicable, and in any event no later than [***] days following the Execution Date, any notifications required under the HSR Act and any comparable filing required by applicable foreign Law.  Thereafter, each of Buyer and Seller shall use commercially reasonable efforts to respond as promptly as practicable to any inquiries or requests received from any Governmental Authority for additional information or documentation and to cause the waiting periods or approvals under the HSR Act and any applicable foreign Law to terminate or expire or to be approved at the earliest possible date after the date of filing; provided, however, that Buyer shall have the right to withdraw and re-file its HSR notification if Buyer reasonably determines that doing so is likely to cause the waiting period under the HSR Act to terminate or expire sooner.

4.4.2Buyer and Seller shall cooperate with each other and shall (a) promptly prepare and file all necessary documentation and (b) effect all necessary applications, notices, petitions and filings and execute all agreements and documents.  In connection with the foregoing, Buyer shall have the right to review and approve in advance all characterizations of the information relating to Buyer; Seller shall have the right to review and approve in advance all characterizations of the information relating to Seller and its Affiliates; and each of Buyer and Seller shall have the right to review and approve in advance all characterizations of the information relating to the transactions contemplated hereby, in each case, that appear in any material filing made in connection with this Section 4.4.

4.4.3Notwithstanding anything in this Agreement to the contrary, Buyer shall take any and all steps necessary or advisable to obtain a waiver or consent or approvals from any Governmental Authority required to satisfy the conditions set forth in Section 6.1.1 and Section 6.1.2, as applicable, or to avoid the entry of or have lifted, vacated or terminated any order of a Governmental Authority or other action restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement so as to enable the Parties to close the transactions contemplated hereby as promptly as commercially practicable, and in any event prior to the End Date.  Such steps shall include: (a) proposing, negotiating, offering to commit and effecting (and if such offer is accepted, committing to and effecting) the sale, divestiture or disposition (including by licensing any intellectual property rights) of any assets or businesses of Buyer or any of its Affiliates (or equity interests held by Buyer or any of its Affiliates in entities with assets or businesses) other than the Purchased Assets; (b) terminating any existing relationships and contractual rights and obligations; (c) otherwise offering to take or offering to commit to take any action which Buyer is capable of taking and, if the offer is accepted, taking or committing to take such action that limits Buyer’s and its Affiliates’ freedom of action with respect to, or their ability to retain, any assets or businesses of Buyer or any of its Affiliates (or equity interests held by Buyer or any of its Affiliates in entities with assets or businesses) other than the Purchased Assets; and (d) in the event that any action is filed seeking a permanent or preliminary injunction or other order or restraint or any other Proceeding that would make consummation of the transactions contemplated by this Agreement and the Ancillary Agreements unlawful or that would prevent or delay consummation of the transactions contemplated by this Agreement and the other Ancillary Agreements, promptly taking any and all steps (including the appeal thereof, the posting of a bond or the taking of the steps contemplated by clauses (a) and (b) of this Section 4.4.3) necessary to vacate, modify or suspend such injunction or order so as to satisfy the conditions set forth in Section 6.1.1 and Section 6.1.2 and enable the Parties to close the transactions contemplated hereby as promptly as practicable, and in any event prior to the Termination Date.

4.4.4All filing fees under the HSR Act and any applicable foreign Law, and all expenses (other than legal fees and expenses, which shall be borne by the Party incurring such expenses) in complying with any request for additional information or documentary material from any applicable Governmental Authority, shall be borne by [***].

4.5Notices.

4.5.1Subject to Section ‎5.4, during the Pre-Closing Period, each Party shall give prompt written notice to the other Party of any Litigation, examination or audit in which such Party is involved as a party that concerns and would reasonably be expected to materially and adversely affect the Product Business, Purchased Assets or Licensed Intellectual Property or the other Party’s rights in the same or that would otherwise reasonably be expected to have a Material Adverse Effect or Buyer Material Adverse Effect, as applicable. During the Pre-Closing Period, Seller shall promptly (and in any event within [***] Business Days) notify Buyer following receipt of written notice of any Paragraph IV certification notice in accordance with 21 U.S.C. §355(j)(2)(B)(ii) or 21 U.S.C. §355(b)(3)(B) advising Seller or any of its Affiliates of the filing of an Abbreviated New Drug Application or Section 505(b)(2) NDA with respect to the Product and provide Buyer a copy of each such certification notice.

4.5.2During the Pre-Closing Period,  (a) Seller shall promptly notify Buyer in writing of any event, condition, fact or circumstance that reasonably would be expected to make the satisfaction of any of the conditions set forth in Section ‎6.1 or Section ‎6.2 impossible or unlikely, and (b) Buyer shall promptly notify Seller in writing of any event, condition, fact or circumstance that reasonably would be expected to (i) make the satisfaction of any of the conditions set forth in Section ‎6.1 or Section ‎6.3 impossible or unlikely or (ii) cause Buyer’s representations and warranties in Section ‎3.2.7 to be untrue in any respect prior to or as of the End Date.

4.5.3No notification or update by Seller under Section 4.5.1 or Section 4.5.2 or by Buyer under Section 4.5.1 shall be taken into account (or, with respect to Seller, deemed to supplement or amend the Disclosure Schedules) for the purpose of: (x) determining the accuracy of any representation or warranty made by Seller or Buyer, as applicable (for purposes of Article 7 or otherwise); or (y) determining whether any of the conditions set forth in Section ‎6.1, Section ‎6.2 or Section 6.3, as applicable, has been satisfied.

4.6No Negotiation.  During the Pre-Closing Period and subject to this Section ‎4.6, Seller shall not (and shall cause each of its Affiliates and their respective Representatives not to), directly or indirectly:

4.6.1solicit or encourage the initiation of any inquiry, proposal or offer from any Person (other than Buyer) relating to a Prohibited Transaction;

4.6.2participate in any discussions or negotiations or enter into any agreement with, or provide any non-public information to, any Person (other than Buyer or its Representatives) relating to or in connection with a Prohibited Transaction; or

4.6.3consider, entertain or accept any proposal or offer from any Person (other than Buyer) relating to a Prohibited Transaction.

Seller shall promptly notify Buyer in writing of any inquiry, proposal or offer relating to Prohibited Transaction that is received by Seller or any of its Affiliates or any of their respective Representatives during the Pre-Closing Period. Notwithstanding the foregoing, Seller’s obligations under this Section ‎4.6 shall terminate in the event that Buyer provides Seller any notice contemplated in Section ‎4.5.2.

4.7Paragraph IV Notices.  During the Pre-Closing Period, if Seller or any of its Affiliates receives a notice under 21 U.S.C. §355(b)(2)(A)(iv) or 355(j)(2)(A)(vii)(IV) concerning the Product (a “Paragraph IV Claim”), then Seller shall provide a copy of such Paragraph IV Claim to Buyer within [***] Business Day after its receipt thereof, and Buyer shall promptly cooperate with Seller or an appropriate Affiliate of Seller to enter into a common interest agreement regarding actions to be taken in response to such Paragraph IV Claim.  Seller or one of its Affiliates shall initiate patent infringement litigation in a jurisdiction acceptable to Buyer for such Paragraph IV Claim (“Product ANDA Litigation”) within [***] days after receipt of the Paragraph IV Claim by Seller or any of its Affiliates.  Seller shall engage outside counsel reasonably acceptable to Buyer in any Product ANDA Litigation.  Buyer shall review and approve any complaint or other filing made by or on behalf of Seller in any Product ANDA Litigation.  Seller will transfer control of any Product ANDA Litigation to Buyer promptly after the Closing.  In addition to the foregoing, in respect of any Product ANDA Litigation controlled by Seller, Seller shall (a) keep Buyer reasonably informed regarding Seller’s actions with respect to such action and (b) promptly provide Buyer with copies of all documents and other materials filed by any party to such Product ANDA Litigation with the court before which such Product ANDA Litigation is pending.  Notwithstanding the foregoing, it is understood and agreed that (x) except for the original notice of a Paragraph IV Claim, Seller’s shall not be obligated to share information pursuant to this Section 4.7 until a common interest agreement has been mutually agreed to and executed by the Parties; and (y) Seller and its Affiliates shall retain the right to initiate Product ANDA Litigation prior to the Closing Date in response to a Paragraph IV Claim.

4.8Clinical Supply Agreement.  Promptly following the date hereof, Buyer and Seller shall commence good faith negotiations of the Clinical Supply Agreement and shall enter into such agreement on the Closing Date.

4.9Incentive Plan.  At any time following the date hereof, upon the request of Buyer Seller shall establish an incentive plan to compensate Seller's sales representatives and other employees supporting the Product Business on terms to be established by Seller and reasonably acceptable to Buyer, with the costs of such plan to be paid [***].  Any such plan shall be subject to Seller's internal compliance procedures.

                     ARTICLE 5                      

ADDITIONAL COVENANTS

5.1Cooperation in Litigation and Investigations.  Subject to Section ‎5.4 and except as set forth in any Ancillary Agreement, from and after the Closing Date, Buyer and Seller shall fully cooperate with each other in the defense or prosecution of any Litigation, examination or audit instituted prior to the Closing or which may be instituted thereafter against or by either Party relating to or arising out of the conduct of the Product Business or the Exploitation or Manufacture of the Product in the Buyer Territory prior to or after the Closing (other than Litigation between Buyer and Seller or their respective Affiliates arising out of the transactions contemplated hereby or by the Ancillary Agreements).  In connection therewith, and except as set forth in any Ancillary Agreement, from and after the Closing Date, each of Seller and Buyer shall make available to the other during normal business hours and upon reasonable prior written notice, but without unreasonably disrupting its business, all records relatingexclusively to the Purchased Assets, the Licensed Intellectual Property, the Assumed Liabilities and the Excluded Liabilities held by it and reasonably necessary to permit the defense or investigation of any such Litigation, examination or audit (other than Litigation between Buyer and Seller or their respective Affiliates arising out of the transactions contemplated hereby or by the Ancillary Agreements, with respect to which applicable rules of discovery shall apply), and shall preserve and retain all such records for the length of time contemplated by its standard record retention policies and schedules.  The Party requesting such cooperation shall pay [***]. From and after the Closing Date, Buyer shall be responsible for the defense of any Paragraph IV Claim.  After such transition, upon Buyer’s reasonable request, Seller shall promptly execute any instruments and documents that are necessary to effect such transition and Seller shall reasonably cooperate with Buyer in the defense of such Paragraph IV Claim.

5.2Further Assurances.

5.2.1Each of Seller and Buyer shall, at any time or from time to time after the Closing, at the request and expense of the other, execute and deliver to the other all such instruments and documents or further assurances as the other may reasonably request in order to (a) vest in Buyer all of the rights, title and interests of Seller and the Specified Affiliates in and to the Purchased Assets as contemplated hereby, (b) effectuate Buyer’s assumption of the Assumed Liabilities and (c) grant to each Party all rights contemplated herein to be granted to such Party under the Ancillary Agreements; provided, however, that after the Closing, apart from such customary further assurances, neither Seller nor Buyer shall have any other obligations except as specifically set forth and described herein or in the Ancillary Agreements.  Without limitation of the foregoing, except as expressly set forth in the Ancillary Agreements, neither Seller nor Buyer shall have any obligation to assist or otherwise participate in the amendment or supplementation of the Purchased Regulatory Approvals or otherwise to participate in any filings or other activities relating to the Purchased Regulatory Approvals other than as necessary to effect the assignment thereof to Buyer in connection with the Closing pursuant to this Agreement.

5.2.2To the extent that Seller’s rights under any Purchased Asset may not be assigned without the approval, consent or waiver of another Person and such approval, consent or waiver has not been obtained prior to the Closing, Seller shall for a period of up to [***] after the Closing, (a) use its commercially reasonable efforts to obtain all necessary approvals, consents and waivers to the assignment and transfer thereof, and Buyer shall use its commercially reasonable efforts to assist and cooperate with Seller in connection therewith[***]; and (b) until any such approval, consent or waiver is obtained and the related Purchased Asset is transferred and assigned to Buyer or Buyer’s designee, use its commercially reasonable efforts to provide to Buyer substantially comparable benefits thereof and enforce, at the request of and for the account of Buyer, any rights of Seller arising under any such Purchased Asset against any Person.  To the extent that Buyer is provided with benefits of any such Purchased Asset, Seller shall perform the obligations of Seller thereunder.  It is understood and agreed that, in the event of Seller’s or an Affiliate’s inability to assign or transfer a Purchased Contract identified on Schedule 2.1.1(a)(i) or 2.1.1(a)(ii) within the time permitted above, Seller or the applicable Affiliate shall remain responsible for completion of the applicable Purchased Contract as Buyer’s agent, [***] as described in the Transition Services Agreement; provided that, in the case of “master” or enterprise-wide agreements on Schedule 2.1.1(a)(ii), [***].

5.3Publicity.  No public announcement related to this Agreement or the transactions contemplated herein will be issued without the joint approval of Seller and Buyer, which approval shall not be unreasonably withheld, conditioned or delayed, except in any public disclosure which either Seller or Buyer, in its good faith judgment, believes is required by applicable Law or by any stock exchange on which its securities or those of its Affiliates are listed.  If either Party, in its good faith judgment, believes such disclosure is required, such Party will use its commercially reasonable efforts to consult with the other Party and its Representatives, and to consider in good faith any revisions proposed by the other Party or its Representatives, as applicable, prior to making (or prior to any of its Affiliates making) such disclosure, and shall limit such disclosure to only that information which is legally required to be disclosed.  Notwithstanding the foregoing, neither Seller nor Buyer shall issue or permit any of its Affiliates to issue any public announcement of the execution of this Agreement without the prior written consent of the other Party, which consent shall not be unreasonably withheld, delayed or conditioned. Nothing herein shall prohibit a Party to issue a press release that includes information that was previously made public without such Party’s violation of this Section ‎5.2.2.

5.4Confidentiality.

5.4.1Prior to the Closing, all Confidential Information provided by one Party (or its Representatives or Affiliates) (collectively, the “Disclosing Party” with respect to such information) to the other Party (or its Representatives or Affiliates) (collectively, the “Receiving Party” with respect to such information) shall be subject to and treated in accordance with the terms of the Confidentiality Agreement.  As used in this Section ‎5.4, “Confidential Information” means, as to a Party (a) all information disclosed by such Party (or its Representatives or Affiliates) to the Receiving Party in connection with this Agreement or any Ancillary Agreement, including all information with respect to the Disclosing Party’s licensors, licensees or Affiliates, (b) all information disclosed to the Receiving Party by the Disclosing Party under the Confidentiality Agreement, and (c) all memoranda, notes, analyses, compilations, studies and other materials prepared by or for the Receiving Party to the extent containing or reflecting the information in the preceding clause (a) or (b).  Notwithstanding the foregoing, Confidential Information shall not include information that, in each case as demonstrated by competent written documentation:

(i)was already known to the Receiving Party or its Affiliates, other than under an obligation of confidentiality, at the time of disclosure by the Disclosing Party;

(ii)was generally available to the public or otherwise part of the public domain at the time of its disclosure to the Receiving Party;

(iii)became generally available to the public or otherwise part of the public domain after its disclosure to the Receiving Party other than through any act or omission of the Receiving Party in breach of this Agreement or the Confidentiality Agreement;

(iv)is subsequently disclosed to the Receiving Party by a Third Party without obligations of confidentiality with respect thereto; or

(v)is subsequently independently discovered or developed by the Receiving Party without the aid, application or use of Confidential Information of the Disclosing Party.

5.4.2From and after the Closing, (i) all Confidential Information obtained by Seller (or its Affiliates or Representatives) from Buyer (or its Affiliates or Representatives) and (ii) all Confidential Information to the extent relating solely to the Product Business (other than Confidential Information relating to the Licensed Intellectual Property), the Purchased Assets and the Assumed Liabilities ((i) and (ii), collectively, the “Buyer Confidential Information”) shall be deemed to be Confidential Information disclosed by Buyer to Seller for purposes of this Section ‎5.4 shall be used by Seller solely as required to (a) perform its obligations or exercise or enforce its rights under this Agreement, any Ancillary Agreement, (including for purposes of engaging in pharmacovigilance tasks, including maintaining the global safety database for the Product), any Other Agreement or any Contract related to the Product pursuant to which Seller or any of its Affiliates obtains rights to the Licensed Intellectual Property, (b) undertake Manufacturing activities in support of Buyer’s operations in the Buyer Territory, (c) operate the business of Seller and its Affiliates in the Seller Territory, and with respect to Excluded Assets only, in the Buyer Territory, or (d) comply with applicable Law (each of (a) through (d), a “Seller Permitted Purpose”), and for no other purpose.  For a period of [***] years after the Closing Date, Seller shall not disclose, or permit the disclosure of, any of the Buyer Confidential Information to any Person except those Persons to whom such disclosure is necessary in connection with any Seller Permitted Purpose and Seller shall not use the Buyer Confidential Information except in connection with the Seller Permitted Purpose.  Seller shall treat, and will cause its Affiliates and the Representatives of Seller or any of its Affiliates to treat, the Buyer Confidential Information as confidential, using the same degree of care as Seller normally employs to safeguard its own confidential information from unauthorized use or disclosure, but in no event less than a reasonable degree of care.

5.4.3All Confidential Information obtained by Buyer (or its Affiliates or Representatives) from Seller (or its Affiliates or Representatives) other than the Buyer Confidential Information (the “Seller Confidential Information”) shall be used by Buyer solely as required to (a) perform its obligations or exercise or enforce its rights under this Agreement, any Ancillary Agreement or any Other Agreement, or (b) comply with applicable Law (each of (a) and (b), a “Buyer Permitted Purpose”), and for no other purpose.  For a period of [***] years after the Closing Date, Buyer shall not disclose, or permit the disclosure of, any of Seller Confidential Information to any Person except to its employees and consultants under a duty of confidentiality or to Persons to whom such disclosure is necessary in connection with a Buyer Permitted Purpose and Buyer shall not use, or permit the use of, the Seller Confidential Information, except in connection with a Buyer Permitted Purpose or other internal business purpose.  Buyer shall treat, and will cause its Affiliates and the Representatives of Buyer or any of its Affiliates to treat, Seller Confidential Information as confidential, using the same degree of care as Buyer normally employs to safeguard its own confidential information from unauthorized use or disclosure, but in no event less than a reasonable degree of care.

5.4.4In the event either Party is requested pursuant to, or required by, applicable Law to disclose any of the other Party’s Confidential Information (i.e., Seller Confidential Information or Buyer Confidential Information, as applicable), it will notify the other Party in a timely manner so that such Party may seek a protective order or other appropriate remedy or, in such Party’s sole discretion, waive compliance with the confidentiality provisions of this Agreement.  Each Party will cooperate in all reasonable respects in connection with any reasonable actions to be taken for the foregoing purpose.  In any event, the Party requested or required to disclose such Confidential Information may furnish it as requested or required pursuant to applicable Law (subject to any such protective order or other appropriate remedy) without liability hereunder, provided that such Party furnishes only that portion of the Confidential Information which such Party is advised by an opinion of its counsel is legally required, and if confidential treatment is available such Party exercises reasonable efforts to obtain reliable assurances that confidential treatment will be accorded such Confidential Information.

5.4.5Nothing in this Section ‎5.4 shall be construed as preventing or in any way inhibiting either Party from complying with applicable Law governing activities and obligations undertaken pursuant to this Agreement or any Ancillary Agreement in any manner which it reasonably deems appropriate. Either Party may disclose information relating to this Agreement to the SEC or any securities exchange or any governmental entity if required by applicable Law, provided that the Disclosing Party shall: (x) unless prohibited by applicable Law, provide the other Party with reasonable advance notice of and an opportunity to comment on any such required disclosure, (y) if requested by such other Party, seek, or cooperate with such Party’s efforts to obtain, confidential treatment or a protective order with respect to any such disclosure to the extent available at the Disclosing Party’s expense, and (z) take into consideration the comments of such other Party in any such disclosure or request for confidential treatment or protective order; provided, however, that a Party shall not be required to provide any notice to the other Party with respect to any disclosure in any securities filings (including 10-K filings and 10-Q filings) that discloses information that has been previously disclosed in an earlier filing or press release or that reports aggregate financial results related to this Agreement.

5.5FDA Letters.  Buyer and Seller shall file the Buyer FDA Letters and Seller FDA Letters, respectively, with FDA within [***] after the Closing Date; provided that Buyer's obligation shall be conditioned on it receiving from Seller not less than [***] prior to the Closing Date the complete regulatory file from Seller for all the relevant INDs and NDAs. Transfer of title to the NDA and the INDs for the Product shall be effective as of the Closing.

5.6Regulatory Responsibilities.

5.6.1From and after the Closing, subject to the terms of the Transition Services Agreement and except as required by a Party to comply with applicable Law or to exercise its rights and obligations hereunder or under any other Ancillary Agreement, (a) Buyer shall have the sole right and responsibility for preparing, obtaining and maintaining all Regulatory Approvals necessary for the Product Business, and for conducting communications with Governmental Authorities of competent jurisdiction, for the Product and any Other Productin the Buyer Territory, and (b) Seller (on its own behalf or through Seller’s licensees, sublicensees or distributors, as applicable) shall have the sole right and responsibility for preparing, obtaining and maintaining all Regulatory Approvals, and for conducting communications with Governmental Authorities of competent jurisdiction, for the Product in the Seller Territory.  Without limitation of the foregoing, promptly following the Closing, Buyer shall obtain such FDA approvals as are necessary for Buyer’s own Product labeling and shall comply with such FDA approvals upon receipt thereof.

5.6.2Subject to the terms of the Transition Services Agreement from and after the Closing (a) Seller shall support Buyer, as may be reasonably necessary and practicable, [***], in preparing, obtaining and maintaining all Regulatory Approvals for the Productin the Buyer Territory, including providing necessary documents or other materials required by applicable Law for Buyer to obtain or maintain such Regulatory Approvals, in each case, in accordance with the terms and conditions of this Agreement; and (b) Buyer shall support Seller, as may be reasonably necessary and practicable, [***], in preparing, obtaining and maintaining all Regulatory Approvals for the Product in the Seller Territory, including providing necessary documents or other materials required by applicable Law for Seller to obtain or maintain such Regulatory Approvals, in each case, in accordance with the terms and conditions of this Agreement.

5.6.3Subject to the immediately following sentence and except to the extent otherwise provided in the Supply Agreement or the Transition Services Agreement, from and after the Closing, (a) Buyer shall provide Seller with (i) copies of all written or electronic correspondence relating to the Product or any Other Productin the Buyer Territory, received by Buyer, its Affiliates, licensees, sublicensees or distributors from, or submitted by Buyer, its Affiliates, licensees, sublicensees or distributors to, Regulatory Authoritiesand (ii) copies of all meeting minutes and other similar summaries of all meetings, conferences and discussions held by Buyer with Regulatory Authorities to the extent relating solely to the Product or any Other Product, including copies of all contact reports produced by Buyer and its Affiliates, licensees, sublicensees and distributors, in each case ((i) and (ii)), within [***] Business Days after Buyer’s receipt, submission or production of the foregoing, as applicable; and (b) Seller shall provide Buyer with (i) copies of all written or electronic correspondence relating to the Product received by Seller, its Affiliates, licensees, sublicensees or distributors from, or submitted by Seller, its Affiliates, licensees, sublicensees or distributors to, Regulatory Authoritiesand (ii) copies of all meeting minutes and other similar summaries of all meetings, conferences and discussions held by Seller with Regulatory Authorities to the extent relating solely to the Product in the Buyer Territory, including copies of all contact reports produced by Seller and its Affiliates, licensees, sublicensees and distributors, in each case ((i) and (ii)), within [***] Business Days after Seller’s receipt, submission or production of the foregoing, as applicable.  If such written or electronic correspondence received from a Regulatory Authority relates to the withdrawal, suspension, revocation or variation of a Regulatory Approval for the Product or any Other Product, the prohibition or suspension of the supply of the Product or any Other Product, or the initiation of any investigation, review or inquiry by such Regulatory Authority concerning the safety of the Product or any Other Product, except to the extent otherwise provided in the Supply Agreement, then the Party that received such written or electronic correspondence shall notify the other Party and provide the other Party with copies of such written or electronic correspondence as soon as practicable, but not later than [***] Business Days after receipt of such correspondence. The Party that received such written or electronic correspondence shall provide the other Party a draft of any written response thereto reasonably in advance (in light of the prevailing circumstances) of submitting such response to the applicable Regulatory Authorities.  Buyer shall notify Seller as soon as practicable if Buyer reasonably believes that the last patient last visit dates for the Phase IV Commitments will be delayed beyond the estimated dates included in the Phase IV Commitments as of the Closing Date(or any subsequent estimated dates).

5.7Access to Regulatory Approvals and Documentation.

5.7.1From and after the Closing, upon Buyer’s reasonable request, Seller promptly shall (a) provide to Buyer, [***], copies of the Licensed Regulatory Documentation as shall be reasonably requested by Buyer solely for purposes of exercising its rights under the grants in Section 2.1 of the License Agreement and (b) provide to Buyer and to any specified Governmental Authority in the Buyer Territory a letter, in the form reasonably requested by Buyer, acknowledging that Buyer has the right of reference to any Licensed Regulatory Documentation as necessary to Exploit the Product or any Other Productin the Buyer Territory.  Notwithstanding anything to the contrary contained in this Agreement, Seller shall not be required to disclose any information or provide any such access if such disclosure or access could, in Seller’s reasonable discretion, (x) violate (i) applicable Law or (ii) any binding agreement entered into by Seller prior to the Closing Date, including any confidentiality agreement to which Seller is a party (provided, that Seller shall use commercially reasonable efforts to obtain consent from any Third Party to any such binding agreement to enable Seller to disclose such information), (y) jeopardize any attorney/client privilege or other established legal privilege or (z) disclose any Trade Secrets.

5.7.2From and after the Closing, upon Seller’s reasonable request, Buyer promptly shall (a) provide to Seller, [***], copies of the Buyer Regulatory Approvals and Documentation as shall be reasonably requested by Seller solely for purposes of exercising its rights under the grants in Section 2.4 of the License Agreement and (b) provide to Seller and to any specified Governmental Authority in the Seller Territory a letter, in the form reasonably requested by Seller, acknowledging that Seller has the right of reference to any Buyer Regulatory Approvals and Documentation as necessary to Exploit the Product or any Other Productin the Seller Territory.  Notwithstanding anything to the contrary contained in this Agreement, Buyer shall not be required to disclose any information or provide any such access if such disclosure or access could, in Buyer’s reasonable discretion, (x) violate (i) applicable Law or (ii) any binding agreement entered into by Buyer prior to the Closing Date, including any confidentiality agreement to which Buyer is a party (provided, that Buyer shall use commercially reasonable efforts to obtain consent from any Third Party to any such binding agreement to enable Buyer to disclose such information), (y) jeopardize any attorney/client privilege or other established legal privilege or (z) disclose any Trade Secrets.

5.8Pharmacovigilance Obligations. This Section 5.8 shall be effective from and after Closing Date.

5.8.1Pharmacovigilance Agreement.  Within [***]Business Days after the Closing Date, the Parties shall negotiate and execute a separate pharmacovigilance agreement to set forth the responsibilities of each Party or their designees with respect to the pharmacovigilance matters relating to the Product and shall include, at a minimum, the following provisions of Section ‎5.8.2 and Section ‎5.8.3 (the “Pharmacovigilance Agreement”). Each Party shall duly and punctually perform all of its obligations under the Pharmacovigilance Agreement and in compliance with applicable Law.

5.8.2Legacy Safety Data.  Seller and its Affiliates shall provide Buyer an electronic copy of the CIOMS I form for all legacy data of Adverse Events with respect to the Product that is within Seller’s (or its Affiliate’s, as appropriate) possession, for inclusion in Buyer’s safety database for the Product.

5.8.3Exchange of Ongoing Safety Data.

(a)Each Party agrees to notify the other Party of any information of which such Party becomes aware concerning any Adverse Event with respect to the Product (and, for Buyer, any Other Product) whether or not determined to be attributable to the Product (or, for Buyer, any Other Product).  Such notice shall be provided in English within [***] days after such Party becomes aware of such information where such potential Adverse Event is Serious and associated with the clinical uses, studies, investigations, tests or marketing of the Product (and, for Buyer, any Other Product). Such notice shall be provided in English within [***] days after such Party becomes aware of such information for all other Adverse Events (non-Serious expected or non-Serious Unexpected Adverse Experiences) reported to a Party in connection with the clinical uses, studies, investigations, tests or marketing of the Product (and, for Buyer, any Other Product).  “Serious”as used in this Section 5.8.3 refers to an experience which results in death, is immediately life threatening, results in persistent and significant disability/incapacity or requires in-patient hospitalization, or prolongation of existing hospitalization, or is a congenital anomaly, cancer or an overdose.  Other important medical events that may jeopardize the patient or may require intervention to prevent one of the outcomes previously listed are also considered serious.  “Unexpected”as used in this Section 5.8.3 refers to a condition or development not listed in the current labeling or investigator’s brochure for the Product (or, for Buyer, any Other Product), and includes an event that may be symptomatically and pathophysiologically related to an event listed in the labeling, but differs from the event because of increased frequency or greater severity or specificity.

(b)With respect to clinical trials being carried out by or on behalf of a Party, Adverse Event reports of unexpected and fatal or life-threatening events which are possibly, probably, definitely related or of unknown relationship to the use of the Product (and, for Buyer, any Other Product) must be forwarded to the other Party within [***] days after receipt of the information. It is understood and agreed that these Adverse Event reporting requirement provisions are based on the policies and procedures of the Parties and regulatory reporting requirements. In the event of changes to regulatory requirements for Adverse Event reporting, the Parties agree to comply with any such reasonably required revised notification requirements.

(c)From and after the Closing, Buyer shall be responsible for notifying all investigators for any clinical trials with respect to the Product or any Other Product conducted by or on behalf of Buyer (other than, for clarity, clinical trials conducted by Seller as part of the Retained Phase IV Commitments) of any Adverse Events that meet expedited reporting requirements in a country, including (i) Serious and Unexpected adverse reactions to the Product or Other Product and (ii) Serious Adverse Events, that are possibly, probably or definitely related or have an unknown relationship to the use of the Product or the Other Product within the time period required by applicable Law, but in no event later than [***] days after receipt of such information.  It is understood and agreed that this notification requirement is based on the policies and procedures of the Parties and regulatory reporting requirements.  In the event of changes to regulatory requirements for such notification of investigators, the Parties agree to comply with any such revised notification requirements.   

(d)Except as otherwise provided in the Transition Services Agreement, (i) Buyer shall be responsible for complying with all applicable Adverse Event reporting obligations to any Regulatory Authority with respect to the Product and any Other Product in (A) the Buyer Territory and (B) the Seller Territory to the extent such Adverse Event reporting obligations arise out of the Transferred Phase IV Commitments and (ii) except as provided in the immediately preceding clause (B), Seller shall be responsible for complying with all applicable Adverse Event reporting obligations to any Regulatory Authority with respect to the Product in the Seller Territory.

5.9Medical and Other Inquiries.  Except to the extent otherwise provided in the Transition Services Agreement, from and after the Closing Date, Buyer or its designee (a) shall be responsible for, and shall handle and respond to, all customer complaints and inquiries (including medical and non-medical inquiries) related to the Product or any Other Productused, marketed, distributed or sold in the Buyer Territory (provided, that Buyer shall consult and coordinate with Seller prior to communicating with any Regulatory Authority in connection with any customer complaints and reported defects with respect to the Product or any Other Productin the Buyer Territory), and (b) shall be responsible for, and shall conduct, all correspondence and communication with physicians and other health care professionals in the Buyer Territory relating to the Product or any Other Product.  Buyer shall keep such records and make such reports as shall be reasonably necessary to document such communications in compliance with applicable Law.

5.10Commercialization.  Except to the extent otherwise provided in the Transition Services Agreement,from and after the Closing Date, (a) Buyer, [***], shall be responsible for and have sole discretion over the commercialization, marketing strategy, promotion, distribution and sale of the Product and any Other Productin the Buyer Territory and shall independently determine and set prices for the Product and any Other Product in the Buyer Territory, including the selling price, volume discounts, Rebates, chargeback claims, and similar matters; (b) Buyer shall be responsible, [***], for all marketing, advertising and promotional materials in the Buyer Territory related to the Product and any Other Product; and (c) Buyer or its Affiliates shall be responsible for receiving and processing all orders, undertaking all invoicing, collection and receivables, and providing all customer service related to the sale of the Product and any Other Productin the Buyer Territory.

5.11Returned Products, Chargebacks, Rebates, Health Care Reform Fees and Coupons.The Parties shall comply with all applicable terms and conditions of the Transition Services Agreement, which shall, at a minimum, address respective rights, obligations and payment issues pertaining to the transition of NDC numbers, returned products, Rebate payments, chargeback claims, Health Care Reform Fees, coupons and vouchers, and government program price reporting issues.

5.12Post-Closing Responsibility for Product.

5.12.1Following the Closing, Buyer shall maintain the validity and good standing of the Purchased Regulatory Approvals such that (a) during the term of the Supply Agreement, Seller is authorized to Manufacture (or have Manufactured pursuant to and in accordance with the Supply Agreement) the Product in the Buyer Territory and (b) during the term of the License Agreement (and, in any event, at all times prior to the payment in full of all Milestone Payments hereunder), Buyer is authorized to sell the Product under the name “SAPHRIS” in the Buyer Territory, in each case, in accordance with applicable Law.  Except as permitted by this Agreement, the Supply Agreement or the License Agreement, Buyer shall not knowingly (i) alter or impair any Purchased Regulatory Approval in any commercially unreasonable manner, or (ii) unreasonably fail to take any commercially reasonable action or take or permit to be taken any commercially unreasonable action, with respect to the Purchased Assets that is reasonably likely to materially adversely affect Seller’s or Seller’s Affiliates’ ability to (A) Manufacture or have Manufactured the Product in the Buyer Territory or (B) otherwise exercise their rights with respect to the Excluded Assets.

5.12.2From and after the Closing Date, (a) Buyer shall fund, direct, and pursuant to the timelines set forth in the Transition Services Agreement, conduct the Transferred Phase IV Commitments, and (b) Seller shall fund (subject to reimbursement), direct, and pursuant to the timelines set forth in the Transition Services Agreement, conduct the Retained Phase IV Commitments, in each case ((a) and (b)), all in accordance with applicable Law, including cGCP, and FDA requirements.  [***]

5.13Certain Tax Matters.

 5.13.1Transfer Taxes and Apportioned Obligations.

(a)All amounts due under this Agreement are exclusive of sales, use, goods and services, value added, excise, and other Taxes, duties or charges of a similar nature imposed by any Governmental Authority, or other taxing authority. If any sales, use, goods and services, value added, excise, or other Taxes, duties or charges of a similar nature will be chargeable with respect to payments or transactions hereunder, Buyer shall pay, or upon receipt of invoice from Seller shall reimburse Seller for, these amounts at the rate in force at the due time for payment or such other time as is stipulated under the relevant legislation.  Each of Seller and Buyer shall use commercially reasonable efforts to minimize obligations relating to Taxes of the nature described in this Section 5.13.1 as a result of the transactions contemplated by this Agreement.

(b)All personal property and similar ad valorem obligations levied with respect to the Purchased Assets for a taxable period which includes (but does not end on) the Closing Date (collectively, the “Apportioned Obligations”) shall be apportioned between Seller and Buyer [***].

(c)Apportioned Obligations and transfer taxes shall be timely paid, and all applicable filings, reports and returns shall be filed, as provided by applicable Law.  With respect to the Apportioned Obligations, the paying Party shall be entitled to reimbursement from the non-paying Party in accordance with Section ‎5.13.1(b).  Upon payment of any such Apportioned Obligation, the paying Party shall present a statement to the non-paying Party setting forth the amount of reimbursement to which the paying Party is entitled under Section ‎5.13.1(b) together with such supporting evidence as is reasonably necessary to calculate the amount to be reimbursed.  The non-paying Party shall make such reimbursement promptly but in no event later than [***] days after the presentation of such statement.

5.13.2Cooperation and Exchange of Information.  Each of Seller and Buyer shall (a) provide the other with such assistance as may reasonably be requested by the other in connection with the preparation of any Tax Return, audit or other examination by any taxing authority or judicial or administrative proceeding relating to Liability for Taxes in connection with the Product Business or the Purchased Assets, (b) retain and provide the other with any records or other information that may be relevant to such Tax Return, audit or examination, proceeding or determination and (c) inform the other of any final determination of any such audit or examination, proceeding or determination that affects any amount required to be shown on any Tax Return of the other for any period.

5.13.3Survival of Covenants.  The covenants contained in this Section ‎5.13 shall survive until [***] days after the expiration of the applicable statute of limitations (including extensions thereof).

5.14Accounts Receivable and Payable.

5.14.1Accounts Receivable.  The Parties acknowledge and agree that all Accounts Receivable outstanding on the Closing Date shall remain the property of Seller or its Affiliates and shall be collected by Seller or its Affiliates subsequent to the Closing.  In the event that, subsequent to the Closing, Buyer or an Affiliate of Buyer receives any payments from any obligor with respect to an Account Receivable, then Buyer shall, within [***] days of receipt of such payment, remit the full amount of such payment to Seller.  In the case of the receipt by Buyer of any payment from any obligor of both Seller and Buyer then, unless otherwise specified by such obligor, such payment shall be applied first to amounts owed to Buyer with the excess, if any, remitted to Seller.  In the event that, subsequent to the Closing, Seller or any of its Affiliates receives any payments from any obligor with respect to an account receivable of Buyer for any period after the Closing Date, then Seller shall, within [***] days of receipt of such payment, remit the full amount of such payment to Buyer.  In the case of the receipt by Seller of any payment from any obligor of both Seller and Buyer then, unless otherwise specified by such obligor, such payment shall be applied first to amounts owed to Seller with the excess, if any, remitted to Buyer.

5.14.2Accounts Payable.  In the event that, subsequent to the Closing, Buyer or an Affiliate of Buyer receives any invoices from any Third Party with respect to any account payable or other Liability of the Product Business that constitutes an Excluded Liability, then Buyer shall, within [***] days of receipt of such invoice, provide such invoice to Seller. In the event that, subsequent to the Closing, Seller or any of its Affiliates receives any invoices from any Third Party with respect to any account payable of Buyer or any of its Affiliates for any period after the Closing that constitutes an Assumed Liability, then Seller shall, within [***] days of receipt of such invoice, provide such invoice to Buyer. It is hereby clarified that all such accounts payable are Excluded Liabilities and shall be satisfied by Seller.

5.14.3In the event of a conflict or ambiguity between this Section 5.14 and any applicable section of the Transition Services Agreement, the Transition Services Agreement shall control.

5.15Net Sales Reports; Audit Rights.

5.15.1Until Buyer has satisfied its reporting obligations set forth in this Section ‎5.15.1 with respect to the Reporting Period, Buyer shall provide Seller with reasonably detailed quarterly reports, not later than [***] days after the end of each Calendar Quarter, of the aggregate gross sales of Product and any Other Product and Net Sales in the Buyer Territory for such Calendar Quarter (the “Net Sales Reports”).  The Net Sales Report for the fourth Calendar Quarter of each Calendar Year also shall include the aggregate gross sales of Product and any Other Products and Net Sales in the Buyer Territory for such Calendar Year.All Net Sales Reports shall include separate line items for gross sales and Net Sales of each SKU of the Product, Other Products, Combination Products, and Authorized or Owned Generic Products, in each case, as applicable.

5.15.2Upon Seller’s request, Buyer shall, and shall cause each of its Affiliates, licensees and sublicensees to permit an independent accounting firm of national standing appointed by Seller and reasonably acceptable to Buyer (or the applicable other party), to inspect and audit the applicable books and records of account of Buyer and its Affiliates, licensees and sublicensees that relate directly to (a) gross sales and Net Sales of Products or Other Products and (b) the Milestone Information, solely in order to confirm the accuracy and completeness of the Net Sales Reports and all payments based on Net Sales under this Agreement. Seller shall not be entitled hereunder to (x) cause the inspection and audit of such books and records relating to a particular time period more than once per Calendar Year, or (y) exercise its inspection and audit rights under this Section ‎5.15.2 more than once per Calendar Year; provided, however, that if any audit conducted pursuant to this Section ‎5.15.2 reveals an under payment of [***] percent or more in any Net Sales Report or in any payment based on Net Sales under this Agreement, then Seller shall be entitled, for a period of [***] following its receipt of notice of such material deviation, to initiate another audit pursuant to this Section ‎5.15.2 for the applicable time period in order to determine whether the applicable material deviation has been cured.  All information disclosed pursuant to this Section ‎5.14.3 shall be subject to the confidentiality and non-use provisions set forth in Section ‎5.4.

5.15.3Seller shall bear all out-of-pocket costs and expenses incurred in connection with any inspection or audit performed pursuant to Section ‎5.15.2; provided, however, that if any such inspection or audit correctly identifies any underpayments by Buyer hereunder or under the License Agreement in excess of the greater of [***] percent of the amounts actually payable for the period audited, and [***], then, in addition to paying the full amount of such underpayment, plus accrued interest at a rate equal to [***], as of the date such payment is due, as listed in The Wall Street Journal, Eastern edition, or the maximum rate permitted under applicable Law, whichever is less, and Buyer shall reimburse Seller for all reasonable out-of-pocket costs and expenses incurred by Seller in connection with such inspection or audit.

5.16Covenant Not to Sue.   Seller shall not, and Seller shall cause its Affiliates not to, sue, bring claims or initiate other Litigation against Buyer or any of its Affiliates and their respective Representatives and sublicensees based on, or in connection with, the potential infringement or misappropriation of any Intellectual Property Rights owned or Controlled by Seller or any of its Affiliates, in connection with Buyer’s (i) conduct of the Product Business (as conducted or contemplated by Seller as of the Closing Date), or (ii) developing or commercializing of the 2.5 mg Dosage Strength or [***] Product in or for the Buyer Territory in the form conducted, or transferred to Buyer, by Seller as of the Closing Date, or (iii) Manufacturing anywhere in the world (a) the Product in connection with developing or commercializing the Product in or for the Buyer Territory (subject to the applicable terms of the Supply Agreement) or (b) the 2.5 mg Dosage Strength or the [***] Product (in the form conducted, or transferred to Buyer, by Seller as of the Closing Date) in connection with developing or commercializing such product in or for the Buyer Territory.  Seller further agrees to use commercially reasonable efforts to achieve the same result with respect to any of its or its Affiliates' licensees or sublicensees of such Intellectual Property Rights in the applicable territory.

5.17Exclusivity.  Subject to the terms, conditions and rights set forth in the License Agreement, Seller covenants and agrees that it shall not, and it shall cause its Affiliates not to, and shall use commercially reasonable efforts to cause its licensees not to, promote, market, offer for sale or sell any prescription product containing asenapine in the Buyer Territory, and it shall not and shall cause its Affiliates not to permit or enable any third party to do so (provided that the foregoing covenant shall not apply to Seller’s supply of Supplied Product (as defined in the Supply Agreement) to Buyer under the Supply Agreement or Seller’s supply of product under the Clinical Supply Agreement).

5.18Insurance.  On or prior to the Closing Date, Buyer shall deliver to Seller an insurer or insurer’s agent’s signed Certificate of Insurance in customary form, evidencing that Buyer has obtained the insurance policies, with the insurers, coverages and limits of insurance, as are specified in the License Agreement, and that such policies are in full force and effect.

5.19Exchange Act Filings. Upon reasonable request of either Party made within [***] days following the Closing Date, the other Party shall, and shall use commercially reasonable efforts to cause its Affiliates and Representatives to, provide any information reasonably required by the requesting Party to comply with its obligations under Regulation S-X and Form 8-K of the Exchange Act, including information reasonably necessary to prepare any applicable pro forma financial information required to be filed by the requesting Party with the Securities and Exchange Commission.  The requesting Party shall promptly reimburse the other Party for all out of pocket costs and expenses reasonably incurred by the other Party, its Affiliates or its or their Representatives in connection with this Section.

5.20Assignment of Certain Intellectual Property.  As soon as is practicable after the Closing Date, Seller shall transfer and assign to Buyer the Patent Rights that are listed on Schedule 1.1.83 hereto pursuant to a Patent Assignment Agreement in a standard form to be mutually agreed.

                ARTICLE 6                      

CONDITIONS PRECEDENT

6.1Conditions to Obligations of Buyer and Seller.  The obligations of Buyer and Seller to complete the transactions contemplated by this Agreement are subject to the satisfaction at or prior to the Closing of the following conditions:

6.1.1No Adverse Law; No Injunction.  No Law shall have been enacted, entered, promulgated or enforced by any Governmental Authority that prohibits the consummation of all or any part of the transactions contemplated by this Agreement or the Ancillary Agreements, and no order by any Governmental Authority restraining, enjoining or otherwise preventing the consummation of the transactions contemplated hereby shall be in effect; and

6.1.2Governmental Approvals.  All required consents of, notifications to and filings with any Governmental Authority shall have been made and any waiting periods or required approvals applicable to the transactions contemplated hereby pursuant to any applicable Law shall have expired or been terminated or been granted, including any applicable waiting period or approvals under the HSR Act.

6.1.3Litigation. There shall not be any Litigation pending, or threatened in writing, in which a Governmental Authority is or has threatened in writing to become a party and neither Buyer nor Seller shall have received any written communication from any Governmental Authority in which such Governmental Authority indicates that it intends to commence any Litigation or take any other action (a) challenging or seeking to restrain or prohibit any of the Transactions, or (b) that will have, or would be reasonably likely to  have, the effect of preventing, delaying or making illegal any of the Transactions.

6.2Conditions to Obligations of Buyer.  The obligation of Buyer to complete the transactions contemplated by this Agreement is subject to the satisfaction or waiver by Buyer at or prior to the Closing of the following additional conditions:

6.2.1Representations and Warranties.  The representations and warranties of Seller contained in Section ‎3.1 shall be true and correct in all respects (disregarding all materiality qualifiers such as “material,” “in all material respects” or “Material Adverse Effect”) at and as of the Closing Date as if made at and as of such date (except that those representations and warranties that address matters only as of a particular date need only be true and correct as of such date), except for breaches of such representations and warranties that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect;

6.2.2Covenants.  Seller shall have performed and complied in all material respects with all covenants, agreements and obligations required to be performed or complied with on or prior to the Closing Date;

6.2.3No Material Adverse Effect.  Since the Execution Date, no Material Adverse Effect shall have occurred; and

6.2.4Closing Deliveries.  Seller shall have delivered to Buyer each of the items listed in Section ‎2.4.2(a).

6.3Conditions to Obligations of Seller.  The obligation of Seller to complete the transactions contemplated by this Agreement is subject to the satisfaction or waiver by Seller at or prior to the Closing of the following additional conditions:

6.3.1Representations and Warranties.  The representations and warranties of Buyer contained in Section ‎3.2 shall be true and correct in all respects (disregarding all “material”, “in all material respects” and “Buyer Material Adverse Effect” qualifiers) at and as of the Closing Date as if made at and as of such date (except that those representations and warranties that address matters only as of a particular date need only be true and correct as of such date), except for breaches of such representations and warranties that would not, individually or in the aggregate, reasonably be expected to have a Buyer Material Adverse Effect;

6.3.2Covenants.  Buyer shall have performed and complied in all material respects with all covenants, agreements and obligations required to be performed or complied with on or prior to the Closing Date; and

6.3.3Closing Deliveries.  Buyer shall have delivered to Seller each of the items listed in Section ‎2.4.2(b).

6.4Frustration of Closing Conditions.  With respect to the condition to Buyer’s and Seller’s respective obligations to consummate the transactions contemplated by this Agreement as provided hereunder and each Party’s right to terminate this Agreement as provided in Section ‎8.1, neither Buyer nor Seller may rely on the failure of any condition set forth in this Article 6 to be satisfied if such failure was caused by such Party’s failure to act in good faith or to use its reasonable best efforts to cause the condition to be satisfied to the extent required by Section ‎4.3.

                   ARTICLE 7                      

INDEMNIFICATION

7.1Indemnification.

7.1.1Indemnification by Seller.  Following the Closing, but subject to the provisions of this Article 7, Seller shall indemnify, defend and hold harmless Buyer and its Affiliates, and their respective officers, directors, employees and agents (collectively, “Buyer Indemnitees”) from and against, and shall compensate and reimburse each of the Buyer Indemnitees for, any and all Losses suffered or incurred by any Buyer Indemnitee or to which any Buyer Indemnitee may otherwise become subject arising out of or related to:

(a)any inaccuracy in or breach by Seller of any of the representations or warranties made by Seller: (i) in this Agreement or (ii) in any certificate delivered on behalf of Seller pursuant to Section ‎2.4.2(a)(ii) (in each case of the foregoing clauses (i) and (ii), without giving effect to any “material”, “in all material respects”, and “Material Adverse Effect” qualification limiting the scope of such representation or warranty, but solely for purposes of determining the amount of Losses and not for purposes of determining whether a breach has occurred);

(b)any failure of Seller to perform or any breach by Seller of any of its covenants, agreements or obligations contained in this Agreement;

(c)any Excluded Liability;

(d)any failure of Seller to comply with any applicable bulk sales statute in connection with the transactions contemplated hereby; or

(e)any failure of Seller to pay transfer taxes or Apportioned Obligations allocated to Seller under Section ‎5.13.1; provided, however neither Seller nor any of its Affiliates shall have any indemnification obligation hereunder with respect to any Losses that arise solely out of, or relate solely to, the decision of the Office of the Inspector General of the U.S. Department of Health & Human Services ("OIG") to impose all or part of the obligations of Buyer's existing Corporate Integrity Agreement with the OIG or any new corporate integrity agreement to Buyer or its Affiliates following consummation of the transactions contemplated by this Agreement; provided that the foregoing exclusion shall not apply to any Losses as a result of the activities of any Seller Indemnitee prior to the consummation of the transactions hereunder.

7.1.2Indemnification by Buyer.  Following the Closing, but subject to the provisions of this Article 7, Buyer shall indemnify and hold harmless Seller and its Affiliates, and their respective officers, directors, employees and agents (collectively, “Seller Indemnitees”) from and against and shall compensate and reimburse each of the Seller Indemnitees for, any and all Losses suffered or incurred by any Seller Indemnitee or to which any Seller Indemnitee may otherwise become subject arising out of or related to:

(a)any inaccuracy in or breach by Buyer of any of the representations or warranties made by Buyer: (i) in this Agreement or (ii) in any certificate delivered on behalf of Buyer pursuant to Section ‎2.4.2(b)(ii) (in each case of the foregoing clauses (i) and (ii), without giving effect to any “material”, “in all material respects” or “Buyer Material Adverse Effect” qualification limiting the scope of such representation or warranty, but solely for purposes of determining the amount of Losses and not for purposes of determining whether a breach or inaccuracy has occurred);

(b)any failure of Buyer to perform or any breach by Buyer of any of its covenants, agreements or obligations contained in this Agreement;

(c)except to the extent the Loss is indemnifiable by Seller under any Ancillary Agreement, any Assumed Liability;

(d)except to the extent the Loss is indemnifiable by Seller under Section 7.1.1(a) or any Ancillary Agreement, any Product, 2.5 mg Dosage Strength or Other Product sold by or on behalf of Buyer or any of its Affiliates on or after the Closing Date; or

(e)any failure of Buyer to pay Apportioned Obligations allocated to Buyer under Section ‎5.13.1.

7.2Claim Procedure.

7.2.1Indemnification Claim Procedure.  Except as provided in Section ‎7.2.2 with respect to Third Party claims, in the event of a claim made by a Buyer Indemnitee or a Seller Indemnitee (the “Indemnified Party”), the Indemnified Party shall give reasonably prompt written notice to the other Party (the “Indemnifying Party”), which notice (an “Indemnification Certificate”) shall: (a) state that the Indemnified Party has paid or properly accrued or in good faith anticipates that it will have to pay or accrue Losses that are subject to indemnification by the Indemnifying Party pursuant to Section ‎7.1.1 or Section ‎7.1.2, as applicable, and (b) specify in reasonable detail the facts and circumstances supporting the Indemnified Party’s claim for indemnification (to the extent known) and contain a non-binding preliminary, good faith estimate of the amount to which the Indemnified Party claims to be entitled (to the extent known); provided, however, that the failure to give reasonably prompt notice shall not relieve the applicable Indemnifying Party of its indemnification obligations under this Agreement except to the extent that the Indemnifying Party is materially prejudiced by any delay in receiving such notice.  In the event that the Indemnifying Party agrees to or is determined to have an obligation to indemnify or reimburse the Indemnified Party for Losses as provided in this Article 7, the Indemnifying Party shall, subject to the provisions of Section 7.2.2, promptly (but in any event, within [***] days of receipt of the Indemnification certificate) pay such amount to the Indemnified Party by wire transfer of immediately available funds to the account specified in writing by the Indemnified Party.  If the Indemnifying Party objects to all or a portion of the Indemnified Party’s claim made in the Indemnification Certificate, the Indemnifying Party will notify the Indemnified Party of such objection by delivering a written statement (the “Objection Notice”) to the Indemnifying Party within [***] days following receipt of the Indemnification Certificate (the “Response Period”).  The Objection Notice shall indicate whether the Indemnifying Party objects to all or only a portion of the claim specified in the Indemnification Certificate and shall specify in reasonable detail the facts and circumstances supporting the Indemnifying Party’s basis and reasons for such objection. An Indemnifying Party’s failure to deliver an Objection Notice in accordance with the provisions of this Section ‎7.2.1 within the Response Period to any claim set forth in an Indemnification Certificate shall be deemed to be the Indemnifying Party’s acceptance of, and waiver of any objections to, such claim and the Indemnifying Party shall be deemed to have agreed that an amount equal to the full claimed amount specified in the Indemnification Certificate is owed to the Indemnified Party.  If the Indemnifying Party in its Objection Notice objects only to a portion of the claim set forth in the Indemnification Certificate (the amount of Losses claimed in the Indemnification Certificate to which the Indemnifying Party does not object shall be referred to herein as the “Agreed Amount”), then such Indemnifying Party shall, within [***] Business Days following the delivery of such Objection Notice pay the Agreed Amount to the Indemnified Party.  If an Indemnifying Party shall provide Objection Notice in accordance with the provisions of this Section ‎7.2.1, the Indemnifying Party and the Indemnified Party shall attempt in good faith for a period of [***] days following the Indemnified Party’s receipt of the Objection Notice to agree upon the rights of the respective parties with respect to each of such claims. If no such agreement can be reached after such [***]-day period of good faith negotiation, either the Indemnifying Party or the Indemnified Party may initiate Litigation for purposes of having the matter settled in accordance with the terms of this Agreement.

7.2.2Third Party Claim Procedure.  In the event an Indemnified Party becomes aware of a claim made by a Third Party (including any action or proceeding commenced or threatened to be commenced by any Third Party) that such Indemnified Party in good faith believes may result in an indemnification claim pursuant to Section 7.1, such Indemnified Party shall promptly (and in any event within [***] Business Days after receiving written notice of such claim) notify the Indemnifying Party in writing of such claim (such notice, the “Claim Notice”).  The Claim Notice shall be accompanied by reasonable supporting documentation submitted by the Third Party making such claim and shall describe in reasonable detail (to the extent known by the Indemnified Party) the facts constituting the basis for such claim and the amount of the claimed damages; provided, however, that no delay or failure on the part the Indemnified Party in delivering a Claim Notice shall relieve the applicable Indemnifying Party of its indemnification obligations under this Agreement except to the extent that the Indemnifying Party is materially prejudiced by any delay in receiving such notice.  Within [***] days after receipt of any Claim Notice, the Indemnifying Party may, upon written notice thereof to the Indemnified Party, assume control of the defense of the claim referred to therein at the Indemnifying Party’s sole cost and expense (which shall be subject to Section 7.3) with counsel reasonably satisfactory to the Indemnified Party.  If the Indemnifying Party does not so assume control of the defense of such claim, the Indemnified Party shall control the defense of such claim.  The party not controlling the defense of such claim (the “Non-Controlling Party”) may participate therein at its own expense; provided, however, that if the Indemnifying Party assumes control of the defense of such claim and the Indemnifying Party and the Indemnified Party have materially conflicting interests or different defenses available with respect to such claim that cause the Indemnified Party to hire its own separate counsel with respect to such proceeding, the reasonable fees and expenses of a single counsel to the Indemnified Party shall be considered “Losses” for purposes of this Agreement.  The party controlling the defense of such claim (the “Controlling Party”) shall keep the Non-Controlling Party advised of the status of such claim and the defense thereof and shall consider in good faith recommendations made by the Non-Controlling Party with respect thereto.  The Non-Controlling Party shall furnish the Controlling Party with such information as it may have with respect to such claim (including copies of any summons, complaint or other pleading that may have been served on such party and any written claim, demand, invoice, billing or other document evidencing or asserting the same) and shall otherwise cooperate with and assist the Controlling Party in the defense of such claim.  Neither the Indemnified Party nor the Indemnifying Party shall agree to any settlement of, or the entry of any judgment arising from, any such claim without the prior written consent of the other Party, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however, that the consent of the Indemnified Party shall not be required with respect to any such settlement or judgment if the Indemnifying Party agrees in writing to pay or cause to be paid any amounts payable pursuant to such settlement or judgment and such settlement or judgment includes no admission of liability by or other obligation on the part of the Indemnified Party and includes a complete release of the Indemnified Party from further Liability.

7.3Limitations on Indemnification.  For the avoidance of doubt, each of the provisions in this Section ‎7.2.2 is subject to the last sentence of Section ‎7.5.

7.3.1The provisions for indemnity under Section ‎7.1.1(a) or Section ‎7.1.2(a) shall be effective only (a) for any individual claim where the Loss exceeds $[***]  and (b) when the aggregate amount of all Losses for claims in excess of $[***] for which indemnification is sought from any Indemnifying Party exceeds $[***], in which case the Indemnified Party shall be entitled to indemnification of the Indemnified Party’s Losses in excess of $$[***]; provided, however, that the foregoing limitation shall not be applicable for breaches of any Fundamental Rep or in the case of claims based on fraud, intentional breach or willful breach.

7.3.2In no event shall any Indemnifying Party have liability for indemnification under Section ‎7.1.1(a) or Section ‎7.1.2(a), as applicable, for any amount exceeding, in the aggregate, (a) the sum of (i) $[***] and (ii) [***], with respect to any breach of any Specified Rep, and (b) the sum of (i) $[***] and (ii) [***], with respect any breach of any other representation or warranty; provided, however, that in no event shall Seller have liability for indemnification under Section ‎7.1.1(a) for any amount exceeding, in the aggregate, the sum of (x) $[***] and (y) [***]; and provided, further, that the foregoing limitations on indemnification described in this Section 7.3.2 shall not apply to breaches of any Fundamental Rep.

7.3.3The Indemnified Party shall take all commercially reasonable steps to mitigate any Losses incurred by such party upon and after becoming aware of any event or condition that would reasonably be expected to give rise to any indemnification rights hereunder.  The amount of Losses recovered by an Indemnified Party under Section ‎7.1.1 or Section ‎7.1.2, as applicable, shall be reduced by [***]. If any amounts referenced in the preceding clauses (a) and (b) are received after payment by the Indemnifying Party of the full amount otherwise required to be paid to an Indemnified Party pursuant to this Article 7, the Indemnified Party shall repay to the Indemnifying Party, promptly after such receipt, any amount that the Indemnifying Party would not have had to pay pursuant to this Article 7 had such amounts been received prior to such payment.

7.3.4If the Indemnified Party receives any payment from an Indemnifying Party in respect of any Losses pursuant to Section 7.1.1 or Section 7.1.2 and the Indemnified Party could have recovered all or a part of such Losses from a Third Party based on the underlying claim asserted against the Indemnifying Party, the Indemnified Party shall assign such of its rights to proceed against such Third Party as are necessary to permit the Indemnifying Party to recover from the Third Party the amount of such payment.

7.3.5The representations and warranties of Seller and Buyer contained in this Agreement shall survive the Closing and continue in full force and effect thereafter through and including the date that is [***] following the Closing Date; provided, that (a) the Fundamental Reps shall remain in full force and effect and shall survive indefinitely or, if applicable (and in the case of Section3.1.10 (Taxes)), until [***]; and (b) the Specified Reps shall remain in full force and effect and shall survive through and including the [***], and provided further, that if a Claim Notice or Indemnification Certificate relating to the breach of any representation or warranty is given to the Indemnifying Party on or prior to the date on which the applicable survival period described in this Section ‎7.3.4 expires, then, notwithstanding anything to the contrary contained in this Section ‎7.3.4, such Claim Notice or Indemnification Certificate, as applicable, shall not expire at the applicable expiration date, but rather shall remain in full force and effect until such time as the Claim Notice or the Indemnification Certificate has been fully and finally resolved.

7.3.6TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW AND EXCEPT AS A RESULT OF THIRD PARTY INDEMNIFICATION CLAIMS OR FRAUD, INTENTIONAL MISREPRESENTATION OR WILLFUL MISCONDUCT, NEITHER BUYER NOR SELLER SHALL BE LIABLE TO THE OTHER, OR THEIR AFFILIATES, FOR ANY CLAIMS, DEMANDS OR SUITS FOR CONSEQUENTIAL, INCIDENTAL, SPECIAL, EXEMPLARY, PUNITIVE, INDIRECT OR MULTIPLE DAMAGES, INCLUDING LOSS OF PROFITS, REVENUE OR INCOME, DIMINUTION IN VALUE OR LOSS OF BUSINESS OPPORTUNITY (WHETHER  OR NOT FORESEEABLE AT THE EXECUTION DATE) CONNECTED WITH OR RESULTING FROM ANY BREACH AFTER THE CLOSING DATE, OR ANY ACTIONS UNDERTAKEN IN CONNECTION WITH, OR RELATED HERETO, INCLUDING ANY SUCH DAMAGES THAT ARE BASED UPON BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE AND MISREPRESENTATION), BREACH OF WARRANTY, STRICT LIABILITY, STATUTE, OPERATION OF LAW OR ANY OTHER THEORY OF RECOVERY.

7.4Tax Treatment of Indemnification Payments.  All payments made pursuant to this Article 7 shall be treated as adjustments to the Purchase Price for all Tax purposes, unless otherwise required by applicable Law.

7.5Exclusive Remedy.  Except as expressly provided otherwise in this Agreement or any Ancillary Agreement and subject to Section ‎9.9, each Party acknowledges and agrees that, following the Closing, the remedies provided for in this Article 7 shall be the sole and exclusive remedies for claims and damages available to the Parties and their respective Affiliates arising out of or relating to this Agreement and the transactions contemplated hereby.  Nothing herein shall limit the Liability of either Party for common law fraud, intentional misrepresentation or willful misconduct.

7.6Setoff Rights.  Neither Party shall have any right of setoff of any amounts due and payable, or any Liabilities arising, under  against any amounts due and payable under this Agreement against any other amounts due and payable under this Agreement or any amounts due and payable, or any Liabilities arising, under any Ancillary Agreement; provided, however, that Buyer may set-off against and deduct from any amounts due and payable to Seller pursuant to Section 2.3.2 any amounts due and payable by Seller pursuant to Section 7.1.1.  Except as expressly set forth in this Section 7.6, the payment obligations under each of this Agreement and the Ancillary Agreements remain independent obligations of each Party, irrespective of any amounts owed to any other Party under this Agreement or the respective Ancillary Agreements.

                  ARTICLE 8                      

TERMINATION

8.1Termination.  Prior to the Closing, this Agreement shall terminate on the earliest to occur of any of the following events:

8.1.1the mutual written agreement of Buyer and Seller;

8.1.2by written notice delivered by either Buyer or Seller to the other, if the Closing shall not have occurred on or prior to [***] (the “End Date”) (other than due to a breach of any representation or warranty hereunder of the Party seeking to terminate this Agreement or as a result of the failure on the part of such Party to comply with or perform any of its covenants, agreements or obligations under this Agreement); provided, however, that the End Date may be extended by either party if the only condition to closing that has not been satisfied is Buyer’s obligation under Section 6.1.2.

8.1.3by written notice delivered by Buyer to Seller, if (a) there has been a misrepresentation or breach by Seller of a representation or warranty of Seller contained in this Agreement or (b) there shall be a material breach by Seller of any covenant, agreement or obligation of Seller in this Agreement, and such failure or breach described in clause (a) or (b) would result in the failure of a condition set forth in Section ‎6.2.1 or Section ‎6.2.2 that has not been waived by Buyer, or in the case of a breach of any covenant or agreement, is not cured upon the earlier to occur of (i) the [***] day after written notice thereof is given by Buyer to Seller and (ii) the day that is [***] Business Days prior to the End Date; provided, that Buyer may not terminate this Agreement pursuant to this Section ‎8.1.3 if Buyer is in material breach of its agreements or covenants contained in this Agreement; or

8.1.4by written notice delivered by Seller to Buyer, if (a) there has been a material misrepresentation or material breach by Buyer of a representation or warranty of Buyer contained in this Agreement or (b) there shall be a material breach by Buyer of any covenant, agreement or obligation of Buyer in this Agreement, and such failure or breach described in clause (a) or clause (b) would result in the failure of a condition set forth in Section ‎6.3.1 or Section ‎6.3.2 and has not been waived by Seller, or in the case of a breach of any covenant or agreement, is not cured upon the earlier to occur of (i) the [***] day after written notice thereof is given by Seller to Buyer and (ii) the day that is [***] Business Days prior to the End Date; provided, that Seller may not terminate this Agreement pursuant to this Section ‎8.1.4 if Seller is in material breach of its agreements or covenants contained in this Agreement.

8.2Procedure and Effect of Termination.

8.2.1Notice of Termination.  Termination of this Agreement by either Buyer or Seller shall be by delivery of a written notice to the other.  Such notice shall state the termination provision in this Agreement that such terminating Party is claiming provides a basis for termination of this Agreement.  Termination of this Agreement pursuant to the provisions of Section ‎8.1 shall be effective upon and as of the date of delivery of such written notice as determined pursuant to Section ‎9.2.

8.2.2Effect of Termination.  In the event of the termination of this Agreement pursuant to Section ‎8.1 by Buyer or Seller, this Agreement shall be terminated and have no further effect, and there shall be no liability hereunder on the part of Seller, Buyer or any of their respective Affiliates, except that Sections ‎5.2.2 (Publicity), ‎5.4 (Confidentiality), ‎8.2.2 (Effect of Termination), ‎8.2.3 (Withdrawal of Certain Filings) and Article 9 (Miscellaneous) shall survive any termination of this Agreement.  For clarity, in the event of termination of this Agreement pursuant to Section 8.1, the Parties shall not enter into any of the Ancillary Agreements or have any obligations thereunder.  Nothing in this Section ‎8.2.2 shall relieve any Party to this Agreement of liability for fraud, willful misconduct, intentional misrepresentation or any breach of this Agreement prior to the termination hereof.

8.2.3Withdrawal of Certain Filings.  As soon as practicable following a termination of this Agreement for any reason, but in no event less than [***] days after such termination, Buyer or Seller shall, to the extent practicable, withdraw all filings, applications and other submissions relating to the transactions contemplated by this Agreement filed or submitted by or on behalf of such Party, any Governmental Authority or other Person.

                  ARTICLE 9                      

MISCELLANEOUS

9.1Governing Law, Jurisdiction, Venue and Service.

9.1.1Governing Law.  This Agreement shall be governed by and construed in accordance with the Laws of the State of New York, excluding any conflicts or choice of Law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive Law of another jurisdiction.

9.1.2Jurisdiction.  Subject to Section ‎9.9 and Section ‎9.10, the Parties hereby irrevocably and unconditionally consent to the exclusive jurisdiction of the courts of the State of New York and the United States District Court for the Southern District of New York for any action, suit or proceeding (other than appeals therefrom) arising out of or relating to this Agreement, and agree not to commence any action, suit or proceeding (other than appeals therefrom) related thereto except in such courts.  The Parties irrevocably and unconditionally waive their right to a jury trial.

9.1.3Venue.  Subject to Section ‎9.10, the Parties further hereby irrevocably and unconditionally waive any objection to the laying of venue of any action, suit or proceeding (other than appeals therefrom) arising out of or relating to this Agreement in the courts of the State of New York or in the United States District Court for the Southern District of New York, and hereby further irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.

9.1.4Service.  Each Party further agrees that service of any process, summons, notice or document by registered mail to its address set forth in Section ‎9.2.2 shall be effective service of process for any action, suit or proceeding brought against it under this Agreement in any such court.

9.2Notices.

    9.2.1Notice Requirements.  Any notice, request, demand, waiver, consent, approval or other communication permitted or required under this Agreement (each, a “Notice”) shall be in writing, shall refer specifically to this Agreement and shall be deemed given only if delivered by hand or sent by facsimile transmission (with transmission confirmed) or by overnight registered mail, courier or express delivery service that maintains records of delivery, addressed to the Parties at their respective addresses specified in Section ‎9.2.2 or to such other address as the Party to whom notice is to be given may have provided to the other Party at least 10 days’ prior to such address taking effect in accordance with this Section ‎9.2.  Such Notice shall be deemed to have been received: (a) as of the date delivered by hand or by overnight registered mail, courier or express delivery service; or (b) on the day sent by facsimile provided that the sender had received confirmation of transmission (by facsimile receipt confirmation or confirmation by telephone or email) prior to 6:00 p.m. Eastern Time on such day (and if is received confirmation is received after 6:00 p.m. Eastern Time, such Notice shall be deemed to have been delivered on the following Business Day).  Any Notice delivered by facsimile shall be confirmed by a hard copy delivered promptly thereafter.

9.2.2Address for Notice.

If to Seller, to:

Merck Sharp & Dohme BV

Waarderweg 39

2031 BN

Haarlem

Netherlands

Attention: Managing Director

Facsimile: [***]

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

Merck Sharp & Dohme Corp.

One Merck Drive

Whitehouse Station, NJ 08889

United States of America

Facsimile:  [***]

Attention:  Office of Secretary

and to:

Covington & Burling LLP

1201 Pennsylvania Avenue, N.W.

Washington, DC  20004

Facsimile:  (202) 662-6291

Attention:  John Hurvitz

Michael J. Riella

If to Buyer, to:

Forest Laboratories Holdings Limited

Cumberland House

9th Floor

1 Victoria Street

Hamilton HM 11, Bermuda

Attention: Chief Legal Officer

Facsimile: [***]

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

Dentons US LLP

101 JFK Parkway, Suite 400

Short Hills, New Jersey 07078

Attention: John L. Cleary, II

Facsimile: (973) 912-7199

9.3No Benefit to Third Parties.  The covenants and agreements set forth in this Agreement are for the sole benefit of the Parties and their successors and permitted assigns, and, except for the rights of Buyer Indemnitees and Seller Indemnitees under Article 8, they shall not be construed as conferring any rights on any other Persons.

9.4Waiver and Non-Exclusion of Remedies.  Any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving such term or condition.  The waiver by any Party of any right hereunder or of the failure to perform or of a breach by the other Party shall not be deemed a waiver of any other right hereunder or of any other breach or failure by said other Party whether of a similar nature or otherwise.  The rights and remedies provided herein are cumulative and do not exclude any other right or remedy provided by applicable Law or otherwise available except as expressly set forth herein.

9.5Expenses.  Except as otherwise specified herein, and whether or not the Closing takes place, each Party shall bear any costs and expenses incurred by it with respect to the transactions contemplated herein.

9.6Assignment.  Neither this Agreement nor either Party’s rights or obligations hereunder may be assigned or delegated by such Party without the prior written consent of the other Party, and any attempted assignment or delegation of this Agreement or any of such rights or obligations by either Party without the prior written consent of the other Party shall be void and of no effect; provided, however, that either Party may assign or delegate any or all of its rights or obligations hereunder (a) to an Affiliate or (b) in connection with a merger, consolidation or similar change of control transaction of such Party or any divestiture due to considerations under Section 4.4 hereto, without the prior written consent of the other Party.  Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and permitted assigns.

9.7Amendment.  This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by both Parties.

9.8Severability.  If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law, and if the rights or obligations of either Party under this Agreement will not be materially and adversely affected thereby, (a) such provision shall be fully severable, (b) this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and reasonably acceptable to the Parties.

9.9Equitable Relief.  The Parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the Parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity.  Each Party hereby waives (a) any requirement that the other Party post a bond or other security as a condition for obtaining any such relief, and (b) any defenses in any action for specific performance, including the defense that a remedy at law would be adequate.

9.10Dispute Resolution.

9.10.1Negotiation; Mediation.  Except as otherwise expressly provided herein or in any Ancillary Agreement, Buyer and Seller shall attempt to resolve any Dispute through good faith negotiations between senior executives of the Parties (or their delegates) with the authority to settle such Dispute. If such Dispute cannot be resolved through negotiations between such senior executives within [***] days thereafter or within such other time period as the Parties may agree.  Any such mediation shall be conducted in accordance with the Commercial Mediation Procedures of the American Arbitration Association (“AAA”) as such procedures are in effect on the date of such mediation.  If neither Party issues a notice of mediation within such [***]-day (or other agreed upon period), or if the Parties fail to settle such Dispute within [***] days following the notice of mediation, then, with respect to any Dispute other than an Excluded Dispute (as to which, notwithstanding anything to the contrary contained herein, a Party is not limited to any particular forum for resolution of such Dispute, subject to the venue provisions of Section 9.1.3), either Party shall have the right to submit such Dispute to resolution by final and binding arbitration pursuant to Section 9.10.2.  For the avoidance of doubt, except as otherwise expressly provided herein or in any Ancillary Agreement, no Party may seek a binding determination of a Dispute, except through arbitration as provided for in this Section 9.10.

9.10.2Arbitration. The following provisions shall apply to arbitration proceedings commenced pursuant to this Section ‎9.10.2:

(a)The place of arbitration will be New York, New York.  The arbitration will be conducted in the English language.

(b)The arbitral proceedings shall be carried out in accordance with the AAA Commercial Arbitration Rules and Supplementary Procedures for Large Complex Disputes then in effect, except as expressly modified by this Section ‎9.10.2.  The arbitral tribunal shall be composed of three arbitrators experienced in the pharmaceutical industry, selected as follows: (i) each Party shall simultaneously nominate one arbitrator within [***] days after the date on which the respondent(s)’ answer is filed and (ii) the two initial arbitrators will endeavor, within the following [***] days to agree upon the third arbitrator, who shall be the chairman of the arbitral tribunal.  If any arbitrator is not nominated pursuant to the foregoing sentence, the AAA shall appoint such arbitrator.

(c)The Parties shall submit true copies of all documents considered relevant with their respective statement of claim or defense and any counterclaim or reply.  Further, the arbitral tribunal, at its own initiative or upon the request of either Party, may decide to require the submission of additional specific documents or specific, narrow and well-defined classes of documents that the arbitral tribunal considers relevant to the case and material to the outcome of an issue in the applicable Dispute.  The arbitral panel shall limit document production to what is essential in order to resolve the applicable Dispute.  Further, the arbitral tribunal is authorized to make pre- or post-award interest at applicable statutory interest rates during the relevant period.

(d)The written award of the arbitral tribunal shall be final and binding.  Except to the extent set forth in the following sentence, each Party hereby waives irrevocably any right to appeal such arbitration award and its rights to any form of review or recourse to any court or other judicial authority, in each case, to the extent such rights may be waived.  Notwithstanding anything to the contrary herein, each party retains the right to seek judicial assistance (i) to compel arbitration; (ii) to obtain interim measures of protection pending or during arbitration, including injunctive relief and declarations of specific performance; and (iii) to enforce any decision of the arbitral tribunal, including the final award.  Judgment upon the award rendered by the arbitral tribunal may be entered by any court having jurisdiction thereof.

(e)All arbitration fees and costs shall be borne equally by the Parties.  Each Party shall bear its own costs of legal representation and, subject to the immediately preceding sentence, witnesses expenses.

(f)Each applicable Dispute shall be resolved as quickly as reasonably possible.  Any arbitration award must be issued within [***] from completion of the hearing, or as soon as possible thereafter.

9.10.3Each applicable Dispute and any negotiations, mediation and arbitration proceedings, including final decisions and awards, between the parties thereto regarding such Dispute shall be confidential and shall be subject to Section ‎5.4.

9.11Use of Affiliates.  Seller shall have the right to exercise its rights and perform its obligations under this Agreement either itself or through any of its Affiliates. In addition, in each case where an Affiliate of Seller has an obligation pursuant to this Agreement or performs an obligation pursuant to this Agreement, Seller shall cause and compel such Affiliate to perform such obligation and comply with the terms of this Agreement.

9.12English Language.  This Agreement shall be written and executed in, and all other communications under or in connection with this Agreement shall be in, the English language.  Any translation into any other language shall not be an official version thereof, and in the event of any conflict in interpretation between the English version and such translation, the English version shall control.

9.13Bulk Sales Statutes.  Buyer hereby waives compliance by Seller with any applicable bulk sales statutes in any jurisdiction in connection with the transactions under this Agreement.

9.14Counterparts.  This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement.  Delivery of an executed counterpart of a signature page of this Agreement by facsimile or other electronic transmission shall be effective as delivery of a manually executed original counterpart of this Agreement.

9.15Entire Agreement.  This Agreement, together with the Schedules and Exhibits expressly contemplated hereby and attached hereto, the Disclosure Schedules, the Ancillary Agreements, the Confidentiality Agreement and the other agreements, certificates and documents delivered in connection herewith or therewith or otherwise in connection with the transactions contemplated hereby and thereby, contain the entire agreement between the Parties with respect to the transactions contemplated hereby or thereby and supersede all prior agreements, understandings, promises and representations, whether written or oral, between the Parties with respect to the subject matter hereof and thereof.  In the event of any inconsistency between any such Schedules and Exhibits and this Agreement, the terms of this Agreement shall govern.

[Signature page follows]

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first set forth above.

Merck Sharp & Dohme BV

By:/s/ A.M. van der Vat                                                                           

Name:  A.M. van der Vat

Title:  Managing Director

Forest Laboratories Holdings Limited

By:/s/ David F. Solomon                                                                           

Name:  David F. Solomon

Title:  Assistant Secretary

AMENDMENT NO 1. TO ASSET PURCHASE AGREEMENT

This Amendment No. 1 to Asset Purchase Agreement (this “Amendment”), dated as of January 9, 2014, is entered into by and between Merck Sharp & Dohme BV, a limited liability company (a Besloten Vennootschap) organized and existing under the Laws of the Netherlands (“Seller”), and Forest Laboratories Holdings Limited, an Irish corporation (“Buyer”) and amends that certain Asset Purchase Agreement (the “APA”), dated as of November 29, 2013, by and between Buyer and Seller. Capitalized terms used herein and not otherwise defined herein shall have the respective meanings ascribed to such terms in the APA.

WHEREAS, Buyer and Seller are parties to the APA and desire to make certain amendments to the APA as set forth herein in advance of the Closing.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1.           Amendment to Timing of Payment of Consideration.  The APA is hereby amended as follows:

(a)           By deleting Section 2.3.1 of the APA in its entirety and inserting in lieu thereof the following:

"2.3.1                 Purchase Price.  In consideration of the conveyances contemplated under Section 2.1, and the rights granted to Buyer under the License Agreement, Buyer shall pay to Seller (a) (i) on the Closing Date, $155,000,000 (the “Initial Closing Payment”) by wire transfer of immediately available funds to the account designated by Seller by notice to Buyer at least three Business Days prior to the Closing Date, and (ii) upon the later of (A) the Closing Date and (B) (1) in the event that Buyer does not dispute Seller’s Phase IV 2013 Funded Amount Documentation, within [***] following delivery by Seller to Buyer pursuant to Section 2.3.3 of the Phase IV 2013 Funded Amount Documentation, or (2) in the event that Buyer disputes Seller’s Phase IV 2013 Funded Amount Documentation, within [***] of the determination of the Accountants regarding the Phase IV 2013 Funded Amount Documentation pursuant to Section 2.3.3, the Phase IV 2013 Funded Amount (the “Additional Closing Payment” and, together with the Initial Closing Payment, the "Closing Payment"), in the case of each of the Initial Closing Payment and the Additional Closing Payment, by wire transfer of immediately available funds to the account designated by Seller by notice to Buyer at least three Business Days prior to the Closing Date, and (b) the Milestone Payment(s), as and to the extent provided in Section 2.3.2.  Notwithstanding the foregoing, in the event that Buyer disputes only a portion of Seller’s calculation of the Phase IV 2013 Funded Amount, Buyer shall pay Seller the undisputed portion of the Phase IV 2013 Funded Amount within the time period specified in (B)(1) above, with the balance due Seller by Buyer (or any overpayment refunded to Buyer by Seller, if applicable) within [***] of the determination of the Accountants regarding the Phase IV 2013 Funded Amount Documentation pursuant to Section 2.3.3."

(b)           By deleting Section 2.3.3 of the APA in its entirety and inserting in lieu thereof the following:

"2.3.3                 Phase IV Reimbursement Payment.  As soon as is practicable, Seller shall cause to be prepared and delivered to Buyer a statement setting forth the Phase IV 2013 Funded Amount, which statement shall be accompanied by reasonable documentation (as exemplified by Schedule 1.1.113) supporting Seller’s calculation of the Phase IV 2013 Funded Amount set forth therein (such statement and the calculations therein, the “Phase IV 2013 Funded Amount Documentation”). Buyer shall have the right to review and raise any objections in writing to the Phase IV 2013 Funded Amount Documentation within [***] after its receipt thereof.  If Buyer disagrees with respect to any item in the Phase IV 2013 Funded Amount Documentation, the Parties shall promptly negotiate in good faith to resolve the dispute (and, in such case, upon the request of Buyer, Seller shall promptly provide a reasonable level of documentation supporting the calculations included in the statement setting forth the Phase IV 2013 Funded Amount), and Buyer shall pay the Phase IV 2013 Funded Amount not in dispute pursuant to the last sentence of Section 2.3.1.  If the Parties are unable to resolve such dispute within [***] after the commencement of such good faith negotiations (or such longer period as Seller and Buyer may mutually agree in writing), then the Accountants shall be engaged at that time to review the Phase IV 2013 Funded Amount Documentation, and shall make a determination as to the resolution of the Phase IV 2013 Funded Amount Documentation.  The determination of the Accountants regarding the Phase IV 2013 Funded Amount Documentation shall be delivered as soon as practicable following engagement of the Accountants, but in no event more than [***] thereafter, and shall be final, conclusive and binding upon Seller and Buyer, and Seller shall revise the Phase IV 2013 Funded Amount Documentation in accordance with the determination of the Accountants.  Seller, on the one hand, and Buyer on the other hand, shall each pay one-half of the cost of the Accountants."

2.           Amendment to Certain Closing Deliverables.  The APA is hereby amended as follows:

(a)           By deleting the third WHEREAS clause in the RECITALS to the APA in its entirety and inserting in lieu thereof the following:

"WHEREAS, at the Closing, Seller and Buyer intend to enter into certain of the Ancillary Agreements as provided herein."

(b)           By deleting Section 1.1.34 of the APA in its entirety and inserting in lieu thereof the following:

"1.1.34                                "Clinical Supply Agreement" means the Clinical Supply Agreement in form and substance satisfactory to Seller and Buyer to be entered into by Seller and Buyer (or their respective Affiliates) in accordance with Section 5.21 and pursuant to which Seller (or its Affiliate) will supply Product to Buyer (or its Affiliate) for use in the Phase IV Commitments at a purchase price equal to [***]."

(c)           By deleting Section 1.1.141 of the APA in its entirety and inserting in lieu thereof the following:

“1.1.141                      “Seller FDA Letters” means letters to the FDA substantially in the form of Exhibit D, transferring the rights to the Purchased Regulatory Approvals to Buyer.

(d)           By replacing the fifth entry on Schedule 1.1.83 [***] with the following:

[***] [***] [***] [***] [***] [***]

(e)           By adding a new entry on Schedule 1.1.83 just below the fifth entry [***] as follows:

[***] [***] [***] [***] [***] [***] [***]

(f)           By deleting Section 2.4.2(a) of the APA in its entirety and inserting in lieu thereof the following:

"(i)           each of the Ancillary Agreements (other than the Pharmacovigilence Agreement and the Clinical Supply Agreement) to which Seller is a party, validly executed by a duly authorized officer of Seller.  For the avoidance of doubt, the Pharmacovigilence Agreement shall be executed and delivered in accordance with Section 5.8 hereto, the Clinical Supply Agreement shall be executed and delivered in accordance with Section 5.21 hereto, and the Patent Assignment Agreement shall be executed and delivered in accordance with Section 5.20 hereto.

(ii)           a certificate, executed by an officer of Seller and dated the Closing Date, confirming on behalf of Seller that the conditions set forth in Sections 6.2.1 and 6.2.2 have been satisfied;

(iii)           the Purchased Assets; provided, that (A) with respect to tangible Purchased Assets, delivery shall, unless the Parties otherwise mutually agree, be in accordance with the Transition Services Agreement and to a place within the continental United States specified by Buyer by notice to Seller at a time prior to or after the Closing as the Parties mutually agree, and (B) Seller may retain one copy of the Product Records included within the Purchased Assets and the Purchased Contracts (and, for clarity, prior to delivering or making available any files, documents, instruments, papers, books and records containing Product Records to Buyer, Seller shall be entitled to redact from such files, documents, instruments, papers, books and records any information to the extent that it does not relate to the Product Business);

(iv)           [intentionally omitted]; and

(v)           a schedule setting forth in reasonable detail the Closing Inventory.”

(g)           By deleting Section 2.4.2(b) of the APA in its entirety and inserting in lieu thereof the following:

"(i)           each of the Ancillary Agreements (other than the Pharmacovigilence Agreement and the Clinical Supply Agreement) to which Buyer is a party, validly executed by a duly authorized officer of Buyer.  For the avoidance of doubt, the Pharmacovigilence Agreement shall be executed and delivered in accordance with Section 5.8 hereto and the Clinical Supply Agreement shall be executed and delivered in accordance with Section 5.21 hereto.

(ii)           a certificate, executed by an officer of Buyer and dated the Closing Date, confirming on behalf of Buyer that the conditions set forth in Sections 6.3.1 and 6.3.2 have been satisfied;

(iii) [intentionally omitted]; and

(iv) a guaranty, substantially in the form of Exhibit E, from the Buyer’s parent company for fulfillment of Buyer’s and its Affiliates’ financial obligations under this Agreement and the Ancillary Agreements to which Buyer's parent is not a party

(h)  By deleting Section 5.5 of the APA in its entirety and inserting in lieu thereof the following:

"5.5           FDA Letters.  (a) Seller shall file the Seller FDA Letter, with FDA no later than [***] and shall provide Buyer with notice of such filing at the time of filing.  (b)  Buyer shall file the Buyer FDA Letter within [***] of the date that Seller files the Seller FDA Letter; provided that Buyer's obligation shall be conditioned on it receiving from Seller not less than [***] prior to the date that Buyer shall file the Buyer FDA Letter with FDA the complete regulatory file from Seller for all the relevant INDs and NDAs."

(i)           By inserting a new Section 5.21 to the APA immediately following Section 5.20 of the APA which reads as follows:

"5.21         Clinical Supply Agreement. Within [***] after the Closing Date, the Parties shall negotiate and execute the Clinical Supply Agreement.  If necessary to perform under the Clinical Supply Agreement, each Party shall duly and punctually perform all of its obligations under the Clinical Supply Agreement and in compliance with applicable Law to the extent that such party has any obligation to perform under the Clinical Supply Agreement. "

3.           Miscellaneous.

(a)           Except as expressly set forth herein, the APA shall remain in full force and effect and all other terms and conditions of the original APA, as amended, remain unchanged.

(b)           THIS AMENDMENT AND THE APA AS AMENDED BY THIS AMENDMENT, TOGETHER WITH THE OTHER DOCUMENTS REFERRED TO HEREIN AND THEREIN, SETS FORTH THE ENTIRE AGREEMENT AND UNDERSTANDING OF BUYER AND SELLER WITH RESPECT TO THE SUBJECT MATTER HEREOF, AND SUPERCEDES ALL PRIOR DISCUSSIONS, AGREEMENTS AND WRITINGS IN RELATION THERETO.  ALL MATERIAL REPRESENTATIONS AND WARRANTIES ON WHICH THE PARTIES HAVE RELIED IN CONNECTION WITH THE NEGOTIATION OF THIS AMENDMENT, IF ANY, ARE STATED EXPRESSLY IN THIS AMENDMENT.

(c)           This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but both of which when taken together shall constitute one and the same instrument.

(signature page follows)

IN WITNESS WHEREOF, the Parties have executed this Amendment as of the date first set forth above.

Merck Sharp & Dohme BV

By:/s/ M.L.P.J. Mol-Arts                                                                           

Name:  ML.P.J. Mol-Arts

Title:  General Manager, MSD Oss

Forest Laboratories Holdings Limited

By:/s/ Francis I. Perier, Jr.                                                                           

Name:  Francis I. Perier, Jr.

Title:  Secretary

EX-10.9

[***] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

LICENSE AGREEMENT

By and between

Merck Sharp & Dohme BV

and

Forest Laboratories Holdings Limited

Dated as of January 10, 2014

TABLE OF CONTENTS

ARTICLE 1 DEFINITIONS

ARTICLE 2 GRANT OF RIGHTS

2.1 Grants to Buyer.

2.2 Retention of Rights.

2.3 Sublicenses.

2.4 Grants to Seller.

2.5 No Implied Rights.

2.6 Covenants Relating to In-License Agreements and Other Agreements.

ARTICLE 3 TERRITORIAL RESTRICTIONS; COMPLIANCE

3.1 Buyer Restrictions

3.2 Seller Restrictions.

3.3 Compliance with Legal Requirements.

3.4 Compliance

ARTICLE 4 PAYMENTS AND RECORDS

4.1 Royalty.

4.2 Payments and Reports.

4.3 Payment Method.

4.4 Late Payments.

4.5 Withholding Taxes.

4.6 Records.

4.7 Audit.

ARTICLE 5 LICENSED PATENTS

5.1 Maintenance and Prosecution of Licensed Patents.

5.2 Enforcement of Licensed Patents.

5.3 Infringement Claims by Third Parties.

5.4 Invalidity or Unenforceability Defenses or Actions.

5.5 Third Party Licenses.

ARTICLE 6 LICENSED TRADEMARKS

6.1 Use of Licensed Trademarks.

6.2 Approval Procedures

6.3 Clearance; Registration, Prosecution and Maintenance of Licensed Trademarks.

6.4 Enforcement of Licensed Trademarks.

6.5 No Implied Rights.

ARTICLE 7 LICENSED DOMAIN NAMES

7.1 Ownership and Goodwill.

7.2 Registration and Maintenance.

7.3 Country-Specific Traffic.

7.4 Enforcement.

ARTICLE 8 CONFIDENTIALITY AND NON-DISCLOSURE

ARTICLE 9 DISCLAIMER OF WARRANTIES

ARTICLE 10 INDEMNITY

10.1 Indemnification of Seller.

10.2 Indemnification of Buyer.

10.3 Indemnification Procedures.

10.4 Limitation on Damages and Liability.

10.5 Insurance.

ARTICLE 11 TERM

11.1 Term.

11.4 Consequences of Termination.

ARTICLE 12 MISCELLANEOUS

12.1 Governing Law, Jurisdiction, Venue and Service.

12.2 Dispute Resolution.

12.3 Equitable Relief

12.4 Notices.

12.5 No Benefit to Third Parties.

12.6 Waiver and Non-Exclusion of Remedies.

12.7 Expenses

12.8 Assignment.

12.9 Use of Affiliates.

12.10 Amendment.

12.11 Independent Contractors.

12.12 Severability.

12.13 English Language.

12.14 Counterparts.

12.15 Entire Agreement.

12.16 Construction.

SCHEDULES

Schedule 1                      Seller Marks

Schedule 2                      Trademark Usage Guidelines and Quality Standards

LICENSE AGREEMENT

                      This License Agreement (this “Agreement”) is madeand entered into effective as of January 10, 2014 (the “Effective Date”)by and between Merck Sharp & Dohme BV, a limited liability company (a Besloten Vennootschap) organized and existing under the Laws of the Netherlands(“Seller”), and Forest Laboratories Holdings Limited, an entity organized and existing under the Laws of Ireland (“Buyer”).  Seller and Buyer are sometimes referred herein individually as a “Party” and collectively as the “Parties.”

RECITALS

                      WHEREAS, Seller and Buyer are parties to that certain Asset Purchase Agreement, dated as of November 29, 2013 (the “Asset Purchase Agreement”), pursuant to which, effective as of the Closing, Buyer is purchasing from Seller certain assets related to the Product in the Buyer Territory and Seller is required to grant a license and right of referenceto Buyer, and Buyer is required to take a license and right of reference, under the Licensed IP and Documentation to Exploit the Product and Other Products in the Buyer Territory; and

                      WHEREAS, following the Closing, Buyer will Control certain regulatory data and approvals with respect to the Product and is required to grant a right of reference to Seller, and Seller is required to take a right of reference, under such regulatory data and approvals with respect to the Product to Exploit the Product and Other Products in the Seller Territory.

                      NOW, THEREFORE, in consideration of the premises and the mutual promises and conditions hereinafter set forth and set forth in the Asset Purchase Agreement, the other Ancillary Agreements, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

ARTICLE 1                                

DEFINITIONS

Unless otherwise specifically provided herein, the following capitalized terms shall have the meanings set forth in this Article 1 when used in this Agreement, and capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed thereto in the Asset Purchase Agreement.

1.1“Agreement”has the meaning set forth in the preamble hereto.

1.2“Asset Purchase Agreement”has the meaning set forth in the recitals hereto.

1.3“Assigned Patents” means those Patent Rights assigned to Buyer pursuant to Section 5.20 of the Asset Purchase Agreement.

1.4“Assigning Party” has the meaning set forth in Section 12.8.

1.5“Buyer”has the meaning set forth in the preamble hereto.

1.6“Buyer Indemnitees”has the meaning set forth in Section 10.2.

1.7“Buyer Regulatory Approvals and Documentation” means any and all Regulatory Approvals and other Regulatory Documentation related to the Product, or any Other Product, in each case, that are Controlled by Buyer or any of its Affiliates effective as of and following the Closing, including the Purchased Regulatory Approvals and any other Regulatory Documentation included in the Purchased Assets.

1.8“Buyer Trademark” has the meaning set forth in Section 6.2.3.

1.9“Consenting Party” has the meaning set forth in Section 12.8.

1.10“Effective Date”has the meaning set forth in the preamble hereto.

1.11“Enforcing Party” has the meaning set forth in Section 5.2.2.

1.12“First Commercial Sale” means, with respect to a product, the first purchase and sale of such product, following receipt of marketing approval, to one or more Third Parties for value for use or consumption by the general public.

1.13“Generic Entry” means the First Commercial Sale in the Buyer Territory of a second Generic Product, other than any Authorized or Owned Generic Product.

1.14“Hatch-Waxman Act” means the United States “Drug Price Competition and Patent Term Restoration Act” of 1984, as set forth at 21 U.S.C. §355(b)(2)(A)(iv) or (j)(2)(A)(vii)(IV).

1.15“Infringement” has the meaning set forth in Section 5.2.2.

1.16“Invalidity Claim” has the meaning set forth in Section 5.4.

1.17“Licensed IP and Documentation” has the meaning set forth in Section 2.1.

1.18“Licensed Domain Names” means (a) Licensed Domain Names, as such term is defined in the Asset Purchase Agreement and (b) any other domain names deemed Licensed Domain Names pursuant to Section 7.1.

1.19“Licensed Trademarks” means (a) the Licensed Trademarks, as such term is defined in the Asset Purchase Agreement and (b) any other Trademarks (including, for clarity, any trade dress) that are variations or derivatives of any Trademark in subclause (a) above that Buyer, or the Parties jointly, may develop under this Agreement for use on or in connection with the Exploitation of the Product or any Other Productin the Buyer Territory, but in each case ((a) and (b)), excluding any Seller Marks.

1.20“[***] Product” means any Other Product [***].

1.21“[***] Loss of Exclusivity” means, with respect to a [***], the First Commercial Sale in the Buyer Territory of the second pharmaceutical product that is (a) distributed under a Regulatory Approval approved by FDA expressly in reliance on the prior approval of such [***] pursuant to 21 U.S.C. 355(j) and (b) under applicable Law is substitutable for such [***] as administered to patients without the intervention of a physician or other health care provider with prescribing authority, other than any such pharmaceutical product described in clauses (a) and (b) above that is marketed, distributed or sold in the Buyer Territory by or on behalf of or under a license or sublicense from Buyer or any of its Affiliates.

1.22“Notice” has the meaning set forth in Section 12.4.1.

1.23“Officials” has the meaning set forth in Section 3.4.2.

1.24“Party”and“Parties”each has the meaning set forth in the preamble hereto.

1.25“Payment” has the meaning set forth in Section 3.4.2.

1.26“Product Label” means, with respect to the Product or any Other Productin the Buyer Territory, (a) the Regulatory Authority-approved full prescribing information for the Product or any Other Product, as applicable, including any required patient information and (b) all labels and other written, printed or graphic matter upon a container, wrapper or any package insert utilized with or for the Product or any Other Product, as applicable.

1.27“Seller” has the meaning set forth in the preamble hereto.

1.28“Seller Indemnitees”has the meaning set forth in Section 10.1.

1.29“Seller Marks” means the trade names, corporate names, trade dress and corporate logos of Seller or Seller’s Affiliates that are used by Seller or any of Seller’s Affiliates in connection with the Product in the Buyer Territory or the Product Business prior to or as of the Execution Date, but which are not used exclusively in connection with the Product in the Buyer Territory or the Product Business, including those Trademarks listed on Schedule 1.

1.30“Seller Other Product” has the meaning ascribed to such term in Section 2.2.

1.31“Seller Territory IP” means (a) counterparts of the Licensed Patents or Assigned Patents in the Seller Territory and (b) the data, information and know-how that is not generally known, that is Controlled by Seller or its Affiliates, and is used by or on behalf of Seller, for the Manufacture of the Product in the Seller Territory; provided, that if such data, information or know-how becomes publicly disclosed (other than as a result of any disclosure by Buyer in breach of its obligations under Section 5.4 of the Asset Purchase Agreement or any other provision of any Ancillary Agreement), such data, information or know-how shall no longer be deemed Seller Territory IP.

1.32“Sublicensee”means a Third Party that is granted a sublicense by Buyer under the grant in Section 2.1, as provided in Section 2.3.

1.33“Supplied Product” has the meaning assigned to such term in the Supply Agreement or the Clinical Supply Agreement,as applicable.

1.34“Term” has the meaning set forth in Section 11.1.

1.35“Third Party Claims” has the meaning set forth in Section 10.1.

     ARTICLE 2                                

GRANT OF RIGHTS

2.1Grants to Buyer.Subject to the terms and conditions of this Agreement and in consideration of the amounts due hereunder and under the Asset Purchase Agreement, Seller hereby grants to Buyer and its Affiliates a license and right of reference, with the right to grant sublicenses and further rights of reference in accordance with Section 2.3, to the Licensed Patents, Licensed Know-How, Licensed Regulatory Documentation, the Licensed Copyrights, the Licensed Trademarks and the Licensed Domain Names and, solely in connection with the grant in Section 2.1.3, to the Seller Territory IP (collectively, the “Licensed IP and Documentation”):

2.1.1to use, sell, offer for sale, have sold, promote, market, distribute and otherwise commercialize (including the importation and exportation of compounds (including asenapine), the Product in the Buyer Territory, which license shall be, with respect to the foregoing rights, in each case, to the extent Controlled by Seller or its Affiliates as of the Execution Date or any time thereafter, exclusive (even as to Seller or its Affiliates), fully-paid, perpetual, irrevocable, royalty-free and non-transferable (except as expressly provided in this Agreement);

2.1.2as necessary to obtain, maintain and hold Regulatory Approvals for and to otherwise Exploit the Product in the Buyer Territory, which license shall be exclusive, fully-paid, perpetual, irrevocable, royalty-free and non-transferable (except as expressly provided in this Agreement);

2.1.3subject to the applicable terms of the Supply Agreement and the Clinical Supply Agreement with respect to Manufacture of Product, to Manufacture and have Manufactured (including the importation or exportation of components (including asenapine) for Manufacture) the Product worldwide for Exploitation of the Product in the Buyer Territory, which license shall be, with respect to the foregoing rights, in each case, to the extent Controlled by Seller or its Affiliates as of the Execution Date or any time thereafter, non-exclusive, fully-paid, perpetual, irrevocable, royalty-free and non-transferable (except as expressly provided in this Agreement); and

2.1.4with respect to Manufacture of Other Product, to Manufacture and have Manufactured (including the importation or exportation of components (including asenapine) for Manufacture) any Other Product worldwide for Exploitation of such Other Product in the Buyer Territory, which license shall be, with respect to the foregoing rights, in each case, to the extent Controlled by Seller or its Affiliates as of the Execution Date or any time thereafter, non-exclusive, fully-paid, perpetual, irrevocable, royalty-free and non-transferable (except as expressly provided in this Agreement);

2.1.5to Exploit any Other Product in the Buyer Territory, which license shall be exclusive (subject to Section 2.2), fully-paid, perpetual, irrevocable, royalty-free (except with respect to Combination Products, which shall be royalty-bearing in accordance with this Agreement) and non-transferable (except as expressly provided in this Agreement).

2.2Retention of Rights.Notwithstanding the rights granted to Buyer in this Agreement, Seller retains, on behalf of itself and its Affiliates, and its and their licensees, Sublicensees, licensors and distributors, such rights in and to the Licensed IP and Documentation, in each case, as may be necessary or useful (a) to perform its obligations under the Asset Purchase Agreement or any Ancillary Agreement, including this Agreement, the In-License Agreements and the Other Agreements, (b) to Manufacture or have Manufactured the Product or any Other Productworldwide, (c) to export or import the Product or any Other Productanywhere in the world in connection with the Manufacture or Exploitation of the Product or any Other Productin the Seller Territory, (d) to Exploit the Product or any Other Product in the Seller Territory and to develop Other Product in the Buyer Territory as necessary for obtaining regulatory approvals in the Seller Territory, (e) to perform research and development activities with respect to asenapine in the Seller Territory and to perform research and development activities with respect to asenapine (but excluding the Product) in the Buyer Territory as necessary to obtain regulatory approvals in the Seller Territory, and (f) to Manufacture, have Manufactured or Exploit products for use in humans on a non-prescription basis and for use in animals worldwide.  Notwithstanding clause (f) of this Section 2.2, Seller shall not, and it shall cause its Affiliates not to, market, sell, distribute or otherwise commercialize in the Buyer Territory a version of the Product that is available for use by humans on a non-prescription basis prior to the later of (x) the last to expire of the Valid Claims covering the Product under the Licensed Patents and Assigned Patents and (y) the Milestone Termination Date.  For clarity, nothing in the foregoing shall be deemed to grant to Seller (or its Affiliates) any rights (express or implied) of Buyer or its Affiliates in any information, data or intellectual property rights developed by Buyer or its Affiliates with respect to Other Products, and Seller’s rights retained by the foregoing provisions, as to Other Products, shall be solely to the extent such Other Products are developed by Seller or its Affiliates independently of Buyer and its Affiliates and Sublicensees (such Other Products, the “Seller Other Products”), and in compliance with all terms of this Agreement, the Asset Purchase Agreement and all other Ancillary Agreements.

2.3Sublicenses.  Buyer shall have the right to grant sublicenses (and further rights of reference) under the licenses and rights granted in Section 2.1 of this Agreement through multiple tiers of Sublicensees; provided that Buyer shall remain jointly and severally liable for the performance or non-performance of any such Sublicensee.  Buyer hereby acknowledges that the grant of any such sublicense shall not relieve Buyer of its obligations under this Agreement, except to the extent such obligations are performed by such Sublicensee.  A copy of any sublicense agreement executed by Buyer pursuant to this Section 2.3 (provided that the financial terms and other highly confidential information of any such sublicense agreement may be redacted to the extent not pertinent to an understanding of either Party’s obligations or benefits under this Agreement) shall be provided to Seller within [***] after its execution by the parties thereto.  Notwithstanding the foregoing, Buyer shall not be required to provide any sublicense agreement entered into by Buyer pursuant to this Section 2.3 that is entered into by Buyer in the ordinary course of its Exploitation of the Product in the Buyer Territory to the extent that any such agreement (x) consists of non-exclusive sublicenses under the Licensed Trademarks or Licensed Copyrights granted for the sole purpose of performing services on behalf of Buyer in connection with its Exploitation of the Product and (y) is otherwise consistent with, and expressly made subject to, the terms and conditions of this Agreement.

2.4Grants to Seller.Subject to the terms and conditions of this Agreement, Buyer (on behalf of itself and its Affiliates, licensees, Sublicensees and distributors) hereby grants to Seller and its Affiliates a fully-paid, royalty-free, non-transferable (except as expressly provided in this Agreement) license and right of reference, with the right to grant sublicenses and further rights of reference through multiple tiers, to all Buyer Regulatory Approvals and Documentation as necessary to Exploit and Manufacture or have Manufactured the Product and Seller Other Products solely for use, sale, offering for sale, having sold, promotion, marketing or other commercialization in the Seller Territory, which license shall be (a) exclusive with respect to such use, sale, offering for sale, having sold, promotion, marketing or other commercialization and (b) non-exclusive with respect to other Exploitation and Manufacturing of the Product and Seller Other Products.  Buyer (on behalf of itself and its Affiliates) hereby grants to Seller and its Affiliates a fully-paid, royalty-free, perpetual license, with the right to grant sublicenses, to the Assigned Patents as necessary to: (i) Exploit and Manufacture or have Manufactured the Product and Seller Other Products solely for use, sale, offering for sale, having sold, promotion, marketing or other commercialization in the Seller Territory, which license shall be (x) exclusive with respect to such use, sale, offering for sale, having sold, promotion, marketing or other commercialization and (y) non-exclusive with respect to other Exploitation and Manufacturing of the Product and Seller Other Products; and (ii) exercise those rights of Seller and its Affiliates in Section 2.1.4 of the Asset Purchase Agreement.

2.5No Implied Rights.  For the avoidance of doubt, (a) Buyer and its Affiliates, licensees, Sublicensees and distributors shall have no right, express or implied, with respect to the Licensed IP and Documentation, except as expressly provided in Section 2.1 and elsewhere in this Agreement, in Section 2.3(b)(ii) of the Supply Agreement and in the Clinical Supply Agreement, and (b) Seller and its Affiliates, licensees, sublicensees and distributors shall have no right, express or implied, with respect to the Buyer Regulatory Approvals and Documentation, except as expressly provided in Section 2.4 and elsewhere in this Agreement.  Except as expressly granted herein, in the Asset Purchase Agreement or in any other Ancillary Agreement, neither Party grants the other Party any right or license to any assets or rights, including intellectual property rights, of such Party or its Affiliates.

2.6Covenants Relating to In-License Agreements and Other Agreements.  Subject to this Section 2.6, Buyer shall be bound by and enjoy the benefit of the terms and conditions applicable to the Exploitation of the Product and any Other Product, as permitted under this Agreement, under the In-License Agreements in the Buyer Territory. Buyer agrees that it shall comply in all material respects with the specific terms and conditions of such In-License Agreements in connection with its receipt and exercise of rights hereunder or under the Supply Agreement, to the extent Buyer has been provided a true and complete copy of such In-License Agreement (provided that any such terms and conditions of each In-License Agreement may be redacted to preserve the confidentiality of financial information and Buyer shall not be obligated to comply with any such redacted terms or conditions) and solely to the extent such compliance would not contravene applicable Law or any provision of this Agreement, the Asset Purchase Agreement or any Ancillary Agreement.  Seller, through its actions or inactions, shall not be in material breach of any In-License Agreement or any Other Agreement to the extent that being in such material breach materially adversely affects Buyer’s rights under this Agreement or the Supply Agreement.  Buyer, through its actions or inactions, shall not knowingly cause Seller to be in material breach of any terms of In-License Agreement or any Other Agreement that have been disclosed in writing to Buyer; provided, however, that in the event of any allegation of such breach by a Third Party that is a party to any such agreement, Buyer shall have the opportunity to cure such alleged breach in accordance with (and for any period of cure provided in) the terms of the applicable In-License Agreement or Other Agreement.

                            ARTICLE 3                                

TERRITORIAL RESTRICTIONS; COMPLIANCE SALES

3.1Buyer Restrictions.In partial consideration of the rights and licenses granted herein and for amounts due hereunder and under the Asset Purchase Agreement, other than as expressly set forth in this Agreement, Buyer shall not (and Buyer shall ensure that its Affiliates, and shall use commercially reasonable efforts to ensure that its Sublicensees, do not), in all cases outside the Buyer Territory, promote, market, sell or solicit orders for or otherwise commercialize the Product or any Other Product, except pursuant to this Agreement, the Asset Purchase Agreement or any other Ancillary Agreement.  Seller acknowledges that, given the nature of modern communications and advertising media, Buyer’s (and its Affiliates’ or Sublicensees’) marketing and promotion of Product or any Other Product, intended for customers located in the Buyer Territory, may be received or viewed by Persons outside of the Buyer Territory, and such fact shall not be deemed to violate the foregoing covenant so long as Buyer or the Person conducting such marketing or promotion does not intend for such activities to influence buying or prescribing activities outside of the Buyer Territory.

      3.2Seller Restrictions.Seller shall not (and Seller shall ensure that its Affiliates, and shall use commercially reasonable efforts to ensure that its sublicensees hereunder, do not), in all cases outside the Seller Territory, promote, market, sell, solicit orders for or otherwise commercialize the Product or any Other Product, except pursuant to this Agreement, the Asset Purchase Agreement or any other Ancillary Agreement.  Buyer acknowledges that, given the nature of modern communications and advertising media, Seller’s (and its Affiliates’, licensees’ or sublicensees’) marketing and promotion of Product or any Other Product, intended for customers located in the Seller Territory, may be received or viewed by Persons outside of the Seller Territory, and such fact shall not be deemed to violate the foregoing covenant so long as Seller or the Person conducting such marketing or promotion does not intend for such activities to influence buying or prescribing activities outside of the Seller Territory.

3.3Compliance with Legal Requirements.Each of Buyer and Seller shall conduct, and shall use commercially reasonable efforts to ensure that each of their Affiliates, sublicensees, Sublicensees, and Third Party subcontractors and distributors conduct, all its respective activities concerning the Product and the Licensed IP and Documentation hereunder in material compliance with all applicable Laws.  In addition, each Party certifies that it will not knowingly employ or otherwise use in any capacity, the services of any Person debarred under United States Law, including 21 U.S.C. Section 335a or who is the subject of a conviction described in such section, in connection with the Exploitation of the Product or the performance of any portion of its activities hereunder or pursuant hereto, as the case may be.

3.4Compliance.

3.4.1Compliance with Law.  Each Party shall maintain a compliance program consistent with the “Compliance Program Guidance for Pharmaceutical Manufacturers,” published by the Office of Inspector General, U.S. Department of Health and Human Services.  Each Party agrees to conduct, to cause its Affiliates to conduct, and to use commercially reasonable efforts to cause its Sublicensees and Third Party contractors and distributors to conduct, the activities contemplated with respect to this Agreement in a manner that is consistent with applicable Law.

3.4.2Governments and International Public Organizations.  Each Party shall not make any payment, shall ensure that its Affiliates and shall use commercially reasonable efforts to ensure that its Sublicensees and Third Party contractors and distributors do not, make any payment, either directly or indirectly, of money or other assets, including the compensation the Party derives from this Agreement in connection with the subject matter of this Agreement (collectively referred as a “Payment”), to (a) government or political party officials, officials of international public organizations, candidates for public office, or representatives of other businesses or Persons acting on behalf of any of the foregoing (collectively referred as “Officials”) where such Payment would constitute a violation of any Law applicable to Seller, Buyer or any of their respective Affiliates, or (b) Officials if such Payment is for the purpose of influencing decisions or actions with respect to the subject matter of this Agreement.

3.4.3No Authority.  Buyer acknowledges that no employee of Seller or its Affiliates shall have authority to give any direction, either written or oral, relating to the making of any commitment by Buyer or its agents to any Third Party in violation of terms of this or any other provisions of this Agreement.

3.4.4Exclusions List.  Each Party shall not use (and shall cause its Affiliates not to use) any Person (including any employee, officer, director, Sublicensee or Third Party contractor or distributor) who is (or has been) on the Exclusions List of the Office of Inspector General, U.S. Department of Health & Human Services.  Each Party certifies to the other Party that, as of the Effective Date, such Party has screened itself, and its officers and directors against the Exclusions List of the Office of Inspector General, U.S. Department of Health & Human Services.

ARTICLE 4                                

PAYMENTS AND RECORDS

4.1Royalty.  As further consideration for the rights granted to Buyer hereunder, commencing upon the First Commercial Sale of a Combination Product or a [***] in the Seller Territory, Buyer shall pay to Seller a royalty of as a percentage of Net Sales of Combination Products and [***] by Seller, its Affiliates and Sublicensees in the Buyer Territory, which obligation shall expire as described below in this Section 4.1.  Such royalty rate percentage shall equal:  (a) [***] for Combination Products and [***] that are claimed, or the use or Manufacture of which are claimed, by Patent Rights in the Licensed Patents or Assigned Patents at the time of sale in the Buyer Territory by Buyer or its Affiliate or sublicensee; and (b) [***] for Combination Products and [***] that are not within the criteria in subsection (a) above, but that relied on Licensed Know-How or clinical data or other know-howincluded in the Purchased Assets to obtain regulatory approval in the Buyer Territory.  Buyer acknowledges that (x) the Licensed Know-How and the information included in the Licensed Regulatory Documentation licensed to Buyer are proprietary and valuable and that without the Licensed Know-How and such information, Buyer would not be able to obtain and maintain Regulatory Approvals with respect to the Combination Products, (y) access to the Licensed Know-How and the rights with respect to the Licensed Regulatory Documentation and the other rights granted hereunder have provided Buyer with a competitive advantage in the marketplace beyond the exclusivity afforded by the Licensed Patents and Assigned Patents and the Buyer Regulatory Approvals and Documentation and (z) the royalties set forth in this Section 4.1 are, in part, intended to compensate Seller for such exclusivity and such competitive advantage.  The Parties agree that the royalty rate set forth in this Section 4.1 reflects an efficient and reasonable blended allocation of the value provided by Seller to Buyer.  For clarity, (1) [***] no royalty will be owed under this Article 4 for any subsequent sales of any Combination Product and (2) [***] no royalty or other payment will be owed under this Article 4 for any subsequent sales of the applicable [***].

      4.2Payments and Reports.  Buyer shall calculate all amounts payable to Seller pursuant to Section 4.1 promptly after the end of each Calendar Quarter and shall pay to Seller the amounts due with respect to a given Calendar Quarter within [***] after the end of such Calendar Quarter.  Each payment of royalties due to Seller shall be accompanied by the applicable Quarterly Net Sales Report delivered pursuant to Section 5.15.1 of the Asset Purchase Agreement and a calculation of the amount of royalty payment due on such Net Sales for such Calendar Quarter.  Without limiting the generality of the foregoing, Buyer shall require its Affiliates and Sublicensees to account for their Net Sales of Combination Products or [***], as applicable, and to provide such reports with respect thereto as if such sales were made by Buyer.

4.3Payment Method.  All payments to be made by a Party under this Agreement shall be paid in U.S. Dollars, by wire transfer, pursuant to the instructions of Seller, as such instructions may be designated from time to time by Seller at least 10 Business Days prior to the date payment is due.  Buyer shall have no right to offset, set off or deduct any amounts from or against the amounts due to Seller hereunder or under the Asset Purchase Agreement or any other Ancillary Agreement.

4.4Late Payments.  In the event that any payment is not paid in accordance with the provisions of this Article 4 or the Supply Agreement, as applicable, the overdue amount shall bear interest, at a rate equal to [***], as of the date such payment is due, or the maximum rate permitted under applicable Law, whichever is less, until the entire unpaid overdue amount shall have been paid in full.

4.5Taxes.

4.5.1Withholding Taxes. If applicable Laws require withholding of income or other similar Taxes imposed upon any payments made by Buyer to Seller under this Article 4, Buyer shall make such withholding payments to the applicable tax authorities as may be required and shall subtract such withholding payments from such payments.  Buyer shall submit reasonable proof of payment of the withholding Taxes to Seller within a reasonable period of time. Buyer shall promptly provide Seller with copies of the official receipts.  Buyer shall render Seller reasonable assistance in order to allow Seller to obtain the benefit of any present or future treaty against double taxation which may apply to such payments.

4.5.2Value Added Taxes and Similar Taxes.  All amounts due under this Article 4 are exclusive of sales, use, goods and services, value added, excise, and other Taxes, duties or charges of a similar nature imposed by any Governmental Authority, or other taxing authority. If any sales, use, goods and services, value added, excise, or other Taxes, duties or charges of a similar nature will be chargeable with respect to the payments or transactions hereunder, Buyer shall pay, or upon receipt of invoice from Seller shall reimburse Seller for, these amounts at the rate in force at the due time for payment or such other time as is stipulated under the relevant legislation.  Each of Seller and Buyer shall use commercially reasonable efforts to minimize obligations relating to Taxes of the nature described in this Section 4.5.2 as a result of the transactions contemplated by this Agreement.

4.6Records.  Buyer and its Affiliates shall prepare and maintain complete and accurate books and records of account, in accordance with GAAP, of all transactions and other business activities under this Agreement, sufficient to confirm the accuracy of all reports furnished by Buyer under this Agreement and all payments by Buyer to Seller under this Agreement.  Such records shall be maintained by Buyer and its Affiliates for the Calendar Year to which such records pertain and for a period of [***] thereafter.

4.7Audit.  Seller and its Affiliates shall have the audit rights set forth in Section 5.16 of the Asset Purchase Agreement.

ARTICLE 5                                

LICENSED PATENTS AND ASSIGNED PATENTS

5.1Maintenance and Prosecution of Licensed Patent and Assigned Patents.  Buyer shall have the sole right, but not the obligation, at its sole expense, to prepare, file, prosecute and maintain (including with respect to related interference, re-issuance, re-examination and opposition proceedings) the Licensed Patents and Assigned Patents in the Buyer Territory.  Buyer shall have the sole right to make decisions regarding patent term extensions, including any extensions that are now or become available in the future with respect to the Licensed Patents and Assigned Patents.Seller shall assist and cooperate with Buyer as Buyer may reasonably request from time to time in connection with its activities set forth in this Section 5.1.  Subject to the other provisions of this Article 5, neither Seller nor Buyer shall, without the other Party’s prior written consent, (a) take any action to abandon or withdraw any application for any Licensed Patents or Assigned Patent, or (b) permit any Licensed Patents or Assigned Patent to lapse or expire.  Notwithstanding the foregoing, Buyer may elect to cease further prosecution or maintenance of particular patent applications or patents in the Licensed Patents or Assigned Patents, and if Buyer so elects it shall notify Seller in writing of any such proposed action not less than [***] prior to the date on which any applicable filing or payment is due.  Upon receipt of such notice, Seller shall have the right, but, notwithstanding the foregoing, not the obligation to immediately assume control of the preparation, filing, prosecution or maintenance of such Licensed Patents and/or Assigned Patent at its sole expense.  All costs and expenses of preparing, filing, prosecuting and maintaining the Licensed Patents and/or Assigned Patents in the Buyer Territory shall be [***].

5.2Enforcement of Licensed Patents and Assigned Patents.

5.2.1Notice.If any Licensed Patent or Assigned Patent is allegedly to be or is actually infringed by a Third Party in a manner relating to the Product or any Other Product, the Party first having knowledge of such infringement shall promptly notify the other in writing, which notice shall set forth the facts known to such Party of that infringement in reasonable detail.

5.2.2Licensed Patents and Assigned Patents.  Subject to Section 5.3.1 and this Section 5.2.2, Buyer shall have the initial right, but not the obligation, through counsel of its choosing, to control the enforcement of the Licensed Patents and Assigned Patents against any activity involving the use, development, formulation, testing, assembly, packaging, transportation, importation, distribution, marketing, sale, offer for sale or other commercialization activity relating to a product containing asenapine (an “Infringement”), including the right to grant any Third Party rights and licenses necessary to conduct activities under the Licensed Patents and/or Assigned Patents.  In the event that Buyer decides not to enforce the Licensed Patents against such Infringement, Buyer shall provide written notice thereof to Seller within [***] after the date on which it provides notice or receives notice in accordance with Section 5.2.1, in which case Seller shall have the right, but not the obligation, to request that Buyer consent to Seller’s enforcing the applicable Licensed Patents against such Infringement, such consent not to be unreasonably withheld.  If Seller makes such request and Buyer so consents, then Seller shall have the ability to control enforcement of the Licensed Patents against such Infringement.  The Party enforcing the Licensed Patents against an Infringement shall be referred to herein as the “Enforcing Party.” [***]  If Seller gives such notice, the Parties shall discuss in good faith the appropriate actions to be taken in response to such infringement; provided, however, that if the Parties are unable to come to a mutually acceptable resolution within [***] of such notice, then the Enforcing Party shall be entitled to undertake such enforcement in its sole discretion, taking Seller’s concerns into good faith consideration.

5.2.3Enforcement Procedure; Costs and Recovery.  In the event that an Enforcing Party asserts a claim or brings an infringement action ("Action") against an Infringement in accordance with Section 5.2.2, the other Party shall cooperate fully with the Enforcing Party in connection therewith, including furnishing powers of attorney, being joined as a party plaintiff in such Action, providing access to relevant documents and other evidence and making its employees available at reasonable business hours.  The Enforcing Party in any Action against such alleged Infringement shall consider in good faith any comments from the other Party and shall keep the other Party reasonably informed of any steps taken to preclude such infringement (provided that neither Party shall not be required to disclose any information subject to the attorney/client privilege, attorney work product or other highly confidential information).  The Enforcing Party shall have the right to settle any such Action in its discretion; provided that the Enforcing Party shall not have any right to settle any such Action, including by the grant of any license rights, in a manner that materially negatively impacts the other Party or any of Affiliates or sublicensees, except (a) subject to Section 10.1(d), Buyer, as the Enforcing Party, without the consent of Seller, shall have the right to settle any such Action based on the Hatch-Waxman Act, and (b) otherwise, with the other Party’s prior written consent, such consent not to be unreasonably withheld, conditioned or delayed.  [***].  Any damages or other amounts collected shall be first allocated to reimburse the Parties for their costs and expenses in enforcing the Licensed Patents or Assigned Patents in order to make such recovery, which amounts shall be allocated [***] if insufficient to cover the totality of such expenses.  Any amount of recovery remaining after such reimbursement is made shall be [***].

5.3Infringement Claims by Third Parties.

5.3.1Defense of Third Party Claims.  If a Third Party asserts that a Patent Right owned or controlled by such Third Party is infringed by the Exploitation or Manufacture of the Product or any Other Product, the Party first obtaining knowledge of such a claim shall immediately provide the other Party notice of such claim along with the related facts in reasonable detail (provided that such Party shall not be required to disclose any information subject to the attorney/client privilege, attorney work product or other highly confidential information).

5.3.2Buyer Territory.  Buyer shall have the first right, but not the obligation, to undertake and control such defense to the extent it relates to the Exploitation of the Product or any Other Productin the Buyer Territory, including the right to grant any Third Party rights and licenses necessary to conduct activities under the Licensed Patents or Assigned Patents in the Buyer Territory; provided that Buyer shall not be entitled to assert a claim or counterclaim against such Third Party based on any intellectual property rights of Seller other than the Licensed IP and Documentation without Seller’s prior written consent, such consent not to be unreasonably withheld, delayed or conditioned; and, provided, further, that prior to commencing any such claim or counterclaim hereunder, Buyer shall notify Seller of its intent to commence such claim or counterclaim, and if Seller in good faith believes that the assertion of any such claim or counterclaim by Buyer could have a material adverse effect on the Seller Territory IP or Seller’s rights thereunder, Seller shall promptlynotify Buyer after receipt of such notice of intent and the Parties shall discuss in good faith the appropriate actions to be taken in response to such claim.  If Buyer does not accept control of the defense of a claim described in Section 5.3.1 against Seller within [***] after receiving notice thereof from, or giving notice thereof to, Seller pursuant to Section 5.3.1, then Seller shall have the right, but not the obligation, to defend against such claim at its expense, and in connection therewith Seller shall be entitled to assert a claim or counterclaim against such Third Party based on Seller’s Intellectual Property Rights or those of Buyer licensed to Seller hereunder.

5.3.3Seller Territory.  Seller shall have the sole right, but not the obligation, to control that portion of the defense of any such claim that relates exclusively to the Exploitation of the Product or any Other Product in the Seller Territory.

5.3.4Defense Procedure.  The Party that does not control the defense of a claim hereunder shall cooperate with the controlling Party, at the controlling Party’s reasonable request and expense, in any such defense and shall have the right, at its sole cost and expense, to be represented separately by counsel of its own choice in any such proceeding.  In the event a Party is entitled to and brings a claim or counterclaim in accordance with this Section 5.3, the other Party shall cooperate fully with the claiming Party, at the claiming Party’s cost and expense, in connection therewith, including furnishing powers of attorney, being joined as a party plaintiff in such action, providing access to relevant documents and other evidence and making its employees available at reasonable business hours.  In connection with any such defense or claim or counterclaim, the controlling Party shall consider in good faith any comments from the other Party and shall keep the other Party reasonably informed of any steps taken in connection with such defense, claim or counterclaim.

5.3.5Allocation of Costs.All costs and expenses relating to any defense, settlement and judgments in Litigation commenced or defended pursuant to this Section 5.3 with respect to [***].  Any damages or other amounts collected shall [***].

5.4Invalidity or Unenforceability Defenses or Actions.If a Third Party asserts, as a defense or as a counterclaim in any infringement action under Section 5.2 or claim or counterclaim asserted under Section 5.3, or in a declaratory judgment action or similar action or claim filed by such Third Party, in any such case, that any Licensed Patent or Assigned Patent is invalid or unenforceable (an “Invalidity Claim”), then the Party pursuing such infringement action, or the Party first obtaining knowledge of such declaratory judgment action, as the case may be, shall promptly give written notice thereof to the other Party.  With respect to the Licensed Patents or Assigned Patents, Buyer shall have the initial right, but not the obligation, through counsel of its choosing, to defend against such Invalidity Claim, and shall have the right to control settlement of such Invalidity Claim, including the right to grant any Third Party rights and licenses necessary to conduct activities under the Licensed Patents and/or Assigned Patents.  If Buyer defends such Invalidity Claim, all costs and expenses of defending such action or claim shall be [***].  Seller shall assist and cooperate with Buyer as Buyer may reasonably request, [***], from time to time in connection with its activities set forth in this Section 5.4, including by providing reasonable access to relevant documents and other evidence and making its employees available at reasonable business hours.  In connection with any such defense or claim or counterclaim, Buyer shall consider in good faith any comments from Seller and shall keep Seller reasonably informed of any steps taken, and shall provide copies of material documents filed, in connection with such defense, claim or counterclaim, excluding documents that are subject to a protective order.  With respect to the Licensed Patents, if Buyer does not assume the defense of any such Invalidity Claim by the date that is [***] prior to any required answer or response to such Invalidity Claim, then Seller shall have the right, but not the obligation, to undertake such defense, [***], and in such case Buyer shall assist and cooperate with Seller as Seller may reasonably request, [***], from time to time in connection with its activities set forth in this Section 5.4, including by providing reasonable access to relevant documents and other evidence and making its employees available at reasonable business hours.  In connection with any such defense or claim or counterclaim, Seller shall consider in good faith any comments from Buyer and shall keep Buyer reasonably informed of any steps taken, and shall provide copies of material documents filed, in connection with such defense, claim or counterclaim, excluding documents that are subject to a protective order.

5.5Third Party Licenses.  If a Party determines that the Exploitation of the Product or any Other Productby Buyer, its Affiliates, licensees, Sublicensees or distributors in the Buyer Territory may be asserted to infringe or misappropriate any Patent or any other intellectual property right of a Third Party, such that Buyer, its Affiliates, licensees, Sublicensees or distributors may not be able to Manufacture or Exploit the Product or Other Product in the Buyer Territory without material risk of being found to infringe the Patent or intellectual property right of such Third Party, then such Party shall promptly notify the other Party of such determination, and Buyershall have the first right, but not the obligation, to obtain a license or other rights from the applicable Third Party to avoid any such infringement or misappropriation, and take the lead on negotiating the terms of a license (or other rights) sufficient to permit Buyer, its Affiliates, licensees, Sublicensees, and distributors to Manufacture and Exploit the Product or any Other Product in the Buyer Territory;  provided that, except with Seller’s prior consent to the contrary, any such license shall not include exclusive rights granted to Buyer that would prevent Seller from exercising the rights retained by Seller pursuant to Section 2.2, unless Buyer also would have the unencumbered right, but not the obligation, for Buyer to transfer, by sublicense or otherwise, such rights to Seller and, upon Seller’s request, Buyer promptly transfers such rights to Seller. [***]

      ARTICLE 6                                

LICENSED TRADEMARKS

6.1Use of Licensed Trademarks.

6.1.1Buyer hereby acknowledges that, as between Seller and Buyer, and subject to the rights granted to Buyer under this Agreement, Seller retains all right, title and interest in and to the Licensed Trademarks, together with all goodwill associated therewith and all registrations and registration applications therefor, on a worldwide basis and that nothing herein shall be construed to accord to Buyer any rights in the Licensed Trademarks except for the license rights expressly conferred by this Agreement.  Buyer shall not, and shall cause its Affiliates, and shall use commercially reasonable efforts to cause its Third Party licensees, Sublicensees and distributors not to, use in their respective businesses, any Trademark that is confusingly similar to or a colorable imitation of, misleading or deceptive with respect to or that dilutes any (or any part) of the Licensed Trademarks or Seller Marks.

6.1.2Buyer shall, and shall cause its Affiliates Third Party licensees, Sublicensees and distributors to, (a) comply with the trademark usage guidelines attached hereto as Schedule 2, as such Schedule may be updated reasonably from time to time, upon [***]’ written notice to Buyer, (b) promptly make any changes to all future Product Labeling, packaging with respect to any Product or any Other Product, Product (or any Other Product)inserts and advertising, marketing, promotional or other materials, all to the extent bearing any of the Licensed Trademarks, as Seller may reasonably request to achieve compliance with clause (a), and (c) refrain from taking any action that is reasonably likely to endanger, destroy or similarly affect, in any material negative respect, the Licensed Trademarks or the value of the goodwill associated with the Licensed Trademarks or Seller’s rights in the Licensed Trademarks.

6.1.3Buyer shall not, and shall cause its Affiliates, and shall use commercially reasonable efforts to cause its Third Party licensees, Sublicensees and distributors not to, (a) directly or indirectly, at any time challenge Seller’s rights, title or interest in and to the Licensed Trademarks or in any registration or registration application therefor in any jurisdiction, (b) knowinglydo or cause to be done any action that would materially impair the rights of Seller in and to the Licensed Trademarks or in any registrations or registration applications therefor in any jurisdiction, (c) represent to any Third Party that it has, in any jurisdiction, any ownership rights in or to the Licensed Trademarks or in any registration or registration application therefor or any other rights in the Licensed Trademarks other than the specific license rights conferred by this Agreement, or (d) register or attempt to register the Licensed Trademarks, Seller Marks or any confusingly similar Trademark (including any translation or transliteration of any of the Licensed Trademarks or any colorable or confusing imitation thereof) as a Trademark with any Governmental Authority in its own name or in the name of any of its Affiliate or any Third Party in any jurisdiction.

6.1.4Buyer acknowledges and agrees that no ownership rights are vested or created in the Licensed Trademarks anywhere in the world by the licenses and other rights granted in this Agreement (including, for clarity, under Section 2.1 of this Agreement, Section 2.3(b)(ii) of the Supply Agreement and the Clinical Supply Agreement) and that, as between the Parties, Seller shall retain and hold all ownership rights in the Licensed Trademarks and the Seller Marks worldwide.

6.2Approval Procedures.

6.2.1Buyer shall, prior to its use in commerce, submit to Seller for review and prior approval, any new, or any revisions to any existing, Product Label, packaging with respect to the Product or any Other Buyer Product, Product or any such Other Buyer Productinsert and advertising, marketing, promotional or other materials, in each case, solely to the extent bearing a Licensed Trademark, that Buyer wishes to use on or in connection with the Exploitation of the Product or any Other Product by Buyer in the Buyer Territory; provided that the foregoing review and prior approval by Seller shall (a) not be required to the extent that the applicable use of the Licensed Trademark described above is in compliance with Section 6.1.2 and (b) be deemed completed and approved, if Seller fails to respond to any such request for approval within [***] of Seller’s receipt of such request.

6.2.2At Seller’s request from time to time, Buyer shall, shall cause its Affiliates, and shall use commercially reasonable efforts to cause its Third Partylicensees, Sublicensees and distributors to, furnish to Seller representative samples of all Product Labeling, Product packaging, Product inserts and advertising, and Product marketing, promotional or other materials in each case to the extent bearing any of the Licensed Trademarks, for quality control purposes, including web pages, brochures and stationery.

6.2.3Subject to Section 6.1.4, Buyer (and its Affiliates and Sublicensees) shall have the rights to select and use any new Trademark, including, for clarity, any trade dress, on or in connection with the Exploitation of the Product or any Other Productin the Buyer Territory (each, a “Buyer Trademark”), provided that such Buyer Trademarks are not confusingly similar to or otherwise dilute the Seller Marks or Licensed Trademarks in the Buyer Territory.

6.3Clearance, Registration, Prosecution and Maintenance of Licensed Trademarks.  Seller shall be responsible for the clearance, registration, prosecution and maintenance of the Licensed Trademarks in the Buyer Territory.  All registrations and applications therefor shall be filed, prosecuted, registered and maintained in the name of Seller.  All costs and expenses of clearing, registering, prosecuting and maintaining the Licensed Trademarks in the Buyer Territory shall be borne [***].  Seller shall not, without Buyer’s prior written consent, not to be unreasonably withheld, conditioned or delayed, take any action to abandon or withdraw any application for any Licensed Trademark, or permit any registration for any Licensed Trademark to lapse, expire or be cancelled; provided that upon reasonable notice from Seller following Generic Entry, Seller may choose to assign[***] any Licensed Trademark in the Buyer Territory to Buyer and thereafter, Licensed Trademarks shall be deemed to exclude such assigned Trademark.  Seller shall execute such documents as may be required in the reasonable opinion of Buyer for Buyer to be entered as a “registered user” or recorded licensee of the Licensed Trademarks or to be removed as registered user or licensee thereof.

6.4Enforcement of Licensed Trademarks.Buyer shall have the first right, but not the obligation, to enforce and defend the Licensed Trademarks in the Buyer Territory, including (a) after consultation with Seller,defending against any alleged, threatened or actual claim by a Third Party that the use of the Licensed Trademarks in the Buyer Territory infringes, dilutes, misappropriates or otherwise violates any Trademark or copyright of that Third Party or constitutes unfair trade practices or any other like offense, or any other claims as may be brought by a Third Party against a Party in connection with the use of or relating to the Licensed Trademarks with respect to the Product or any Other Productin the Buyer Territory and (b) taking such action as Buyer, after consultation with Seller and subject to Seller’s prior approval, deems necessary or commercially appropriate against a Third Party based on any alleged, threatened or actual infringement, dilution, misappropriation or other violation of, or unfair trade practices or any other like offense relating to, the Licensed Trademarks by a Third Party in the Buyer Territory.  Seller shall provide Buyer all reasonable assistance in connection with the foregoing activities of Buyer, including executing any reasonably necessary documents or instruments and making its employees available at reasonable business hours to assist in such defense or enforcement.  If Buyer plans to cease, or ceases, any action with respect to the enforcement or defense of any of the Licensed Trademarks in the Buyer Territory, Buyer shall notify Seller in writing at least [***] in advance of the due date of any action that is required with respect thereto and, in such event, Seller may elect (but shall not be obligated), on written notice to Buyer, to assume responsibility for and control over such enforcement or defense or to take any such actionin its own name or in the name of Buyer.  [***] Any damages or other amounts recovered in any such proceeding shall be [***].  Each Party shall provide to the other Party all reasonable assistance requested by the other Party in connection with any such action, defense, claim or suit under this Section 6.4[***].  Buyer shall obtain Seller’s written consent before entering into any compromise, settlement or stipulation with respect to any such action, defense, claim or suit, such consent not to be unreasonably withheld, delayed or conditioned.  Buyer shall not knowingly take any position or submit any argument with respect to such action, defense, claim or suit that would be reasonably expected to materially endanger or impair the Licensed Trademarks or Seller’s rights therein or Seller’s corresponding Trademark rights outside the Buyer Territory. Each Party[***] shall execute such powers of attorney or other instruments and shall take such other actions as the other Party may reasonably request as necessary to permit the other Party to assume responsibility for and control over the enforcement or defense of the Licensed Trademarks as permitted hereunder.

6.5No Implied Rights.  Except as expressly provided in this Article 6, Buyer shall have no right to register, maintain, prosecute, enforce or defend the Licensed Trademarks.

 ARTICLE 7                                

LICENSED DOMAIN NAMES

7.1Ownership and Goodwill.  Buyer acknowledges that it acquires no right, title or interest in the Licensed Domain Names other than the rights expressly set forth in this Agreement.  Seller shall own and retain all right, title and interest in and to the Licensed Domain Names.  Buyer agrees not to directly or indirectly contest or aid in contesting the ownership of the Licensed Domain Names, or to take any action whatsoever in derogation of Seller’s claimed rights therein.  Buyer or its Affiliates shall be prohibited from, and shall ensure that any agreements with Sublicensees prohibit such Sublicensees from, (a) using or registering any domain name or any social media identifier that consists of or incorporates, in whole or in part, (i) any of the Seller Marks or (ii) any term that is confusingly similar to, a colorable imitation of, or deceptive with respect to, or that dilutes any of the Seller Marks or (b) knowingly doing any act that is likely to materially impair Seller’s proprietary rights in or to the Licensed Domain Names.  Buyer shall submit to Seller for review and prior approval (such approval not to be unreasonably withheld, delayed or conditioned), any proposed use of any domain names or social media identifiers consisting of or incorporating the Licensed Trademarks, to the extent materially different from any previously approved use; provided that the foregoing review and prior approval by Seller shall be deemed completed and approved, if Seller fails to respond to any such request for approval within [***]of Seller’s receipt of such request; and provided, further, that with respect to any such domain names, upon such approval by Seller, whether deemed or granted, as applicable, such domain name shall be deemed a Licensed Domain Name hereunder.

7.2Registration and Maintenance.

7.2.1Subject to the remainder of this Section 7.2.1, (a) Seller, at its sole cost and expense, shall register, as applicable, and maintain the Licensed Domain Names and (b) neither Party shall intentionally take, or fail to take, any action which may reasonably be expected to jeopardize the use, value, validity, or enforceability of the Licensed Domain Names.  Seller shall not allow any registration of the Licensed Domain Names to lapse, without first providing Buyer with timely written notice thereof and offering to transfer to Buyer such Domain Name, at Seller’s sole cost and expense.

7.2.2Seller shall use the technical contact and server information as Buyer may designate for use with each Licensed Domain Name, as Buyer may identify, to give Buyer control over the use of such Licensed Domain Name and over the administration and management of any website and web content associated with such Licensed Domain Name.  Seller shall not change the technical contact or server information for any of the Licensed Domain Names or take any action to direct Internet traffic to any of the Licensed Domain Names to any server or IP address other than those identified by Buyer.  Seller may, from time to time, change the registrar for a Licensed Domain Name and Buyer agrees to assist and cooperate with Seller, the old registrar or the new registrar in any way necessary to effectuate such a change of registrar.

7.3Country-Specific Traffic.  Buyer shall cause traffic to the Licensed Domain Names, which traffic originates within a country outside the Buyer Territory, to be re-directed to such ccTLD as Seller may designate in writing.  Among other techniques that the Parties may mutually agree for re-directing traffic is the placement of a hyperlink on the homepage of the generic “.com” top-level Licensed Domain Names, which hyperlink shall be placed in a manner, form and style mutually agreeable to the Parties, each acting reasonably.  Without limitation of the foregoing, (a) Buyer shall ensure that the principal pages of each Licensed Domain Names display in prominent font that such Licensed Domain Name is “intended only for residents of the United States, its territories, and Puerto Rico.” and (b) none of the websites corresponding to each of the Licensed Domain Names shall include or otherwise use any Seller Mark, except as may be expressly agreed in writing by Seller.

7.4Enforcement. If Buyer becomes aware of any use, trafficking, or registration of a Licensed Domain Name, Buyer shall promptly notify Seller of such use or trafficking or registration.  Seller may take any action and institute legal, administrative or other proceedings relating to the use, trafficking, or registration of such Licensed Domain Names as Seller, in its sole discretion, deems fit.  Buyer shall execute any and all documents and shall take such actions as may be reasonably necessary to carry out such proceeding or Litigation, including becoming a nominal party to any legal action.  If Seller fails to take any action within [***] after notification of such use, trafficking or registration, or notifies Buyer that it will not take any action, then Buyer may take any action and institute legal, administrative or other proceedings relating to such use, trafficking or registration as Buyer, in its sole discretion, deems appropriate.  Seller agrees to execute any and all documents and to do such acts as may be reasonably necessary to carry out such proceeding or Litigation, including becoming a nominal party to any legal action.  [***]

 ARTICLE 8                                

CONFIDENTIALITY AND NON-DISCLOSURE

The rights and obligations of each of the Parties with respect to Confidential Information hereunder shall be governed by the terms of Section 5.4 of the Asset Purchase Agreement.

 ARTICLE 9                                

DISCLAIMER OF WARRANTIES

9.1BUYER ACKNOWLEDGES AND AGREES THAT, EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES CONTAINED IN ARTICLE 3 OF THE ASSET PURCHASE AGREEMENT, SELLER HAS MADE NO REPRESENTATION OR WARRANTY WHATSOEVER TO BUYER, EXPRESS OR IMPLIED, RELATED TO THE LICENSED IP AND DOCUMENTATION OR THE TRANSACTIONS CONTEMPLATED HEREBY.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, BUYER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS EXPRESSLY PROVIDED IN ARTICLE 3 OF THE ASSET PURCHASE AGREEMENT, BUYER IS LICENSING THE RIGHTS GRANTED TO IT HEREUNDER WITHOUT ANY OTHER EXPRESS WARRANTIES OR ANY IMPLIED WARRANTIES, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, INCLUDING ANY WARRANTY OF QUALITY, THE FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY, CONDITION OF THE ASSETS, AS TO THE NON-INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OF ANY PERSON OR AS TO ANY OTHER MATTER.

ARTICLE 10      

                      INDEMNITY

10.1Indemnification of Seller.Subject to this Article 10, Buyer shall indemnify, defend and hold harmless Seller and its Affiliates, and their respective licensors, licensees, officers, directors, employees and agents (collectively, “Seller Indemnitees”) from and against any and all Losses incurred by them in connection with any and all Litigation by Third Parties (collectively, “Third Party Claims”) against a Seller Indemnitee solely to the extent arising from or occurring as a result of:  (a) any breach by Buyer of any term of this Agreement (including any breach of Section 3.3 or Section 3.4 hereof); (b) the fraud, gross negligence or willful misconduct on the part of Buyer or any of its Affiliates or Sublicensees in the performance of Buyer’s obligations under this Agreement; (c) the Manufacture and Exploitation of the Product or any Other Product by or on behalf of Buyer, its Affiliates and Sublicensees (excluding, for clarity, the Manufacture of Supplied Product by Seller pursuant to the Supply Agreement); or (d) any settlement by Buyer as the Enforcing Party of an Infringement action pursuant to Section 5.2.3(a), except, in each case ((a),(b), (c) and (d) above), to the extent of those Third Party Claims arising from or occurring as a result of matters covered by subsections (a) or (b) of Section 10.2, subsections (a) or (b) in Section 7.2 of the Supply Agreement or indemnification obligations of Seller or its Affiliates under the Clinical Supply Agreement, as to which Third Party Claims each Party shall indemnify the other Party and the Seller Indemnitees or the Buyer Indemnitees, as applicable, to the extent of its liability for such Third Party Claims.

10.2Indemnification of Buyer.Subject to this Article 10, Seller shall indemnify, defend and hold harmless Buyer and its Affiliates and Sublicensees, and their respective officers, directors, employees and agents (collectively, “Buyer Indemnitees”) from and against any and all Losses incurred by them in connection with any and all Third Party Claims against any such Buyer Indemnitee solely to the extent arising from or occurring as a result of: (a) any breach by Seller of any term of this Agreement or (b) the fraud,gross negligence or willful misconduct on the part of Seller or any of its Affiliates in the performance of Seller’s obligations under this Agreement, except, in each case ((a) and (b) above), to the extent of those Third Party Claims arising from or occurring as a result of matters covered by subsections (a), (b), (c) or (d) of Section 10.1, subsections (a), (b) or (c) of Section 7.1 of the Supply Agreement or indemnification obligations of Buyer or its Affiliates under the Clinical Supply Agreement, as to which Third Party Claims each Party shall indemnify the other Party and the Seller Indemnitees or the Buyer Indemnitees, as applicable, to the extent of its liability for such Third Party Claims.

10.3Indemnification Procedures. All indemnification claims in respect of Buyer or any Buyer Indemnitee shall be made solely by Buyer, and all indemnification claims in respect of Seller or any Seller Indemnitee shall be made solely by Seller and, in each case, shall be governed by Section 7.2 of the Asset Purchase Agreement.  Notwithstanding anything herein to the contrary, the Parties’ respective indemnification obligations under this Article 10 shall not apply to any Losses or Third Party Claims for which such Party is entitled to indemnification under the Asset Purchase Agreement (excluding for this purpose, application of the limitations in Section 7.3 of the Asset Purchase Agreement).

10.4Limitation on Damages and Liability.OTHER THAN WITH RESPECT TO CLAIMS UNDER SECTIONS 10. AND 10.2,TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, AND EXCEPT WITH RESPECT TO A CLAIM ARISING OUT OF FRAUD, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, NEITHER PARTY NOR ANY OF ITS AFFILIATES SHALL BE LIABLE FOR SPECIAL, INDIRECT, INCIDENTAL, MULTIPLE, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR FOR LOST PROFITS, REVENUE OR INCOME, DIMINUTION IN VALUE OR LOSS OF BUSINESS OPPORTUNITY, WHETHER IN CONTRACT, WARRANTY, NEGLIGENCE, TORT, STRICT LIABILITY OR OTHERWISE, ARISING OUT OF OR WITH RESPECT TO THIS AGREEMENT, EVEN IF THAT PARTY HAS BEEN PLACED ON NOTICE OF THE POSSIBILITY OF SUCH DAMAGES.  FOR CLARITY, THE FOREGOING SHALL NOT LIMIT EITHER PARTY’S RIGHTS OR OBLIGATIONS UNDER SECTION 10.1 OR 10.2 WITH RESPECT TO THIRD PARTY CLAIMS AND LOSSES.

10.5Insurance.As of the Effective Date, Buyer shall have and maintain adequate insurance coverage, which policies shall be in effect during the Term, including: (a) products liability coverage and comprehensive general liability insurance of not less than [***]; (b) auto liability insurance of not less than [***]; and (c) any other insurance, including workers’ compensation, cyber liability and professional liability, necessary to cover its obligations under this Agreement and that are consistent with normal business practices of prudent companies similarly situated; provided that if any such policy is held on a claims-made basis, such policy shall be maintained throughout the Term and for a period of [***]thereafter.  Such policies shall be blanket policies and shall insure against Liability on the part of Buyer and any of its Affiliates, as their interests may appear, due to injury, disability or death of any person or persons, or injury to property, arising from the Exploitation and Manufacture of the Product and any Other Product.  Such policies maintained by Buyer shall name Seller and its Affiliates as additional insureds.  All insurers providing such policies shall have an AM Best (A-) or higher rating. Buyer shall provide Seller with certificates of insurance evidencing that the policies required to be maintained by Buyer hereunder are in full force and effect annually and, upon Seller’s request, copies of such policies shall be provided. Should any of the policies be cancelled, terminated or otherwise materially altered before the expiration date thereof, notice will be delivered in accordance with the policy provisions in writing to Seller.  Buyer’s insurers shall waive all rights of subrogation against Seller, its Affiliates and its and their officers, directors and employees.  Buyer’s insurance shall be primary with no contribution by Seller’s insurance.

 ARTICLE 11   

TERM

11.1Term.The term of this Agreement shall commence on the Effective Date and shall continue in full force and effect until terminated upon the mutual written agreement of Buyer and Seller at any time (such period, the “Term”).

11.2Consequences of Termination.

11.2.1Termination of Agreement.  Upon the termination of this Agreement by agreement of the Parties (as provided in Section 11.1), all of the licenses granted by the Parties under this Agreement, and any sublicenses related thereto entered into by either Party as permitted hereunder, shall terminate in their entirety.

11.2.2Accrued Rights.  The termination of this Agreement for any reason shall be without prejudice to any rights that shall have accrued to the benefit of a Party prior to such termination.  Such termination shall not relieve a Party from obligations that are expressly indicated to survive the termination of this Agreement.

11.2.3Survival.  Without limiting the foregoing, Articles 8, 9, 10, 11 and 12 shall survive the termination of this Agreement for any reason.

ARTICLE 12          

                      MISCELLANEOUS

                                  12.1Governing Law, Jurisdiction, Venue and Service.

12.1.1Governing Law.  This Agreement shall be governed by and construed in accordance with the Laws of the State of New York, excluding any conflicts or choice of Law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive Law of another jurisdiction.

12.1.2Jurisdiction.  Subject to Sections 12.2, 12.3 and 12.12, the Parties hereby irrevocably and unconditionally consent to the exclusive jurisdiction of the courts of the State of New York and the United States District Court for the Southern District of New York for any action, suit or proceeding (other than appeals therefrom) arising out of or relating to this Agreement, and agree not to commence any action, suit or proceeding (other than appeals therefrom) related thereto except in such courts.  The Parties irrevocably and unconditionally waive their right to a jury trial.

12.1.3Venue. Subject to Sections 12.2 and 12.3, the Parties further hereby irrevocably and unconditionally waive any objection to the laying of venue of any action, suit or proceeding (other than appeals therefrom) arising out of or relating to this Agreement in the courts of the State of New York or in the United States District Court for the Southern District of New York, and hereby further irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.

12.1.4Service.  Each Party further agrees that service of any process, summons, notice or document by registered mail to its address set forth in Section 12.4.2 shall be effective service of process for any action, suit or proceeding brought against it under this Agreement in any such court.

12.2Dispute Resolution.  Except as expressly set forth herein, any Dispute arising hereunder shall be resolved in accordance with Section 9.10 of the Asset Purchase Agreement.  With respect to any Dispute relating to Seller’s rights or Buyer’s obligations under Article 6 of this Agreement, the Parties agree (a) that any such Dispute shall not be an Excluded Dispute and (b) to first attempt to resolve any such Dispute through good faith negotiations between in-house trademark counsel or other appropriate representatives appointed by the Parties (or their delegates) with the authority to settle such Dispute.  If such Dispute cannot be resolved through negotiations between such representatives within [***] thereafter or within such other time period as the Parties may agree, then either Party may elect to resolve such Dispute in accordance with Section 9.10 of the Asset Purchase Agreement.

12.3Equitable Relief.  The Parties agree that irreparable damage would occur in the event that the terms of Article 6 of this Agreement are breached.  It is accordingly agreed that the Parties shall be entitled to an injunction or injunctions, whether preliminary or permanent, to prevent such breaches of Article 6 and to cause by an order of specific performance requiring compliance with the terms and provisions of Article 6, in any court of the United States or any state having jurisdiction, in each case, solely to the extent required to cure the applicable breach.  Such injunctive relief would be in addition to any other remedy to which the applicable Party is entitled at law or in equity.  Each Party hereby waives (a) any requirement that the other Party post a bond or other security as a condition for obtaining any such relief, and (b) any defenses in any action for specific performance, including the defense that a remedy at law would be adequate.  For clarity, the Parties agree that no injunction hereunder shall be sought by or granted to Seller to prevent Buyer from using the Licensed Trademarks in connection with Exploitation of Products in the Buyer Territory to the extent such use is in compliance with Article 6.

12.4Notices.

12.4.1Notice Requirements.  Any notice, request, demand, waiver, consent, approval or other communication permitted or required under this Agreement (each, a “Notice”) shall be in writing, shall refer specifically to this Agreement and shall be deemed given only if delivered by hand or sent by facsimile transmission (with transmission confirmed) or by overnight registered mail, courier or express delivery service that maintains records of delivery, addressed to the Parties at their respective addresses specified in Section 12.4.2 or to such other address as the Party to whom notice is to be given may have provided to the other Party at least 10 days’ prior to such address taking effect in accordance with this Section 12.  Such Notice shall be deemed to have been received: (a) as of the date delivered by hand or by overnight registered mail, courier or express delivery service; or (b) on the day sent by facsimile provided that the sender had received confirmation of transmission (by facsimile receipt confirmation or confirmation by telephone or email) prior to 6:00 p.m. Eastern Time on such day (and if confirmation is received after 6:00 p.m. Eastern Time, such Notice shall be deemed to have been delivered on the following Business Day).  Any Notice delivered by facsimile shall be confirmed by a hard copy delivered promptly thereafter.

12.4.2Address for Notice.

If to Seller, to:

Merck Sharp & Dohme BV

Waarderweg 39

2031 BN

Haarlem

Netherlands

Attention: Managing Director

Facsimile: [***]

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

Merck Sharp & Dohme Corp.

One Merck Drive

Whitehouse Station, NJ 08889

United States of America

Facsimile:  [***]

Attention:  Office of Secretary

and to:

Covington & Burling LLP

1201 Pennsylvania Avenue, N.W.

Washington, DC  20004

Facsimile:  (202) 662-6291

Attention:  John Hurvitz

Michael J. Riella

If to Buyer, to:

Forest Laboratories Holdings Limited

Cumberland House

9th Floor

1 Victoria Street

Hamilton HM 11, Bermuda

Attention: Chief Legal Officer

Facsimile: [***]

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

Dentons US LLP

101 JFK Parkway, Suite 400

Short Hills, New Jersey 07078

Attention: John L. Cleary, II

Facsimile: (973) 912-7199

12.5No Benefit to Third Parties.  The covenants and agreements set forth in this Agreement are for the sole benefit of the Parties and their successors and permitted assigns, and, except for the rights of Buyer Indemnitees and Seller Indemnitees under Article 10, they shall not be construed as conferring any rights on any other Persons.

12.6Waiver and Non-Exclusion of Remedies.  Any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving such term or condition.  The waiver by any Party of any right hereunder or of the failure to perform or of a breach by the other Party shall not be deemed a waiver of any other right hereunder or of any other breach or failure by said other Party whether of a similar nature or otherwise.  The rights and remedies provided herein are cumulative and do not exclude any other right or remedy provided by applicable Law or otherwise available except as expressly set forth herein.

12.7Expenses. Except as otherwise specified herein or in the Asset Purchase Agreement or in any other Ancillary Agreement, each Party shall bear any costs and expenses incurred by it with respect to the transactions contemplated herein.

12.8Assignment.  Except as expressly set forth in this Agreement, neither Party shall have the right or the power to assign, in whole or in part, any of its rights, or delegate or subcontract the performance of any of its obligations under this Agreement without the prior written authorization of the other Party, which authorization shall not be unreasonably withheld, conditioned or delayed; provided, however, that either Party may assign or delegate any or all of its rights or obligations hereunder without such prior written authorization (a) to an Affiliate or (b) to its successor in interest in connection with a merger, consolidation or similar change of control transaction of such Party or any divestiture due to considerations under Section 4.4 of the Asset Purchase Agreement.  Further, Buyer may in any event grant sublicenses as provided in Section 2.3.  Subject to the foregoing, it shall not be unreasonable for a Party (the “Consenting Party”) to refuse to authorize any assignment or subcontract proposed by the other Party (the “Assigning Party”) and that is not otherwise provided for in this Agreement in the event that: [***].  Any permitted assignment or delegation hereunder by a Party shall not relieve such Party of any of its obligations under this Agreement, unless, with respect to an assignment to a Third Party, such assignee agrees in writing to assume such Party’s obligations under this Agreement, in which case such Party shall be relieved of its obligations hereunder from and after the effective date of such assignment and assumption.  Subject to the foregoing, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and permitted assigns.

12.9Use of Affiliates. Seller shall have the right to exercise its rights and perform its obligations under this Agreement either itself or through any of its Affiliates.

12.10Amendment.  This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by both Parties.

12.11Independent Contractors. In the exercise of their respective rights, and the performance of their respective obligations, under this Agreement, the Parties are, and shall remain, independent contractors.  Nothing in this Agreement shall be construed to constitute the Parties as partners, joint venturers, or participants in a joint enterprise or undertaking, or to constitute either of the Parties as the agent of the other Party for any purpose whatsoever.  Neither Party shall bind, or attempt to bind, the other Party hereto to any contract or the performance of any other obligation, or represent to any Third Party that it is authorized to enter into any contract or binding obligation on behalf of the other Party hereto.

12.12Severability.  If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law, and if the rights or obligations of either Party under this Agreement will not be materially and adversely affected thereby, (a) such provision shall be fully severable, (b) this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and reasonably acceptable to the Parties.

12.13English Language.  This Agreement shall be written and executed in, and all other communications under or in connection with this Agreement shall be in, the English language.  Any translation into any other language shall not be an official version thereof, and in the event of any conflict in interpretation between the English version and such translation, the English version shall control.

12.14Counterparts.  This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement.  Delivery of an executed counterpart of a signature page of this Agreement by facsimile or other electronic transmission shall be effective as delivery of a manually executed original counterpart of this Agreement.

12.15Entire Agreement.  This Agreement, together with the Schedules and Exhibits expressly contemplated hereby and attached hereto, the Asset Purchase Agreement and the other Ancillary Agreements, contain the entire agreement between the Parties with respect to the transactions contemplated hereby and supersede all prior agreements, understandings, promises and representations, whether written or oral, between the Parties with respect to the subject matter hereof.  In the event of any inconsistency between any such Schedules and Exhibits and this Agreement, the terms of this Agreement shall govern.

12.16Construction.  Except where the context otherwise requires, wherever used, the singular includes the plural, the plural the singular, the use of any gender shall be applicable to all genders and the word “or” is used in the inclusive sense (and/or).  The captions of this Agreement are for convenience of reference only and in no way define, describe, extend or limit the scope or intent of this Agreement or the intent of any provision contained in this Agreement.  The term “including” as used herein does not limit the generality of any description preceding such term, and is deemed to mean “including without limitation”.  The language of this Agreement shall be deemed to be the language mutually chosen by the Parties and no rule of strict construction shall be applied against either Party.  Unless otherwise specified or where the context otherwise requires, (a) references in this Agreement to any Article, Section, Schedule or Exhibit are references to such Article, Section, Schedule or Exhibit of this Agreement; (b) references in any Section to any clause are references to such clause of such Section; (c) “hereof,” “hereto,” “hereby,” “herein” and “hereunder” and words of similar import when used in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement; (d) references to a Person are also to its permitted successors and assigns; (e) references to a Law include any amendment or modification to such Law and any rules or regulations issued thereunder, in each case, as in effect at the relevant time of reference thereto; (f) references to any agreement, instrument or other document in this Agreement refer to such agreement, instrument or other document as originally executed or, if subsequently amended, replaced or supplemented from time to time, as so amended, replaced or supplemented and in effect at the relevant time of reference thereto; and (g) references to monetary amounts are denominated in United States Dollars.

[Signature page follows]

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first set forth above.

MERCK SHARP & DOHME BV                                                                           FOREST LABORATORIES

                                                                           HOLDINGS LIMITED

By:/s/ M.L.P.J. Mol-Arts                                                      By: /s/ Francis I. Perier, Jr.                                                      

Name: M.L.P.J. Mol-Arts                                                      Name: Francis I. Perier, Jr.                                                                

Title: General Manager, MSD Oss                                                                      Title: Secretary                                                      

SCHEDULE 1:

SELLER MARKS

“Merck Sharp & Dohme Corp., a subsidiary of Merck & Co., Inc.,

Whitehouse Station, NJ 08889, USA”.

“MSD Oss B.V., a subsidiary of Merck & Co., Inc.”

[Missing Graphic Reference]

SCHEDULE 2:

TRADEMARK USAGE GUIDELINES

In order for the Licensed Trademarks to maintain their value and enforceability, they must be used in the proper way on packaging and labeling, in advertising and promotional materials, and on websites and other Internet uses. The following guidelines and standards must be followed in order to achieve this objective, as well to clarify usage of the Licensed Domain Name.

[***]

[***]

EX-10.10

[***] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

SUPPLY AGREEMENT

By and between

Merck Sharp & Dohme BV

and

Forest Laboratories Ireland Limited

Dated as of January 10, 2014

TABLE OF CONTENTS

1. DEFINITIONS                                                                                                                                                 

2. SUPPLY OF PRODUCT                                                                                                                                                 

2.1 Supply of Supplied Product                                                                                                                                      

2.2 Use of Supplied Product                                                                                                                                      

2.3 Shortage                                                                                                                                      

2.4 Safety Stock                                                                                                                                      

2.5 Coordination                                                                                                                                      

2.6 Specifications                                                                                                                                      

2.7 2.5 mg Dosage Strength                                                                                                                                      

3. FORECASTS AND ORDERS                                                                                                                                                 

3.1 Long Term Annual Non-binding Forecast                                                                                                                                      

3.2 Rolling Forecasts                                                                                                                                      

3.3 Firm Orders                                                                                                                                      

3.4 Terms of Sale                                                                                                                                      

3.5 Expiry Dating                                                                                                                                      

4. PRICE; PAYMENT AND TERMS OF SALE                                                                                                                                                 

4.1 Supply Price                                                                                                                                      

4.2 Reports                                                                                                                                      

4.3 Payments                                                                                                                                      

4.4 Delivery                                                                                                                                      

4.5 Title and Risk of Loss                                                                                                                                      

4.6 Terms of Sale                                                                                                                                      

5. PACKAGING TRANSFER                                                                                                                                                 

5.1 Packaging Transfer                                                                                                                                      

5.2 Reimbursement for Packaging Transfer                                                                                                                                      

5.3 Buyer Responsibility Following Packaging Transfer                                                                                                                                      

6. WARRANTY AND LIMITATIONS                                                                                                                                                 

6.1 Warranties                                                                                                                                      

6.2 Claims                                                                                                                                      

7. INDEMNIFICATION, LIMITATION OF LIABILITY AND INSURANCE                                                                                                                                                 

7.1 Indemnification by Buyer                                                                                                                                      

7.2 Indemnification by Seller                                                                                                                                      

7.3 Procedures for Indemnification                                                                                                                                      

7.4 Limitation of Liability                                                                                                                                      

7.5 Insurance                                                                                                                                      

8. AUDIT AND REGULATORY ACTIONS; QUALITY                                                                                                                                                 

8.1 Governmental Authority Visits and Inspections                                                                                                                                      

8.2 Audit                                                                                                                                      

8.3 Quality Agreement                                                                                                                                      

8.4 Changes                                                                                                                                      

8.5 Subcontracting                                                                                                                                      

8.6 Compliance with Law                                                                                                                                      

9. WITHDRAWALS AND RECALLS                                                                                                                                                 

9.1 Withdrawal                                                                                                                                      

9.2 Administration of Recalls                                                                                                                                      

9.3 Disputes Related to Direct Expenses                                                                                                                                      

10. CONFIDENTIALITY AND PUBLIC ANNOUNCEMENTS                                                                                                                                                 

10.1 Confidentiality and Non-Use                                                                                                                                      

10.2 Publicity/Use of Names                                                                                                                                      

11. TERM AND TERMINATION                                                                                                                                                 

11.1 Term                                                                                                                                      

11.2 Termination by Either Party                                                                                                                                      

11.3 Effect of Expiration and Termination                                                                                                                                      

11.4 Survival                                                                                                                                      

12. GENERAL PROVISIONS                                                                                                                                                 

12.1 Force Majeure                                                                                                                                      

12.2 Governing Law                                                                                                                                      

12.3 Dispute Resolution                                                                                                                                      

12.4 Assignment                                                                                                                                      

12.5 Amendment                                                                                                                                      

12.6 Entire Agreement                                                                                                                                      

12.7 Severability                                                                                                                                      

12.8 Headings                                                                                                                                      

12.9 Further Assurances                                                                                                                                      

12.10 Counterparts                                                                                                                                      

12.11 Notices                                                                                                                                      

12.12 No Benefit to Third Parties                                                                                                                                      

12.13 Expenses                                                                                                                                      

12.14 Waiver and Non-Exclusion of Remedies                                                                                                                                      

12.15 Equitable Relief                                                                                                                                      

12.16 Independent Contractors                                                                                                                                      

12.17 English Language                                                                                                                                      

12.18 Construction                                                                                                                                      

SCHEDULES

Schedule 1                      Seller Supply Agreements

Schedule 2                      Technology Transfer

Schedule 3                      Packaging Transfer

Schedule 4                      Minimum Batch Sizes

SUPPLY AGREEMENT

This SUPPLY AGREEMENT (this “Agreement”), effective as of the 10th day of January, 2014 (the “Effective Date”), is made and entered into by and between Merck Sharp & Dohme BV, a limited liability company (a Besloten Vennootschap) organized and existing under the Laws of the Netherlands(“Seller”), and Forest Laboratories Ireland Limited, a corporation organized and existing under the Laws of Ireland(“Buyer”).  Seller and Buyer are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

WITNESSETH:

WHEREAS, Seller and Buyer are parties to that certain Asset Purchase Agreement, dated as of November 29, 2013 (the “Asset Purchase Agreement”), and that certain License Agreement, dated as of the date hereof (the “License Agreement”),pursuant to which, effective as of the Closing (as defined in the Asset Purchase Agreement), Buyer is purchasing from Seller certain assets and licensing certain rights related to the Product and the Product Business in the Buyer Territory (each as defined in the Asset Purchase Agreement); and

WHEREAS, Seller has agreed to supply or arrange for the supply of, and Buyer has agreed to purchase, all of Buyer’s (and its Affiliates’ and Sublicensee’s) Requirements (as defined herein) of Supplied Product in the Buyer Territory, subject to and on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the premises and the mutual promises and conditions hereinafter set forth and set forth in the Asset Purchase Agreement, the other Ancillary Agreements (as defined in the Asset Purchase Agreement), and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

1.   DEFINITIONS.

Unless otherwise specifically provided herein, the following terms shall have the meanings set forth in this Section 1 and capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed thereto in the Asset Purchase Agreement or the License Agreement, as applicable.

1.1   “Agreement” has the meaning set forth in the preamble hereto.

1.2   “Assigning Party” has the meaning set forth in Section 12.4.

1.3   “Asset Purchase Agreement” has the meaning set forth in the recitals hereto.

1.4   “Back-up Manufacturing License” has the meaning set forth in Section 2.3(b)(ii).

1.5   “Breaching Party” has the meaning set forth in Section 11.2(b).

1.6   “Buyer” has the meaning set forth in the preamble hereto.

1.7   “[***]” has the meaning set forth in Section 2.3(b)(ii).

1.8   “Change” has the meaning set forth in Section 8.4(a).

1.9   “Consenting Party” has the meaning set forth in Section 12.4.

1.10   “Constrained Forecast” has the meaning set forth in Section 3.2(b).

1.11   “Control” means, with respect to any know-how, possession of the right, whether directly or indirectly, and whether by ownership, license or otherwise (other than by operation of the licenses and other grants set forth in the License Agreement), to assign or grant a license, sublicense or other right to or under such know-how as provided for herein without violating the terms of any Contract with any Third Party.

1.12   “Cost Price Increase” has the meaning set forth in Section 4.1(c).

1.13   “Deductible” has the meaning set forth in Section 7.4(b).

1.14   “Defective Product” has the meaning set forth in Section 6.2(a).

1.15   “Delivery” has the meaning set forth in Section 4.4(a), and the term “Delivered” shall have a corresponding definition.

1.16   “Direct Expenses” means actual, documented out-of-pocket costs and expenses incurred by a Party or its Affiliates as the direct result of a Recall or Withdrawal, as applicable, such as costs of goods (including Supplied Product), notification, packing, shipping, distribution and destruction costs and required reimbursement to Third Parties, but shall not include any indirect costs or expenses such as administrative costs, overhead, loss of reputation or goodwill, or lost profits or any other costs or expenses not associated directly with the Supplied Product that is the subject of the Recall or Withdrawal.

1.17   “Effective Date” has the meaning set forth in the preamble hereto.

1.18   “Firm Orders” has the meaning set forth in Section 3.3(a).

1.19   “Floor Price” means, subject to Section 4.1(c), an amount equal to [***]; provided, however, that, upon Packaging Transfer, the then-current Floor Price shall be decreased by [***], to reflect the reduction of [***], unless the Parties otherwise mutually agree in writing.

1.20   “Force Majeure” has the meaning set forth in Section 12.1(a).

1.21   “License Agreement” has the meaning set forth in the recitals hereto.

1.22   “Manufacturing Changes” has the meaning set forth in Section 8.4(b).

1.23   “Manufacturing Price Increase” has the meaning set forth in Section 4.1(c).

1.24   “Manufacturing Price Reduction” has the meaning set forth in Section 4.1(c).

1.25   “Notice” has the meaning set forth in Section 12.11(a).

1.26   “Packaging Transfer” means the technology transfer of all know-how and specifications needed to conduct packaging of Supplied Product, as in the categories set forth on Schedule 3 and contemplated in Section 5.1.

1.27   “Packaging Transfer Date” means the completion of Packaging Transfer; provided that in no event shall the Packaging Transfer Date occur after [***].

1.28   “Party(ies)” has the meaning set forth in the preamble hereto.

1.29   “Quality Executives” means (a) for Seller, Senior Vice President of Quality and (b) for Buyer, [***], VP, FRI Corporate Quality & Compliance.

1.30   “Recall” has the meaning set forth in Section 9.2.

1.31   “Requirements” means all quantities of the Supplied Product required or reasonably needed by Buyer (or its Affiliate or Sublicensee) fordevelopment, use, marketing, distribution, sale, commercialization and other Exploitation of the Product during the Supply Term; provided, that Requirements shall not include any Product required by Buyer for carrying out the Phase IV Commitments.

1.32   “Seller” has the meaning set forth in the preamble hereto.

1.33   “Seller Supply Agreements” means the agreements set forth in Schedule 1 hereto, as such schedule may be updated from time to time upon written notice by Seller.

1.34   “Source of Supply” means a Seller Affiliate, a Supplier or, upon Buyer’s consent, such consent not to be unreasonably withheld, delayed or conditioned, a Third Party designated by Seller to act on Seller’s behalf as supplier of Supplied Product to Buyer under this Agreement.

1.35   “Specifications” means the specifications for (a) the Product as set forth in the NDA #022-117; and (b) the 2.5 mg Dosage Strength, as set forth in IND #70329 and IND #51641, approved by the FDA, as applicable, in each case, as such specifications may be modified in accordance with the terms and conditions of this Agreement.

1.36   “Supplied Product” means the Product or (if applicable) the 2.5 mg Dosage Strength, each:  (a) prior to the end of the Calendar Quarter in which Packaging Transfer is completed, in finished, packaged form; and (b) thereafter, in pre-printed, bulk blister packs.  For clarity, all Closing Inventory shall be included within Supplied Product, and subject to all provisions relating to Supplied Product, except as otherwise provided in Section 3.3(a).

1.37   “Supplier” means, with respect to a Seller Supply Agreement, a Third Party signatory to such Seller Supply Agreement.

1.38   “Supply Deficiency” has the meaning set forth in Section 2.3(b)(i).

1.39   “Supply Failure” has the meaning set forth in Section 2.3(b)(ii).

1.40   “Supply Price” with respect to Supplied Product means [***]; provided that, upon Packaging Transfer, the Supply Price as a percentage of Net Sales shall be decreased by an amount equal to the [***] decrease in then-current Floor Price.  Supply Price with respect to Owned Generic Product means [***].  Supply Price with respect to Authorized Generic Product (authorized pursuant to Section 5.2.3 of the License Agreement) is [***].

1.41   “Supply Term” has the meaning set forth in Section 11.1.

1.42   “Technology Transfer” has the meaning set forth in Section 2.3(b)(ii).

1.43   “Third Party Claims” has the meaning set forth in Section 7.1.

1.44   “Visual Inspection” has the meaning set forth in Section 6.2(a).

1.45   “Withdrawal” has the meaning set forth in Section 9.1.

1.46   “Year Price Adjustment” has the meaning set forth in Section 4.1(c).

2.     SUPPLY OF PRODUCT.

2.1   Supply of Supplied Product.  Subject to the other terms and conditions hereof, (a) Seller shall supply (which may include arranging for a Source of Supply to supply to Buyer, with Delivery terms in accordance with this Agreement or otherwise acceptable to Buyer), and Buyer shall purchase from Seller, the amount of Supplied Product equal to all of Buyer’s (and its Affiliates’ and Sublicensees’) Requirements other than Requirements of Buyer for a sub-licensee pursuant to Section 5.2.3(a) of the License Agreement and (b) Buyer shall not purchase, or permit any Affiliate to purchase, any Supplied Product or any other product containing asenapine for (re)sale from any supplier other than Seller, except as otherwise provided in, and subject to the terms and conditions of, Section 2.3(b)(ii).  All Supplied Product supplied to Buyer hereunder shall be packaged and labeled in accordance with the Specifications, Regulatory Approvals and applicable Laws and as otherwise may be agreed by the Parties in writing.  It is understood that the Clinical Supply Agreement provides for supply to Buyer of Product clinical materials for use by Buyer in certain clinical trials as contemplated in that agreement.  Seller shall, [***], initiate, provide and manage all stability, testing, retain and other similar programs required by applicable Law and performed by Seller as of the Effective Date.

2.2   Use of Supplied Product.  Buyer agrees that all Supplied Product supplied hereunder shall be used solely for development, marketing, distribution, sale, Exploitation and other commercialization in the Buyer Territory pursuant to the terms and conditions of the Asset Purchase Agreement, License Agreement and Transition Services Agreement.

2.3   Shortage.

(a)   Shortage of Supplied Product.  In the event that Seller fails to supply, or expects that it will not be able to supply, to Buyer any amounts of Supplied Product ordered by Buyer under a Firm Order by the specified delivery date in such Firm Order, due to a shortage of raw materials, resources or existing capacity, or for any other reason (including due to a Force Majeure) (a “Supply Shortage”), then Seller shall notify Buyer in writing of such circumstances as soon as reasonably practicable, including the underlying reasons for such shortage, proposed remedial measures and, to the extent it can be reasonably determined, the date such inability to supply Supplied Product is expected to end.  As to any such Supply Shortage, or expected Supply Shortage, Seller shall use good faith, diligent efforts to resolve such problem and deliver the shortfall of ordered Products as soon as reasonably practicable.  Further, in such event, the Parties shall negotiate in good faith and seek to agree on a reasonable delivery schedule (in light of the circumstances) for such Supplied Product, provided that any such negotiation or agreement shall not relieve Seller of its supply obligations hereunder.

(b)   Consequences of Shortage of Supplied Product for any reason (including Force Majeure).

(i)   Supply Deficiency of Supplied Product.  In the event that Seller fails to supply to Buyer, in accordance with the terms of this Agreement, at least [***] of the aggregate quantity of Supplied Product ordered in Firm Orders submitted over [***] (a “Supply Deficiency”), then the Parties shall meet as soon as reasonably practicable following the first occurrence of any Supply Deficiency in order to discuss the source and causes of such Supply Deficiency and suggested remedies therefor.  Seller shall use commercially reasonable efforts to cure the Supply Deficiency as soon as practicable, by Delivery to Buyer of the amounts of Product needed to satisfy the shortage resulting from such failure(s) to supply.  If the Supply Deficiency was caused by a Source of Supply, Seller shall, subject to the terms and conditions of the applicable Seller Supply Agreement, use its reasonable best efforts to allow Buyer to participate in all applicable discussions concerning Product supply to Buyer with the applicable Source of Supply, subject to Buyer’s execution of customary confidentiality or similar agreements, and Seller shall in any event use commercially reasonable efforts to cause such Source of Supply to cure the Supply Deficiency, which efforts shall include Seller exercising the remedies available to Seller under the applicable Seller Supply Agreement to cause the Source of Supply to cure such Supply Deficiency, including the use of the additional Manufacturing capacity at [***]’s facility in the United States, as contemplated by Section 2.3(c), if applicable.  In the event of a Supply Deficiency, Seller shall allocate all available raw materials, production capacity and other resources necessary to cure the Supply Shortage [***].

(ii)   Supply Failure of Supplied Product.  In the event that Seller fails to supply to Buyer, in accordance with the terms of this Agreement, at least [***] of the aggregate quantity of Supplied Product specified in Firm Orders over a period of [***] (a “Supply Failure”) then the Parties shall meet as soon as reasonably practicable following the first occurrence of any Supply Failure to discuss the source of the Supply Failure and the suggested remedies therefor.  If a Supply Failure is not cured by Seller within [***] after the first occurrence of such Supply Failure, then at Buyer’s written request, Buyer shall have the right to exercise the manufacturing license rights and rights of reference granted under Section 2.1.3 of the License Agreement to Manufacture or have Manufactured Supplied Product (the “Back-up Manufacturing License”), subject to the terms and conditions of the Seller Supply Agreements, this Agreement and the License Agreement, for the purpose of curing such Supply Failure and Manufacturing such amounts of Buyer’s (and its Affiliates’ and Sublicensee’s) Requirements of Supplied Product as Seller is not able to supply or to demonstrate, to Buyer’s reasonable satisfaction, that Seller can supply going forward on a consistent basis; provided that, other than as provided in Section 11, Buyer shall not exercise the Back-up Manufacturing License with respect to the Manufacturing activities conducted on behalf of Seller by [***] (“[***]”), unless and until a Supply Failure caused by [***] remains uncured despite Seller’s reasonable and good faith efforts to exercise the remedies available to Seller under the Seller Supply Agreement with [***] to cure such Supply Failure, including the use of the additional Manufacturing capacity at [***]’s facility in the United States, as contemplated by Section 2.3(c).  If Buyer exercises the Back-up Manufacturing License and to the extent that the Supply Failure was caused by Seller or a Source of Supply and relates to packaging of Supplied Product or the Manufacture of API used in the Manufacture of Supplied Product, Seller shall diligently and reasonably cooperate with Buyer, in good faith, to:  (A) disclose to Buyer the know-how Controlled by Seller  and used in the Manufacture of Supplied Product and API as of the date of such Supply Failure, which is in the categories set forth on Schedules 2 and 3 hereto; and (B) have its representatives meet with representatives of Buyer, in each case, to the extent not previously conducted pursuant to Packaging Transfer, (the “Technology Transfer”); provided that, subject to Section 11.3(a), [***]; provided, further, that in no event shall Seller’s obligations to conduct such Technology Transfer exceed [***] or extend beyond [***] after the commencement thereof (except that such technology transfer obligation of Seller shall be extended to the extent such technology transfer is delayed by reasons within Seller’s or its Affiliate’s control).  For clarity, Buyer shall not be entitled to exercise the Back-up Manufacturing License prior to the expiration or termination of this Agreement, except to the extent provided in this Section 2.3(b)(ii).

(iii)   If Buyer exercises the Back-up Manufacturing License, to Manufacture or have Manufactured Products or 2.5 mg Dosage Strength, as applicable, then for sales of such Products or 2.5 mg Dosage Strength, as applicable, that are Manufactured under the Back-up Manufacturing License, Buyer shall pay Seller a royalty in the amount of [***] (subject to the following) of the Net Sales of such Products or 2.5 mg Dosage Strength, as applicable; provided, however, that in the event of a Supply Failure, Buyer shall be entitled to retain [***].In the event that, following a Supply Failure, Seller fails to supply at least [***] of the aggregate quantity of Supplied Product specified in Firm Orders over a period of [***], then thereafter the above royalty rate for sale of Product Manufactured by or on behalf of Buyer shall be [***] of Net Sales of the Product or 2.5 mg Dosage Strength, as applicable.  The provisions of Article 4 shall apply to the reporting and payment of such royalties on the applicable Products or 2.5 mg Dosage Strength, as applicable.  Subject to Section 11.3(a), such royalty obligation shall expire upon [***].

(c)   [***]

2.4   Safety Stock.

(a)   Seller shall maintain an inventory of at least [***]’ supply of pre-printed, bulk blister strips of Product and 2.5 mg Dosage Strength, based on Buyer’s then-current Constrained Forecast, on a first-expiry first-out basis; provided that, during a reasonable period surrounding launch of the 2.5 mg Dosage Strength, Seller shall only be required to use commercially reasonable efforts to maintain the foregoing inventory levels of 2.5 mg Dosage Strength.  Seller shall provide written notice to Buyer where the above inventory of at least [***]’ supply is decreased in whole or in part to meet a Firm Order.  Upon request of a Party on reasonable cause shown, the Parties shall discuss reasonably and in good faith whether such inventory requirement may be reduced or eliminated.  Any such change shall be made only upon agreement between the Parties, including agreement on the timing of such reduction or elimination.  Buyer agrees to purchase from Seller at [***] any remaining amounts of such inventory held pursuant to this Section 2.4(a) (i) that fails to meet the expiry dating requirements of Section 3.5 upon invoice from Seller and (ii) upon termination or expiration of this Agreement.

(b)   Buyer shall maintain an inventory of at least [***]’ supply of Supplied Product, based on Buyer’s then-current Constrained Forecast, on a first-expiry first-out basis.  Buyer shall provide written notice to Seller where the above inventory of at least [***]’ supply is decreased in whole or in part to meet market demand for Supplied Product.  Upon request of a Party on reasonable cause shown, the Parties shall discuss reasonably and in good faith whether such inventory requirement may be reduced or eliminated.  Any such change shall be made only upon agreement between the Parties, including agreement on the timing of such reduction or elimination.

2.5   Coordination.  Each Party shall appoint one or more supply and operations employee(s) of such Party to meet with the appointed employees of the other Party to review and discuss in good faith forecast and demand of Supplied Product, supply chain, safety stock maintained pursuant to Section 2.4 and other topics as may be agreed by the Parties related to supply of Supplied Product and performance hereunder.  Such meetings shall occur [***] during the Supply Term, or as otherwise agreed by the Parties, and by telephone, other similar means, or in-person at locations, as agreed by the Parties.

2.6   Specifications.  Seller shall Manufacture and supply Supplied Product in accordance with the Specifications, and in accordance with the current approved Regulatory Approval for the Supplied Product, cGMPs and all applicable Laws of the United States and the country of Manufacture.  No production batch of Supplied Product shall be Delivered unless approved and released by Seller’s quality control department in accordance with the Quality Agreement.

2.7   2.5 mg Dosage Strength.  In a manner and on such timelines to be agreed by the Parties in good faith, Seller shall undertake validation (including development of protocols and reporting of results) and qualification activities to the extent required to Manufacture the 2.5 mg Dosage Strength pursuant to this Agreement; provided that [***]; and, provided, further, that Seller shall reimburse Buyer [***], should any data generated in connection with such validation activities be used to obtain Regulatory Approval of the 2.5 mg Dosage Strength in Seller Territory and the validated line be used to supply such product for sale in the Seller Territory.  For clarity, Buyer shall pay to Seller (x) the Floor Price for validation batches of 2.5 mg Dosage Strength Manufactured in connection with the activities described in this Section 2.7, and (y) the Supply Price for 2.5 mg Dosage Strength validation batch product supply that is sold commercially in the Buyer Territory.  Commercial stability for said validation batches shall be performed in accordance with the provisions of Section 2.1.

3.     FORECASTS AND ORDERS.

3.1   Long Term Annual Non-binding Forecast.  Within [***] after the Effective Date and no later than [***] of each Calendar Year thereafter, Buyer shall advise Seller in writing of its estimated annual non-binding requirements of Supplied Product by SKU for [***].  Buyer shall use commercially reasonable efforts to make its estimated long-range forecast a reasonable basis for Seller’s production planning and capacity investment.  If at any time Buyer’s long-range forecast reasonably suggests any problems in relation to production capacity, the Parties shall discuss how to address the potential shortage.

3.2   Rolling Forecasts.

(a)   Within [***] after the Effective Date and thereafter, prior to the [***] of each month, Buyer shall submit to Seller, a [***] rolling forecast by SKU of Buyer’s expected orders of each Supplied Product SKU, during each month of such period, the first [***] of which will be binding commitments to submit Firm Orders, as further described in this Section 3.2 (but subject to the batch size order restrictions set forth in Section 3.3(a)), and the rest of which shall represent a non-binding estimate, but, for clarity, subject to the restrictions described in Section 3.2(b), for the following [***] period (each such forecast, a “Constrained Forecast”).

(b)   For the first through [***] in any particular Constrained Forecast, the Firm Orders for Product (including 2.5 mg Dosage Strength, if applicable) that are ultimately placed by Buyer for each such month shall not vary (up or down) from the amount of Product forecasted to be ordered in such month in such Constrained Forecast, by more than the following percentages:  (i) for the first through [***] of the applicable Constrained Forecast: +/- [***]%; (ii) for the [***] through [***] of the applicable Constrained Forecast: +/- [***]%; and (iii) for the [***] through [***] of the applicable Constrained Forecast: +/- [***]%.  The foregoing percentage deviation allowances, for each of the applicable months in a particular Constrained Forecast, set out the ultimate limit for changes in subsequent Constrained Forecasts, with respect to the Firm Orders that ultimately are placed by Buyer in each of such months.  For example, if the forecast in a particular Constrained Forecast for the amount of Product to be ordered in the [***] of such Constrained Forecast is [***] tablets, then the ultimate Firm Order that is placed by Buyer during such month cannot be more than [***] tablets or less than [***] tablets.  Similarly, if the forecast in a particular Constrained Forecast for the amount of Product to be ordered in the [***] of such Constrained Forecast is [***] tablets, then the ultimate Firm Order that is placed by Buyer during such month cannot be more than [***] tablets or less than [***] tablets.  For the 2.5 mg Dosage Strength, Seller will manufacture [***] validation batches as described above.  For any future orders of the 2.5 mg Dosage Strength, purchase orders will be placed with at least [***] lead time for initial orders.  Parties shall negotiate in good faith and agree on a reasonable forecasting process for 2.5 mg Dosage Strength Product a reasonable time prior to approval of such Product.

3.3   Firm Orders.

(a)   As provided in Section 3.2(a) above, the first [***] of each Constrained Forecast submitted by Buyer shall constitute binding commitments by Buyer to submit firm orders (each, a “Firm Order”) to purchase the amount of Product or 2.5 mg Dosage Strength, as applicable, forecasted to be ordered in each such month (subject to the following).  Buyer, on a monthly basis, shall deliver orders to Seller for Supplied Product in the amounts consistent with the applicable Firm Order in the form of a written purchase order, stating (i) the quantity of Supplied Product ordered; and (ii) the requested delivery date thereof; provided, however, that, in no event shall the requested delivery date be less than [***] from the date of Buyer’s order thereof.  Each Firm Order submitted by Buyer shall be binding on Seller.  All quantities of each Supplied Product ordered by Buyer shall be [***].  In the event of any inconsistency between the terms and conditions of any purchase order delivered under this Agreement and the terms and conditions of this Agreement, the terms and conditions of this Agreement shall prevail.

(b)   Notwithstanding the order size limitations of Sections 3.2(b) and 3.3(a) above, Buyer may, in any particular month, submit orders for amounts of Supplied Product in excess of the Firm Order amount for such month (as provided in the applicable constraints set forth in Section 3.2(b) or 3.3(a)). Seller shall use all commercially reasonable efforts to supply such excess quantity of Supplied Product ordered.  If unable to supply the entire amount of such excess order, Seller shall supply such lesser quantity of Supplied Product as it is able to using such efforts, but Seller shall have no liability hereunder to Buyer to the extent Seller is unable to supply such excess orders notwithstanding its using such efforts.

(c)   On the Effective Date, Buyer is delivering an order to Seller for the Closing Inventory in the form of a written purchase order.  Notwithstanding anything in Section 4.4(a) to the contrary, the Closing Inventory shall be delivered to Buyer (or its designee) pursuant to the Transition Services Agreement.

3.4   Terms of Sale.  All Firm Orders for Supplied Product placed by Buyer in accordance with Sections 3.1, 3.2 and 3.3 above shall be accepted by Seller within [***].  In addition, any orders for excess amounts of Product or 2.5 mg Dosage Strength, as applicable, submitted under Section 3.3(b) shall, subject to Section 3.3(b), be binding on Seller to the extent Seller accepts such orders.

3.5   Expiry Dating.  Subject to Section 4.4(d), no Supplied Product shall be Delivered to Buyer that has less than [***]’ expiry dating remaining on the date Delivered, unless the Parties agree otherwise.

4.     PRICE; PAYMENT AND TERMS OF SALE.

4.1   Supply Price.  Seller shall sell to Buyer, and Buyer shall purchase from Seller, the Supplied Product, at the Supply Price, payable in two installments, as set forth in this Section 4.1.

(a)   Initial Payments.  Upon Delivery of each shipment of Supplied Product (other than the Closing Inventory), Seller shall invoice Buyer for payment in an amount equal to the number of tablets of Supplied Product included in such shipment multiplied by the Floor Price.  Payment of each such invoice shall be due and payable by Buyer within [***] after the receipt thereof by Buyer.  Buyer shall pay the aggregate Floor Price for the Closing Inventory at the Closing.

(b)   Quarterly Payments based on Net Sales.  Within [***] after the end of each Calendar Quarter, Buyer shall pay to Seller, with respect to each tablet of Supplied Product (which shall include Closing Inventory) sold by Buyer during such Calendar Quarter, the Supply Price applicable to the sale of such tablet, less the amount paid by Buyer pursuant to Section 4.1(a) with respect to such tablet.

(c)   Increased Manufacturing Costs.  In the event that Seller’s actual and verifiable cost to Manufacture Supplied Product increases by amounts not accounted for in the adjustments to the Floor Price, such that such manufacturing cost is more than [***] greater than the then-current Floor Price, for any reason that (i) applies to all purchasers of Supplied Product from Seller or its Affiliates, (ii) relates to any Change or volume decrease under this Agreement or (iii) relates solely to the Buyer Territory (each, a “Manufacturing Price Increase”), the Floor Price shall be increased by [***].  Such increase to the Floor Price shall become effective for the first order of Supplied Product filled by Seller following the occurrence of the Manufacturing Price Increase, and Seller shall give Buyer written notice of any such increase.  If following any increase to the Floor Price pursuant to this Section 4.1(c), Seller’s actual cost to Manufacture Supplied Product is reduced by at least [***] of the amount of the Cost Price Increase, the Floor Price shall be adjusted downward to reflect such cost reductions.  Such decrease in the Floor Price shall become effective for the first order of Supplied Product filled by Seller following the occurrence of the Manufacturing Price Reduction, and Seller shall give Buyer written notice of any such decrease.  All calculations of Seller’s cost to Manufacture Supplied Product pursuant to this Section 4.1(c) shall be made using currency exchange rate calculations based on the spot rate published by OANDA Corporation at www.oanda.com, on the date of the applicable adjustment.

(d)   Samples.  Notwithstanding Section 4.1(b), the price payable hereunder for any Supplied Product that constitutes a sample shall be [***].

4.2   Reports.

(a)   Monthly Statements.  Subject to Section 4.2(b), within [***] after the end of each Calendar Month, Buyer shall deliver a report to Seller specifying, on an SKU-by-SKU basis, an estimate (based on the third party sources available to Buyer) of the tablets of Supplied Product sold in such Calendar Month and of the gross amounts billed Third Parties for such Supplied Product in such Calendar Month.

(b)   Quarterly Reports.  Within [***] after the end of each Calendar Quarter, Buyer shall deliver a report to Seller specifying, on an SKU-by-SKU basis, the tablets of Supplied Product sold, gross amounts billed Third Parties for such Supplied Product, deductions taken to arrive at Net Sales attributable to such Supplied Product and the Net Sales attributable to such Supplied Product, in each case, on a cumulative basis for such Calendar Quarter.

4.3   Payments.

(a)   Payment Method.  All payments to be made by Buyer under this Agreement shall be paid in U.S. Dollars, by wire transfer, pursuant to the instructions of Seller, as such instructions may be designated from time to time by Seller at least 10 Business Days prior to the date payment is due.  [***]

(b)   Late Payments.  In the event that any payment is not paid by the date due in accordance with the provisions of this Article 4, the overdue amount shall bear interest, at a rate equal to [***], as of the date such payment is due, or the maximum rate permitted under applicable Law, whichever is less, from the date due until payment is made.  Seller shall, in its sole discretion, and without prejudice to any other of its accrued rights, be entitled to suspend the provision of Supplied Product if any material payment default is not cured within [***] after Buyer’s receipt of written notice from Seller of such default, such suspension to terminate (and Seller’s Delivery of ordered Supplied Product to recommence) automatically upon cure of such payment default.

(c)   Withholding Taxes. If applicable Laws require withholding of income or other similar Taxes imposed upon any payments made by Buyer to Seller under this Article 4, Buyer shall make such withholding payments as may be required and shall subtract such withholding payments from such payments.  Buyer shall submit appropriate proof of payment of the withholding Taxes to Seller within a reasonable period of time. Buyer shall promptly provide Seller with the official receipts.  Buyer shall render Seller reasonable assistance in order to allow Seller to obtain the benefit of any present or future treaty against double taxation which may apply to such payments.

(d)   Value Added Taxes and Similar Taxes.  All amounts due under this Article 4 are exclusive of sales, use, goods and services, value added, excise, and other Taxes, duties or charges of a similar nature imposed by any Governmental Authority, or other taxing authority. If any sales, use, goods and services, value added, excise, and other Taxes, duties or charges of a similar nature will be chargeable with respect to payments or transactions hereunder, Buyer shall pay, or upon receipt of invoice from Seller shall reimburse, these amounts at the rate in force at the due time for payment or such other time as is stipulated under the relevant legislation.  Each of Seller and Buyer shall use commercially reasonable efforts to minimize obligations relating to Taxes of the nature described in this Section 4.3(d) as a result of the transactions contemplated by this Agreement.

(e)   Records.  Buyer and its Affiliates shall prepare and maintain complete and accurate books and records of account, in accordance with GAAP, of all applicable transactions and other business activities under this Agreement, sufficient to confirm the accuracy of all reports furnished by Buyer under this Agreement, Section 5.16 of the Asset Purchase Agreement, and all payments by Buyer to Seller under this Agreement.  Such records shall be maintained by Buyer and its Affiliates for a period of [***] after the Calendar Quarter to which such records pertain.

(f)   Audit.  Upon Seller’s request, Buyer shall, and shall cause each of its Affiliates, licensees and Sublicensees to permit an independent accounting firm of national standing appointed by Seller and reasonably acceptable to Buyer (or the applicable other party), to inspect and audit the applicable books and records of account of Buyer and its Affiliates, licensees and Sublicensees that relate directly to any reports provided pursuant to Section 5.16 of the Asset Purchase Agreement, Section 4.2 and records maintained pursuant to Section 4.3(e), in order to confirm the accuracy and completeness of the such reports and all payments hereunder; provided, that such accounting firm enters into a typical confidentiality agreement with the party audited.  Seller shall be entitled hereunder to (x) cause the inspection and audit of such books and records relating to a particular time period only one time, and (y) exercise its inspection and audit rights under this Section 4.3(f) once per Calendar Year; provided, however, that if any audit conducted pursuant to this Section 4.3(f) reveals that any previously delivered report was materially inaccurate or that any prior inspection or audit resulted in a material adjustment to amounts due hereunder for any Calendar Quarter, then Seller shall be entitled, for a period of [***] following its receipt of notice of such material deviation, to initiate one other audit pursuant to this Section 4.3(f) for the applicable time period in order to determine whether the applicable material deviation has been cured.  Seller shall bear all out of pocket costs and expenses incurred in connection with any inspection or audit performed pursuant to this Section 4.3(f); provided, however, that if any such inspection or audit correctly identifies any underpayments by Buyer hereunder in excess of the greater of [***] of the amounts actually payable for the period audited and [***], then, in addition to paying the full amount of such underpayment, plus accrued interest at a rate set forth in Section 4.3(b), Buyer shall reimburse Seller for all reasonable out-of-pocket costs and expenses incurred by Seller in connection with such inspection or audit.  All information disclosed pursuant to this Section 4.3(f) shall be subject to the confidentiality and non-use provisions set forth in Article 10.

4.4   Delivery.

(a)   Except as otherwise agreed upon by the Parties, Seller shall deliver the quantities of Supplied Product (excluding, for clarity, the Closing Inventory) set forth in each Firm Order EXW (INCOTERMS 2010), by the delivery date specified in such Firm Order, for pick up at Seller's facility in Swords, Ireland(“Delivery”).  For clarity, Closing Inventory shall be deemed Delivered hereunder at the Closing.

(b)   Buyer shall be responsible for final release of each lot of Supplied Product supplied hereunder for sale within the Buyer Territory in accordance with Buyer’s standard practices.  Seller shall provide Buyer with certificates of analysis for each batch of Supplied Product released for Delivery hereunder, which certificates shall document that each batch received by Buyer conforms to the current Regulatory Approvals for the Supplied Product, the Specifications, cGMPs and all applicable U.S. Laws and include the date of Supplied Product Manufacture, Seller batch number, expiry date for Supplied Product, quantitative results of release testing performed and the signature of an authorized person within the Seller quality organization.  In the event of any major or critical deviations associated with the Supplied Product, Seller will provide Buyer a detailed description of the nature and scope of such deviations, subject to Buyer’s execution of a confidentiality or similar agreement in customary form covering such disclosure.  A copy of each certificate shall be included with each batch of Supplied Product Delivered to Buyer, and one copy shall be transmitted (via e-mail, or as otherwise agreed by the Parties) at the same time to the Buyer representative specified in the applicable Firm Order.  Seller shall provide such information as reasonably requested by Buyer and required by applicable Law, including cGMP, to enable Buyer to qualify Seller as a manufacturer of the Supplied Product in accordance with Buyer’s standard practices.

(c)   Seller shall effect Delivery of the amounts of Supplied Products ordered in each of Buyer’s Firm Orders submitted by Buyer in compliance with Article 2, on or before the specified delivery dates.  However, Seller shall only be required to exert reasonable commercial efforts to fill Buyer’s purchase orders to the extent in excess of the Firm Orders, and Seller shall not be in breach if it is unable to supply in any particular Calendar Quarter any quantities of the Supplied Product ordered by Buyer in a particular month that are in excess of [***] of the quantity of Supplied Product that was ordered by Buyer in the Firm Order for such month.

(d)   If Buyer fails to take Delivery of any Supplied Product on the applicable scheduled delivery date, Seller shall store such Product as Buyer’s agent and Buyer bear Seller’s reasonable administration and storage costs incurred in connection therewith. With respect to any such stored Supplied Product, Buyer agrees that:  (i) Buyer has made a fixed commitment to purchase such Supplied Product; (ii) title and risk of loss for such Supplied Product will have passed to Buyer; (iii) such Supplied Product shall be on a bill and hold basis for legitimate business purposes; (iv) if no delivery date is determined at the time of billing, Seller shall have the right to ship such Supplied Product to Buyer within [***] after billing, at Buyer’s sole cost and expense; and (v) Buyer shall be responsible for any decrease in market value of such Supplied Product relating to factors and circumstances outside of Seller’s reasonable control, including any resulting loss in expiry dating.

4.5   Title and Risk of Loss.  Except as provided in Section 4.4(d), title to and risk of loss of any Supplied Product sold hereunder shall pass to Buyer, and Seller’s liability as to delivery thereof shall cease, upon Delivery of such Supplied Product, whereupon Buyer shall assume all risk of loss or damage.  Except as provided in Section 6.2, under no circumstance shall Buyer have the right to return Supplied Product for which Delivery has been effected.

4.6   Terms of Sale.  The terms and conditions of this Agreement shall be controlling over any inconsistent terms or conditions included in any purchase order or any other sales acknowledgment or document.  No provision of Buyer’s purchase order forms that may impose conditions different from those herein referenced upon Seller or any Source of Supply, or upon Buyer shall be of any force or effect unless expressly agreed to in writing by Seller.

5.     PACKAGING TRANSFER.

5.1   Packaging Transfer.  To the extent not previously provided pursuant to any Technology Transfer, in accordance with a timeline to be agreed by the Parties in good faith, but commencing no later than [***], Seller shall (a) disclose to Buyer any packaging know-how (including documentation constituting specifications as to materials to be used) in the categories set forth on Schedule 3 hereto and owned or controlled by Seller as of the Effective Date, (b) have its representatives meet with representatives of Buyer and (c) provide such other assistance to Buyer as may be reasonably requested; provided, however, that in no event shall Seller’s obligations in this Section 5.1 to conduct such packaging technology transfer without additional charge exceed [***] or extend beyond [***] after the commencement thereof (except that such technology transfer obligation of Seller shall be extended to the extent such technology transfer is delayed by reasons within Seller’s or its Affiliate’s control).  If additional Seller assistance is needed to complete the Packaging Transfer, then Seller shall provide reasonable amounts of additional assistance, as requested by Buyer, provided that Buyer shall pay Seller a reasonable per-person hourly rate for such additional packaging technology transfer services, which shall be payable pursuant to Section 5.2.  Each of Seller and Buyer shall use good faith, diligent efforts to effect completion of the Packaging Transfer as soon as practicable after commencement of the above technology transfer.

5.2   Reimbursement for Packaging Transfer.  Buyer shall reimburse Seller for (a) all reasonable and verifiable out-of-pocket costs and expenses and (b) the amounts due, if any, pursuant to the payment commitment set forth in Section 5.1 for additional Seller assistance, in each case ((a) and (b)), incurred by Seller in performing the packaging know-how transfer services and activities specified in Section 5.1, within [***] after receipt of an invoice therefor and reasonable documentation evidencing such costs and expenses from Seller.  Notwithstanding the foregoing, Seller shall continue, at its sole cost and expense, such on-going stability studies as may be required by applicable Law.

5.3   Buyer Responsibility Following Packaging Transfer.  Buyer shall be responsible for all subsequentpackaging and labeling of Supplied Product from and after the Packaging Transfer Date.

6.     WARRANTY AND LIMITATIONS.

6.1   Warranties.

(a)   Seller hereby warrants to Buyer that all Supplied Product, at the time of Delivery:  (i) meets the Specifications, (ii) assuming the accuracy of Buyer’s warranty set forth in Section 6.1(d), was Manufactured (A) in accordance with all applicable Laws in effect on the day of Delivery as well as all Laws applicable for the Buyer Territory in the country of Manufacture,  (B) in accordance with cGMPs and the current Regulatory Approval for the Supplied Product and (C) is not adulterated or misbranded; provided that for Supplied Product that is Delivered after the Packaging Transfer Date Seller makes no representation or warranty hereunder with respect to any packaging or labeling of Supplied Product after Delivery of such Supplied Product ordered.

(b)   Seller hereby warrants to Buyer that, as of immediately prior to Delivery to Buyer, Seller has good and marketable title to the Supplied Product sold, free of any and all Encumbrances.  Seller hereby warrants to Buyer that, as of the Execution Date, no Taxes are due to the country where Product is currently formulated or packaged on account of manufacture and supply of Product purchased or supplied for distribution in the Buyer Territory.

(c)   Each Party hereby agrees that it shall not at any time, from and after the Effective Date, retain or use in any capacity in connection with the Manufacture, in the case of Seller and Buyer, or Exploitation, in the case of Buyer, of the Supplied Product any Person who has been debarred pursuant to Section 306 of the Act or who is the subject of a conviction described in such section.  From and after the Effective Date, each Party will inform the other Party in writing promptly if such Party, any of its Affiliates or any other Person connected with the Exploitation of the Supplied Product in the Buyer Territory is debarred or is the subject of a conviction described in such Section 306, or if any action, suit, claim, investigation or legal or administrative proceeding is pending or, to such Party’s knowledge, is threatened, relating to the debarment or conviction of such Party or any such Person.

(d)   Buyer hereby warrants to Seller that, following the Effective Date, the Specifications for the Supplied Product do and will comply with the Regulatory Approval for the Supplied Product and all applicable Laws.

(e)   EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY WARRANTY IN RESPECT OF ANY PRODUCT OR SERVICES PROVIDED HEREUNDER AND ALL OTHER WARRANTIES OF ANY KIND ARE EXPRESSLY DISCLAIMED, WHETHER EXPRESS OR IMPLIED, BY STATUTE, CUSTOM OF THE TRADE OR OTHERWISE INCLUDING, ANY WARRANTY RELATING TO THE DESCRIPTION OR QUALITY OF PRODUCT, ITS MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR USE UNDER ANY CONDITIONS, AS TO THE NON-INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OF ANY PERSON OR AS TO ANY OTHER MATTER AND ANY SUCH WARRANTY IS HEREBY EXCLUDED.

6.2   Inspection; Defects and Claims.

(a)   Buyer shall perform visual inspection of each Delivery of Supplied Product prior to use or distribution in the Buyer Territory in accordance with its standard procedures (the “Visual Inspection”).  Any claim relating to Supplied Product that fails to conform to the warranty set forth in Section 6.1(a) or (b) or to loss of or damage to Supplied Product (any such defective Supplied Product, “Defective Product”), shall be made in writing to Seller, as soon as reasonably practical, but no later than [***] after Delivery of the applicable shipment (or within [***] after discovery of a defect or nonconformity that could not reasonably have been detected by performing the Visual Inspection). If Buyer does not notify Seller of any particular Defective Product within the foregoing time periods after discovery of the applicable non-conformity or defect, such failure shall be deemed a waiver of the remedies available to Buyer under this Section 6.2 solely with to the applicable Defective Product.

(b)   Upon Seller’s request, Buyer shall forward for inspection a representative sampling of the Supplied Product or any part thereof that are the subject of Buyer’s claim that such Supplied Product is Defective Product.  If Seller disagrees with Buyer’s claim, representatives of the Parties shall attempt to resolve such dispute in good faith.  If the Parties are unable to resolve their differences within [***] after Buyer’s notice to Seller under Section 6.2(a) (or, if Seller elects to inspect a representative sampling of the Supplied Product or any part thereof that are the subject of Buyer’s claim, within [***] after Seller notifies Buyer of the results of such inspection), then either Party may refer the matter to an independent specialized and qualified laboratory reasonably agreeable to each of the Parties (acting in good faith) for final analysis, which shall be a final resolution of such issue, binding on both Parties hereto and not subject to Section 12.2(a) or Section 12.3 of this Agreement.  The fees and expenses of such laboratory testing shall be borne by [***].

(c)   If Seller agrees with Buyer’s claim, or if such Supplied Product is determined in accordance with Section 6.2(b) to be Defective Product, then Seller shall, at Buyer’s election, either replace the Defective Product as soon as reasonably practicable, without any cost to Buyer, or credit (or refund) Buyer for the total amount paid by Buyer with respect to the Defective Product (at Buyer’s election).  If such Supplied Product is determined in accordance with Section 6.2(b) not to be Defective Product, then Buyer shall pay within [***] after such determination the Supply Price with respect thereto, as provided under Section 4.1, together with any interest applicable thereto in accordance with Section 4.3.  Any Supplied Product that is determined to be Defective Product that is in Buyer’s control shall, at Seller’s option, either be returned to Seller at Seller’s expense, or shall be destroyed by Buyer at Seller’s expense pursuant to Seller’s written instructions and with Seller’s written approval.  Buyer, at Seller’s request, shall provide evidence of such destruction.

(d)   EXCEPT WITH RESPECT TO (I) THOSE RIGHTS AND REMEDIES SET FORTH IN SECTIONS 2.3, 9.1 AND 9.2, (II) SELLER’S OBLIGATION TO INDEMNIFY BUYER FOR THIRD PARTY CLAIMS PURSUANT TO SECTION 7.2, AND (III) BUYER’S ABILITY TO TERMINATE THIS AGREEMENT PURSUANT TO SECTION 11.2, BUYER ACKNOWLEDGES THAT REPLACEMENT OF SUPPLIED PRODUCT OR CREDIT OF THE FLOOR PRICE SHALL BE BUYER’S SOLE AND EXCLUSIVE REMEDY FOR BREACH OF WARRANTY CLAIMS UNDER SECTION 6.1(a) HEREOF BY SELLER OR ITS SOURCES OF SUPPLY HEREUNDER.

7.     INDEMNIFICATION, LIMITATION OF LIABILITY AND INSURANCE.

7.1   Indemnification by Buyer.  Subject to this Article 7, Buyer shall indemnify, defend and hold harmless Seller, its Affiliates and their respective directors, officers, employees, licensors and agents (the “Seller Indemnitees”) from and against any and all Losses incurred by them in connection with any and all Litigation by Third Parties (collectively, “Third Party Claims”) against any such Seller Indemnitee arising from or occurring as a result of:  (a) any breach of this Agreement by Buyer, including any breach by Buyer of its representations or warranties hereunder or a failure by Buyer to comply with or perform any covenants hereunder, (b) the fraud, gross negligence or willful misconduct by Buyer in the performance of Buyer’s obligations under this Agreement and (c) the storage, marketing, promotion, sale, distribution, use or other Exploitation, or, during any period in which Buyer Manufactures (or has Manufactured by an Affiliate of Buyer or a Third Party) the Supplied Product pursuant to Section 2.3(b)(ii), the Manufacture, of any Supplied Product by or on behalf of Buyer, in each case ((a) through (c)), except to the extent of those Third Party Claims arising from or occurring as a result of matters covered by subsections (a) or (b) of Section 7.2, subsections (a) or (b) in Section 10.2 of the License Agreement or indemnification obligations of Seller or its Affiliates under the Clinical Supply Agreement, as to which Third Party Claims each Party shall indemnify the other to the extent of its liability for such Third Party Claims.

7.2   Indemnification by Seller.  Subject to this Article 7, Seller shall indemnify, defend and hold harmless Buyer, its Affiliates and their respective directors, officers, employees and agents (the “Buyer Indemnitees”) from and against any and all Losses incurred by them in connection with any and all Third Party Claims against any such Buyer Indemnitee arising from or occurring as a result of:  (a) any breach of this Agreement by Seller, including any breach by Seller of its representations or warranties hereunder or a failure by Seller to comply with or perform any covenants hereunder and (b) the fraud, gross negligence or willful misconduct by Seller in the performance of Seller’s obligations under this Agreement,  in each case ((a) and (b)), except to the extent of those Third Party Claims arising from or occurring as a result of matters covered by subsections (a), (b) or (c) of Section 7.1, subsections (a), (b), (c) or (d) of Section 10.1 of the License Agreement or indemnification obligations of Buyer or its Affiliates under the Clinical Supply Agreement, as to which Third Party Claims each Party shall indemnify the other to the extent of its liability for such Third Party Claims.

7.3   Procedures for Indemnification.  All indemnification claims under Section 7.1 or Section 7.2 shall be made solely by a Party to this Agreement and shall be governed by Section 7.2 of the Asset Purchase Agreement.  Notwithstanding anything herein to the contrary, the Parties’ respective indemnification obligations under this Article 7 shall not apply to any Losses for which such Party is entitled to indemnification under the Asset Purchase Agreement (excluding for this purpose, application of the limitations in Section 7.3 of the Asset Purchase Agreement).

7.4   Limitation of Liability.

(a)   General Limitation of Liability.  EXCEPT (i) IN CIRCUMSTANCES OF FRAUD, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT BY A PARTY OR ITS AFFILIATES, AND (ii) FOR EACH PARTY’S OBLIGATIONS (1) WITH RESPECT TO THE OTHER PARTY’S CONFIDENTIAL INFORMATION, AS PROVIDED IN ARTICLE 10 HEREOF, OR (2) TO PROVIDE INDEMNIFICATION UNDER SECTION 7.1 OR 7.2, AS APPLICABLE, WITH RESPECT TO THIRD PARTY CLAIMS, UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY UNDER OR WITH RESPECT TO THIS AGREEMENT FOR ANY INDIRECT, SPECIAL, CONSEQUENTIAL, MULTIPLE, PUNITIVE OR INCIDENTAL DAMAGES OF ANY KIND, INCLUDING LOST PROFITS, REVENUE OR INCOME, TORT, BREACH OR REPUDIATION OF ANY TERM OR CONDITION OF THIS AGREEMENT, LOST SALES DIMINUTION IN VALUE, LOSS OF BUSINESS OPPORTUNITY OR LOSS OF GOOD WILL, EVEN IF THAT PARTY HAS BEEN PLACED ON NOTICE OF THE POSSIBILITY OF SUCH DAMAGES.

(b)   EXCEPT IN CIRCUMSTANCES OF FRAUD, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT BY SELLER OR ITS AFFILIATES, AND EXCLUDING SELLER’S OBLIGATIONS UNDER ARTICLE 9, SELLER SHALL NOT BE LIABLE TO BUYER FOR ANY CLAIM FOR LOSSES (WHETHER GROUNDED IN CONTRACT, TORT OR OTHERWISE) UNDER THIS AGREEMENT (OR THE ASSET PURCHASE AGREEMENT OR ANY OTHER ANCILLARY AGREEMENT TO THE EXTENT SUCH LIABILITY ARISES AS A RESULT OF SELLER’S ACTIVITIES UNDER THIS AGREEMENT) UNTIL THE AGGREGATE AMOUNT OF SUCH LOSSES EXCEEDS [***] (the “DEDUCTIBLE”), AFTER WHICH SELLER SHALL BE LIABLE FOR LOSSES IN EXCESS OF THE DEDUCTIBLE UP TO A MAXIMUM AGGREGATE AMOUNT (INCLUDING ANY ROYALTY AMOUNTS RETAINED BY BUYER PURSUANT TO SECTION 2.3(b)(iii)) OF [***]; PROVIDED, THAT (i) THE DEDUCTIBLE SHALL NOT APPLY AND (ii) SUCH MAXIMUM AGGREGATE AMOUNT (INCLUDING ANY ROYALTY AMOUNTS RETAINED BY BUYER PURSUANT TO SECTION 2.3(b)(iii)) SHALL BE [***] WITH RESPECT TO ANY CLAIM FOR LOSSES ARISING OUT OF A SUPPLY FAILURE OCCURRING BEFORE THE [***].

7.5   Insurance.  Seller shall, at its sole cost and expense, obtain and maintain in full force and effect during the Supply Term, commercial general liability insurance, which shall provide product liability coverage that provides for minimum loss coverage at least equal to the insurance coverage maintained by Seller with respect to Seller’s proprietary pharmaceutical products.  Seller may satisfy its obligations hereunder through self-insurance to the same extent.

8.     AUDIT AND REGULATORY ACTIONS; QUALITY.

8.1   Governmental Authority Visits and Inspections.  Upon either Party learning that one or more representatives of a Governmental Authority of competent jurisdiction shall visit or inspect its facilities or, subject to the applicable Seller Supply Agreements, the facilities of a Source of Supply, to conduct an audit or for any other reason related to the Supplied Product, such Party shall (to the extent feasible and permitted by applicable Law) notify the other Party at least [***] in advance to allow such other Party an opportunity to be present during such visit in an observer capacity, to the extent practicable, at such other Party’s expense and subject to the inspected Party’s right to maintain confidentiality of the information related to its facilities.  When a Party does not have advance notice of such a visit or inspection or when the other Party is otherwise unable to attend, the audited Party shall promptly (to the extent permitted by applicable Law) provide the other Party with an accurate written report of the visit in English.

8.2   Manufacturing Audit.  Seller shall permit not more frequently than [***], one or more qualified technical specialists from Buyer (or its sublicensee), upon reasonable prior notice and during normal business hours, to conduct audits (including quality, safety and environmental) of the portion of any its facilities or other facilities (to the extent Seller has audit or observation rights over other facilities) used to Manufacture, store, handle or distribute Supplied Product; provided, however, that Seller may refuse access to portions of such facilities where products other than the Supplied Product are Manufactured, stored, handled or distributed and; provided, further, that Seller shall allow and support such additional audits as reasonably requested by Buyer to address specific quality problems relating to the Supplied Product or in response to any applicable Governmental Authority requirements.  Subject to compliance with the terms and conditions of the Seller Supply Agreements, one or more qualified technical specialists of Buyer shall be permitted to accompany Seller on Seller’s audits or observation visits of its Sources of Supply to the extent any such audit or observation relates to the Supplied Product; provided that, if Seller has the right to conduct such an audit but decides not to conduct such audit, Seller shall notify Buyer of its decision not to exercise such right and Buyer may then request Seller to exercise such right accompanied by one or more qualified technical specialists of Buyer, and Seller shall reasonably cooperate with such request including with respect to scheduling, scope and duration of the audit.  Observations and conclusions of any such audits will be issued to Seller and Seller shall provide a written response within [***] of receipt of such observations and conclusions.  The Parties shall discuss such response and agree on corrective action to be implemented.  Seller shall ensure that agreed corrective action shall be implemented by the audited party, at the audited party’s expense.

8.3   Quality Agreement.  In connection herewith and on the Effective Date, the Parties are entering into the Quality Agreement.   Each Party shall perform all of its obligations under the Quality Agreement in accordance with the terms thereof.

8.4   Changes.

(a)   Upon [***]’ advance written notice (except where such changes are required by applicable Law, in which case such notice shall be given within [***] of Seller becoming aware of such requirement), Seller shall have the right to request to Buyer that it consent to changes to the Specifications or the Manufacturing process for the Supplied Product (each, a “Change”) as Seller may deem appropriate in consultation with Buyer, and Buyer shall not unreasonably withhold, condition or delay its granting such consent; and provided that any such modification or improvement must be in accordance with the Regulatory Approval for the Supplied Product and applicable Law; provided, further, that in all such cases no Changes shall be made unless and until all Regulatory Approvals for the Supplied Product have been received that are necessary for such Change.  In the event that Buyer disagrees with any such Changes requested by Seller, the Parties shall meet in good faith to attempt to come to a mutually acceptable resolution; provided, however, that if the Parties are unable to come to a mutually acceptable resolution then Seller shall be entitled to make such Change if such Change does not adversely impact Buyer’s ability to Exploit the Supplied Product and would be in compliance with applicable Laws or other requirements of the FDA.  [***]  For clarity, Seller shall not need to obtain Buyer’s prior consent for minor Changes to the Manufacturing process for the Supplied Product; provided thatin each case no such Change (or combination of Changes) negatively impacts Buyer, the Exploitation of Product or any Regulatory Approvals of Product, and consistent with the terms of the Quality Agreement.

(b)   Subject to the provisions of this Section 8.4, Buyer may make Changes to the Specifications or the Manufacturing process for the Supplied Product (i) that are required by applicable Law or (ii) otherwise upon Seller’s written agreement (including with respect to pricing terms, to the extent such changes cause actual changes in cost of goods) with respect thereto, such agreement not to be unreasonably withheld, delayed or conditioned (collectively, “Manufacturing Changes”), and Seller shall use its commercially reasonable efforts to implement such Manufacturing Changes as soon as reasonably practicable after notification thereof by Buyer.  In the event that any Manufacturing Change increases or is reasonably likely to increase the actual costs incurred by Seller in connection with the Manufacture of any Supplied Product, such costs shall [***].  [***]  If a Change is made to the Specifications, then prior to the implementation of such Change Buyer shall (x) submit all supplemental applications or reports to Governmental Authorities with respect to such Supplied Product, if required, to reflect such Change, and (y) obtain all approvals required by Governmental Authorities (including required Regulatory Approvals) with respect to such Change.

8.5   Subcontracting.  Seller may subcontract any of its Manufacturing obligations hereunder to any Source of Supply; provided that, notwithstanding such subcontracting, Seller remains and shall remain fully responsible for the supply and Delivery of Product ordered by Buyer hereunder and for all related obligations, including the product warranty set forth in Section 6.1(a).  During the Supply Term, without the consent of Buyer (which consent shall not be unreasonably conditioned, withheld or delayed), Seller shall not (and shall cause its Affiliates not to):  (a) assign to a Third Party (other than to a wholly-owned subsidiary of Seller); (b) amend in a manner that would adversely impact Buyer’s rights hereunder; or (c) terminate (other than for cause), in each case ((a), (b) and (c)), any Seller Supply Agreement to the extent relating to the supply of Supplied Product hereunder.

8.6   Compliance with Law.  Buyer shall (a) store, handle and distribute, and after the Packaging Transfer Date, package and label, Supplied Product in accordance with cGMP and applicable Law and (b) not alter the Supplied Product in any manner, including the labeling and packaging thereof (except after Packaging Transfer).

9.     WITHDRAWALS AND RECALLS.

9.1   Withdrawal.  Buyer shall have the right to withdraw Supplied Product Delivered hereunder or Purchased Inventory from the Buyer Territory (“Withdrawal”) that in Buyer’s reasonable opinion has a minor violation that would not be subject to a FDA legal action, or is potentially unsafe for administration in humans or potentially may cause adverse health consequences, in each case after providing [***] written notice to Seller and an opportunity to discuss such withdrawal; provided that Buyer may conduct such Withdrawal immediately if Buyer believes it is reasonably necessary to prevent injury and/or to comply with applicable Laws.  If Buyer conducts such Withdrawal immediately, Buyer shall provide notice thereof to Seller within [***] of initiating such Withdrawal.  In addition, Sellershall have the right to request that Buyer conduct a Withdrawal if the Supplied Product or Purchased Inventory that is subject to such requested Withdrawal is in Seller’s reasonable opinion unsafe for administration in humans.  If after such request the Parties cannot agree on whether or not to conduct the requested Withdrawal, the matter will be escalated to the Quality Executives for resolution; provided that if the Parties continue to fail to reach agreement within [***] of such meeting/discussion, then Buyer shall have the final decision as to whether or not to conduct such Withdrawal.  Seller shall cooperate with Buyer’s reasonable requests and instructions for carrying out any Withdrawal.  Nothing herein shall prevent either Party from taking such action that is required by applicable Law or regulation, taking into account the reasonable concerns of the other Party as it relates to Supplied Product or Purchased Inventory inside or outside the Buyer Territory.  All Direct Expenses incurred by either Party in connection with any Withdrawal shall be [***].

9.2   Administration of Recalls.  In the event of a mandatory or voluntarily recall of any Purchased Inventory or any Supplied Product that is or is to be Delivered hereunder (“Recall”), Seller shall cooperate with Buyer in carrying out such Recall.  It is acknowledged and agreed by Seller that any decision to initiate a Recall, and the scope and implementation of such Recall, shall rest solely with Buyer; provided, however, that Seller may, subject to Section 9.2(a), request that Buyer conduct a Recall of Purchased Inventory or Supplied Product if it has a reasonable basis to conclude that such Purchased Inventory or Supplied Product is unsafe for administration in humans.

(a)   In the event Seller determines such Recall may be necessary, Seller shall advise Buyer thereof by telephone within [***] of such determination and provide written confirmation of such determination, including all details on which such determination is based, to Buyer as soon as possible, but not later than within [***] of such determination.  The Parties shall then meet and discuss the matter as soon as possible and use good faith efforts to reach agreement on such Recall; provided that the final decision shall rest with Buyer.  Notwithstanding the preceding sentence, in the event that applicable Law or a Governmental Authority of competent jurisdiction requires Buyer to conduct a Recall, Buyer may proceed with such Recall upon [***] written notice to Seller.  Nothing herein shall prevent either Party from taking such action that is required by applicable Law, taking into account the reasonable concerns of the other Party as it relates to Supplied Product or Purchased Inventory inside or outside the Buyer Territory.

(b)   To the extent a Recall is initiated because the Supplied Product does not comply with the Seller’s warranties in Section 6.1(a), the Purchased Inventory does not comply with Seller’s representations and warranties in Section 3.1.13(a) of the Asset Purchase Agreement or as a result of gross negligence, fraud or willful misconduct by Seller or any of its subcontractors, Seller shall be responsible for all Direct Expenses incurred by Buyer as a result of such Recall.  To the extent a Recall is initiated because of a defect in, or any adulteration or misbranding of, the Supplied Product resulting from Buyer’s or any of Buyer’s Affiliates, distributors, licensees, subcontractor’s or other agents’ failure to package, label, warehouse, transport, handle or sell Supplied Product strictly in accordance with the terms of this Agreement, the Asset Purchase Agreement or the License Agreement and applicable Law, or having repacked or relabeled such Product in a manner that violates applicable Law, or any gross negligence, fraud or willful misconduct by Buyer or any of Buyer’s Affiliates, distributors, licensees, subcontractor’s or other agents, Buyer shall reimburse Seller for all Direct Expenses incurred by Seller or its Affiliates as a result of such Recall.  All other Direct Expenses of the Parties incurred in connection with any Recall shall be borne by the Party incurring such Direct Expenses.

9.3   Disputes Related to Direct Expenses.  If there is any dispute concerning which Party’s acts or omissions gave rise to any Recall or Withdrawal, such dispute, at either Party’s option, shall be first referred for good faith discussions between the Quality Executives for a period of [***] and, if such dispute remains unresolved after such period, at either Party’s option, shall be then referred for decision to an independent expert, acting as an expert and not as an arbitrator, to be appointed by agreement between Buyer and Seller, such agreement not to be unreasonably withheld, delayed or conditioned by either Party.  The decision of such independent expert shall be in writing and, except for manifest error on the face of the decision, shall be binding on both Buyer and Seller and not subject to Section 12.2(a) or Section 12.3 of this Agreement.  The costs of such independent expert shall be borne by the Party found to be responsible for the Recall or Withdrawal by the independent expert.  After such determination, costs shall be paid by the responsible Party in accordance with Section 9.1 or 9.2, as applicable.

10.     CONFIDENTIALITY AND PUBLIC ANNOUNCEMENTS.

10.1   Confidentiality and Non-Use.  Each of the Parties hereto agrees to preserve the confidentiality of Confidential Information of the other Party delivered hereunder pursuant to the terms and conditions of Section 5.4 of the Asset Purchase Agreement.

10.2   Publicity/Use of Names.  Any press releases or public announcements concerning this Agreement or use of the other Party’s name, trademark, trade name or logo shall be made subject to and only in accordance with the terms of the Asset Purchase Agreement.

11.     TERM AND TERMINATION.

11.1   Term.  This Agreement shall be effective as of the Effective Date and, unless terminated earlier pursuant to Section 11.2 below, shall expire on the last day of the Calendar Quarter immediately following the Calendar Quarter in which Generic Entry first occurs; provided, however, that if Buyer provides written notice to Seller within [***] following Generic Entry, the term of the Agreement shall be extended and shall expire on the first anniversary of Generic Entry, unless otherwise agreed by the Parties in writing; and provided, further, that notwithstanding anything to the contrary in this Section 11.1, this Agreement shall expire no later than [***] (such period, the “Supply Term”).

11.2   Termination by Either Party.

This Agreement may be terminated prior to expiration as described below:

(a)   this Agreement shall terminate automatically upon any termination of the License Agreement;

(b)   in the event that either Party to this Agreement (the “Breaching Party”) breaches any of its material obligations hereunder, the other Party may give the Breaching Party written notice of such breach and shall require that such breach or default be cured immediately.  In the event that the Breaching Party fails to cure such breach or default within [***] after the date of the other Party’s notice thereof, this Agreement shall terminate immediately; provided that if such breach or default cannot be cured within [***] and the Breaching Party commences and diligently pursues actions to cure such breach within such [***] period, the Breaching Party shall have an additional [***] period to cure such breach before such termination becomes effective; provided, further, that a [***](rather than a [***]) cure period shall apply to any breach of a payment obligation hereunder and such cure period shall not be subject to extension in accordance with the preceding proviso;

(c)   Seller or Buyer, as the case may be, shall have the right to terminate this Agreement, immediately upon giving written notice of termination to the other Party in the event that the other Party suffers an Insolvency Event;

(d)   Seller or Buyer, as the case may be, shall have the right to terminate this Agreement, immediately upon giving written notice of termination to the other Party, as provided for in Section 12.1; and

(e)   the Parties shall have the right to terminate this Agreement upon the Parties’ mutual written agreement at any time.

11.3   Effect of Expiration and Termination.

(a)   Upon any expiration or earlier termination of this Agreement:  (i) Buyer shall have the right, subject to Section 9.1 and 9.2, to continue selling and complete the sale of all inventory of Supplied Products (itself or through Affiliates and/or sublicensees) remaining in its possession at the time of such expiration or termination, as the case may be, in accordance with the terms of the License Agreement, (ii) Buyer shall have the right to exercise the Back-Up Manufacturing License under Section 2.3(b)(ii) for the sole purpose of Manufacturing the Requirements of Supplied Product for Exploitation in the Buyer Territory, in accordance with the terms of the License Agreement (provided that in the event of a termination of this Agreement by Seller pursuant to Section 11.2(b), notwithstanding Section 11.4 to the contrary, Section 2.3(b)(iii) shall be deemed to survive such termination) and (iii) upon Buyer’s request and to the extent not previously conducted in connection with any Supply Failure, Seller shall conduct the Technology Transfer (provided that in the event of a termination of this Agreement by Seller pursuant to Section 11.2(b), [***] costs and expenses incurred in connection with the Technology Transfer.  Except as set forth in Section 11.3(b)(i), upon expiration or earlier termination of this Agreement, all Firm Orders automatically shall be deemed canceled, and Seller shall have no further obligation with respect thereto.

(b)   Upon expiration or termination of this Agreement (other than by Seller pursuant to Section 11.2(b)):  (i) Seller shall have the right and obligation (but subject to Section 4.4(c)) to complete any Firm Orders for Supplied Product accepted prior to the date of receipt of notice of such termination and Buyer shall be required to accept delivery and make payment for such Product in accordance with the terms and conditions of this Agreement, (ii) Seller shall use its commercially reasonable efforts to assign to Buyer the Seller Supply Agreements, unless, with respect to any Seller Supply Agreement, such agreement (A) expressly prohibits such assignment, in which case, Seller shall reasonably cooperate with Buyer to secure the consent of the applicable Third Party to such assignment (provided, that Seller shall in no event be required to pay any amounts to effect secure such consent), or (B) covers Manufacturing or other services other than the Manufacture of the Supplied Product for resale in the Buyer Territory (and Seller determines in good faith that it would not be commercially feasible or otherwise practicable to partially assign the rights and obligations relating to the Supplied Product in the Buyer Territory under such agreement to Buyer), in which case ((A) or (B)), Seller shall[***] reasonably cooperate with Buyer in connection with Buyer obtaining similar Manufacturing services with respect to the Supplied Product in the Buyer Territory, including facilitating the execution of a new agreement between Buyer and the applicable Third Party with respect thereto, (iii) unless and until assumed pursuant to clause (ii) above or otherwise to the extent reasonably requested by Seller, Buyer shall perform Seller’s obligations under the Seller Supply Agreements to the extent resulting from Buyer’s continued Exploitation of the Product in the Buyer Territory (and Seller shall pass through to Buyer the benefits resulting from such performance) and (iv) Buyer shall, in the event it seeks to establish its own supply of Supplied Product, include the Suppliers in any requests for bids or proposals in connection therewith and consider any bids or proposals received from any Supplier in good faith.

(c)   Upon expiration or termination of this Agreement for any reason, subject to Section 11.3(a), Buyer shall pay to Seller (i) all amounts payable hereunder to Seller that have accrued but that remain outstanding as of the date of expiration or termination, as applicable, or that accrue thereafter, (ii) [***] and (iii) [***], in each case within [***] following such expiration or termination or, if later, of the accrual thereof.

(d)   Within [***] following the expiration or termination of this Agreement, each Party shall either, at the other Party’s option (i) return to the other Party all Confidential Information received from the other Party under this Agreement to which such Party does not otherwise retain rights under this Agreement, the Asset Purchase Agreement or the License Agreement or (ii) destroy, and certify in writing to the destruction of, such Confidential Information, except in either case, one copy of such Confidential Information, which may be retained for archival purposes.

11.4   Survival.  Termination or expiration of this Agreement shall not relieve a Party from obligations that are expressly indicated to survive the termination or expiration of this Agreement and shall be without prejudice to any rights that shall have accrued to the benefit of a Party prior to such termination or expiration.  Without limiting the foregoing, clause (ii) of Section 2.4(a), Section 11.3, this Section 11.4, Article 4, Article 7, Article 9, Article 10and Article 12 shall survive the termination or expiration of this Agreement for any reason.

12.     GENERAL PROVISIONS.

12.1   Force Majeure.

(a)   Neither Party shall be liable for any failure to perform, or any delay in the performance of, any of its obligations under this Agreement to the extent, but only to the extent, that such Party’s performance is prevented or delayed by the occurrence of an event of Force Majeure.  For purposes of this Agreement, “Force Majeure” shall mean (i) war, civil war, insurrection, rebellion, civil unrest, fire, flood, earthquake, or adverse weather conditions, (ii) strike, lockout or labor unrest, (iii) unavailability of supplies, materials or transportation, acts of the public enemy, acts of government authorities (including the refusal of the competent Governmental Authorities to issue required Regulatory Approvals), and (iv) any other cause or condition beyond the reasonable control of the Party whose performance is affected thereby.  In the event that a Party’s performance is affected by the occurrence of any event of Force Majeure, that Party shall furnish immediate written notice thereof to the other Party hereto and shall use diligent good faith efforts to perform such obligation.

(b)   If an event of Force Majeure occurs that prevents or substantially interferes with either Party’s ability to perform a material obligation under this Agreement for a period greater than [***], then either Party may terminate this Agreement upon written notice to the other Party.  This Section 12.1 will not excuse the payment of any amount due and owing to a Party through any available lawful means reasonably available to the other Party.

12.2   Governing Law.  This Agreement shall be governed by and construed in accordance with the Laws of the State of New York, excluding any conflicts or choice of Law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive Law of another jurisdiction.

(a)   Jurisdiction.  Subject to Section 12.3 and Section 12.15, the Parties hereby irrevocably and unconditionally consent to the exclusive jurisdiction of the courts of the State of New York and the United States District Court for the Southern District of New York for any action, suit or proceeding (other than appeals therefrom) arising out of or relating to this Agreement, and agree not to commence any action, suit or proceeding (other than appeals therefrom) related thereto except in such courts.  The Parties irrevocably and unconditionally waive their right to a jury trial.

(b)   Venue.  Subject to Section 12.3, the Parties further hereby irrevocably and unconditionally waive any objection to the laying of venue of any action, suit or proceeding (other than appeals therefrom) arising out of or relating to this Agreement in the courts of the State of New York or in the United States District Court for the Southern District of New York, and hereby further irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such action, suit or proceeding  brought in any such court has been brought in an inconvenient forum.

(c)   Service.  Each Party further agrees that service of any process, summons, notice or document by registered mail to its address set forth in Section 12.11 shall be effective service of process for any action, suit or proceeding brought against it under this Agreement in any such court.

12.3   Dispute Resolution.  The Parties recognize that a bona fide Dispute as to certain matters may from time to time arise during the term of this Agreement that relates to either Party’s rights or obligations hereunder.  Except as expressly set forth herein and subject to Section 12.15, any Dispute arising hereunder shall be resolved in accordance with Section 9.10 of the Asset Purchase Agreement.

12.4   Assignment.  Except as expressly set forth in this Agreement, neither Party shall have the right or the power to assign or sublicense (except as permitted in the License Agreement), in whole or in part, any of its rights, or delegate or subcontract the performance of any of its obligations under this Agreement without the prior written authorization of the other Party, which authorization shall not be unreasonably withheld, conditioned or delayed; provided, however, that either Party may assign or delegate any or all of its rights or obligations hereunder without such prior written authorization (a) to an Affiliate or (b) to its successor in interest in connection with a merger, consolidation or similar change of control transaction of such Party.  Further, Buyer may in any event grant sublicenses as provided in Section 2.3 of the License Agreement.  Subject to the foregoing, it shall not be unreasonable for a Party (the “Consenting Party”) to refuse to authorize any assignment, sublicense or subcontract proposed by the other Party (the “Assigning Party”) that is not otherwise provided for in this Agreement in the event that: [***].  Any permitted assignment or delegation hereunder by a Party shall not relieve such Party of any of its obligations under this Agreement, unless, with respect an assignment to a Third Party, such assignee agrees in writing to assume such Party’s obligations under this Agreement, in which case such Party shall be relieved of its obligations hereunder from and after the effective date of such assignment and assumption.  Nothing in this Section 12.4 shall relieve or release either Party from its obligations relating to a change to the situs of Manufacture, which shall be governed by the Quality Agreement.Subject to the foregoing, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and permitted assigns.

12.5   Amendment.  This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by both Parties

12.6   Entire Agreement.  This Agreement, together with the Schedules and Exhibits expressly contemplated hereby and attached hereto, the Asset Purchase Agreement and the other Ancillary Agreements, contain the entire agreement between the Parties with respect to the transactions contemplated hereby and supersede all prior agreements, understandings, promises and representations, whether written or oral, between the Parties with respect to the subject matter hereof.  In the event of any inconsistency between any such Schedules and Exhibits and this Agreement, the terms of this Agreement shall govern.  

12.7   Severability.  If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law, and if the rights or obligations of either Party under this Agreement will not be materially and adversely affected thereby, (a) such provision shall be fully severable, (b) this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and reasonably acceptable to the Parties.

12.8   Headings.  The subject headings of this Agreement are included for purposes of convenience only, and shall not affect the construction or interpretation of any provision of this Agreement.

12.9   Further Assurances.  Each Party agrees to execute such further papers, agreements, documents, instruments and the like as may be necessary or desirable to effect the purpose of this Agreement and to carry out its provisions.

12.10   Counterparts.  This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement.  Delivery of an executed counterpart of a signature page of this Agreement by facsimile or other electronic transmission shall be effective as delivery of a manually executed original counterpart of this Agreement.

12.11   Notices.

(a)   Notice Requirements.  Any notice, request, demand, waiver, consent, approval or other communication permitted or required under this Agreement (each, a “Notice”) shall be in writing, shall refer specifically to this Agreement and shall be deemed given only if delivered by hand or sent by facsimile transmission (with transmission confirmed) or by overnight registered mail, courier or express delivery service that maintains records of delivery, addressed to the Parties at their respective addresses specified in Section 12.11(b) or to such other address as the Party to whom notice is to be given may have provided to the other Party at least 10 days’ prior to such address taking effect in accordance with this Section 12.11.  Such Notice shall be deemed to have been received: (a) as of the date delivered by hand or by overnight registered mail, courier or express delivery service; or (b) on the day sent by facsimile provided that the sender had received confirmation of transmission (by facsimile receipt confirmation or confirmation by telephone or email) prior to 6:00 p.m. Eastern Time on such day (and if confirmation is received after 6:00 p.m. Eastern Time, such Notice shall be deemed to have been delivered on the following Business Day).  Any Notice delivered by facsimile shall be confirmed by a hard copy delivered promptly thereafter.

(b)   Address for Notice.

If to Seller, to:

Merck Sharp & Dohme BV

Waarderweg 39

2031 BN

Haarlem

Netherlands

Attention: Managing Director

Facsimile: [***]

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

Merck Sharp & Dohme Corp.

One Merck Drive

Whitehouse Station, NJ 08889

United States of America

Facsimile:  [***]

Attention:  Office of Secretary

and to:

Covington & Burling LLP

1201 Pennsylvania Avenue, N.W.

Washington, DC  20004

Facsimile:  (202) 662-6291

Attention:  John Hurvitz

Michael J. Riella

If to Buyer, to:

Forest Laboratories Holdings Limited

Cumberland House

9th Floor

1 Victoria Street

Hamilton HM 11, Bermuda

Attention: Chief Legal Officer

Facsimile: [***]

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

Dentons US LLP

101 JFK Parkway, Suite 400

Short Hills, New Jersey 07078

Attention: John L. Cleary, II

Facsimile: (973) 912-7199

12.12   No Benefit to Third Parties.  The covenants and agreements set forth in this Agreement are for the sole benefit of the Parties and their successors and permitted assigns, and, except for the rights of Buyer Indemnitees and Seller Indemnitees under Article 7, they shall not be construed as conferring any rights on any other Persons.

12.13   Expenses. Except as otherwise specified herein or in the Asset Purchase Agreement or in any other Ancillary Agreement, each Party shall bear any costs and expenses incurred by it with respect to the transactions contemplated herein.

12.14   Waiver and Non-Exclusion of Remedies.  Any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving such term or condition.  The waiver by any Party of any right hereunder or of the failure to perform or of a breach by the other Party shall not be deemed a waiver of any other right hereunder or of any other breach or failure by said other Party whether of a similar nature or otherwise.  The rights and remedies provided herein are cumulative and do not exclude any other right or remedy provided by applicable Law or otherwise available except as expressly set forth herein.

12.15   Equitable Relief.  The Parties agree that irreparable damage may occur in the event that a Party does not perform its obligations hereunder in accordance with its specific terms or otherwise materially breaches such obligations.  It is accordingly agreed that each Party shall be entitled to seek an injunction or injunctions to prevent material breaches of terms and provisions of this Agreement by the other Party that will or may cause irreparable harm to such Party, in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which the aggrieved Party may be entitled at law or in equity.  Each Party hereby waives any defenses in any action for specific performance, including the defense that a remedy at law would be adequate.

12.16   Independent Contractors.  In the exercise of their respective rights, and the performance of their respective obligations, under this Agreement, the Parties are, and shall remain, independent contractors.  Nothing in this Agreement shall be construed to constitute the Parties as partners, joint venturers, or participants in a joint enterprise or undertaking, or to constitute either of the Parties as the agent of the other Party for any purpose whatsoever.  Neither Party shall bind, or attempt to bind, the other Party hereto to any contract or the performance of any other obligation, or represent to any Third Party that it is authorized to enter into any contract or binding obligation on behalf of the other Party hereto.

12.17   English Language.  This Agreement shall be written and executed in, and all other communications under or in connection with this Agreement shall be in, the English language.  Any translation into any other language shall not be an official version thereof, and in the event of any conflict in interpretation between the English version and such translation, the English version shall control.

12.18   Construction.  Except where the context otherwise requires, wherever used, the singular includes the plural, the plural the singular, the use of any gender shall be applicable to all genders and the word “or” is used in the inclusive sense (and/or).  The captions of this Agreement are for convenience of reference only and in no way define, describe, extend or limit the scope or intent of this Agreement or the intent of any provision contained in this Agreement.  The term “including” as used herein does not limit the generality of any description preceding such term, and is deemed to mean “including without limitation”.  The language of this Agreement shall be deemed to be the language mutually chosen by the Parties and no rule of strict construction shall be applied against either Party.  Unless otherwise specified or where the context otherwise requires, (a) references in this Agreement to any Article, Section, Schedule or Exhibit are references to such Article, Section, Schedule or Exhibit of this Agreement; (b) references in any Section to any clause are references to such clause of such Section; (c) “hereof,” “hereto,” “hereby,” “herein” and “hereunder” and words of similar import when used in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement; (d) references to a Person are also to its permitted successors and assigns; (e) references to a Law include any amendment or modification to such Law and any rules or regulations issued thereunder, in each case, as in effect at the relevant time of reference thereto; (f) references to any agreement, instrument or other document in this Agreement refer to such agreement, instrument or other document as originally executed or, if subsequently amended, replaced or supplemented from time to time, as so amended, replaced or supplemented and in effect at the relevant time of reference thereto; and (g) references to monetary amounts are denominated in United States Dollars.

[Signature Page Follows]

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first set forth above.

MERCK SHARP & DOHME BV                                                                           FOREST LABORATORIES

                                                                           IRELAND LIMITED

By:/s/ M.L.P.J. Mol-Arts                                                      By: /s/ Diarmuid Burke                                                      

Name: M.L.P.J. Mol-Arts                                                      Name: Diarmuid Burke                                                      

Title: General Manager, MSD Oss                                                                      Title: Director

SCHEDULE 1:

SELLER SUPPLY AGREEMENTS

[***]

[***]

SCHEDULE 2:

TECHNOLOGY TRANSFER

API Technical Transfer Information

[***]

SCHEDULE 3:

PACKAGING TRANSFER

1)           Secondary packaging bill of materials

[***]

2)           Packaging process overview

[***]

3)           Pallet configuration

4)           Shipping conditions

SCHEDULE 4:

MINIMUM BATCH SIZES

[***]

EX-10.11

[***] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

AMENDED AND RESTATED PATENT AND KNOW-HOW LICENSE AGREEMENT

This AMENDED AND RESTATED PATENT AND KNOW-HOW LICENSE AGREEMENT (the “Agreement”) dated this 17th day of December, 2013 (the “Restatement Effective Date”) by and between PIERRE FABRE MÉDICAMENT SAS, a corporation organized under the laws of France and having its principal offices at 45, Place Abel Gance 92100 Boulogne - France (“Pierre Fabre”) and FOREST LABORATORIES HOLDINGS LIMITED, a corporation organized under the laws of the Republic of Ireland and having its principal place of business at Cumberland House, 9th Floor, 1 Victoria Street, Hamilton HM 11, Bermuda(“Forest”) a wholly-owned subsidiary of Forest Laboratories, Inc., a Delaware company having its principal offices at 909 Third Avenue, New York, New York 10022.

R E C I T A L S:

A.           Pierre Fabre has developed and owns the proprietary rights to Levomilnacipran, an enantiomer of Milnacipran (INN) (“Milnacipran”) designated by Pierre Fabre as F-2695 (as more fully defined herein, the “Compound”), a serotonin norepinephrine reuptake inhibitor (an “SNRI”). 

B.           Pierre Fabre and Forest entered into that certain Patent and Know-How License Agreement (the “Original Agreement”) dated as of December 19, 2008 (the “Effective Date”), pursuant to which Pierre Fabre granted to Forest an exclusive license to develop, register, manufacture from the Compound, use, distribute, sell, offer for sale, have sold and import the Product (as defined below) in any and all indications in North America (as defined below).Pursuant to the Original Agreement, Pierre Fabre and Forest have developed the Compound for use as a pharmaceutical product which product has been approved by the FDA.

C.           Pierre Fabre and Forest desire to amend and restate the Original Agreement to, inter alia, (i) expand the territory covered by exclusive commercialization licenses granted to Forest hereunder to include the countries of Latin America (as defined below), (ii) define the conditions under which Forest will grant Pierre Fabre a license to certain Forest Technology, and (iii) define the scope of assistance Forest will provide Pierre Fabre with respect to the Initial Product for the purposes of registration and commercialization of such Product outside the Territory , all in accordance with, and subject to, the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the foregoing, and of the terms and conditions hereinafter set forth, Pierre Fabre and Forest (each a “Party” and collectively the “Parties”) hereto hereby agree as follows:

1.           Definitions.  As used herein, the following terms shall have the respective meanings set forth below.

1.1.“Affiliate” means any person or legal entity controlling, controlled by or under common control with the person with respect to whom such status is at issue and shall include any corporation 50% or more of the voting power of which (or other comparable ownership interest for an entity other than a corporation) is owned, directly or indirectly, by a Party hereto or any corporation, person or entity which owns 50% or more of such voting power of a Party hereto.

1.1.A           “Alliance Manager” has the meaning set forth in Section 3.5.

1.2.“Applicable Laws” means all statutes, ordinances, regulations, rules, or orders of any kind whatsoever pertaining to any of the activities contemplated by this Agreement, including, without limitation, the FD&C Act, Prescription Drug Marketing Act, Generic Drug Enforcement Act of 1992 (21 U.S.C. § 335a et seq.), and Anti-Kickback Statute (42 U.S.C. § 1320a-7b et seq.), and any other regulations promulgated by any regulatory authority, including the FDA, all as amended and in effect from time to time in the relevant territory.

1.3.“cGMP” means current Good Manufacturing Practices as defined in 21 CFR §§ 210 and 211 et. seq., as amended from time to time, and relevant guidelines published by the FDA relating to the standard of practice that is acceptable to the FDA and as required by Applicable Laws.

1.4.“Change of Control” means (i) the acquisition, directly or indirectly, of beneficial ownership of a percentage of the voting power of a Party sufficient to exercise de facto control over the policies and business decisions of such  Party or of all or substantially all of the business or assets of such Party (whether by way of merger, sale of stock, sale of assets or otherwise) by any person or entity (including a “group” as defined in Section 13(d)-3 of the Securities Exchange Act of 1934 (the “Exchange Act”)) (provided that the acquisition of less than 50% of such voting power shall not be deemed to constitute a “Change of Control” for as long as the acquiror or “group” qualifies to report, and does in fact report, its beneficial ownership on Schedule 13G in accordance with Rule 13(d)-1 promulgated under the Exchange Act) or (ii) the appointment or election to the Board of Directors of a Party of members constituting a majority of such Board who were not appointed, approved or recommended for election by the Board of Directors as constituted immediately prior to the appointment or election of such majority.

1.5.[***]

1.6.“Commencement Date” means the date on which Forest commercially launches the Product in the relevant country within the Territory.

1.7.“Commercial Working Group” has the meaning set forth in Section 3.3.

1.8.“Commercially Reasonable Efforts” means those diligent, good faith efforts and resources to be expended by a Party to accomplish an objective as such Party would normally use for a product or compound owned by it or to which it has rights of the type it has hereunder, which is of similar market potential at a similar stage in its development or product life, taking into account, issues of safety and efficacy, product profile, the regulatory environment and status of the Product, the competitive environment, the extent of market exclusivity, and other relevant  factors then prevailing, [***].  The phrase “Commercially Reasonable” as used herein shall be interpreted in a corresponding manner.

1.9.“Compound” means Levomilnacipran, an enantiomer of Milnacipran designated by Pierre Fabre as F-2695, having the chemical structure set forth on Schedule 1.9 of this Agreement, and its pro-drugs, metabolites, salts and polymorphs.

1.10.“Contract Year” means, with respect to a country in the Territory, for (a) the first Contract Year, the period beginning on the first day of the first Quarter following the Commencement Date in such country and ending twelve months after such date, and (b) each subsequent Contract Year, each successive twelve-month period or portion thereof thereafter in such country during the Term.  The first Contract Year shall also be deemed to include the period from the Commencement Date in such country to the first day of the first Quarter of such Contract Year.

1.11.“Control” or “Controlled” means, with respect to any intellectual property right of a Party, that the Party or its Affiliate owns or has a license to such intellectual property right and has the ability to grant access, a license, or a sublicense to such intellectual property right to the other Party as provided in this Agreement without violating the terms of an agreement with any Third Party.

1.12.“Cost of Goods” means Pierre Fabre’s or Forest’s direct costs of materials and labor incurred in acquiring (including any acquisition costs paid to Third Parties for materials or services acquired), formulating, manufacturing, packaging and labeling the Compound or Product, as the case may be, including quality assurance and quality control activities necessary to release the Compound or Product, together with directly allocable manufacturing overheads (but excluding corporate, general or administrative overheads).  Cost of Goods shall be determined in accordance with Pierre Fabre’s and Forest’s standard cost accounting policies, respectively, in each case as consistently applied to the manufacture of pharmaceutical ingredients and products and shall not include inter-company profits among a Party and its Affiliates.  Cost of Goods shall be accrued and reflected in accordance with GAAP.

1.13.“Covered Indication” means [***]

1.14.“Cypress” means Cypress Bioscience, Inc.

1.15.“Cypress/Forest License” has the meaning set forth in Section 2.8(a).

1.16.“Cypress Reimbursement Payment” has the meaning set forth in Section 2.8(e).

1.17.“Detail” means a one-on-one, face-to-face meeting, in an individual or group practice setting, between one or more physician prescribers and one sales representative during which information regarding a Product is communicated by such sales representative as either the first product discussed (i.e., “first position”) or the second product discussed (i.e., “second position”) in such presentation.  When used as a verb, “Detail” or “Detailing” shall mean to engage in a Detail.

1.18.“Development” means all development activities performed by or on behalf of either Party with respect to the Product, including, without limitation, all activities related to, preclinical testing, test method development and stability testing, toxicology, formulation, process development, manufacturing scale-up, quality assurance/quality control, clinical studies, seeking Regulatory Approval and otherwise handling regulatory affairs, statistical analysis and report writing.  When used as a verb, “Develop” means to engage in Development.

1.19.“Development Plan” means the development plan as of the Effective Date set forth as Schedule 1.19 hereto, as updated or amended in accordance herewith, which has been designed by the Parties with a view to obtaining Regulatory Approval by the FDA.

1.19A.“Effective Date” has the meaning set forth in Recital B.

1.20.“EMEA” means the European Medicines Evaluation Agency, or any successor agency having similar jurisdiction.

1.21.“Exclusive” means, when used in connection with a specific grant of rights that the granting Party (i) shall retain for itself no ability to use such granted rights and (ii) shall have no ability to authorize its Affiliates or Third Parties (other than the grantee of such specific rights hereunder) to use such granted rights, in the relevant territory and in the granted field of use, and for the term of, the grant.

1.22.[INTENTIONALLY OMITTED]

1.23.“[***]” means [***]

1.24.“FDA” means the United States Food and Drug Administration or any successor agency having similar jurisdiction.

1.25.“Field” means all human diagnostic, prophylactic, and therapeutic uses of a Product in any formulation or dosage form for any and all indications.

1.26.“First Negotiation Period” has the meaning set forth in Section 2.4.

1.27.“Force Majeure” has the meaning set forth in Section 11.

1.28.“Forest Improvements” means Improvements owned or Controlled by Forest, or one of its Affiliates.

1.29.“Forest Know-How” means Information, whether patented or unpatented, now or hereafter during the Term of this Agreement Controlled by Forest or any Affiliate (other than Pierre Fabre Know-How, which is licensed to Forest pursuant to this Agreement, but including Forest’s interest in the Joint Know-How), which is useful in, and to the extent related to, Developing, formulating, manufacturing, marketing or using a Product.

1.30.“Forest Patents” means each claim of each patent or patent application which is now Controlled or may hereafter be Controlled by Forest or any Affiliate or as to which Forest or any Affiliate may hereafter have rights (other than in respect of the Pierre Fabre Patents which are licensed to Forest pursuant to this Agreement, but including Forest’s interest in the Joint Patents), to the extent claiming the Compound or Product or methods for formulating, making or using the Compound or a Product, in each case including extensions, continuations, continuations-in-part, reissues and divisions thereof; provided, however, that in the event any claim shall no longer subsist or be enforceable for any reason, including the expiration, cancellation, renunciation, abandonment, disclaimer, dedication, withdrawal or failure to maintain thereof, or an adjudication of invalidity or unenforceability by a court of competent jurisdiction from the judgment of which no further appeal can be taken, such claim shall be deemed automatically excluded from the term “Forest Patents” to such extent.

1.31.“Forest Technology” has the meaning set forth in Section 2.3.

1.32.“GAAP” means, as to Forest, generally accepted accounting principles in the United States, as in effect from time to time, and as to Pierre Fabre, generally accepted accounting principles in France, as in effect from time to time, and in each case, including such accounting principles or standards as may be in effect following the Restatement Effective Date in replacement of such respective accounting principles or standards.

1.33.“GCP” means current Good Clinical Practices as set forth in the regulations established by the FDA and embodied in the Code of Federal Regulations, as amended from time to time, and relevant guidelines published by the FDA, relating to the standard of practice that is acceptable to the FDA in the conduct of clinical studies and as required by Applicable Laws.

1.34.“Generic Equivalent” means, with respect to a Product, a product containing the same active pharmaceutical ingredients as the Product (and no other active pharmaceutical ingredients) which is lawfully being sold in a country in the Territory as a generic equivalent substitutable by a pharmacist for the Product.

1.35.“GLP” means current Good Laboratory Practices as promulgated under the Act at 21 C.F.R. Part 58, as the same may be amended or re-enacted from time to time and as required by Applicable Laws.

1.36.“IND” means an Investigational New Drug Application submitted to the FDA in accordance with the Applicable Laws.

1.37.“Impairment” means [***]

1.38.“Improvement” means any new or useful improvement, discovery, claim, formula, process, trade secret and technology (including confidential data and Confidential Information), to the extent relating to, derived from, or useful for the research, development, manufacture, commercialization or use of the Compound or Product (including the formulation, delivery or use thereof), including any synthesis, preparation, recovery, purification processes and techniques, control methods and assays, chemical data, toxicological and pharmacological data and techniques, results of clinical trials and other pre-clinical and clinical data, new product forms, product formulations, indications and specifications, in each case whether patentable or unpatentable, that is conceived or first reduced to practice or demonstrated to have utility during the Term of or in connection with this Agreement.

1.39.“Information” means all tangible and intangible (i) techniques, technology, practices, trade secrets, inventions (whether or not patentable), methods, manufacturing processes, knowledge, know-how, skill, experience, test data and results (including pharmacological, toxicological and clinical test and safety data results), analytical and quality control data, results or descriptions of software, (ii) compounds, composition of matter, materials, and (iii) marketing data including clinical studies designed to support promotional efforts, in each case to the extent relating to the Compound or the Product in any indication.

1.39A.“Initial Indication” means the treatment of MDD in humans.

1.40.“JDC” has the meaning set forth in Section3.1.

1.41.“Joint Know-How” means all Information, whether patented or unpatented, now or hereafter during the Term of this Agreement Controlled jointly by Forest and Pierre Fabre or their respective Affiliates (other than know-how of the other Party which is licensed to a Party pursuant to this Agreement) which is useful in, and to the extent related to, Developing, formulating, manufacturing, marketing or using the Product.

1.42.“Joint Patents” means each claim of each patent or patent application which may hereafter be owned jointly, in accordance with United States laws of inventorship, by Forest or any Affiliate and Pierre Fabre or any Affiliate to the extent claiming a Compound or a Product or methods for formulating, making or using a Compound or a Product, in each case including extensions, continuations, continuations-in-part, reissues and divisions thereof; provided, however, that in the event any claim shall no longer subsist or be enforceable for any reason, including the expiration, cancellation, renunciation, abandonment, disclaimer dedication, withdrawal, failure to maintain thereof, or an adjudication of invalidity or enforceability by a court of competent jurisdiction from the judgment of which no further appeal can be taken, such claim shall be deemed automatically excluded from the term “Joint Patents” to such extent.

1.42A.“Latin America” means the following countries (and any other countries that result from the division or consolidation of such countries): Anguilla, Antigua & Barbuda, Argentina, Aruba, Bahamas, Barbados, Belize, Bermuda, Bolivia, Brazil, British Virgin Islands, Cayman Islands, Chile, Columbia, Costa Rica, Cuba, Curacao, Dominica, Dominican Republic, Ecuador, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Montserrat, Netherlands Antilles, Nicaragua, Panama, Paraguay, Peru, St. Kitts & Nevis, St. Lucia, St. Maarten, St. Vincent and the Grenadines, Suriname, Trinidad & Tobago, Uruguay and Venezuela.

1.42B.“Latin America Patents” means those Pierre Fabre Patents granted or applied for in any of the countries of Latin America.

1.43.“Letter Agreement” has the meaning set forth in Section 2.8(a).

1.44.“MDD” means Major Depressive Disorders.

1.45.“Milnacipran” has the meaning set forth in Recital A.

1.46.“Milnacipran Agreements” has the meaning set forth in Section2.8(a).

1.47.“Milnacipran Indications” has the meaning set forth in Section 2.8(a).

1.48.“NDA” means a New Drug Application submitted to the United States FDA in respect of a Product.

1.49.“Net Sales” of a Product for a period means the gross sales of such Product in a country in the Territory by Forest, its Affiliates and sublicensees to unaffiliated Third Parties for such period, recognized and recorded in accordance with GAAP, less [***]  Net Sales of Forest or its Affiliate will be determined from its books and records generally maintained in accordance with GAAP consistently applied, and Net Sales of a permitted sublicensee based in a jurisdiction other than the U.S. will be determined from its books and records generally maintained in accordance with generally accepted accounting standards applicable to such sublicensee’s pharmaceutical business generally, consistently applied.  Without limiting the generality of the foregoing, transfers or dispositions of a Product for charitable, promotional (including Samples), pre-clinical, clinical, or regulatory purposes will be excluded from Net Sales, as will sales or transfers of such Product among a Party and its Affiliates.

1.50.“New Product” has the meaning set forth in Section 2.4.

                     1.50A.“North America” shall mean Canada, its territories and possessions and the United States.

1.50B.“Original Agreement” has the meaning set forth in Recital B.

                     1.50C.“Pierre Fabre’s Commercialization” means activities undertaken by or on behalf of Pierre Fabre, directly or indirectly (including through a licensee), directed toward marketing, having marketed, promoted, distributing, selling, having sold, offering for sale, and providing commercial support (including activities before obtaining Regulatory Approvals), including (a) activities relating to pre-launch, launch, export, import, transport, disposal and distribution; (b) strategic marketing, sales force detailing, market access activities, advertising, medical education and liaison; and (c) all customer support, invoicing and other sales activities  with respect to the Product outside of the Territory.

1.51.“Pierre Fabre Know-How” means all Information, whether patented or unpatented, now or hereafter during the Term of this Agreement Controlled by Pierre Fabre or any Affiliate (other than Forest Know-How which is licensed to Pierre Fabre pursuant to this Agreement, but including Pierre Fabre’s interest in the Joint Know-How) which is useful in, and to the extent related to, Developing, formulating, manufacturing, marketing or using a Product.  Pierre Fabre Know-How shall exclude Pierre Fabre Manufacturing Know-How.

1.52.“Pierre Fabre Manufacturing Know-How” means all Information, whether patented or unpatented, now or hereafter during the Term of this Agreement Controlled by Pierre Fabre or any Affiliate to the extent related to the manufacture of the Compound and Product.  Wherever references are made in the Agreement and in the Supply Agreement (a) to manufacture of Compound as opposed to manufacture of Product it shall be referred to as “Pierre Fabre Compound Manufacturing Know-How” and (b) to manufacture of Product after the Compound has been manufactured, it shall be referred to as “Pierre Fabre Product Manufacturing Know-How”, respectively.  Notwithstanding anything to the contrary, Pierre Fabre Manufacturing Know-How shall exclude Pierre Fabre Know-How and Pierre Fabre Patents.

1.53.“Pierre Fabre Patents” means each claim of each patent or patent application which is now Controlled by or may hereafter be Controlled by Pierre Fabre or any Affiliate or as to which Pierre Fabre or any Affiliate may hereafter have rights (other than in respect of a Forest Patent which is licensed to Pierre Fabre pursuant to this Agreement, but including Pierre Fabre’s interest in Joint Patents) to the extent claiming the Compound or a Product or methods for formulating, making or using the Compound or a Product, including, without limitation, (i) each claim of each Pierre Fabre patent listed on Schedule 1.53 and (ii) each claim of each patent issuing from or on each Pierre Fabre patent application listed on Schedule 1.53, and in each case including extensions, continuations, continuations-in-part, reissues and divisions thereof; provided, however, that in the event any claim shall no longer subsist or be enforceable for any reason, including the expiration, cancellation, renunciation, abandonment, disclaimer, dedication, withdrawal or failure to maintain thereof, or an adjudication of invalidity or unenforceability by a court of competent jurisdiction from the judgment of which no further appeal can be taken, such claim shall be deemed automatically excluded from the term “Pierre Fabre Patents” to such extent.

1.54.“Pierre Fabre Technology” has the meaning set forth in Section 6.1(b).

1.55.[***]

1.55A.“Principal Markets” means each of [***]

1.56.“Product” means any pharmaceutical product for human use that contains the Compound either as the sole active ingredient or in a fixed dose combination with one or more other active ingredients (other than Milnacipran) and all Improvements thereto.

1.57.[***]

1.58.“Publishing Party” has the meaning set forth in Section 4.3.

1.59.“Quarter” shall refer to the calendar quarterly periods ending March 31, June 30, September 30 and December 31.

1.60.“Regulatory Approval” means the regulatory and governmental approvals and authorizations in any country necessary to Develop, manufacture, distribute, sell or market the Product in that country, including pricing and reimbursement approval, where required.

1.61.“Regulatory Authority” means any national, regional, state or local regulatory agency, department, bureau, commission, council or other governmental entity in each country of the world involved in the granting of Regulatory Approval for a Product, including without limitation, the FDA and the EMA.

1.61A."Regulatory Materials” means regulatory applications, submissions, communications, correspondence, registration, Regulatory Approvals and/or other filings which have been made to, received from or otherwise conducted by the FDA or other Regulatory Authorities.

1.61B.“Regulatory Working Group” has the meaning set forth in section 3.4.

1.62.“Related Agreements” means the Supply Agreement and the Trademark License Agreement.

1.63.“Report” has the meaning set forth in Section2.6(b)(i).

1.64.“Review Period” has the meaning set forth in Section2.6(b)(i).

1.65.“Safety Data” has the meaning set forth in Section 4.4.

1.66.“Samples” means quantities of Product given to authorized medical professionals free of charge as part of the marketing, advertising or promotion of the Product.

1.67.“[***] Product” shall mean [***]

·           [***]

1.68.“Supply Agreement” means the Amended and Restated Purchase and Supply Agreement between Pierre Fabre and Forest dated as of the Restatement Effective Date and as the same may be amended by the Parties from time to time.

1.69.“Term” has the meaning set forth in Section 10.1.

1.70.“Territory” means the United States and Canada and their respective territories and possessions (including Puerto Rico, irrespective of political status) and Latin America.

1.71.“Third Party” means a party other than Forest and Pierre Fabre and any of their Affiliates.

1.72.“Third Party Agreement” has the meaning set forth in Section 2.4.

1.73.“Trademark” means the trademark or trademarks to be used to market the Product in the Territory (other than trademarks applicable to a Party’s business generally and not specific to a Product).

1.74.“Trademark License Agreement” means the Amended and Restated Trademark License agreement between Pierre Fabre and Forest dated as of the Restatement Effective Date and as the same may be amended by the Parties from time to time.

1.75.“United States” means the United States of America, including its territories and possessions, including without limitation Puerto Rico (irrespective of political status).

1.76.“U.S. Royalty” has the meaning set forth in Section 5.3(a).

1.77.“Valuation Panel” means a panel of three independent Third Parties having expertise and experience in the valuation of pharmaceutical products for human use in the Territory appointed by mutual agreement of the Parties.  In the event the Parties are required by the terms hereof to select a Valuation Panel, each Party shall select one such expert within [***] and the two experts so chosen shall select a third who shall serve as chairperson of the panel.  Each Party shall instruct the expert chosen by it to attempt to reach agreement upon such third expert as promptly as practicable, and if possible within [***].  The decision of a majority of the members of the panel entered into shall be deemed the decision of the Valuation Panel.  The Parties shall instruct the Valuation Panel to reach its decision as promptly as practicable, and if possible within [***] of selection of the third member.  The costs of this Valuation Panel shall be covered [***].  Except to the extent otherwise agreed by the Parties, the Valuation Panel will proceed in accordance with the procedural rules of arbitration established pursuant to Section 16.2 as if an arbitration pursuant to such Section.

2.           Grant of License; Exclusivity; Right of First Refusal; New Products; Milnacipran.

2.1.Grant of License by Pierre Fabre.Subject to the terms and conditions of this Agreement, Pierre Fabre hereby grants to Forest (i) an Exclusive license under the Pierre Fabre Patents, Pierre Fabre Know-How and under Pierre Fabre’s interest in the Joint Patents and Joint Know-How to use, offer for sale, sell, have sold, promote, distribute, otherwise transfer and import the Product in the Field in the Territory, subject to the restrictions indicated in Section 2.8, (ii) a co-exclusive license under the Pierre Fabre Patents, Pierre Fabre Know-How and under Pierre Fabre’s interest in the Joint Patents and Joint Know-How to Develop the Product in the Field anywhere in the world solely for purposes of commercialization of the Product in the Field and in the Territory, subject to the restrictions indicated in Section 2.8 and the obligations with respect to clinical studies set forth in Section 4.2, and (iii) an Exclusive license under the Pierre Fabre Patents, Pierre Fabre Know-How, Pierre Fabre’s interest in the Joint Patents and Joint Know-How, and Pierre Fabre Product Manufacturing Know-How to make, have made and formulate the Product anywhere in the world solely for purposes of commercialization of the Product in the Field and in the Territory, in each case in accordance with the terms of this Agreement.

2.2.Sublicensing by Forest.

(a)With respect to the United States, Forest may sublicense its rights hereunder to its Affiliates and shall provide written notice thereof to Pierre Fabre.  With respect to Canada and each country of Latin America, Forest may sublicense its rights hereunder to (i) any of Forest’s Affiliates upon written notice to Pierre Fabre or (ii) a Third Party with the prior written consent of Pierre Fabre, which consent shall not be unreasonably withheld or delayed.  [***]

(b)All sublicenses granted by Forest hereunder will be in writing and consistent with all the terms and conditions of this Agreement and shall not include a further right to sublicense.

(c)Forest shall be responsible for performing all of its obligations set forth in this Agreement, without regard to whether it has granted any sublicense under this section.  Without limitation of the preceding sentence, Forest shall be responsible for reporting to Pierre Fabre the sales of Product by any sublicensee and paying the royalties on Net Sales to Pierre Fabre, in each case as though such sales were made by Forest itself.

2.3.Grant of License by Forest.

(a)Subject to the terms and conditions of this Agreement, Forest hereby grants Pierre Fabre (i) an Exclusive license, including the right to sublicense, under the Forest Patents, Forest Know-How, Forest’s interest in the Joint Patents and Joint Know-How and Forest Improvements (“Forest Technology”)  to make, have made, use, offer for sale, sell, have sold, promote, distribute, otherwise transfer and import the Product in the Field outside the Territory, (ii) a co-exclusive (with Forest) license, including the right to sublicense, under the Forest Technology to Develop the Product in the Field anywhere in the world solely to perform activities contemplated by the Development Plan or for purposes of Commercialization of the Product in the Field outside of the Territory, subject to the restrictions indicated in Section 2.8 and the obligations with respect to clinical studies set forth in Section 4.2, and (iii) an Exclusive license, including the right to sublicense under the Forest Technology to formulate the Product anywhere in the world solely for purposes of Commercialization of the Product in the Field and outside the Territory.  The above license shall be (i) fully paid to the extent necessary to permit Pierre Fabre to fulfill its obligations under this Agreement and the Related Agreements, and (ii) shall be subject to Pierre Fabre’s payment to Forest of the Development Contribution (as defined below) to the extent Pierre Fabre exercises its rights under the license for any other purpose, including without limitation, for any use or incorporation of or any reference to the Forest Technology, including for this purpose, the data (including Safety Data arising from Forest’s clinical study Development program if relied upon by Pierre Fabre to submit an application for Regulatory Approval but not if such Safety Data is included simply for purposes of completeness) generated from Forest’s Development activities hereunder, in connection with Pierre Fabre’s Development and Commercialization of the Products for sale and distribution outside of the Territory.  In the event Pierre Fabre desires to use Forest Technology for purposes other than in fulfillment of its obligations hereunder, Pierre Fabre shall provide written notice to Forest identifying the Forest Technology that it proposes to use and describing such proposed use.  Pierre Fabre and Forest shall then negotiate in good faith to determine the appropriate allocation of the Development expenses incurred by Forest with respect to the Forest Technology that Pierre Fabre proposes to so use, including if applicable the sharing of on-going Development expenses associated with such Forest Technology (the “Development Contribution”), taking into consideration relevant factors, including the type of Forest Technology to be used, Pierre Fabre’s intended use of such Forest Technology, the relative value of the market in which Pierre Fabre intends to use the licensed rights, and the timing of Pierre Fabre’s election in relation to the timing of Forest’s acquisition or development of such Forest Technology.

(b)Notwithstanding the foregoing, the licenses granted pursuant to Section 2.3(a) from Forest to Pierre Fabre, if any, shall be deemed to be fully paid (i.e., without an obligation to pay the Development Contribution) and perpetual with respect to the Fully Paid Forest Technology.  The “Fully Paid Forest Technology” means that certain Forest Technology which (i) covers a Product containing the Compound as its sole active ingredient in the initial formulation covered by the NDA submitted by Forest and approved by the FDA in the United States prior to the Restatement Effective Date, (the “Initial Product”), (ii) was developed by Forest for purposes of obtaining approval of the Initial Product in the United States in the Initial Indication, and (iii) exists on the Restatement Effective Date,  including the Regulatory Materials set forth in Schedule 2.3(b)-1 hereto whether existing on the Restatement Effective Date or developed after the Restatement Effective Date, provided that Fully Paid Forest Technology shall also include minor Improvements to the initial formulation developed after the Restatement Effective Date provided such Improvement did not require Forest to perform additional clinical development or significant pre-clinical or pharmaceutical development in order to obtain approval of such Improvement in the Territory.  For the sake of clarity, it is hereby understood and agreed by Forest and Pierre Fabre that the Fully Paid Forest Technology does not include any Forest Technology developed by Forest with respect to any Product or indication other than the Initial Product for the Initial Indication.  Notwithstanding the foregoing, Pierre Fabre shall have the right to use the Fully Paid Forest Technology for its or its sublicensees development, manufacture and commercialization of any Product, including the Initial Product, in any indication, including the Initial Indication, outside the Territory, and any Improvements to the Fully Paid Forest Technology so developed by Pierre Fabre shall be deemed Pierre Fabre Technology subject to this Agreement.  Notwithstanding anything to the contrary herein, Pierre Fabre shall not use any Forest Technology, including the Fully Paid Forest Technology, to [***] Within [***] from the Restatement Effective Date and thereafter from time to time, Forest shall provide to Pierre Fabre access to the Fully Paid Forest Technology, reasonably requested by Pierre Fabre and which are reasonably necessary or useful to allow Pierre Fabre (its Affiliates and sub-licensees) to obtain and maintain Regulatory Approvals, and to perform Commercialization activities with respect to the Initial Product in the Initial Indication outside the Territory.  Pierre Fabre’s right and license pursuant to this Section 2.3 shall include a right of reference to and a right to use and incorporate all or portions of Forest’s Regulatory Materials in Pierre Fabre’s applications for Regulatory Approvals of the Initial Product in the Initial Indication for purposes of its Commercialization in any country outside the Territory.  In furtherance of the rights granted to Pierre Fabre pursuant to this Section 2.3, following Forest’s receipt of Pierre Fabre’s first written request for support activities (which notice shall be provided at least [***] in advance of any requested support), Forest will provide in a prompt and timely manner reasonable cooperation and assistance to Pierre Fabre in connection with Pierre Fabre’s use of such Fully Paid Forest Technology to seek and maintain Regulatory Approvals outside of the Territory, including assisting Pierre Fabre in responding to inquiries from Regulatory Authorities outside the Territory, provided that Pierre Fabre shall reimburse Forest [***].  A list of the estimated support activities needed by Pierre Fabre from Forest to seek and maintain Regulatory Approvals outside the Territory is set forth in Schedule 2.3(b)-2.  The initial [***] Forest spends in connection with supporting the activities listed in Schedule 2.3(b)-2 will be billed at an hourly FTE rate of [***].  If Forest provides support beyond the initial [***] at Pierre Fabre’s reasonable request, or if Forest provides support for additional activities (beyond those described in Schedule 2.3(b)-2) at Pierre Fabre’s reasonable request, such additional FTE hours devoted by Forest will be reimbursed by Pierre Fabre at a higher hourly FTE rate of [***].  Forest’s obligations to support Pierre Fabre to seek and maintain applications for Regulatory Approval outside of the Territory pursuant to this Agreement shall be limited to [***]  The detailed modalities of such assistance and the planning for such assistance will be agreed in writing by the Parties in advance.  The Parties shall coordinate the exchange of information contemplated by this Section 2.3(b) through the Regulatory Working Group.  All FTE rates set forth in this Agreement shall be subject to annual adjustment by Forest to reflect increases in the Employment Cost Index for the United States for the relevant employee base for the relevant period.

2.4.Right of First Negotiation.  In the event that during the Term hereof Pierre Fabre determines to enter into a license, collaboration or distribution agreement for purposes of the commercialization of a product containing an enantiomer of Milnacipran other than the Compound (the “New Product”) in the Territory or determines to undertake such commercialization itself (or through an Affiliate) and not with a Third Party, Pierre Fabre shall (or shall cause such Affiliate to) so notify Forest in writing and shall offer to negotiate in good faith with Forest Commercially Reasonable terms and conditions on which Forest may acquire exclusive rights or partnership with Pierre Fabre or its Affiliate to develop, commercialize and distribute such New Product in the Territory.  In the event that the Parties are unable to reach agreement on such terms and condition within [***] of the date of such notice (the “First Negotiation Period”), then subject to Sections 2.5 and 2.6, Pierre Fabre (or its Affiliates) shall have the right to proceed with such commercialization and distribution by itself and without the participation of Forest; provided, however, that Pierre Fabre shall not (and shall cause its Affiliates not to) enter into any agreement granting rights to a Third Party to commercialize or distribute a New Product (a “Third Party Agreement”) without having first (i) offered Forest the opportunity to enter into an agreement with Pierre Fabre (or any such Affiliate) on  substantially the same terms and conditions as are contained in the Third Party Agreement, and (ii) given Forest not less than [***] to accept or reject such offer.  If Forest fails to accept such offer in writing within such [***] period (the “First Refusal Period”), then subject to Sections 2.5 and 2.6, Pierre Fabre (or its Affiliate) shall have the right to enter into such Third Party Agreement provided there have been no material changes in the terms and conditions thereof.  In the event that Pierre Fabre (or any of its Affiliates) has not itself actively commenced commercialization or distribution of the New Product within [***] of the end of the First Negotiation Period or in the event that Pierre Fabre or any of its Affiliates has not entered into a Third Party Agreement within [***] of the end of the First Refusal Period with respect to such Agreement, then and in any such events, the provisions of this Section 2.4 shall apply to any subsequent proposal by Pierre Fabre to directly or indirectly commercialize or distribute the New Product.

For purposes of determining the commercial reasonableness of any terms and conditions proposed in negotiations between the Parties in the event of the proposed commercialization of such New Product by Pierre Fabre itself, the terms and conditions of this Agreement as they reflect the sharing of value between Pierre Fabre and Forest with respect to the rights to the Product in the Territory shall be deemed Commercially Reasonable terms for such New Product in the Territory and shall be applied to the negotiations with respect to any such transaction irrespective of the form of the proposed transaction, taking into account then applicable differences, including, but not limited to, market value, competitive conditions, proprietary rights to active ingredients or technology, the stage of development of the New Product and the effect upon the value of the licenses granted hereunder.

2.5.Prevention of Diversion; Exclusivity.

(a)To the fullest extent permitted by Applicable Laws, Forest (including its Affiliates) is prohibited from selling or distributing Product outside the Territory and Pierre Fabre (including its Affiliates) is prohibited from selling or distributing Product inside the Territory.  Each Party shall be obligated to take all lawful actions as may be required to assure that its sublicensees and distributors comply with the provisions of this Section, including without limitation by limiting or terminating supply of Compound or Product to any sublicensee or distributor that is not acting in compliance with this Section, and will promptly notify the other Party (with all relevant details possessed by such Party) if it believes a violation of this provision by either Party has occurred.

(b)In furtherance of the exclusive license granted to Forest hereunder, Pierre Fabre, on its behalf and on behalf of its Affiliates, agrees not to study, develop, register, use, distribute, offer for sale, sell, have sold or import a New Product for any Covered Indication in the Territory.

2.6.New Products.  During the Term of this Agreement, in the event Pierre Fabre either directly or indirectly through an Affiliate, licensee or sublicensee wishes to commercialize a New Product for use in the Territory, then unless the New Product is subject to a license or other collaboration with Forest pursuant to Section 2.4 above, Pierre Fabre shall be subject to the following:

(a)Pierre Fabre shall not launch such New Product in any country within the Territory for any indication until [***] following the Commencement Date within each such country.  In addition, upon launch of any New Product in accordance with this Section 2.6(a), Pierre Fabre shall use and shall cause its Affiliates, licensees and sublicensees to use Commercially Reasonable Efforts to prevent any use of such New Product in any Covered Indication.

(b)If such New Product is launched in any country within the Territory for any indication other than a Covered Indication in accordance with Section 2.6(a), and if such New Product is prescribed based on a primary diagnosis of a Covered Indication for which the Product has received Regulatory Approval, the provisions of this Section 2.6(b) shall apply:

(i)           Pierre Fabre will reimburse Forest for the economic benefit that Forest would have realized had such sales of the New Product for use in the Covered Indication been sales of Product instead of the New Product as determined in accordance with this Section 2.6(b).  Such economic benefit shall be calculated based on, and to the extent of prescriptions for the New Product reflecting a primary diagnosis of a Covered Indication.  Such economic benefit shall be calculated to be [***].

(ii)           In the event that Forest believes that it is entitled to reimbursement under this Section 2.6(b), it will provide Pierre Fabre written notice claiming reimbursement from Pierre Fabre under this Section 2.6(b), specifying the amount of the reimbursement and supporting data regarding the number of prescriptions for use of the New Product based on a primary diagnosis for an applicable Covered Indication, as reported by an appropriate data service such as National Disease and Therapeutic Index (NDTI) or Verispan Physician Drug and Diagnosis Audit, (or for purposes of markets in the Territory outside of the United States, a comparable leading index of general acceptability for such market), which was used to calculate the amount of the reimbursement (the “Report”).  Pierre Fabre shall have up to [***] after the date of such notice (the “Review Period”) to review the information provided in the notice from Forest.  In the event that Pierre Fabre agrees with the amount of the reimbursement, it shall promptly reimburse Forest for such amount.  Pierre Fabre may, at any time during the Review Period, provide written notice to Forest that it wishes to have an independent Third Party market research firm conduct market research designed to collect accurate information regarding the primary diagnosis that led to the prescription for the New Product.  Pierre Fabre and Forest will mutually agree on the identity of the market research firm and the design of the market research plan.  Pierre Fabre will bear the cost of conducting such market research unless the results of such market research reflect that the actual number of primary diagnoses for a Covered Indication that led to the prescription for the New Products was less than such number in the data originally provided by Forest by more than [***], in which case Forest shall bear such cost.  If Pierre Fabre and Forest cannot agree on these matters within [***] after notice from Pierre Fabre requesting such market research be conducted, then either Party may request dispute resolution using a Valuation Panel.

(iii)           Instead of Forest using data from a data service as provided above, Forest may provide the Report and written notice to Pierre Fabre that it wishes to have an independent Third Party market research firm conduct market research as the basis for determining the amount of the reimbursement, in which case the design of such market research will be subject to mutual agreement by Pierre Fabre and Forest and Forest will bear the cost of conducting the market research.

(iv)           The results of any market research conducted pursuant to this Section 2.6(b) shall be binding on Pierre Fabre and Forest for purposes of calculating the amount of the reimbursement.

2.7.Section 365(n).  All rights and licenses granted under or pursuant to this Agreement by Pierre Fabre or Forest are, and will otherwise be deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code and any comparable laws in other countries, licenses of rights to “intellectual property” as defined under Section 101 of the U.S. Bankruptcy Code.  The Parties agree that the Parties, as licensees of such rights under this Agreement, will retain and may fully exercise all of their rights and elections under the U.S. Bankruptcy Code and such other laws.  The Parties further agree that, in the event of the commencement of a bankruptcy proceeding by or against either Party, the Party hereto that is not a party to such proceeding will be entitled to a complete duplicate of (or complete access to, as appropriate) any such intellectual property and all embodiments of such intellectual property, and same, if not already in its possession, will be promptly delivered to it (i) upon any such commencement of a bankruptcy proceeding upon their written request therefor, unless the Party subject to such proceeding elects to continue to perform all of its obligations under this Agreement, or (ii) if not delivered under (i) above, following the rejection of this Agreement by or on behalf of the Party subject to such proceeding upon written request therefor by the non-subject Party.

2.8.Milnacipran.

(a)The Parties acknowledge that they are parties to the following agreements, among others, relating to the development and commercialization of Milnacipran:  the Letter Agreement (“Letter Agreement”) dated January 9, 2004 among Forest, Pierre Fabre and Cypress; the License and Collaboration Agreement between Forest and Cypress dated January 9, 2004 (the “Cypress/Forest License”); the Third Restated License Agreement between Pierre Fabre and Cypress dated January 9, 2004; the Purchase and Supply Agreement between Pierre Fabre and Cypress dated January 9, 2004; and the First Restated Trademark Agreement between Pierre Fabre and Cypress dated January 9, 2004 (collectively, the “Milnacipran Agreements”).  The Milnacipran Agreements provide for certain obligations and limitations which impact the Development and commercialization of the Product.  Each Party acknowledges that it is fully aware of the restrictions applicable to the Development, commercialization, distribution, promotion and sale of the Product in the United States and Canada resulting from the Milnacipran Agreements and agrees to comply with the terms and conditions of the Milnacipran Agreements to the extent such terms and conditions are related to the subject matter of this Agreement and to perform its respective obligations under this Agreement in a manner so as not to breach or cause the other Party to breach any of the provisions of the Milnacipran Agreements to the extent such provisions are related to the subject matter of this Agreement.

(b)Forest represents to Pierre Fabre as of the Effective Date that (i) prior to execution of this Agreement, it has complied with the provisions of Section 2.7 of the Cypress/Forest License and (ii) pursuant to Section 3.7 of the Letter Agreement, during the term of the Milnacipran Agreements, Forest, its Affiliates and permitted sublicensees, if any, shall not study, develop, register, use, distribute, offer for sale, sell, have sold or import the Product for any of the indications of FMS, chronic fatigue syndrome, attention deficit/hyperactivity disorder, visceral pain syndromes, functional somatic syndromes, cognitive dysfunction (to the extent not associated with depression), sleep disorders (to the extent not associated with depression), irritable bowel syndrome, chronic lower back pain, chronic pelvic pain, interstitial cystitis, non-cardiac chest pain, neuropathic pain, temporomandibular joint disorder, atypical face pain, tension headaches, multiple chemical sensitivities, chronic pain associated with drug or radiation therapy or other chronic pain indications (the “Milnacipran Indications”) for which Milnacipran has received Regulatory Approval or is in active development anywhere in the United States or Canada.

(c)Pierre Fabre agrees, during the term of the Milnacipran Agreements, that it will not, and it will cause its Affiliates and licensees not to, study or develop the Product for any of the Milnacipran Indications for which Milnacipran has received Regulatory Approval or is in active development anywhere in the United States or Canada.

(d)Each Party acknowledges that it has full knowledge of the patent rights held by Cypress or [***] related to Milnacipran and which may include in their scope a description of the Compound.

(e)The Parties agree that any amounts payable to Cypress as a result of a diversion of sales from Milnacipran to the Product for the Milnacipran Indications as defined in and pursuant to Section 3.7 of the Letter Agreement (a “Cypress Reimbursement Payment”) shall be [***].  Forest shall be entitled to credit Pierre Fabre’s share of the Cypress Reimbursement Payment against royalty payments due to Pierre Fabre and Forest shall be responsible for remitting the entire Cypress Reimbursement Payment from the proceeds of Net Sales and shall provide concurrent notice of such payment to Pierre Fabre.

(f)In recognition of the Parties’ existing arrangements with respect to Milnacipran, the Parties agree that for purposes of determining whether activities to be undertaken pursuant to this Agreement are Commercially Reasonable, Forest shall be entitled to consider the impact of such activities on the development and commercialization of Milnacipran, including without limitation, any obligations it may have under the Milnacipran Agreements.  Forest represents to Pierre Fabre that as of the Effective Date, it has no knowledge of any conflict created by its development and promotion of Milnacipran which would have a material negative impact on its Development and promotion of the Product hereunder.  In the event Forest determines that any of its activities with respect to Milnacipran may reasonably be expected to materially impact Forest’s obligations hereunder, Forest shall identify and discuss in good faith such potential impact with Pierre Fabre.

3.           Committees.

3.1.Joint Development Committee. The Parties shall establish a joint development committee (“JDC”) within thirty [***] following the Effective Date that will be responsible for overseeing the Development of the Product in the Field on a worldwide basis, and will serve as a forum for exchanging data, information and Development strategy regarding the Product.  The JDC will consist of three (3) senior representatives from each Party, each of whom will have sufficient seniority within the applicable Party to make decisions arising within the scope of the JDC’s responsibilities.  Pierre Fabre and Forest will each designate a co-chair for the JDC from its members.  The co-chairs will be responsible for calling meetings and setting the agenda (which shall include a list of all participants expected at a meeting) and circulating such agenda prior to each meeting and distributing minutes of the meetings following such meeting, but will not otherwise have any greater power or authority than any other member of the JDC.  JDC members shall have such expertise as appropriate to the activities of the JDC from time to time and the JDC shall invite personnel of the Parties having formulation, manufacturing, commercial, marketing and other expertise to participate in discussions of the JDC from time to time as appropriate to assist in the activities of the JDC.  Subject to reasonable advance notice to the other Party, either Party may invite personnel with appropriate experience in light of the agenda topics to attend meetings of the JDC.  The JDC shall from time to time as appropriate consult with the Commercial Working Group as to the establishment of Development goals and objectives and other related matters, including without limitation, defining a target Product profile and developing a program of Phase IIIB and Phase IV studies and a global publication strategy. 

(a)Responsibilities.  The JDC’s responsibilities will include, among others:  (i) preparing and approving the Development Plan for the Product, and any amendments to such plan, (ii) approving (or establishing procedures to approve) protocols for pre-clinical or clinical studies under the Development Plan, (iii) allocating responsibility for Development work between the Parties, (iv) making modifications to and performing quarterly monitoring of progress of pre-clinical and clinical studies under the Development Plan and proposing additional studies for the Product, (v) facilitating the exchange of all data, information, material or results relating to the Development of the Product, and (vi) coordinating Development activities not specifically provided in the Development Plan, (vii) reviewing and discussing the registration process for the Product, (viii) reviewing and discussing if there is any basis for filing any NDA for the Product, including discussions regarding whether the Development program indicates issues of safety or efficacy that are likely to prevent or significantly delay the filing or approval of the NDA or to result in labeling or indications that would significantly adversely affect the marketing potential of the Product.  The JDC may appoint subcommittees as desired.

(b)Meetings.  During any period in which Development activities are being performed (or as otherwise may be agreed by the Parties), the JDC will meet at such frequency as shall be established by the Parties, provided that prior to approval of the first NDA for the Product in the United States, the JDC shall meet not less frequently than [***] per year.  Meetings of the JDC shall alternate between the offices of the Parties, unless otherwise agreed upon by the members of the JDC, or may be held telephonically or by video conference; provided, however, that at least one (1) meeting per year shall be face to face meetings unless the JDC otherwise agrees.  Meetings of the JDC shall be effective only if at least one (1) representative of each Party is in attendance or participating in the meeting.  Members of the JDC shall have the right to participate in and vote at meetings by telephone.  Each Party shall be responsible for expenses incurred by its employees and its members of the JDC in attending or otherwise participating in JDC meetings.  Each Party shall use reasonable efforts to cause its representatives to attend the meetings of the JDC.  If a representative of a Party is unable to attend a meeting, such Party may designate an alternate to attend such meeting in place of the absent representative.  The minutes of each JDC meeting shall provide a description in reasonable detail of the discussions held at the meeting and a list of any actions, decisions or determinations approved by the JDC.  Minutes of each JDC meeting shall be approved or disapproved, and revised as necessary, at the next meeting. 

(c)Decision-Making.  Each Party’s representatives on the JDC will collectively have one vote on all matters that are within the JDC’s responsibility.  The JDC members will use reasonable efforts to reach consensus on all decisions in accordance with Section 3.1(d).  In the event that the members of the JDC are unable to agree on a particular issue, such issue shall be referred to the Chief Scientific Officers of the Parties or their designees for attempted resolution of such matter.  Such executive officers shall use good faith efforts, in compliance with Section 3.1(d), to resolve promptly such matter.  If within [***] from such referral, they are unable to reach a decision, the matter shall be referred to the Chief Executive Officers for resolution.  In the event that such officers are unable to reach consensus with respect to a particular issue after a period of [***] through good faith negotiations, then (i) with respect to disputes related to Development or regulatory matters relating to the Territory, Forest shall have final decision making authority and (ii) with respect to disputes related to Development or regulatory matters relating to countries outside of the Territory, Pierre Fabre shall have final decision making authority.  Notwithstanding the foregoing, neither Party will conduct clinical Development activities in the other Party’s territory (i.e., Pierre Fabre will not conduct clinical Development activities in the Territory and Forest will not conduct clinical Development activities outside the Territory) which the other Party reasonably believes, in good faith, may materially adversely affect the Development, regulatory status or commercialization of the Product in the Field in its territory. 

(d)Good Faith.In conducting themselves on any committees, and in exercising their rights under Section 3.1(c), all representatives of both Parties shall consider diligently, reasonably and in good faith all input received from the other Party, and shall use reasonable efforts to reach consensus on all matters before them.  In exercising any decision-making authority granted to it under this Section 3.1(c), each Party shall act based on its good faith judgment of what is in the best interests of the Product and the collaboration hereunder.  Notwithstanding anything to the contrary in this Agreement, neither Party nor any of its Affiliates shall be required to take, or shall be penalized for not taking, any action that is not in compliance with such Party’s ethical business practices and policies or that such Party reasonably believes is not in compliance with Applicable Laws.

3.2.Manufacturing Working Group.  The Parties shall establish a manufacturing and supply chain working group (the “MWG”) in accordance with the terms of the Supply Agreement to oversee manufacturing of the Compound and Product in accordance with the Parties’ respective responsibilities under Section 4.7.

3.3.Commercial Working Group.  The Parties shall establish a working group (the “Commercial Working Group”) to facilitate the exchange of commercial information, including without limitation, information relating to marketing strategies and global product positioning, and the coordination of certain commercial activities, including, Phase IIIB and Phase IV studies and publication strategies.  The Commercial Working Group shall consist of an equal number of members from each Party with appropriate commercialization responsibilities.

3.4.Regulatory Working Group.  The Parties shall establish a Regulatory Working Group (the “Regulatory Working Group”) to facilitate the exchange of information with respect to Forest’s submission and maintenance of Regulatory Approvals in the Territory and Pierre Fabre’s submission and maintenance of Regulatory Approvals outside the Territory, exchange of clinical data and global safety data between the Parties for use in their respective territories, discussion, and as appropriate, coordination of risk management plans.  The Regulatory Working Group shall consist of an equal number of members from each party with appropriate regulatory, clinical and safety responsibilities.  Meetings will be held according to the same rules than those agreed with respect to the JDC pursuant to Section 3.1(d).

3.5.Alliance Managers.  In addition to the JDC, Pierre Fabre and Forest each acknowledge and agree that it would be beneficial to each to have a representative with a general understanding of the Development, manufacturing and commercialization issues relating to the Compound and the Products to act as an alliance manager (“Alliance Manager”), and, to the extent not already appointed, will appoint such a person promptly after the Restatement Effective Date.  It is envisioned that the Alliance Managers will serve as a primary point of contact within each Party with responsibility for facilitating communication and collaboration between the Parties.  The Alliance Managers will work together to manage and facilitate the resolution (in accordance with the terms of this Agreement) of business issues between the Parties that arise in connection with this Agreement.

4.           Certain Obligations of the Parties.

4.1.Development Plan; Allocation of Development Work.

(a)Development activities for the Product in MDD in the United States will be conducted as outlined in the Development Plan and each Party will exercise Commercially Reasonable Efforts in performing Development activities assigned to it under the Development Plan and adhering to timelines in order to meet target dates set forth in the Development Plan.  The JDC shall periodically review the progress of the Parties in respect of their Development activities and shall establish, and update as appropriate, the timeline for the filing of an IND in the United States for the initiation of Phase III clinical trials with the Product and the filing of an NDA for the Product in MDD.  Each Party will use Commercially Reasonable Efforts to perform its Development activities in order to enable Forest to file such IND and NDA in accordance with the timeline established by the JDC.

(b)Pierre Fabre shall be responsible for the costs of [***].

(c)Forest shall be responsible for all costs of [***].

(d)Pierre Fabre shall supply Forest with its requirements of Product for all Development work [***].The parties acknowledge that, as of the Restatement Effective Date, Pierre Fabre has no further obligation to supply Product to Forest for Development work.

(e)Pierre Fabre will provide quantities of Compound reasonably required by Forest for Development work, including Compound contained in clinical supplies and for use in manufacturing development, scale-up and validation activities [***] up to a maximum amount of [***] of Compound plus such amounts of Compound as are required by Forest to perform pharmacokinetic studies and stability testing for ICH Stability Zone IV conditions with respect to the Compound, such amounts not to exceed [***].  Forest acknowledges that it has received from Pierre Fabre prior to the Restatement Effective Date, [***] of Compound, without charge.

(f)Canada -Latin America.  Notwithstanding anything to the contrary contained in this Agreement, Forest shall have the sole responsibility for and sole decision making authority with respect to the Development of the Product in the Field for purposes of commercialization in Latin America and Canada and, subject to the other provisions of this Section 4.1, Forest shall be responsible for its cost to perform such Development activities.  For the avoidance of doubt, the Parties shall (1) coordinate Development through the JDC pursuant to Section 3.1, and (2) review and discuss registration of the Product and exchange information regarding the Product through the Regulatory Working Group pursuant to Section 3.4.  In addition, Forest shall update Pierre Fabre as to the status of all such Development activities in accordance with Section 4.2(a).  Pierre Fabre shall provide assistance and cooperation to Forest with respect to such Development activities as reasonably requested by Forest, including the sharing of information as contemplated by Sections 4.2(a) and (b).

4.2.Exchange of Development Information and Know-How; Coordination of Clinical Development Activities.

(a)Each Party shall periodically keep the other Party informed in reasonable detail as to the progress and status of Development activities being conducted by it with respect to the Product and the status of indications with Regulatory Authorities with respect to the Product.  In addition, Pierre Fabre shall keep Forest periodically informed of any Know-How hereafter developed or acquired by it and will provide such Know-How in written form to Forest, as reasonably required for Forest’s research, development, formulation, registration, manufacturing, marketing, sales and other activities relating to the manufacture and sale of the Product in the Territory.  At Forest’s request, Pierre Fabre will also provide reasonable technology transfer assistance to enable Forest to implement the Pierre Fabre Product Manufacturing Know-How.  Forest shall correspondingly keep Pierre Fabre periodically informed of any Know-How hereafter developed or acquired by it in the same manner described above, and provided Pierre Fabre’s license under Section 2.3 covers the use of Forest Know-How for purposes of countries outside of the Territory, Forest shall provide appropriate documentation (in such format prepared by Forest for its own activities) of such Know-How to Pierre Fabre for its use outside of the Territory.

(b)The Parties acknowledge that the license grants in Sections 2.1 and 2.3 hereof contemplate performance of clinical development activities on a worldwide basis, and the Parties recognize that it is in their best interests to keep each other informed as to such activities.  Accordingly, each Party agrees to disclose to the other Party and the JDC its plans for any clinical development activity with respect to the Compound or Product to be undertaken by a Party, its Affiliates, or licensees in the territories in which such other Party has rights to the Compound or Product, and agrees [***].

4.3.Publications.  The Parties recognize the desirability of publishing and publicly disclosing the results of clinical trials of pharmaceutical products which are being marketed and distributed.  Accordingly, each Party shall be free to publicly disclose the results of clinical trials involving the Product conducted by it or, as permitted hereunder, by the other Party (and its Affiliates and licensees), subject to prior review by the other Party for issues of patentability and protection of its Confidential Information, to the extent such disclosure is required by, and consistent with, regulatory, legal or best industry practice standards applicable to such Party.  In addition, a Party intending to publish articles in scientific or medical journals or to make presentations of the results of clinical studies performed by such Party (the “Publishing Party”) shall provide the other Party through the Commercial Working Group at its earliest opportunity with any proposed abstracts, manuscripts of summaries of presentations which cover the results of clinical Development of the Product.  The other Party shall respond promptly and, in any event no later than [***] after receipt of such proposed publication or presentation.  The Publishing Party agrees to allow a reasonable period (not to exceed [***]) to permit filings for patent protection and to otherwise address issues of Confidential Information or related competitive harm to the reasonable satisfaction of the other Party.  In addition, each Party will give due regard to comments furnished by the other Party and such comments shall not be unreasonably rejected.  Each Party shall be responsible to assure that its Affiliates and licensees agree to equivalent undertakings in favor of the other Party.

4.4.Safety Data.  Each of the Parties hereto shall disclose to the other Party all safety reports and other information (collectively “Safety Data”) which it may from time to time receive or obtain (whether from sources within or without the Territory) with respect to any adverse drug experiences that relate to or might reasonably be expected to relate to Products, in accordance with a safety data exchange agreement (“SDEA”) to be mutually agreed by the Parties as promptly as possible following the Effective Date.  Pending completion of such SDEA, each Party will report adverse drug experiences to the other in sufficient time for such other Party to make any current or periodic safety reports to any Regulatory Authority with respect to which such Party has the responsibility to submit such reports.  Forest will maintain and will be the recognized holder of a global safety database for Safety Data related to Product received by either Party.  Therefore, Forest will make available data needed by Pierre Fabre outside the Territory for the purpose of establishing the following safety documents: Integrated Safety Summary (2.7.4), line listings needed to finalize Product information, Periodic Safety Update Reports, Development Safety Update Reports, Risk Management Plans (initial and up-dates), safety data for labeling modifications, as well as data to answer Regulatory Authorities requests.  As a global data base holder, Forest will transmit to Pierre Fabre reports on signal detection.  The format of data will be subject to agreement of the Parties in the SDEA, taking into account pharmacovigilance requirements within and outside of the Territory.  Forest will be responsible for reporting all Safety Data relating to the Product to Regulatory Authorities in the Territory.  Pierre Fabre will be responsible for reporting all Safety Data relating to the Product to Regulatory Authorities outside of the Territory.  Any incremental costs associated with Safety Data reporting activities conducted solely with respect to countries outside of the Territory, including any incremental cost of generating reports which are intended to comply with regulatory requirements of countries outside of the Territory, shall be for the account of Pierre Fabre.  At the request of Pierre Fabre, Forest shall provide estimates of such incremental costs in advance, and reasonably detailed documentation of all such costs to be reimbursed by Pierre Fabre.  Any use by Pierre Fabre of Safety Data generated by Forest, its Affiliates or permitted sublicensees, in clinical Development activities hereunder, shall be subject to the provisions of Section 2.3.

4.5.Regulatory Responsibilities.  Forest will exercise Commercially Reasonable Efforts in undertaking all regulatory work required to obtain in a timely manner and thereafter to maintain, at its expense Regulatory Approvals necessary to market the Product in the Principal Markets.  Applications for Regulatory Approvals (including Investigational New Drug Applications) will be submitted by Forest in its name in such jurisdictions and owned by Forest and Forest shall have authority to conduct all communications and discussions with Regulatory Authorities in the Territory.  Forest shall allow Pierre Fabre representatives to participate in any substantive meetings and substantive oral or written communications with the FDA, to the extent permitted by such Regulatory Authority.

4.6.Commercialization Responsibilities; Samples.

(a)Forest will use Commercially Reasonable Efforts to promote and market the Product, either directly or through one if its Affiliates in the United States throughout the Term commencing within [***].  The decision as to whether to launch, the timing of the launch of the Product in any other country within the Territory, and the degree of commercial and marketing effort to be utilized in marketing or distributing the Production in any such country, shall at all times be in Forest’s sole discretion, provided that when exercising any such decision, Forest shall [***], and provided further Forest will use Commercially Reasonable Efforts to promote and market the Product, either directly or through one of its Affiliates or permitted sublicensees, in [***] throughout the Term commencing with the launch of the Product in each such country, respectively.  At least [***] prior to the anticipated Commencement Date in each of the Principal Markets in the Territory, and thereafter [***] in advance of the beginning of the next applicable fiscal year, Forest will provide Pierre Fabre with a marketing plan and strategy for the Product in each such Principal Market, which shall include [***].  In addition, Forest agrees to provide Pierre Fabre through the Commercial Working Group at least biannually with reports summarizing actual marketing activities on a Principal Market by Principal Market basis within the Territory.

(b)Without limiting the generality of Forest’s obligations under Section 4.6(a), Forest agrees that it shall  [***].  Notwithstanding anything to the contrary set forth herein, in the event of any unexpected situation from and after the date hereof (including situations which arise or become materially more significant after the date hereof) that substantially changes the market potential for the Product or the commercial value of Detailing or other promotional efforts with respect to the United States, and any of the specific promotional commitments set forth herein are no longer Commercially Reasonable in light of such situation, then the promotional commitments shall be reduced to a then Commercially Reasonable level mutually agreed in good faith by the Parties, provided that in any case Forest’s commitment for the United States [***].  Failure of Forest to comply in any material respect with the obligations of this section shall be deemed a material breach of this Agreement, subject to all terms and conditions applicable to a material breach.

(c)In support of Forest’s commercialization activities hereunder and of Forest’s minimum promotional commitments pursuant to Section 4.6(b), Pierre Fabre will supply to Forest [***] the following amounts of Compound to be used for manufacturing Product to be exclusively distributed as free Samples: 

(i)           In the United States and Canada, (A) during each of the [***] Contract Years, an amount of Compound the Cost of Goods of which is equal to a Dollar value of [***] and (B) during the [***] Contract Year, an amount of Compound the Cost of Goods of which is equal to a Dollar value of [***].  In the event that Forest’s minimum promotional commitments indicated in Section 4.6(b) are reduced, then the amounts of Compound to be supplied [***] by Pierre Fabre for the manufacturing of Product to be distributed as free Samples in the United States and Canada will be reduced pro rata, and

(ii)           If Forest agrees in its sole discretion to commit to [***], Pierre Fabre shall provide quantities of Compound [***] for distribution as free Samples in such countries in such amounts as are reasonably determined by the Parties in good faith. If however, no such agreement is reached between the Parties as to [***] or quantities of Compound to be supplied by Pierre Fabre [***] for distribution of free Samples, then Pierre Fabre shall have no obligation to provide quantities of Compound [***] for [***] and Forest’s commercial efforts shall not be subject to [***].

4.7.Manufacturing Responsibilities.

(a)Pierre Fabre shall be responsible for manufacturing and supplying Compound to Forest pursuant to the terms of the Supply Agreement.  Forest shall be responsible for all manufacturing of the Product for the Field with respect to the Territory other than for manufacturing of the Compound.  The Parties will perform or cause to be performed all manufacturing activities allocated to them in accordance with GCP, GLP and cGMP or corresponding Applicable Laws in the Territory and jurisdictions where the Compound or Product is being manufactured.

(b)If requested by Pierre Fabre, following the Restatement Effective Date, Forest shall use its good faith efforts to assist Pierre Fabre in negotiating an agreement with [***] (or any alternate supplier to be used by Forest as a supplemental or replacement supplier to [***]), pursuant to which [***] (or such other supplier) will supply Pierre Fabre with Product outside of the Territory [***].  If, however, no supply agreement has been consummated between Pierre Fabre and [***] (or such other alternate supplier to be used by Forest) by [***] at the latest (the “Deadline”), Forest agrees to use its good faith efforts to negotiate an agreement with [***] (or any such other alternate supplier to be used by Forest) which will enable Forest to supply Pierre Fabre with the Initial Product in bulk capsules or bulk micro beads as requested by Pierre Fabre through [***] (or such other supplier), provided such supply arrangement is not reasonably expected to have any adverse impact on the supply of Product to Forest for the Territory.  In addition, if Pierre Fabre elects to manufacture the Product itself using the Fully Paid Forest Technology pursuant to the license grant set forth in Section 2.3(a), Forest shall provide Pierre Fabre reasonable assistance to transfer the manufacturing process of the Product to Pierre Fabre facilities for up to [***] following Forest’s receipt of notice that Pierre Fabre has elected to commence manufacturing of the Product, provided that Pierre Fabre shall reimburse Forest [***].  A list of the estimated support activities needed by Pierre Fabre from Forest for the transfer of the manufacturing process is set forth in Schedule 4.7.  The initial [***] Forest spends in connection with supporting the activities listed in Schedule 4.7 will be billed at an hourly FTE rate of [***].  If Forest provides support beyond the initial [***] at Pierre Fabre’s reasonable request, or if Forest provides support for additional activities (beyond those described in Schedule 4.7) at Pierre Fabre’s reasonable request, such additional FTE hours devoted by Forest will be reimbursed by Pierre Fabre at a higher hourly FTE rate of [***].  In no event shall Forest be obligated to spend more than [***] cumulatively supporting the transfer of the manufacturing process from Forest to Pierre Fabre pursuant to this Agreement.  The detailed modalities of such assistance and the planning for such assistance will be agreed in writing by the Parties in advance.  The Parties shall coordinate the exchange of information contemplated by this Section 4.7 through the Manufacturing Working Group.All FTE rates set forth in this Agreement shall be subject to annual adjustment by Forest to reflect increases in the Employment Cost Index for the United States for the relevant employee base for the relevant period.

4.8.Third Party Contractors.  In connection with the making, using and selling of Compound or Product in connection with this Agreement, including all Development or manufacturing activities, the Parties shall use Commercially Reasonable Efforts to ensure that all permitted Third Party contractors assign or license to the contracting Party all patent rights, know-how and any other intellectual property developed or conceived in connection with any contracts entered into in connection with this Agreement.  In the event a Party is unable to obtain any such assignment or license from a Third Party contractor, then prior to entering into an agreement with such Third Party, the contracting Party shall discuss the matter with the other Party through the appropriate committee (e.g., the JDC or Manufacturing Working Group, as defined in the Supply Agreement).

5.           License Fees; Supply of Compound and Products.

5.1.License Fees.  As partial consideration for the license rights granted to Forest under the Pierre Fabre Patents, Pierre Fabre Know-How and Product Manufacturing Know-How pursuant to Section 2.1 and in view of the expected sales potential of the Product in the Territory, Forest agrees to pay Pierre Fabre the following non-refundable, non-creditable license fees (each of which shall be payable only once during the Term at the time of the first occurrence of the relevant milestone):

(a)Seventy-Five Million Dollars (US$75,000,000) payable within [***] days of the Effective Date;

(b)[***] payable within [***] days of the acceptance by the United States FDA of the first NDA for a Product filed by Forest or its Affiliate; and

(c)Thirty Million Dollars (US$30,000,000) payable within [***] days of approval by the United States FDA of the first indication for a Product under an NDA filed by Forest or its Affiliate.

Pierre Fabre acknowledges receipt of all amounts due pursuant to this Section 5.1.

5.2.Sales Milestones.  Forest will pay Pierre Fabre the following one-time milestone payments as partial consideration for the rights granted to Forest pursuant to Section 2 (each a “Sales Milestone”) (with each such milestone payable [***] of the end of the Quarter during which such milestone was achieved):

(a)[***] the first time that aggregate Net Sales of Product sold by Forest, its Affiliates and its sublicensees in the United States and Canada on an annual basis exceed [***] in any consecutive [***] period within the [***] following the Commencement Date in the United States.

(b)[***] the first time that aggregate Net Sales of Product sold by Forest, its Affiliates and its sublicensees in the United States and Canada on an annual basis exceed [***] in any consecutive [***]

(c)[***] on the [***] of the Commencement Date in the United States, [***].

(d)[***] on the [***] anniversary of the Commencement Date in the United States [***]

(e)In the event the sales level contemplated by the milestone described in either Section 5.2(c) or 5.2(d) is achieved, but the applicable milestone payment is withheld [***] such milestone shall become payable if [***]  Similarly, in the event the milestone described in either Section 5.2(c) or 5.2(d) is paid despite [***] at the time such milestone is achieved, and thereafter [***] Pierre Fabre shall refund such milestone payment to Forest.

5.3.Forest’s Royalty Obligations.

(a)U.S. Royalty.  As additional consideration for the license rights granted to Forest hereunder on the Pierre Fabre Patents, Pierre Fabre Know-How and Product Manufacturing Know-How, Forest agrees to pay Pierre Fabre during the Term, on a Quarterly basis in arrears, running royalties with respect to any Product sold by Forest or its Affiliates under a Trademark, and not as a Generic Equivalent, payable on annual Net Sales in the United States in accordance with the following schedules (the “US Royalty”):

(i)           The following schedule shall apply during the first [***] Contract Years with respect to Net Sales in the United States:

· [***] of Net Sales up to and including [***];

· [***] of incremental Net Sales in excess of [***] up to and including [***];

· [***] of incremental Net Sales in excess of [***] up to and including [***]; and

· [***] of incremental Net Sales in excess of [***].

(ii)           The following schedule shall apply to the [***] Contract Years with respect to Net Sales in the United States:

· [***] of Net Sales up to and including [***];

· [***] of incremental Net Sales in excess of [***] up to and including [***];

· [***] of incremental Net Sales in excess of [***] up to and including [***]; and

· [***] of incremental Net Sales in excess of [***].

(iii)           The following schedule shall apply following the *** Contract Year with respect to Net Sales in the United States:

· [***] of Net Sales up to and including [***;

· [***] of incremental Net Sales in excess of [***] up to and including [***];

· [***] of incremental Net Sales in excess of [***] up to and including [***]; and

· [***] of incremental Net Sales in excess of [***].

(b)Canadian Royalty.  Forest further agrees to pay Pierre Fabre, on a Quarterly basis in arrears, running royalties with respect to any Product sold by Forest, its Affiliates or sublicensees under a Trademark, and not as a Generic Equivalent, at a rate of [***] of Net Sales in Canada.

(c)Latin America Royalty.  Forest further agrees to pay Pierre Fabre, on a Quarterly basis in arrears, running royalties with respect to a Product sold by Forest, its Affiliates or sublicensees in Latin America at the following rates during the respective periods:

(i)           In each country of Latin America, with respect to periods prior to the Quarter in which Generic Equivalents to such Product capture in such country a market share of at least [***] of the aggregate market share (as measured by unit volume) of such Product (based on data provided by a reliable third party data source used by Forest in its business generally) in such country, royalties will be paid in accordance with the following schedule:

· [***] of Net Sales up to and including [***] of aggregate annual Net Sales in Latin America;

· [***] of incremental Net Sales in excess of [***] of aggregate annual Net Sales in Latin America.

(ii)           In each country of Latin America, commencing with the Quarter in which Generic Equivalents to such Product capture in such country a market share of at least [***] of the aggregate market share (as measured by unit volume) of such Product (based on data provided by a reliable third party data source used by Forest in its business generally) in such country, and for each Quarter thereafter during the Term, the applicable royalty rates set forth in Section 5.3(c)(i) shall be reduced by [***].

(iii)           In each country of Latin America, commencing with the Quarter in which Generic Equivalents to such Product capture in such country a market share of at least [***] of the aggregate market share (as measured by unit volume) of such Product in Latin America (based on data provided by a reliable third party data source used by Forest in its business generally) in such country, and for each Quarter thereafter during the Term, the applicable royalty rates set forth in Section 5.3(c)(i) shall be reduced by [***].

5.4.Royalty Reports & Payments.  Royalties shall be payable Quarterly within [***] of the end of the Quarter to which each payment relates and shall be reconciled on an annual basis together with the payment applicable to the fourth Quarter of Forest’s fiscal year.  Each payment of royalties shall be accompanied by a statement setting forth the amount of gross sales and Net Sales for the Quarter in sufficient detail to permit confirmation of the accuracy of the payment made (expressed in the currency of sale and units sold), the calculation of royalties due and the conversion rate used to convert royalties to US Dollars.  Notwithstanding anything to the contrary set forth herein, no royalties under this Section shall be owed to Pierre Fabre with respect to sales of a Generic Equivalent.  Royalties shall be payable in US Dollars.  Net Sales recorded in currencies other than US Dollars shall be converted into US Dollars for purposes of calculating royalties at the average rates of exchange over the relevant period determined in accordance with Forest’s customary practices.

5.5.[***]  Forest and Pierre Fabre may determine [***]

5.6.Third-Party Obligations.  Subject to Section 5.5, Pierre Fabre shall remain responsible, at its sole cost and expense, for the payment to any Third Party of any milestones, royalties or similar payments to the extent attributable to the manufacture and supply of the Compound or to the Pierre Fabre Patents or Pierre Fabre Know-How.  In the event the Parties mutually agree that Third Party technology should be acquired for Forest to use or practice a manufacturing process, technique or intermediate in order to manufacture a Product for the Territory, the Parties shall agree on an appropriate allocation of the cost of any applicable license fees, milestones or royalties or similar amounts payable to such Third Party in respect of such license, taking into account the Parties’ relative economic interests in the Product and the application of such technology to other products or activities of the Party licensing or acquiring such technology.  Subject to the foregoing, Forest shall be responsible for the cost of any other Third Party technology acquired by it for purposes of manufacturing the Product.

5.7.Books and Records.  Forest shall maintain, and shall require its Affiliates, distributors and sublicensees to maintain, books and records which accurately reflect Net Sales of Product with respect to each country within the Territory for a period of at least [***] years after the end of the period to which they relate.  Pierre Fabre shall have the right, by an accountant or other authorized representative to which Forest shall have no reasonable objection, to inspect, audit and copy such books and records no more than once per calendar year upon reasonable advance notice solely for purposes of verifying the running royalties, including adjustments, payable to Pierre Fabre hereunder.  Such inspection shall be at Pierre Fabre’s expense, provided however, that in the event the inspection determines that running royalties have been overpaid or underpaid, the Parties shall promptly make the appropriate payments or refunds to correct such payment and if an underpayment was by [***] percent or more for a consecutive [***] period, Forest will be responsible for the reasonable cost of such inspection or audit.

5.8.Withholding of Taxes.  The Party receiving payments under this Agreement will pay any and all taxes levied on account of such payment.  If any taxes are required to be withheld by the paying Party, it will (a) deduct such taxes from the remitting payment, (b) timely pay the taxes to the proper taxing authority, and (c) send proof of payment to the other Party and certify its receipt by the taxing authority within [***] following such payment.  Each Party shall provide the other Party with a valid tax residence certificate issued by a competent authority.

6.           Representations, Warranties and Covenants.

6.1.Pierre Fabre Representations.  Pierre Fabre hereby represents and warrants to Forest as of the Effective Date (or as of the Restatement Effective Date solely with respect to the representations and warranties set forth in Section 6.1(b) to the extent covering the Latin America Patents) and covenants to Forest as follows:

(a)Pierre Fabre is a corporation or entity duly organized and validly existing under the laws of the state or other jurisdiction of its incorporation or formation.  The execution and delivery by Pierre Fabre of this Agreement and the performance by Pierre Fabre of its obligations hereunder have been duly authorized by all necessary corporate action on the part of Pierre Fabre, and do not conflict with the terms of any other contract, agreement, arrangement or understanding to which Pierre Fabre is a party or by which it is bound.

(b)Pierre Fabre is the sole owner of the Pierre Fabre Patents and the Pierre Fabre Know-How and has the right to grant the licenses to the Pierre Fabre Patents and Pierre Fabre Know-How in accordance with the terms and conditions hereof.  Pierre Fabre has received no notice, whether in writing or otherwise, of any pending actions, suits, judgments, settlements or claims, and is not aware of any reasonable basis for any claims, actions, suits or judgments, against Pierre Fabre with respect to (i) Pierre Fabre Patents, Pierre Fabre Know-How or Pierre Fabre Manufacturing Know-How (the “Pierre Fabre Technology”) that, if determined adversely to Pierre Fabre, would have a material adverse effect upon its ability to grant to Forest the rights under, or upon the ability of Forest to fully utilize, the Pierre Fabre Technology or (ii)Pierre Fabre’s right to enter into and perform its obligations hereunder.  To the best of Pierre Fabre’s knowledge, neither Pierre Fabre, nor any of its Affiliates has received notice, whether in writing or otherwise, of any threatened claims or litigation, and is not aware of any reasonable basis for any claims or litigation, from any Third Party (including, without limitation, by officers, directors, employees, consultants or other personnel of Pierre Fabre or any predecessor) seeking to invalidate, or alleging the invalidity of, any of the Pierre Fabre Patents.  Pierre Fabre’s right to the Pierre Fabre Technology is not subject to any encumbrance, including any license obligation, royalty obligation, lien, claim or restriction, in favor of any Third Party (including, without limitation, in favor of any current or former officers, directors, employees, consultants or personnel of Pierre Fabre or any predecessor), and Pierre Fabre covenants to maintain throughout the Term the Pierre Fabre Patents and the Pierre Fabre Know-How free and clear of any such encumbrances.  No Pierre Fabre Patents or Pierre Fabre Know-How is subject to, or was developed pursuant to any funding agreement with, any government or government agency pursuant to which such government or agency retains any rights to practice any of such technology.  Pierre Fabre is not in breach of any material provisions of any agreements with Third Parties relating to the Pierre Fabre Patents or Pierre Fabre Know-How nor is Pierre Fabre aware of any breach by any Third Party of any such agreements.

(c)All of Pierre Fabre’s employees, officers, and consultants involved in the performance of this Agreement or having access to Confidential Information provided hereunder (other than employees who perform primarily ministerial functions) have executed agreements or have existing obligations under law, or will execute such agreements or have such obligations under law requiring assignment to Pierre Fabre of all Improvements made by such individuals during the course of and as the result of their association with Pierre Fabre, and obligating such individuals to maintain as confidential Pierre Fabre’s Confidential Information, as well as the Confidential Information of persons doing business with Pierre Fabre that such individuals may receive during the course of and as the result of their association with Pierre Fabre, to the extent required to support Pierre Fabre’s obligations under this Agreement.  Pierre Fabre shall remain responsible for ensuring that all employees take such actions as required to enable Pierre Fabre to comply with its obligations hereunder.

6.2.Forest Representations.  Forest hereby represents and warrants to Pierre Fabre as of the Effective Date as follows:

(a)Forest is a corporation or entity duly organized and validly existing under the laws of the state or other jurisdiction of its incorporation.  The execution and delivery by Forest of this Agreement and the performance by Forest of its obligations hereunder have been duly authorized by all necessary corporate action on the part of Forest, and do not conflict with the terms of any other contract, agreement, arrangement or understanding to which Forest is a party or by which it is bound.

(b)All of Forest’s employees, officers, and consultants involved in the performance of this Agreement or having access to Confidential Information provided hereunder (other than employees who perform primarily ministerial functions) have executed agreements or have existing obligations under law, or will execute such agreements or have such obligations under law requiring assignment to Forest of all Improvements made by such individuals during the course of and as the result of their association with Forest, and obligating such individuals to maintain as confidential Forest’s Confidential Information, as well as the Confidential Information of persons doing business with Forest that such individuals may receive during the course of and as the result of their association with Forest, to the extent required to support Forest’s obligations under this Agreement.  Forest shall be responsible to ensure that all employees take such actions as required to enable Forest to comply with its obligations hereunder.

6.3.No Success Representation.  In light of the developmental nature of the work to be performed, neither Party shall be deemed to represent or warrant to the other that the Development work to be performed hereunder will result in Regulatory Approval for the Product or lead to the successful commercialization thereof.

6.4.Limitations.  Nothing in this Agreement shall be construed as:

(a)a representation or warranty by Pierre Fabre as to the validity, enforceability or the scope of the Pierre Fabre Patents or any claim thereof, except as expressly stated in Section 6.1.

(b)a representation or warranty by any Party hereto, that any Product will be free from infringement of rights of Third Parties, except as expressly stated in Section 6.1.

(c)an obligation of either Party to bring or prosecute actions (other than the cooperation contemplated by Section 7.6) or suits against Third Parties for infringement.

7.           Intellectual Property Matters; Improvements.

7.1.Patent Prosecution and Maintenance.  Each of Pierre Fabre and Forest will be solely responsible for the preparation, filing, prosecution and maintenance of Pierre Fabre Patents and Forest Patents, respectively, and their interest in any patent rights in the Improvements.  Each Party will provide the other Party with copies of and a reasonable opportunity to comment upon, to the extent practicable, proposed patent filings, prosecution strategies and proposed material correspondence with patent officials or other Third Parties relating to any such patents in the Territory and due consideration shall be given to all such comments and such comments shall not be unreasonably rejected, and all material correspondence or other communications on actions which relate to the validity of a Pierre Fabre Patent shall require mutual approval of the Parties.  Each Party shall provide such comments expeditiously and in any event in reasonably sufficient time prior to any filing or other deadline communicated to it by the other Party.  In addition to the foregoing, each Party shall provide the other Party with progress reports relating to its patent prosecution, maintenance and litigation activities outside of the Territory to the extent the same would reasonably be expected to have a material impact on patent rights licensed hereunder.

7.2.Ownership of Intellectual Property.  In the event that a Party hereto Develops, discovers or acquires any Improvements, such Party shall be the sole owner of all intellectual property rights, determined in accordance with applicable laws of inventorship, in and to those Improvements, subject only to the rights of the other Party granted herein and, subject to Section 7.1, shall have the sole right, and shall be solely responsible, for applying for, obtaining and bearing all costs and expenses associated with all patents and other intellectual property rights with respect to all such Improvements, as such Party determines to be necessary or appropriate.

7.3.Joint Patents; Joint Know-How.  The Parties shall consult and determine which Party shall be responsible for filing, prosecuting and maintaining Joint Patents.  Forest and Pierre Fabre shall equally share the costs for filing, prosecuting and maintaining Joint Patents, subject to either Party’s right to elect not to so participate as set forth in Section 7.4 below.  To the extent the Parties’ interests in the Joint Patents and Joint Know-How are not covered by the exclusive licenses set forth in Section 2.1 or 2.3, the Parties intend that each Party be free to exercise its rights under the Joint Patents and Joint Know-How; therefore, the Parties hereby grant to one another a non-exclusive worldwide free license to such Party’s interests in Joint Patents and Joint Know-How except to the extent such interests are subject to the exclusive licenses set forth in Sections 2.1 and 2.3.

7.4.Election Not to Prosecute.  If either Party elects not to pursue the initial filing of a potential Pierre Fabre Patent in the Territory or a Forest Patent or Joint Patent anywhere in the world or support the continued prosecution or maintenance of any such patent, such Party will promptly so notify the other Party, and in any event in good time to enable the other Party to timely meet any applicable deadlines.  The other Party shall then have the right, but not the obligation, to pursue the filing or support the continued prosecution or maintenance of any such patent at its sole expense in any country where such Party Controls rights to the Compound or a Product.  If such other Party does so elect, then the Party which has elected not to pursue such filing, prosecution or maintenance shall provide such cooperation to the other Party, including the execution and filing of appropriate instruments, as may reasonably be requested to facilitate the transition of such patent activities, and shall assign all of its right, title and interest to such patent, other than its rights thereto provided by this Agreement, to the Party electing to pursue such patent activities.

7.5.Right to Pierre Fabre Improvements.  In the event that, during the Term of this Agreement, Pierre Fabre or any Affiliate develops, acquires or Controls any Improvements, Pierre Fabre shall furnish Forest with timely written notice of such Improvements, and shall furnish Forest with a data package which contains all Information, Pierre Fabre Know-How, Pierre Fabre Product Manufacturing Know-How, and other data as Forest will reasonably require in order to apply for Regulatory Approvals for such Improvements, and to implement such Improvements in Forest’s formulation, manufacture, marketing, distribution, sale or use of the Product in or with respect to the Territory in accordance with the licenses granted hereunder.  The preceding shall not be deemed to require Pierre Fabre to prepare written manifestations of Pierre Fabre Improvements to any greater extent, or in any other format than prepared by Pierre Fabre for its own use in its territory.  All Information, Pierre Fabre Patents, Pierre Fabre Know-How and other data with respect to any such Improvements shall be deemed to constitute Pierre Fabre Patents or Pierre Fabre Know-How, respectively, and such Pierre Fabre Patents and Pierre Fabre Know-How shall be deemed included in the licenses granted to Forest hereunder.  Each Pierre Fabre Affiliate and licensee shall be required to agree to grant to Forest a corresponding data package and license to Improvements.

7.6.Third-Party Infringements; ANDA Proceedings.  Each of the Parties shall notify the other of any activity or product which it reasonably believes constitutes an infringement or misappropriation, as the case may be, of the Pierre Fabre Patents, Forest Patents, Joint Patents, the Pierre Fabre Know-How, Forest Know-How, Improvements in the Territory or of any claim of invalidity in respect of a Pierre Fabre Patent, Forest Patent or Joint Patent.  Forest shall have the right to enforce the Patents against such infringing technology or to defend any such claim of invalidity, including in connection with an Abbreviated New Drug Application (or any future or alternate comparable mechanism for seeking Regulatory Approval of a Generic Equivalent, including any such mechanism applicable in countries in the Territory outside of the United States) filed by a Third Party with respect to the Product in the Territory.  Forest shall keep Pierre Fabre reasonably informed as to its strategy and the status of the action.  The Parties agree that the costs of such prosecution or defense of validity shall be [***]  The proceeds of any awards, judgments or settlements obtained in connection with an infringement or misappropriation shall be used first to reimburse Forest and Pierre Fabre for out-of-pocket costs and expenses incurred [***] in connection with the litigation [***] and any remainder shall be shared by the Parties [***].  At Forest’s request and expense, Pierre Fabre agrees to furnish Forest with such cooperation, including consenting to act as a party to litigation if required by Applicable Law, and exchange of information as Forest may reasonably request in connection with the prosecution of any such action and Forest shall consult periodically with Pierre Fabre in connection with any such action and shall reasonably and in good faith consider comments and suggestions made by Pierre Fabre, recognizing that Forest has final decision making authority in connection with such actions and provided that Pierre Fabre’s comments are provided in a timely manner.  Neither Party shall take any action which would admit the invalidity of a Pierre Fabre Patent, Forest Patent, or Joint Patent without the consent of the other Party, which consent shall not be unreasonably withheld.

7.7.Infringement of Third Party Rights.  Each Party shall promptly notify the other Party in writing of any allegation by a Third Party that the activity of either of the Parties or their Affiliates, licensees or sublicensees pursuant to this Agreement infringes or may infringe the intellectual property rights of such Third Party.  Forest shall have the first right to control the defense of any claim alleging that the development, sale or marketing of a Product in the Territory infringes any such Third Party rights.  If Forest fails to proceed in a timely manner with respect to such defense, Pierre Fabre shall have the right to control the defense of such claim.  Irrespective of which Party is taking the lead with respect to the defense of a claim, the Party taking the lead shall keep the other Party reasonably informed as to the status of any such action and shall give due regard to the comments and suggestions of the other Party with respect to the defense of such claims.  Irrespective of which Party defends the claim, the Parties will [***] the costs of such defense, and any damages, awards or royalties to which such Third Party may become entitled as a result of such claim, except to the extent such infringement claims [***]  Each Party shall have the right to participate in the defense of any such claim with counsel of its choice at its own expense.  Neither Party shall have the right to settle any claim or litigation described in this Section without the consent of the other Party, such consent not to be unreasonably withheld.

7.8.Patent Term Extension.  Forest will have the rights, in consultation with Pierre Fabre, to select the Pierre Fabre Patent, Forest Patent or Joint Patent as listed in the Patent Information section of the Product NDA (and for all corresponding filings in other countries in the Territory) for filing to obtain a patent term extension pursuant to all Applicable Laws (“PTE”).  In addition, with respect to each Product, the Parties agree to timely compile and file the necessary documentation for a PTE request (i) with respect to the United States, within [***] of approval by the FDA of the U.S. NDA for the first indication and (ii) with respect to each other country of the Territory, in a timely manner, but no later than any applicable regulatory deadline in such country.

8.           Confidentiality.

8.1.Confidential Information.  For purposes of this Agreement, the term “Confidential Information” shall mean proprietary and confidential information (whether or not reduced to writing) including without limitation, Information, Pierre Fabre Patents, Forest Patents, Joint Patents, Pierre Fabre Know-How, Pierre Fabre Product Manufacturing Know-How, Forest Know-How, Joint Know-How and Improvements, which any Party shall from time to time possess and disclose to the other Party that is (i) not generally known to the public or the pharmaceutical industry, unless such general knowledge results from disclosure by any Party hereto, (ii) otherwise available to Pierre Fabre or Forest, as the case may be, from a Third Party lawfully entitled to disclose such information or (iii) information which the receiving Party can demonstrate by appropriate written records was (A) already in the possession of such Party at the time of receipt thereof from the other Party or (B) independently developed by the receiving Party without use of the other Party’s Confidential Information.

8.2.Maintenance of Confidentiality.  Each of Pierre Fabre and Forest shall keep in strictest confidence all Confidential Information of the other Party and shall not disclose such Confidential Information to any Third Party except employees, consultants or other agents or Affiliates or, subject to the following sentence, sublicensees or potential sublicensees of a Party who need to receive such Confidential Information for the purpose of achieving an objective of this Agreement or in connection with due diligence process or similar investigations, and who are bound by obligations of confidentiality with respect thereto, or as may otherwise be required by law or governmental subpoena or order.  In the event a Party desires to share Confidential Information with a potential sublicensee, prior to making any such disclosure, the Party shall notify the other Party of its intent, including in such notice, the identity of the potential sublicensee and the proposed content of the disclosure, and shall consider any reasonable objections or limitations made or proposed by the other Party with respect to such disclosure.  Each Party shall promptly notify the other of any disclosure it believes is required by law or governmental subpoena or order and will cooperate with the other Party in seeking appropriate limitations or protections with respect to any such disclosure.  Each such Party shall exercise all necessary precautions to safeguard the secrecy of Confidential Information and to prevent the unauthorized disclosure thereof.  The obligations of this Section shall survive the termination or expiration of this Agreement for a period of [***].

8.3.Right to Use Confidential Information.  Subject to the terms and conditions of this Agreement, each Party shall have the right to use all Confidential Information disclosed by the other for use in seeking Regulatory Approvals and marketing a Product to the extent permitted by any license granted herein.

8.4.Privileged Communications.  In furtherance of this Agreement, it is expected that Forest and Pierre Fabre will, from time to time, disclose to one another privileged communications with counsel, including opinions, memoranda, letters and other written, electronic and verbal communications.  Such disclosures will be made with the understanding that they shall remain confidential and protected from disclosure to Third Parties by the attorney-client privilege, the attorney work product doctrine, the joint defense and common interest privilege, and any other applicable privileges, doctrines, or rules of evidence, and that they will be made in connection with the shared community of legal interests existing between Pierre Fabre and Forest, including the community of legal interests in avoiding infringement of any valid, enforceable patents of Third Parties and maintaining and enforcing the Pierre Fabre Patents, Forest Patents and Joint Patents.

9.           Indemnification.

9.1.Indemnification.

(a)Pierre Fabre shall indemnify, defend (subject to Section 9.2) and hold Forest (including for this purpose its Affiliates, employees, officers, directors and agents) harmless from and against any direct costs, expenses (including, without limitation, reasonable attorneys’ fees), or damages which arise (i) from a Third Party action or claim to the extent caused by a material breach by Pierre Fabre or its Affiliates of any of its representations, covenants, warranties or obligations set forth herein, or (ii) from the Development, manufacturing, marketing, sale or distribution of (x) the Compound anywhere in the world (other than as part of the Product being sold by Forest pursuant to this Agreement) or (y) the Product outside of the Territory (including with respect to claims relating to Latin America arising prior to the Restatement Effective Date), except to the extent such damages are caused by or arise from the negligence or willful misconduct of Forest or its Affiliates or by Forest’s breach of this Agreement.

(b)Forest shall indemnify, defend (subject to Section 9.2) and hold Pierre Fabre (including for this purpose its Affiliates, employees, officers, directors and agents) harmless from and against any direct costs, expenses (including, without limitation, reasonable attorneys’ fees), or damages which arise (i) from a Third Party action or claim to the extent caused by a material breach by Forest or its Affiliates of any of its representations, covenants, warranties or obligations set forth herein or (ii) from the Development, manufacturing, marketing, sale or distribution of the Products by Forest in the Territory, except to the extent that such damages were caused by or arise from the negligence or willful misconduct of Pierre Fabre or its Affiliates or by Pierre Fabre’s breach of this Agreement. 

(c)The Party obligated to provide indemnity pursuant to this Section 9.1 is hereinafter referred to as the “Indemnifying Party.”

(d)The obligations of this Section shall survive the termination or expiration of this Agreement until the expiration of all applicable statutes of limitation with respect to Third Party claims covered by this Section.

9.2.Indemnification Procedures.  Promptly after the receipt by any Party hereto of notice of (i) any claim or (ii) the commencement of any action or proceeding, such Party will, if a claim with respect thereto is to be made against any Party obligated to provide indemnification pursuant to Section 9 hereof, give such Indemnifying Party written notice of such claim or the commencement of such action or proceeding.  Such Indemnifying Party shall have the right, at its option, to defend, at its own expense and by its counsel, such claim.  Failure to notify the Indemnifying Party shall not relieve the Indemnifying Party of any liability that the Indemnifying Party might have to the Indemnified Party unless and to the extent such failure can be demonstrated to have materially prejudiced the Indemnifying Party’s position.  In the event that any Indemnifying Party intends to undertake to defend any such claim, it shall promptly notify the Party seeking indemnification of its intention to do so, and the Party seeking indemnification agrees to cooperate fully with the Indemnifying Party and its counsel in the defense against any such claim.  In any event, the Indemnified Party shall have the right, at its own expense, to participate in the defense of such asserted liability, provided that, subject to Section 9.3, the Indemnifying Party shall make all final decisions concerning the defense or compromise or settlement of such litigation.

9.3.Representation; Cooperation.  Each of the Parties hereto shall be entitled to be represented at any proceedings brought by the other Party under this Article 9 by its own counsel, at its own expense, and shall fully cooperate with the other Party in any such proceeding, provided it is adequately reimbursed for its out-of-pocket costs and expenses, including attorneys’ fees, reasonably incurred in providing such requested cooperation.  No Indemnifying Party shall be authorized to settle or compromise any indemnified matter without the consent of the other Party, such consent not to be unreasonably withheld or delayed.

9.4.Insurance.  Each Party shall maintain at its sole cost and expense, an adequate liability insurance or self-insurance program (including product liability insurance) to protect against potential liabilities and risk arising out of activities to be performed under this Agreement and any Related Agreement and upon such terms (including coverages, deductible limits and self-insured retentions) as are customary in the pharmaceutical industry for the activities to be conducted by such Parties under this Agreement and are appropriate to cover the Parties’ respective indemnification obligations hereunder (the “Coverage”). Such product liability insurance or self-insurance program shall insure against all liability, including without limitation personal injury, physical injury or property damage arising out of the manufacture, sale, distribution or marketing of the Product by such Party.  Each Party shall furnish to the other evidence of such insurance and/or self insurance upon request.  Such insurance information shall be kept in confidence in the same manner as any other Confidential Information disclosed by one Party to the other hereunder.

9.5.Limitation on Liability.  NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY PUNITIVE, SPECIAL, INDIRECT, CONSEQUENTIAL, INCIDENTAL OR EXEMPLARY DAMAGES IN CONNECTION WITH THIS AGREEMENT OR THE RELATED AGREEMENTS OR ANY LICENSES GRANTED HEREIN, PROVIDED HOWEVER THAT THE FOREGOING LIMITATION OF LIABILITY SHALL NOT APPLY TO THE LIABILITIES ARISING FROM EITHER PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OR ARISING FROM A PARTY’S INDEMNIFICATION OBLIGATIONS FOR THIRD PARTY CLAIMS UNDER THIS SECTION 9 OR UNDER THE RELATED AGREEMENTS.

10.           Term of Agreement; Termination.

10.1.Term.  This Agreement commenced on the Effective Date and, unless earlier terminated as provided in this Article 10, shall remain in full force and effect (i) in North America, with respect to each Product in each country of North America [***] and (ii) in Latin America, with respect to each country [***] (the “Term”), following which the provisions of Section 10.6 shall apply.

10.2.Forest Right of Termination.  Forest may terminate this Agreement with respect to any Product in (i) North America or (ii) Latin America, respectively, at any time upon [***] written notice to Pierre Fabre in the event that Forest reasonably determines (including without limitation, based upon the interim or final results of any clinical study), after review and discussion with Pierre Fabre and the JDC, that the Development program indicates issues of safety or efficacy that are likely to prevent or significantly delay the filing or approval of the Regulatory Approval in the United States (with respect to North America) or [***] (with respect to Latin America) or to result in labeling or indications which would significantly adversely affect the marketing of such Product in such regions or that a change in market or competitive conditions is likely to significantly adversely affect the marketing of such Product in such region based on objective data disclosed to and discussed with Pierre Fabre.  In connection with any such termination, Forest agrees to assist Pierre Fabre in facilitating the transition of activities being conducted under this Agreement with respect to such Product in such region to Pierre Fabre or any Third Party that is designated by Pierre Fabre and as soon as reasonably practicable and Forest shall transfer or assign, as applicable, to Pierre Fabre all Forest Know-How and Forest Improvements and shall assign to Pierre Fabre all Patents Controlled by Forest in each case to the extent related to such Products and such region, or, with respect to such Forest Know-How, Forest Patents or Forest Improvements that have applications other than to such Product and such region, shall grant to Pierre Fabre a perpetual, world-wide, fully-paid non-exclusive license in connection with the development, manufacture, marketing, sale and distribution of such Products in such regions , in each case without charge.

10.3.Pierre Fabre Right of Termination.  Prior to its expiration, this Agreement may be terminated in its entirety at any time by Pierre Fabre upon [***] prior written notice to Forest in the event that Forest shall challenge or contest any of the Pierre Fabre Patents in front of any Regulatory Authority or in a court of competent jurisdiction.

10.4.Termination for Breach.  Each Party shall have the right to terminate this Agreement and its obligations hereunder for material breach by the other Party, which breach remains uncured for [***], in the case of a payment breach, or [***], in the case of any other breach, after written notice is provided to the breaching Party specifying the nature of the breach in reasonable detail and demanding its cure; provided that in the case of a non-payment related material breach, if such breach cannot be cured within the [***] cure period, this Agreement shall not terminate if the breaching Party has made diligent efforts to cure such breach within the [***] period and this Agreement shall remain in effect for such period after notice of breach as may be reasonable in the circumstances as long as the breaching Party continues to use diligent efforts to pursue the cure.  In the event the Parties dispute the existence of a material breach or a Party’s diligence in attempting to cure a material breach, termination of this Agreement shall not be deemed to occur unless and until such dispute has been referred for resolution by an expedited arbitration in accordance with Section 16.2 hereof, material breach of the Agreement or failure to make diligent efforts to cure such breach has been established by such arbitration, and if such breach can be cured by the payment of money or the taking of specific actions, the breaching party does not pay the amount so determined to be due or take or commit to take the required actions within [***] of receipt of an agreement of the Parties or arbitration decision.  Recognizing the importance of expediting the resolution of any such dispute, the Parties agree to appoint arbitrators as promptly as practicable following receipt of notice of the institution of the arbitration, and to instruct and cooperate with such arbitrators to act to achieve resolution of the issue on an expedited basis.  Finally, in the event a material breach affects only Canada, a country of Latin America or only certain but not all Products, the remedy of termination shall only be effective with respect to Canada, such country in Latin America or the applicable Product (as the case may be).

10.5.Termination for Bankruptcy.  This Agreement may be terminated by either Party upon at least [***] prior written notice thereof if the other Party makes an assignment for the benefit of creditors, is the subject of proceedings in voluntary or involuntary bankruptcy instituted on behalf of or against such Party, or has a receiver or trustee appointed for all or substantially all of its property, provided that in the case of an involuntary bankruptcy proceeding such right to terminate shall only become effective if the Party consents to the involuntary bankruptcy or such proceeding is not dismissed within [***] after the filing thereof.

10.6.Rights following Expiration of Term or Certain Terminations.

(a)Upon expiration of the Term as to a Product pursuant to Section 10.1, in respect of any country in the Territory, the license grant to Forest in Section 2.1 shall become a perpetual, fully paid (subject only to Forest’s obligations under the Trademark Agreement), Exclusive license solely to the extent related to such Product in such country.  Except as provided by this Section, Pierre Fabre shall have no further obligations to Forest and Forest shall have no further obligations to Pierre Fabre with respect to a Product in a country where the Term has expired for such Product.

(b)Upon expiration of the Term as to each Product pursuant to Section 10.1 in respect of all countries in the Territory, the license grant to Pierre Fabre pursuant to section 2.3 shall continue or become, as applicable, a fully-paid, perpetual, Exclusive license to the Forest Patents, Forest Know-How, Forest’s rights under the Joint Patents and Joint Know-How and Forest Improvements in connection with the Commercialization of such Product outside of the Territory, and the manufacture of the Product anywhere in the world for purposes of the Commercialization of such Product outside of the Territory. 

(c)Upon the expiration of the Term as to a Product pursuant to Section 10.1, if either Party requires assistance from the other Party in connection with its use in its territory of the other Party’s Technology which is subject to a perpetual license pursuant to Section 10.6(a) or 10.6(b), the parties will, to the extent necessary and not already covered by the provisions of the pharmacovigilance agreement which will survive the expiration of the Agreement, agree on  a regulatory and pharmacovigilance service agreement to provide for the exchange of safety and regulatory information between the parties.  Such agreement shall also provide for each Party to provide reasonable cooperation and assistance to the other Party to the extent necessary or useful for such other Party to maintain Regulatory Approvals in any country in its territory, so long as such other Party continues commercializing a Product in such country in its territory under such Regulatory Approvals.  Any such agreement will provide for appropriate reasonable service fees, based on each party’s hourly FTE standard rate applicable at that time, to be paid by each Party to the other Party in consideration for the other Party’s cooperation and assistance.

(d)Upon any termination of this Agreement by Forest pursuant to Section 10.4 (Termination for Breach of Pierre Fabre) or Section 10.5 (Termination for Bankruptcy of Pierre Fabre), the license grant to Forest in Section 2.1 shall become a perpetual, fully paid (subject only to Forest’s obligations under the Trademark Agreement), Exclusive license solely to the extent related to the terminated Product and the terminated country.  Upon any termination of this Agreement by Forest pursuant to Section 11(Force Majeure of Pierre Fabre), the license grant to Forest in Section 2.1 shall become a perpetual, Exclusive license solely to the extent related to the terminated Product and the terminated country, subject to the fulfillment by Forest of its fixed milestone payment obligations and royalties obligations under Article 5, which amounts may be offset by any additional documented costs reasonably incurred by Forest in performing tasks which would have otherwise been performed by Pierre Fabre hereunder or under the Related Agreements but for the occurrence of the Force Majeure.  In addition, in connection with any termination covered by this Section 10.6(d), Pierre Fabre shall furnish Forest with reasonable cooperation to assure a smooth transition of any clinical or other studies in progress related to the terminated Product and terminated country which Forest determines to continue in compliance with the Applicable Laws and ethical guidelines applicable to the transfer or termination of any such studies.  In the event Forest informs Pierre Fabre that it does not intend to continue specific Development activities then in progress, costs incurred in closing out such activities shall be allocated in accordance with the allocation of the applicable Development cost responsibilities provided hereunder.  To the extent that at the time of a termination covered by this Section 10.6(d), Pierre Fabre is then using any of the Forest Improvements under the license granted to it pursuant to Section 2.3 (but excluding Forest Improvements which are part of the Fully Paid Forest Technology licensed to Pierre Fabre pursuant to section 2.3 (b)), Pierre Fabre may continue such use of such Forest Improvement under the license granted in Section 2.3 in the same manner and to the same extent exercised prior to the termination, subject to Pierre Fabre paying to Forest a royalty equal to [***] of Net Sales of all Products sold by Pierre Fabre, its Affiliates and licensees commencing as of the effective date of such termination if such termination is made by Forest pursuant to Section 10.4 (Termination for Breach of Pierre Fabre) or Section 10.5 (Termination for Bankruptcy of Pierre Fabre), such royalties to be calculated, reported and paid in a comparable manner as provided for with respect to royalties payable by Forest to Pierre Fabre under Section 5.3 hereof and subject to corresponding audit rights as provided by Section 5.7 hereof.  In the event Pierre Fabre does not elect to continue to exercise its rights under the license following termination of the Agreement under this Section 10.6(d), Pierre Fabre will return Forest Confidential Information related to the rights terminated, provided Pierre Fabre may retain copies of such Confidential Information as necessary to comply with all Applicable Laws, subject to the obligations of Article 8.  Except as provided by this Section, Pierre Fabre shall have no further obligations to Forest with respect to a terminated Product in the terminated country, and Forest shall have no further obligations to Pierre Fabre with respect to a terminated Product in the terminated country.

(e)Upon termination of this Agreement by Forest pursuant to Section 10.2 (Forest Right of Termination) or by Pierre Fabre pursuant to Section 10.3 ( Pierre Fabre right of Termination), Section 10.4 (Termination for Breach of Forest), Section 10.5(Termination for Bankruptcy of Forest), Section 11(Force Majeure of Forest), or Section16.3 (Change of Control of Forest), all of Forest’s rights under this Agreement with respect to the Product in respect of countries affected by such termination shall automatically terminate, Pierre Fabre will have a perpetual, fully paid, Exclusive right and license to the Forest Know-How, Forest Patents, Forest rights under the Joint Patents and the Joint Know-How and Forest Improvements, in each case solely to the extent related to the terminated Product and such countries, and Forest will assign [***] the IND or NDA or other applicable Regulatory Approval covering the terminated Product in such countries as applicable, to Pierre Fabre or its designee.  In addition, Forest shall furnish Pierre Fabre with reasonable cooperation to assure a smooth transition of any clinical or other studies in progress related to the terminated Product which Pierre Fabre determines to continue in compliance with the Applicable Laws and ethical guidelines applicable to the transfer or termination of any such studies, provided nothing herein shall require Forest to undertake any new Development, manufacturing, commercialization or other activities, except that if the Product is being sold at the time of termination, Forest will continue manufacturing the Product during a transitional period and at conditions to be mutually agreed in good faith between the Parties.  Additionally, Forest shall not be obligated to continue any such activities which implicate a material safety issue.  In the event Pierre Fabre informs Forest that it does not intend to continue specific Development activities then in progress, costs incurred in closing out such activities shall be [***].  In connection with any such transition pursuant to this Section during a period in which the Product is then being sold, the appropriate personnel from each Party’s finance groups shall meet to agree on a Commercially Reasonable mechanism and appropriate rules to apply to allocate chargebacks, rebates, discounts, credits and similar adjustments to Net Sales, between the Parties with the objective that the Party which benefitted from the sale will be responsible for the corresponding chargeback, rebate, discount, credit or similar adjustment.  In addition, in connection with any such transfer of commercial activities, Pierre Fabre will use Commercially Reasonable Efforts to purchase from Forest (or its Affiliate) Forest’s inventory of Compound and Product at Forest’s Cost of Goods provided that Forest’ inventory is of marketable condition and has a sufficient remaining shelf life.  In addition to the foregoing, Forest will return Pierre Fabre Confidential Information solely related to the terminated Product in the terminated country to Pierre Fabre, and if such termination affects all Products in all countries in the Territory, upon such termination, Forest shall return to Pierre Fabre [***] all its Confidential Information, provided Forest may retain copies of such Confidential Information as necessary to comply with all Applicable Laws, subject to the obligations of Article 8.  Except as provided by this Section, Forest shall have no further obligations to Pierre Fabre with respect to a terminated Product in the terminated country and Pierre Fabre shall have no further obligations to Forest with respect to a terminated Product in the terminated country.

10.7.Accrued Obligations and Survival.  Except as otherwise specifically provided herein, termination of this Agreement shall not relieve the Parties of any liability or obligation which accrued hereunder prior to the effective date of such termination, nor preclude either Party from pursuing all rights and remedies it may have hereunder or at law or in equity with respect to any breach of this Agreement nor prejudice either Party’s right to obtain performance of any obligation.  In addition, termination of this Agreement shall not terminate provisions which provide by their respective terms for obligations or undertakings following the expiration of the Term of this Agreement.  Notwithstanding anything to the contrary herein, Forest shall have no obligation to pay any license fee payment under Section 5.1 or any Sales Milestone under Section 5.2 if the Development milestone or Net Sales requirement underlying such payment has not been achieved prior to the time notice of termination is furnished by Forest or Pierre Fabre, as the case may be.  In addition, solely with respect to the license fee payable for achievement of the Development milestone under Section 5.1(c), Forest shall have no obligation to pay any such license fee if notice of termination is furnished by Forest or Pierre Fabre prior to the expiration of the 10 day period provided in Section 5.1(c).

11.           Force Majeure.  Except for the obligation to make payment when due, no liability shall result from, and no right to terminate shall arise, in whole or in part, based upon any delay in performance or non-performance, in whole or in part, by either of the Parties to this Agreement to the extent that such delay or non-performance is caused by Force Majeure.  “Force Majeure” means an event that is beyond a non-performing Party’s reasonable control, including an act of God, strike, lock-out or other industrial/labor dispute, war, riot, civil commotion, terrorist act, epidemic, quarantine, fire, flood, storm, natural disaster or compliance with any law or governmental order, rule, regulation or direction.  The Party whose performance is subject to the Force Majeure (the “Force Majeure Party”) shall within [***] of the occurrence of the Force Majeure, give written notice to the other Party stating the nature of the Force Majeure, its anticipated duration and any action being taken to avoid or minimize its effect.  Any suspension of performance shall be of no greater scope and of no longer duration than is reasonably required and the Force Majeure Party shall use reasonable efforts to remedy its inability to perform; provided, however, that if a suspension of performance which, but for the occurrence of such Force Majeure, would constitute a material breach hereunder continues or is reasonably anticipated to continue for more than [***] after the date of the occurrence, the unaffected Party shall have the right to terminate this Agreement with respect to the country or countries affected by the Force Majeure, which, in connection with a termination by Forest, shall entitle Forest to the license rights and transitional activities pursuant to Section 10.6(d), and which, in connection with a termination by Pierre Fabre, shall entitle Pierre Fabre to the license rights, assignments and transitional activities pursuant to Section 10.6(e).

12.           Further Assurances.  Each of the Parties shall, from time to time during the Term of this Agreement, upon request by the other, execute and deliver all such further documents or instruments as may be required in order to give effect to the purpose and intent of this Agreement.  Without limiting the generality of the foregoing, the obligations of the Parties hereunder are undertaken with a principal objective of complying with all pertinent provisions of Applicable Law, orders and regulations relating to the manufacture, use or sale of pharmaceutical products, and the Parties shall take all necessary action as may be required to comply with such provisions.

13.           Assignment.  This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective assigns and successors in interest.  Neither Party shall have the right to assign its obligations or rights hereunder, except to an Affiliate, without the prior written consent of the other Party, which shall not be unreasonably withheld with due regard to the objectives of, and respective responsibilities of the Parties under, this Agreement, subject to rights of sublicense specifically provided herein.  Any assignment not in accordance with the terms hereof shall be null and void.

14.           Choice of Law.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, USA, without giving effect to its principles of conflicts of law.

15.           Notices.  Any notice, request, delivery, approval or consent required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been delivered upon receipt and may be delivered in person, transmitted by facsimile (receipt verified) or sent by international express courier service (signature required) or international registered letter, return receipt requested (or its equivalent), to the Party to which it is directed at its address or facsimile number shown below or such other address or facsimile number as such Party shall have last given by notice to the other Party.

If to Forest, addressed to:

Forest Laboratories Holdings Limited

Cumberland House

9th Floor

1 Victoria Street

Hamilton HM 11, Bermuda

Facsimile No.: [***]

With a copy to:

Forest Laboratories, Inc.

909 Third Avenue

New York, New York 10022

Attn:  Chief Executive Officer

Facsimile No.:  [***]

If to Pierre Fabre, addressed to:

Pierre Fabre Médicament SAS

 Parc Industriel de la Chartreuse

81106 Castres Cédex

Attn:  President

With a copy to:

Pierre Fabre Médicament SAS

La Chartreuse I

81106 Castres Cédex

Attn: General Counsel

Facsimile No.:  [***]

16.           Miscellaneous.

16.1.Merger.  This Agreement constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior written or oral agreements or understandings concerning the subject matter hereof or in conflict with their terms.  Each Party confirms that it is not relying on any representations, warranties or covenants of the other Party except as specifically set out in this Agreement.

16.2.Dispute Resolution; Arbitration.

(a)The Parties recognize that a bonafide dispute as to certain matters may, from time to time, arise during the Term that relates to a Party’s rights and/or obligations hereunder (a “Dispute”).  In the event of the occurrence of such a Dispute, either Party may, by written notice to the other Party, have such dispute referred to the respective officers designated below, or their successors, for attempted resolution by good faith negotiation within [***] after such notice is received.  Such designated officers are as follows:

For Pierre Fabre:                      Chief Executive Officer

For Forest:                                Chief Executive Officer

(b)In the event of a Dispute arising in connection with this Agreement which is not resolved under Section 16.2(a), such Dispute shall be submitted to mediation proceedings under the International Chamber of Commerce (“ICC”) ADR Rules.  If the Dispute has not been settled pursuant to mediation under said rules within [***] following a request for ADR or within such other period as the Parties may agree in writing, such Dispute shall be finally settled under the Rules of Conciliation and Arbitration (the “Rules”) of the ICC by three arbitrators.  Unless the Parties otherwise agree in writing, the arbitration proceedings shall be conducted and the arbitrators shall be appointed in accordance with the Rules then in effect, subject to the procedures described in this Section 16.2.

(c)The mediation and/or arbitration proceedings shall take place in Toronto, Canada.  Mediation and /or Arbitration will be conducted in the English language.

(d)The arbitration shall be held before a panel of three experts (who may or may not be attorneys or judges) with relevant industry experience (the “Arbitrators”).  One Arbitrator shall be chosen by Forest and one Arbitrator shall be chosen by Pierre Fabre, and the third Arbitrator shall be chosen by mutual agreement of the Arbitrators chosen by Forest and Pierre Fabre.

(e)The arbitrators shall be authorized to award compensatory damages, but shall NOT be authorized (i) to award non-economic damages, such as for emotional distress, pain and suffering or loss of consortium, (ii) to award punitive damages, or (iii) to reform, modify or materially change this Agreement or any other agreements contemplated hereunder; provided, however, that the damage limitations described in parts (i) and (ii) of this sentence will not apply if such damages are statutorily imposed.

(f)Unless the Parties otherwise agree in writing, during the period of time that any arbitration proceeding is pending under this Agreement, the Parties shall continue to comply with all those terms and provisions of this Agreement that are not the subject of the pending arbitration proceeding.

(g)Nothing contained in this Agreement shall deny any Party the right to seek injunctive or other equitable relief from a court of competent jurisdiction in the context of a bona fide emergency or prospective irreparable harm, and such an action may be filed and maintained notwithstanding any ongoing arbitration proceeding.

16.3.Change of Control.

(a)Change of Control not approved by the Board.  In the event Forest is subject to a Change of Control which was not approved by its Board of Directors as constituted immediately prior to such Change of Control, Pierre Fabre shall have the option, but not the obligation, to terminate this Agreement (to be exercised by the furnishing of written notice of termination to Forest within ninety days of the Change of Control), in which case Pierre Fabre shall be entitled to receive the transitional activities and assignments described in Section 10.6(e).  In connection with any such termination, Pierre Fabre shall be required to pay Forest an amount equal to the [***] the Product rights being terminated, as determined by mutual agreement (or, in the event the Parties are unable to agree upon such Fair Market Value within sixty days, by a Valuation Panel).  The payment by Pierre Fabre under this Section shall be made as a lump sum payment within [***] of Pierre Fabre’s exercise of its option to terminate, or, if the determination of [***] has not been completed by such date in accordance with the terms hereof, within [***] after such determination of [***].

(b)Change of Control approved by the Board.  In the event Forest is subject to a Change of Control which was approved by its Board of Directors as constituted immediately prior to such Change of Control, and provided that as a result of such Change in Control, the surviving entity is subject to an Impairment, Pierre Fabre shall have the rights set forth in Section 16.3(a), unless the surviving entity notifies Pierre Fabre of its intent to cure such Impairment within [***] from the date of Change of Control, and does cure such Impairment within such [***].

16.4.Amendment and Waiver.  No modification or waiver of any of the terms of this Agreement shall be deemed valid unless it is in writing and signed by the Party to whom such modification is sought to be enforced.  The failure of either Party to insist upon the strict performance of any term of this Agreement or the waiver by either Party of any breach under this Agreement shall not prevent the subsequent strict enforcement of such term nor be deemed a waiver of any subsequent breach.

16.5.Severability.  Should any part or provision of this Agreement be held unenforceable or in conflict with the applicable laws or regulations of any applicable jurisdiction, the invalid or unenforceable part of provision shall, provided that it does not go to the essence of this Agreement, be replaced with a revision which accomplishes, to the extent possible, the original commercial purpose of such part or provision in a valid and enforceable manner, and the balance of this Agreement shall remain in full force and effect and binding upon the Parties hereto.

16.6.Public Announcements.  Neither Party shall publicly disclose the subject matter or terms and conditions hereof without the prior consent of the other, except to the extent of disclosures which either Party may be required to make by any Applicable Laws, regulations or stock market rules, provided that the other Party shall be permitted an opportunity to comment on any such disclosure, including any requests for proposed redaction.  Each Party shall grant the other the opportunity to review and comment with [***] lead time, or such other period as is reasonable in the circumstances, upon any proposed press release describing the transactions contemplated hereby prior to public release.  The text and contents of any press release or other disclosure agreed upon by the Parties shall not be considered Confidential Information.  It is understood that the Parties intend to issue a joint press release announcing the execution of this Agreement, and that following the initial joint press release announcing this Agreement, either Party shall be free to disclose, without the other Party’s prior written consent, the existence of this Agreement, the identity of the other Party and those terms of the Agreement which have already been disclosed in accordance herewith.

16.7.Independent Contractors.  The status of a Party under this Agreement shall be that of an independent contractor.  Nothing contained in this Agreement shall be construed as creating a partnership, joint venture, or agency relationship between the Parties or, except as otherwise expressly provided in this Agreement, as granting either Party the authority to bind or contract any obligation in the name of or on the account of the other Party or to make any statements, representations, warranties, or commitments on behalf of the other Party.  All Persons employed by a Party or any of its Affiliates shall be employees of such Party or its Affiliates and not of the other Party or such other Party’s Affiliates and all costs and obligations incurred by reason of any such employment shall be for the account and expense of such Party or its Affiliates, as applicable.

16.8.No Third Party Beneficiaries.  The provisions of this Agreement are for the sole benefit of the Parties and their successors and permitted assigns, and they shall not be construed as conferring any rights in any other persons except as otherwise expressly provided in this Agreement.

16.9.Amendment and Restatement.  This Agreement is an amendment and restatement of the Original Agreement.  With respect to (i) any date or time period occurring and ending prior to the Restatement Effective Date, the Original Agreement shall govern the respective rights and obligations of the Parties and shall for such purposes remain in full force and effect; and (ii) any date or time period occurring or ending on or after the Restatement Effective Date, the rights and obligations of the Parties shall be governed by this Agreement.  From and after the Restatement Effective Date, the provisions of this Agreement shall prevail in the event of any conflict or inconsistency between such provisions and those of the Original Agreement.  Each reference to the Original Agreement in any other document, instrument or agreement shall mean and be a reference to this Agreement.  Nothing contained herein, unless expressly herein stated to the contrary, is intended to amend, modify or otherwise affect any other instrument, document or agreement executed and or delivered in connection with the Original Agreement.

16.10.Counterparts; Facsimile Signatures.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original document, and all of which together shall be deemed one instrument.  An executed signature page of this Agreement delivered by facsimile transmission shall be as effective as an original executed signature page.

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the day and year first above written.

FOREST LABORATORIES HOLDINGS LIMITED

By:           /s/ David Solomon                                                                                     

Name:  David Solomon

Title:    Assistant Secretary

PIERRE FABRE MÉDICAMENT SAS

By:       /s/ Frédéric Duchesne

Name:  Frédéric Duchesne

Title:    President

Schedule 1.9

Compound Structure

[***]

Schedule 1.19

Development Plan

Dated as of the Effective Date

[***]

Schedule 1.53

Pierre Fabre Patents

[***]

Schedule 2.3(b)-1

LIST OF REGULATORY MATERIALS TO BE PROVIDED BY FOREST

The following materials shall be provided by Forest to Pierre Fabre [***]

Schedule 2.3(b)-2

LIST OF ESTIMATED SUPPORT ACTIVITIES TO BE PROVIDED BY FOREST TO PIERRE FABRE FOR OBTAINING AND MAINTAINING REGULATORY APPROVAL

ACTIVITY DESCRIPTION

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

Schedule 4.7

LIST OF ESTIMATED SUPPORT ACTIVITIES TO BE PROVIDED BY FOREST TO PIERRE FABRE FOR TECHNOLOGY TRANSFER OF THE MANUFACTURING PROCESS FOR THE FINISHED DOSAGE OF THE PRODUCT

ACTIVITY DESCRIPTION

1.      Project Initiation

2.      API and Raw material procurement

3.      Analytical method transfers

•      Feasibility and acceptance

•      Transfer Protocol

•      Methods Transfer

4.      Drug Product Process Understanding

•      Pilot scale activities

•      Establish process parameters

•      Manufacturing Finished Product

•      Supply of Drug Product to Forest for testing and evaluation

5.      Drug Product manufacturing activity

•      Scale-up to commercial equipment

•      Establish Commercial Process Parameter Ranges

6.      Registration batches

•      Manufacture (Matrix 3:1:1:3),

•      Bulk release

•      Ship to FRX

7.      Registration Documents for Bulk Capsules

Schedule 7.7

Cypress Patents

[***]

EX-10.12

[***] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

AMENDED AND RESTATED TRADEMARK LICENSE AGREEMENT

This Amended and Restated Trademark License Agreement(this “Agreement”) is entered into as of this 17th day of December, 2013 (the “Restatement Effective Date”) by and between Pierre Fabre Médicament s.a.s. organized under the laws of France having an address of 45, place Abel-Gance, 92654 Boulogne cedex, France (“Pierre Fabre”), and Forest laboratories Holding Limited, a corporation organized under the laws of the Republic of Ireland and having its principal place of business at Milner House, 18 Parliament Street, Hamilton HM11, Bermuda (“Forest”), a wholly-owned subsidiary of Forest laboratories, Inc, a Delaware corporation having its principal place of business at 909 Third Avenue, New York, New York 10022, United Sates of America.

Capitalized terms used in this Agreement that are not otherwise defined shall have the meaning set forth in the Amended and Restated Patent and Know-How License Agreement of even date herewith between Forest and Pierre Fabre (the “License Agreement”).

Recitals

Whereas, Pierre Fabre and Forest are entering into the License Agreement concurrently with the execution of this Agreement;

Whereas, in connection with the license granted under the License Agreement, Pierre Fabre granted Forest a license to use certain trademarks in the Territory pursuant to that certain Trademark License Agreement between Pierre Fabre and Forest dated as of December 19, 2008 (the “Original Agreement”); and

Whereas, Pierre Fabre and Forest desire to amend and restate the Original Agreement to, inter alia, expand Forest’s license to use such trademarks to include Latin America, all in accordance with, and subject to, the terms and conditions of this Agreement.

Now, Therefore, in consideration of the foregoing premises and of the terms and conditions hereinafter set forth, Pierre Fabre and Forest (each a “Party” and collectively the “Parties”) hereby agree as follows:

1.   Trademark License.

1.1Trademarks; Ownership and Use of Trademarks.  Forest shall select one or more trademarks under which Forest, its Affiliates and permitted sub-licensees will exclusively market the Product, other than non-branded Generic Equivalents (the “Trademarks”), in the Territory, and shall timely inform Pierre Fabre of the selected Trademarks.  Pierre Fabre shall own and shall retain the ownership of the entire right, title and interest in and to the Trademarks.  If any Trademark selected pursuant to this Section 1.1 is a registered trademark of Forest, Forest shall promptly assign such trademark to Pierre Fabre and in any case before the Commencement Date in the United States, on an exclusive and worldwide basis, subject to the terms of this Agreement. Such assignment will be made by Forest to Pierre Fabre without charge, except for the reimbursement by Pierre Fabre of filing and registration fees incurred by Forest in relation to such assigned Trademark, and upon presentation of corresponding documentation by Forest.

Pierre Fabre may use, sell and offer for sale the Product under the Trademarks outside of the Territory under terms to be mutually agreed upon between Pierre Fabre and Forest, only with the prior written consent of Forest. Forest hereby provides its irrevocable consent to Pierre Fabre, its Affiliates and sublicensees using the Trademark FETZIMA™ in relation with the use, sell and offer for sale of the Product outside of the Territory.  Forest further consents to Pierre Fabre’s reference to the Trademarks outside of the Territory after the first use of the Trademarks by Forest in the United States when referencing the name under which the Product is marketed in the United States in communications directed to physicians and professionals and in scientific publications, posters and abstracts.

1.2Registration of the Trademarks.  While Forest is marketing the Product using the Trademarks, Pierre Fabre shall maintain the applicable Trademarks in the Territory at its own expense.  Pierre Fabre shall keep Forest informed of progress with regard to the prosecution, maintenance, enforcement and defense of the Trademarks by providing Forest with copies of official actions, amendments, notices and responses with respect to such prosecution, maintenance, enforcement and defense.  In the event that Pierre Fabre desires to abandon any of the Trademarks in the Territory, Pierre Fabre shall provide reasonable prior written notice to Forest of such intention to abandon and shall, at Forest’ request, assign such Trademark (including all associated goodwill) to Forest and such Trademark shall be excluded from the Trademarks subject to this Agreement.

1.3License to Trademarks.  Pierre Fabre hereby grants to Forest an exclusive license, with the right to sub-license to an Affiliate or a permitted sub-licensee of rights under the License Agreement, to use the Trademarks in connection with Forest’s promotion and commercialization activities relating to the Product in the Territory during the Trademark Term.

1.4Quality Control.  The nature and quality of Products advertised or sold by Forest on which the Trademarks appear shall conform in all material respects to quality standards and requirements for packaging and quality control of Product, as set forth in specifications for Product included in filings with the FDA or other regulatory authority with respect to Product.  Forest agrees to cooperate with Pierre Fabre to enable Pierre Fabre to monitor the nature and quality of the use of the Trademarks such that Pierre Fabre may verify that the use of the Trademarks is consistent with such quality standards and requirements for packaging and quality control.  From time to time and upon request by Pierre Fabre, Forest shall provide Pierre Fabre with samples of Product for such verification purposes.

1.5Rights as Between Parties. Forest acknowledges, as between the Parties, the exclusive rights, title and interest of Pierre Fabre in and to the Trademarks and will not do or cause to be done any act or thing contesting or, in any way, impairing or tending to impair any part of said right, title and interest during the Trademark Term and after its expiration.  Forest will not make any representations or take any actions, which may be taken to indicate that it has any right, title or interest in or to the ownership or use of the Trademarks except under the terms of this Agreement and acknowledges that nothing contained in this Agreement shall give Forest any right, title or interest in or to the Trademarks, except those rights set forth in this Agreement and the License Agreement. Any accretion of goodwill derived by Forest, its Affiliate or permitted sub-licensee from the use of the Trademarks shall accrue to Pierre Fabre and Pierre Fabre may call for a confirmatory assignment thereof.

Unless otherwise agreed with Pierre Fabre, (i) Forest shall not register or acquire any intellectual property rights which are identical or confusingly similar to the Trademark or which include all or part of said Trademark for the Trademark Term and after its expiry, and (ii) will not use, adopt or file any name, or any trademark phonetically, visually and conceptually similar to the Trademarks either in its graphic sizes or in its logos, susceptible to create a likelihood of confusion with the aforementioned Trademark on the part of the public for the Trademark Term and after its expiry, provided that the determination of the likelihood of confusion will be made in accordance with Applicable Laws.

Any domain name related to the Trademark of the Product in the Territory will be in the name of Pierre Fabre who shall be the owner and shall be maintained at Pierre Fabre’s expense. Pierre Fabre hereby grants Forest the right to use any such domain name in connection with Forest’s promotion and commercialization activities for the Product in the Territory in accordance with the terms of this Agreement and during the Trademark Term.  Pierre Fabre shall cooperate and provide such authorization and documentation as necessary to enable Forest to so establish, maintain and use such domain name during the Trademark Term.

1.6Infringement.

(a)Infringement by Third Parties.  Pierre Fabre and Forest shall promptly notify the other in writing of any alleged or threatened infringement or any challenge to the validity of the Trademarks or any challenge to Pierre Fabre’s ownership of or Forest’ and/or its Affiliates’ and permitted sub-licensees’ right to use the Trademarks of which they become aware.  Both Parties shall use their Commercially Reasonable Efforts in cooperating with each other to terminate such infringement without litigation.  Forest shall have the first right to bring and control any action or proceeding with respect to infringement of any of the Trademarks in the Territory at its own expense and by counsel of its own choice, and Pierre Fabre shall have the right, at its own expense, to be represented in any such action or proceeding.  If Forest declines to prosecute such infringement or to defend such claim within [***] of becoming aware of such claim, Pierre Fabre shall have the right to bring and control any such action at its own expense and by counsel of its own choice, and Forest shall have the right, at its own expense, to be represented in any such action by counsel of its own choice.  Irrespective of which Party brings the action, the Party controlling the action shall keep the other Party reasonably informed as to its strategy and the status of the action, and shall give due regard to the comments and suggestions of the other Party.

The Parties agree that, the costs of such prosecution or defense of the Trademarks in the Territory shall be [***] and that the proceeds of any awards, judgments or settlements obtained in connection with an infringement or misappropriation shall be used first to reimburse out-of-pocket costs and expenses incurred by [***] and then the other Party, to the extent such costs and expenses have been reasonably incurred in connection with such proceeding (including attorney and expert fees) and any remainder shall be [***].  [***], each Party agrees to furnish the other with such cooperation, including consenting to act as a Party to litigation if required, and exchange of information as the other Party may reasonably request in connection with the prosecution of any such action and the Party prosecuting an infringement shall consult periodically with the other Party in connection with any such action.

No Party shall have the right to settle any infringement litigation under this Section 1.6(a) relating to the Trademarks in the Territory without the prior written consent of the other Party.

(b)Infringement of Third Party Rights.  Each of the Parties shall notify the other in writing of any allegation by a Third Party that the activity of either of the Parties, its Affiliates or sub-licensees pursuant to this Agreement infringes or may infringe the intellectual property rights of such Third Party.  Forest shall have the first right to control the defense of any claim alleging that the use of the Trademarks in relation with the Product infringes any Third Party rights in the Territory, [***] and by counsel of its own choice, and Pierre Fabre shall have the right, [***], to be represented in any such action by counsel of its own choice.  If Forest fails to proceed in a timely manner with respect to such defense, Pierre Fabre shall have the right to control the defense of such claim [***] and by counsel of its own choice, and Forest shall have the right, at its own expense, to be represented in any such action by counsel of its own choice.  Neither Party shall have the right to settle any trademark infringement litigation under this Section 1.6(b) relating to the use of the Trademarks in the Territory without the consent of such other Party, such consent not to be unreasonably withheld or delayed.  Irrespective of which Party is taking the lead with respect to the defense of a claim, the Party taking the lead shall keep the other Party reasonably informed as to the status of any such action and shall give due regard to the comments and suggestions of the other Party with respect to the defense of such claims.

1.7Trade dress marking. To the extent permitted by Applicable Laws, all packaging, leaflets and other promotional materials relating to a Product sold by Forest, its Affiliate and permitted sub-licensee under a Trademark (and not as a Generic Equivalent) shall contain the notice “Licensed from Pierre Fabre Medicament” in a legible manner, and Pierre Fabre hereby grants to Forest a non-exclusive license to use its corporate name in connection with such promotional materials.

1.8Registered User.

(a)Where required, Pierre Fabre shall make applications to the Registrar of Trademarks (or equivalent) for the registration of Forest, its Affiliates and permitted sub-licensees as registered users of the Trademarks in respect of each registration of the Trademark and Forest, its Affiliates and sub-licensees shall co-operate with Pierre Fabre in making such applications.

(b)Forest, its Affiliates or permitted sub-licensees shall execute further documents, depose to or swear or procure the deposing to or swearing of such declarations or oaths and do any act or thing and provide any information or evidence which may be necessary or desirable for registering and maintaining registration of Forest, its Affiliates and sub-licensees as registered users of the Trademarks.

1.9Reasonable Assistance. Forest, its Affiliates and permitted sub-licensees will, upon request, supply Pierre Fabreor its authorized representative with any information as to its use of the Trademarks which Pierre Fabre may reasonably require and will render any assistance reasonably required by Pierre Fabre in securing and maintaining the registration(s) of the Trademarks in the Territory.

1.10Royalty Payments.

(a)Earned Royalties.  In consideration of the right and license hereby granted, during the Trademark Term, Forest shall pay to Pierre Fabre, on a Quarterly basis in arrears (i) a running royalty of [***] of Net Sales of Product made by Forest, its Affiliates and permitted sub-licensees in the United States and Canada and (ii) a running royalty of  [***] of Net Sales of Product made by Forest, its Affiliates and permitted sub-licensees in Latin America; provided that no royalty shall be payable under this Section 1.10 with respect to any Generic Equivalent that is not sold or offered for sale under a Trademark.  Royalties payable hereunder shall be subject to adjustment pursuant to the terms of the Supply Agreement between Pierre Fabre and Forest of even date herewith.

(b)Payments; Reports; Books and Records.

(i)Payment; Reports.  Royalty payments and reports for the sale of Products shall be calculated and reported for each Quarter.  Royalties shall be payable Quarterly within [***] of the end of the Quarter to which each payment relates and shall be reconciled on an annual basis together with the payment applicable to the fourth Quarter of Forest’s fiscal year.  Each payment of royalties shall be accompanied by a statement setting forth the amount of gross sales and Net Sales for the Quarter in sufficient detail to permit confirmation of the accuracy of the payment made (expressed in the currency of sale and units sold), the calculation of royalties due and the conversion rate used to convert royalties to US Dollars.  Notwithstanding anything to the contrary set forth herein, no royalties under this Section shall be owed to Pierre Fabre with respect to sales of a Generic Equivalent.  Royalties shall be payable in US Dollars.  Net Sales recorded in currencies other than US Dollars shall be converted into US Dollars for purposes of calculating royalties at the average rates of exchange over the relevant period determined in accordance with Forest’s customary practices.

(ii)Withholding of Taxes. The Party receiving payments under this Agreement will pay any and all taxes levied on account of such payment. If any taxes are required to be withheld by the paying Party, it will (a) deduct such taxes from the remitting payment, (b) timely pay the taxes to the proper taxing authority, and (c) send proof of payment to the other Party and certify its receipt by the taxing authority within [***] following such payment. Each Party shall provide the other Party with a valid tax residence certificate issued by a competent authority.

(iii)Books and Records. Forest shall maintain, and shall require its Affiliates, and permitted sub-licensees to maintain, books and records which accurately reflect Net Sales of Product with respect to each country within the Territory for a period of at least [***] after the end of the period to which they relate.  Pierre Fabre shall have the right, by an accountant or other authorized representative to which Forest shall have no reasonable objection, to inspect, audit and copy such books and records no more than once per calendar year upon reasonable advance notice solely for purposes of verifying the running royalties, including adjustments, payable to Pierre Fabre hereunder.  Such inspection shall be at Pierre Fabre’s expense, provided however, that in the event the inspection determines that running royalties have been overpaid or underpaid, the Parties shall promptly make the appropriate payments or refunds to correct such payment and if an underpayment was by [***] or more for a consecutive twelve (12) month period, Forest will be responsible for the reasonable cost of such inspection or audit.

1.11Ownership of the Trademarks.  Any trademark assigned by Forest to Pierre Fabre shall be assigned free and clear of any encumbrance, including any license obligation, royalty obligation, lien, claim or restriction, in favor of any Third Party. Pierre Fabre agrees to maintain throughout the Trademark Term the Trademarks free and clear of any encumbrance, including any license obligation, royalty obligation, lien, claim or restriction, in favor of any Third Party.

1.12Trademark Term and Termination.

(a)Trademark Term.  The term of this Agreement (the “Trademark Term”) commenced on December 19, 2008 and shall remain in full force and effect for so long as Forest, its Affiliates and permitted sub-licensees continue to sell the Product under any of the Trademarks in the Territory unless earlier terminated pursuant to Section 1.12(b) or 1.12(c).

(b)Termination for Cause; Termination by Either Party.  A Party shall have the right to terminate this Agreement upon the occurrence of any of the following:

(i)   Termination for Breach.  Each Party shall have the right to terminate this Agreement and its obligations hereunder for material breach by the other Party, which breach remains uncured for [***], in the case of a payment breach, or [***], in the case of any other breach, after written notice is provided to the breaching Party specifying the nature of the breach in reasonable detail and demanding its cure; provided that in the case of a non-payment related material breach, if such breach cannot be cured within the [***] cure period, this Agreement shall not terminate if the breaching Party has made diligent efforts to cure such breach within the [***] period and this Agreement shall remain in effect for such period after notice of breach as may be reasonable in the circumstances as long as the breaching Party continues to use diligent efforts to pursue the cure.  In the event the Parties dispute the existence of a material breach or a Party’s diligence in attempting to cure a material breach, termination of this Agreement shall not be deemed to occur unless and until such dispute has been referred for resolution by an expedited arbitration in accordance with Section 16.2 of the License Agreement, material breach of the Agreement or failure to make diligent efforts to cure such breach has been established by such arbitration, and if such breach can be cured by the payment of money or the taking of specific actions, the breaching party does not pay the amount so determined to be due or take or commit to take the required actions within [***] of receipt of an agreement of the Parties or arbitration decision.  Recognizing the importance of expediting the resolution of any such dispute, the Parties agree to appoint arbitrators as promptly as practicable following receipt of notice of the institution of the arbitration, and to instruct and cooperate with such arbitrators to act to achieve resolution of the issue on an expedited basis.  Finally, in the event a material breach affects only Canada or only certain but not all Products, the remedy of termination shall only be effective with respect to Canada or the applicable Product (as the case may be).

(ii)   Termination for Bankruptcy.  This Agreement may be terminated by either Party upon at least [***]’ prior written notice thereof if the other Party makes an assignment for the benefit of creditors, is the subject of proceedings in voluntary or involuntary bankruptcy instituted on behalf of or against such Party, or has a receiver or trustee appointed for all or substantially all of its property, provided that in the case of an involuntary bankruptcy proceeding such right to terminate shall only become effective if the Party consents to the involuntary bankruptcy or such proceeding is not dismissed within [***] after the filing thereof.

(c)Termination of the License Agreement.  In the event the License Agreement is terminated prior to the expiration of the Trademark Term, for any reason other than by Forest pursuant to Section 10.4 (Breach of Pierre Fabre), 10.5 (Bankruptcy of Pierre Fabre) or 11 (Force Majeure affecting Pierre Fabre) thereof, then this Agreement shall be terminated without any further act or notice and Forest shall no longer have any right to use the Trademarks in the Territory.  For the sake of clarity, this Agreement shall continue in full force and effect in accordance with its terms notwithstanding any termination by Forest under Section 10.4 (Breach of Pierre Fabre), 10.5 (Bankruptcy of Pierre Fabre) or 11 (Force Majeure affecting Pierre Fabre) of the License Agreement.

(d)Effect of Termination; Surviving Obligations.

(i)Upon expiration of the Trademark Term or upon termination of this Agreement prior to the expiration of the Trademark Term for any reason other than a termination by Forest pursuant to Section 1.12(b) (Breach or Bankruptcy of Pierre Fabre), all rights and obligations under this Agreement shall automatically terminate except as provided in this Section 1.12(d).  In connection with any termination by Forest under Section 1.12(b) (Breach or Bankruptcy of Pierre Fabre), the license grant to Forest in Section 1.3 shall continue so long as Forest is using any of the Trademarks in the Territory, subject to the fulfillment by Forest of its royalty obligations under Section 1.10, and Pierre Fabre shall cooperate with Forest to enable it to perform tasks which were otherwise to be performed by Pierre Fabre under the agreement, and Forest’s royalty obligations hereunder may be offset by any additional documented costs reasonably incurred by Forest in performing such tasks.

(ii)Expiration or termination of this Agreement shall not relieve the parties of any obligation accruing prior to such expiration or termination.

(iii)Within [***] following the expiration or termination of this Agreement, each Party shall deliver to the other Party any and all Confidential Information of the other Party in its possession.

(iv)The license granted under this Agreement will be deemed a license of rights to intellectual property for purposes of Section 365(n) of the U.S. Bankruptcy Code and a licensee under the Agreement will retain and may fully exercise all of its rights and elections under the United States Bankruptcy Code.

(e)Accrued Obligations and Survival.  Except as otherwise specifically provided herein, termination of this Agreement shall not relieve the Parties of any liability or obligation which accrued hereunder prior to the effective date of such termination, nor prejudice either Party’s right to obtain performance of any obligation.  In addition, termination of this Agreement shall not terminate provisions which provide by their respective terms for obligations or undertakings following the expiration of the Trademark Term of this Agreement.

2.   Miscellaneous.

2.1Dispute Resolutions and Arbitration.  In the event of a dispute arising in connection with this Agreement, the provisions set forth as Section 16.2 of the License Agreement shall apply.

2.2Governing Law.  This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, USA, without giving effect to its principles of conflicts of law.

2.3Merger.  This Agreement constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior written or oral agreements or understandings concerning the subject matter hereof or in conflict with their terms.  Each Party confirms that it is not relying on any representations, warranties or covenants of the other Party except as specifically set out in this Agreement.

2.4Independent Contractors.  The status of a Party under this Agreement shall be that of an independent contractor. Nothing contained in this Agreement shall be construed as creating a partnership, joint venture, or agency relationship between the Parties or, except as otherwise expressly provided in this Agreement, as granting either Party the authority to bind or contract any obligation in the name of or on the account of the other Party or to make any statements, representations, warranties, or commitments on behalf of the other Party.  All Persons employed by a Party or any of its Affiliates shall be employees of such Party or its Affiliates and not of the other Party or such other Party’s Affiliates and all costs and obligations incurred by reason of any such employment shall be for the account and expense of such Party or its Affiliates, as applicable.

2.5 Amendment and Waiver.  No modification or waiver of any of the terms of this Agreement shall be deemed valid unless it is in writing and signed by the Party to whom such modification is sought to be enforced.  The failure of either Party to insist upon the strict performance of any term of this Agreement or the waiver by either Party of any breach under this Agreement shall not prevent the subsequent strict enforcement of such term nor be deemed a waiver of any subsequent breach.

2.6Assignment.  This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective assigns and successors in interest.  Neither Party shall have the right to assign its obligations or rights hereunder, except to an Affiliate, without the prior written consent of the other Party, which shall not be unreasonably withheld with due regard to the objectives of, and respective responsibilities of the Parties under, this Agreement, subject to rights of sublicense specifically provided herein. Any assignment not in accordance with the terms hereof shall be null and void.

2.7No Third Party Beneficiaries.  The provisions of this Agreement are for the sole benefit of the Parties and their successors and permitted assigns, and they shall not be construed as conferring any rights in any other persons except as otherwise expressly provided in this Agreement.

2.8Severability.  Should any part or provision of this Agreement be held unenforceable or in conflict with the applicable laws or regulations of any applicable jurisdiction, the invalid or unenforceable part of provision shall, provided that it does not go to the essence of this Agreement, be replaced with a revision which accomplishes, to the extent possible, the original commercial purpose of such part or provision in a valid and enforceable manner, and the balance of this Agreement shall remain in full force and effect and binding upon the Parties hereto.

2.9Notices.  Any notice to be given under this Agreement must be in writing and delivered pursuant to the License Agreement.

2.10.Force Majeure. Except for the obligation to make payment when due, no liability shall result from, and no right to terminate shall arise, in whole or in part, based upon any delay in performance or non-performance, in whole or in part, by either of the Parties to this Agreement to the extent that such delay or non-performance is caused by Force Majeure.  “Force Majeure” means an event that is beyond a non-performing Party’s reasonable control, including an act of God, strike, lock-out or other industrial/labor dispute, war, riot, civil commotion, terrorist act, epidemic, quarantine, fire, flood, storm, natural disaster or compliance with any law or governmental order, rule, regulation or direction.  The Party whose performance is subject to the Force Majeure (the “Force Majeure Party”) shall within [***] of the occurrence of the Force Majeure, give written notice to the other Party stating the nature of the Force Majeure, its anticipated duration and any action being taken to avoid or minimize its effect.  Any suspension of performance shall be of no greater scope and of no longer duration than is reasonably required and the Force Majeure Party shall use reasonable efforts to remedy its inability to perform.  In the event that any Force Majeure is reasonably anticipated to last for [***] or more, the unaffected Party may undertake the obligations of the Force Majeure Party for the period of such Force Majeure and such additional period as may reasonably be necessary to assure the smooth transition of such activities back to the Force Majeure Party.  The Force Majeure Party shall be responsible for any additional documented costs reasonably incurred by the other party in performing such tasks.

2.11Further Assurances.  Each of the Parties shall, from time to time during the Trademark Term of this Agreement, upon request by the other, execute and deliver all such further documents or instruments as may be required in order to give effect to the purpose and intent of this Agreement.  Without limiting the generality of the foregoing, the obligations of the Parties hereunder are undertaken with a principal objective of complying with all pertinent provisions of Applicable Laws, orders and regulations relating to the manufacture, use or sale of pharmaceutical products, and the Parties shall take all necessary action as may be required to comply with such provisions.

2.12Interpretation.

(a)Captions & Headings.  The captions and headings of clauses contained in this Agreement preceding the text of the articles, sections, subsections and paragraphs hereof are inserted solely for convenience and ease of reference only and shall not constitute any part of this Agreement, or have any effect on its interpretation or construction.

(b)Singular & Plural.  All references in this Agreement to the singular shall include the plural where applicable, and all references to gender shall include both genders and the neuter.

(c)Articles, Sections & Subsections.  Unless otherwise specified, references in this Agreement to any article shall include all sections, subsections, and paragraphs in such article; references in this Agreement to any section shall include all subsections and paragraphs in such sections; and references in this Agreement to any subsection shall include all paragraphs in such subsection.

(d)Days.  All references to days in this Agreement shall mean calendar days, unless otherwise specified.

(e)Ambiguities.  Ambiguities and uncertainties in this Agreement, if any, shall not be interpreted against either party, irrespective of which party may be deemed to have caused the ambiguity or uncertainty to exist.

2.13Amendment and Restatement.  This Agreement is an amendment and restatement of the Original Agreement.  With respect to (i) any date or time period occurring and ending prior to the Restatement Effective Date, the Original Agreement shall govern the respective rights and obligations of the Parties and shall for such purposes remain in full force and effect; and (ii) any date or time period occurring or ending on or after the Restatement Effective Date, the rights and obligations of the Parties shall be governed by this Agreement.  From and after the Restatement Effective Date, the provisions of this Agreement shall prevail in the event of any conflict or inconsistency between such provisions and those of the Original Agreement.  Each reference to the Original Agreement in any other document, instrument or agreement shall mean and be a reference to this Agreement.  Nothing contained herein, unless expressly herein stated to the contrary, is intended to amend, modify or otherwise affect any other instrument, document or agreement executed and or delivered in connection with the Original Agreement.

2.14Counterparts; Facsimile Signatures.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original document, and all of which together shall be deemed one instrument.  An executed signature page of this Agreement delivered by facsimile transmission shall be as effective as an original executed signature page.

In Witness Whereof, the parties hereto have duly executed this Agreement.

Pierre Fabre Médicament sas                                                                        Forest Laboratories Holding Limited

By: /s/ Frédéric Duchesne                                                                             By: /s/ David Solomon                                                                

Name:           Frédéric Duchesne                                                                    Name:            David Solomon                             

Title:             President                                                                                     Title:              Assistant Secretary                                                      

EX-10.13

[***] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

AMENDED AND RESTATED PURCHASE AND SUPPLY AGREEMENT

THIS AMENDED AND RESTATED PURCHASE AND SUPPLY AGREEMENT (this “Agreement”) is made and entered into as of this 17th day of December, 2013 (the “Restatement Effective Date”), by and between PIERRE FABRE MÉDICAMENT SAS, organized under the laws of France having an address of 45, place Abel-Gance, 92654 Boulogne Cedex, France (“Pierre Fabre”), and FOREST LABORATORIES HOLDINGS LIMITED, a corporation organized under the laws of the Republic of Ireland and having an address of Milner House, 18 Parliament Street, Hamilton HM11, Bermuda (“Forest”), a wholly-owned subsidiary of Forest Laboratories, Inc., a Delaware corporation having its principal place of business at 909 Third Avenue, New York, New York 10022.

RECITALS

WHEREAS, Pierre Fabre owns or controls certain patents and valuable know-how related to the Compound (as defined below) and the Product (as defined below);

WHEREAS, Pierre Fabre and Forest entered into the Amended and Restated License Agreement, dated as of the date hereof (the “License Agreement”), pursuant to which Pierre Fabre granted to Forest an exclusive license to develop, register, manufacture from the Compound, use, distribute, sell, offer for sale, have sold and import the Product in any and all indications in the Territory (as defined below);

WHEREAS, Pierre Fabre also granted Forest a license to certain trademarks pursuant to the Amended and Restated Trademark License Agreement, dated as of the date hereof between Forest and Pierre Fabre;

WHEREAS, Pierre Fabre agreed under the License Agreement to supply Forest with its requirements of Compound, and accordingly, Pierre Fabre and Forest entered into that certain Purchase and Supply Agreement dated as of December 19, 2008 (the “Original Agreement”) which set forth the terms upon which Pierre Fabre will supply to Forest, and Forest will purchase from Pierre Fabre, the Bulk Compound (as defined below) manufactured in compliance with all applicable requirements set forth herein; and

WHEREAS, Pierre Fabre and Forest desire to amend and restate the Original Agreement in order to, inter alia, expand the territory for which Pierre Fabre shall supply Forest with its requirements of Bulk Compound to include the countries of Latin America (as defined below), all in accordance with, and subject to, the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Pierre Fabre and Forest (each a “Party” and together the “Parties”) agree as follows:

1.DEFINITIONS.

Capitalized terms used but not otherwise defined in this Agreement will have the meanings given such terms in the License Agreement.  Other capitalized terms will have the meanings set forth below.

1.1.“Affiliate” means any company or entity controlled by, controlling, or under common control with a Party hereto. For this purpose, the term "control" shall mean the direct or indirect ownership of at least 50% of the voting stock of that corporation, or in the absence of ownership of at least 50% of the voting stock of that corporation, the power, directly or indirectly to cause the direction of the management and policies of such corporation.

1.2.“Annual [***] Compound Amount” has the meaning set forth in Section 2.1(c).

1.3.“Annual [***] Sample Amount” has the meaning set forth in Section 2.1(c).

1.4.“Buffer Stock” has the meaning set forth in Section 7.9(a).

1.5.“Bulk Compound” means Compound in bulk form.

1.6.“Certificate of Analysis” has the meaning set forth in Section 6.3(d).

1.7.“cGMPs” means current good manufacturing practices as required by any applicable Regulatory Authority or applicable law, rule or regulation in the Territory, including, but not limited to, the FDA’s Guidance for Industry, “Good Manufacturing Practice Guide for Active Pharmaceutical Ingredients” (ICH Q7A).

1.8.“Commercially Reasonable Efforts” means that the Parties shall conform to the standards of diligence customary in the pharmaceutical industry, with respect to compounds having commercial potential comparable to the Compound, in fulfilling their applicable obligations under this Agreement with regard to manufacturing or otherwise.

1.9.“Commencement Date” means the first date on which Forest commercially launches the Product in the Territory.

1.10.“Compound” means Levomilnacipran, an enantiomer of Milnacipran designated by Pierre Fabre as F-2695, having the chemical structure set forth on Schedule 1.10 of this Agreement.

1.11.“Compound Specifications” means (a) with respect to Compound supplied by Pierre Fabre hereunder for use by Forest in the United States, those specifications pertaining to the Compound described in Exhibit I hereto and made a part hereof, and any specifications set forth in the IND for the Product to be filed by Forest with the FDA and in the DMF to be filed by Pierre Fabre with the FDA, as modified to comply with the NDA for the Products and (b) with respect to Compound supplied by Pierre Fabre hereunder for use by Forest in a country of the Territory outside of the United States, those specifications pertaining to the Compound described in Exhibit I hereto, as modified to comply with the specifications contained in the Regulatory Approval for such country, in each case as otherwise modified from time to time in accordance with Section 7.3.

1.12.“Confidential Information” means any confidential information (including, without limitation, Information) furnished to it by the other Party pursuant to the License Agreement or this Agreement.

1.13.“Conform” means that a quality control sample or batch delivery of Bulk Compound meets the Compound Specifications and was manufactured in accordance with the requirements of Section 7.1.

1.14.“Control” means, with respect to any Manufacturing Know-How or intellectual property right, possession by a Party of the ability (whether by ownership, license or otherwise, other than any license granted under this Agreement) to grant access, a license or sub-license to such Manufacturing Know-How or intellectual property right as provided for herein without violating the terms of any agreement or other arrangement with any Third Party as of the time such Party would first be required hereunder to grant the other Party such access, license or sublicense, or at any other time during the term of such access, license or sublicense.

1.15.“Correction Plan” has the meaning set forth in Section 7.9(c).

1.16.“Cost of Goods” means Pierre Fabre’s direct costs of materials and labor incurred in acquiring (including any acquisition costs paid to Third Parties for materials or services acquired), formulating, manufacturing, packaging and labeling the Compound, including quality assurance and quality control activities necessary to release the Compound, together with directly allocable manufacturing overheads (but excluding corporate, general or administrative overheads).  Cost of Goods shall be determined in accordance with Pierre Fabre’s standard cost accounting policies, as consistently applied to the manufacture of pharmaceutical ingredients and products and shall not include inter-company profits among Pierre Fabre and its Affiliates.  Cost of Goods shall be accrued and reflected in accordance with GAAP.

1.17.“Current Buffer Stock” has the meaning set forth in Section 7.9(c).

1.18.“Delivery Forecast” means a forecast provided by Forest of the quantity of Bulk Compound required by Forest during the applicable period (including supplies for formulation development, clinical trials and sampling).

1.19.“DMF” has the meaning set forth in Section 7.6.

1.20.“Effective Date” means December 19, 2008.

1.21.“Exchange Act” means the Securities and Exchange Act of 1934, as amended.

1.22.“Exercise Date” has the meaning set forth in Section 7.11(b).

1.23.“FDA” means the United States Food and Drug Administration or any successor agency having similar jurisdiction.

1.24.“FD&C Act” means the United States Food, Drug and Cosmetic Act.

1.25.“[***] Compound” has the meaning set forth in Section 2.1(c).

1.26.“Generic Equivalent” means, with respect to a Product, a product containing the same active pharmaceutical ingredients as the Product (and no other active pharmaceutical ingredients) which is lawfully being sold in a country in the Territory as a generic equivalent substitutable by a pharmacist for the Product;  provided, however, that a Generic Equivalent shall not be deemed to be sold in the United States by a Third Party for purposes of Sections 2.2 and 7.12 hereof if Forest then has a good faith expectation that it will be able to successfully and promptly terminate the marketing of all such Generic Equivalents through appropriate legal proceedings.

1.27.“Generic Supplier” has the meaning set forth in Section 7.12.

1.28.“Improvement” means any new or useful improvement, discovery, claim, formula, process, trade secret and technology (including confidential data and Confidential Information), to the extent relating to, derived from, or useful for the research, development, manufacture, commercialization or use of the Compound or Product (including the formulation, delivery or use thereof), including any synthesis, preparation, recovery, purification processes and techniques, control methods and assays, chemical data, toxicological and pharmacological data and techniques, results of clinical trials and other pre-clinical and clinical data, new product forms, product formulations, indications and specifications, in each case whether patentable or unpatentable, that is conceived or first reduced to practice or demonstrated to have utility during the term of or in connection with the License Agreement.

1.29.“Indemnified Party” has the meaning set forth in Section 8.3.

1.30.“Indemnifying Party” has the meaning set forth in Section 8.2(c).

1.31.“Information” means all tangible and intangible (i) techniques, technology, practices, trade secrets, inventions (whether or not patentable), methods, manufacturing processes, knowledge, know-how, skill, experience, test data and results (including pharmacological, toxicological and clinical test and safety data results), analytical and quality control data, results or descriptions of software, (ii) compounds, composition of matter, materials, and (iii) marketing data including clinical studies designed to support promotional efforts, in each case relating to the Compound or the Product in any indication.

1.31A.“Latin America” means the following countries (and any other countries that result from the division or consolidation of such countries): Anguilla, Antigua & Barbuda, Argentina, Aruba, Bahamas, Barbados, Belize, Bermuda, Bolivia, Brazil, British Virgin Islands, Cayman Islands, Chile, Columbia, Costa Rica, Cuba, Curacao, Dominica, Dominican Republic, Ecuador, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Montserrat, Netherlands Antilles, Nicaragua, Panama, Paraguay, Peru, St. Kitts & Nevis, St. Lucia, St. Maarten, St. Vincent and the Grenadines, Suriname, Trinidad & Tobago, Uruguay and Venezuela.

1.32.“License Agreement” has the meaning in the second recital.

1.33.“Manufacturing Know-How” means all Information, whether patented or unpatented, now or hereafter during the term of this Agreement Controlled by Pierre Fabre or any Affiliate related to the manufacture of the Compound and Product. Wherever references are made in this Agreement and in the License Agreement (a) to manufacture of Compound as opposed to manufacture of Product it shall be referred to as “Compound Manufacturing Know-How” and (b) to manufacture of Product after the Compound has been manufactured, it shall be referred to as “Product Manufacturing Know-How”, respectively. Notwithstanding anything to the contrary, Manufacturing Know-How shall exclude Pierre Fabre Know-How, Pierre Fabre Patents and Forest Know-How and Forest Patents, each as defined in the License Agreement.

1.34.“Manufacturing Process” has the meaning set forth in Section 7.3.

1.35.“Manufacturing Right” has the meaning set forth in Section 7.11(b).

1.36.“Milnacipran” means the substance known as milnacipran (INN), which expressly excludes any analogs, derivatives and enantiomers of milnacipran (INN).

1.37.“Minimum Buffer Stock” has the meaning set forth in Section 7.9(b).

1.38.“MWG” has the meaning set forth in Section 3.

1.39.“NDA” means a New Drug Application submitted to the United States FDA in respect of the Product.

1.40.“Other Changes” has the meaning set forth in Section 7.3.

1.40A.“Original Agreement” has the meaning set forth in the Recitals.

1.41.“Outsourcing Notice” has the meaning set forth in Section 7.12.

1.42.“Patent” means (a) valid and enforceable patents, re-examinations, reissues, renewals, confirmations, extensions (including supplemental protection certificates) and term restorations, and (b) pending applications for patents, including, without limitation, continuations, continuations-in-part, provisionals, divisionals and substitute applications, including, without limitation, inventors’ certificates.

1.43.“Pierre Fabre Know-How” has the meaning ascribed to it in the License Agreement.

1.44.“Pierre Fabre Patents”has the meaning ascribed to it in the License Agreement.

1.45.“Pierre Fabre Suppliers” includes all Third Parties that supply Raw Materials to Pierre Fabre.

1.46.“Postponement” has the meaning set forth in Section 4.2.

1.47.“Pre-Approved Changes” has the meaning set forth in Section 7.3.

1.48.“Product” means any pharmaceutical product for human use that contains the Compound either as the sole active ingredient or in a fixed dose combination with one or more other active ingredients (other than Milnacipran) and all Improvements thereto.

1.49.“Purchase Order” has the meaning set forth in Section 4.1(b)(i).

1.50.“Quality Agreement” means that certain Quality Agreement between the Parties dated as of March 18, 2013, as the same may be amended from time to time.

1.51.“Raw Materials” means the materials used in manufacturing Bulk Compound.

1.52.“Regulatory Approval” means any and all approvals (including price and reimbursement approvals), licenses, registrations, or authorizations of health/regulatory authorities or any country, federal, state or local regulatory agency, department, bureau or other government entity that is legally required or necessary from an economic point of view for the manufacture, use, storage, import, transport and/or sale of a Product in such jurisdiction.

1.52A.“Restatement Effective Date” has the meaning set forth in the introductory paragraph.

1.53.“Royalty Report” has the meaning set forth in Section 2.1(b)(i).

1.54.“Samples” means quantities of Product given to authorized medical professionals free of charge as part of the marketing, advertising or promotion of the Product.

1.55. “Second Source Facility” has the meaning set forth in Section 7.10.

1.56.“Shortfall” has the meaning set forth in Section 7.9(c).

1.57.“Starting Materials” means those materials that are starting materials within the meaning of the guideline for submitting supporting documentation in drug applications for the manufacture of drug substances FDA/CDER 02 1987, as may be amended, and corresponding Applicable Laws in the Territory outside of the United States.

1.58.“Term” has the meaning set forth in Section 9.1.

1.59.“Territory” means the United States and Canada and their respective territories and possessions (including Puerto Rico, irrespective of political status) and Latin America.

1.60.“Third Party” means a party other than Forest and Pierre Fabre and any of their Affiliates.

2.PURCHASE AND SUPPLY OF COMPOUND.

2.1.Supply by Pierre Fabre.

(a)Pierre Fabre agrees that it will manufacture and supply to Forest such quantities of Bulk Compound as requested by Forest pursuant to Section 4 to cover its total requirements and the total requirements of its sublicensees for commercial sales in the Territory, Samples, and Development activities.

2.2.Transfer Price for Bulk Compound; [***] Compound for Samples.

(a)As long as there is no Generic Equivalent sold in the United States whether by a Third Party or by Forest, Pierre Fabre will supply Forest with Bulk Compound on the following terms and conditions:

All Bulk Compound will be initially supplied to Forest [***].

Notwithstanding the foregoing, with respect to quantities of Bulk Compound requested by Forest for commercial sale in North America, distribution as Samples in North America and Development activities for North America, Pierre Fabre’s price for Bulk Compound provided to Forest in any Quarter in such region shall not exceed [***] of Forest’s Net Sales for such Quarter in such region.  The parties have agreed to effectuate the intent of the preceding sentence as follows:

(i)Together with each Quarterly royalty report provided to Pierre Fabre pursuant to the Trademark License Agreement (each a “Royalty Report”), Forest will identify the aggregate Net Sales for such Quarter in North America, the amount of Bulk Compound represented by such Net Sales for such Quarter and the total amount paid by Forest for Bulk Compound represented by such Net Sales for such Quarter.  To the extent the total amount paid by Forest pursuant to Section 2.1(a) for Bulk Compound represented by such Net Sales for such Quarter exceeds [***] of aggregate Net Sales for such Quarter in such region, the purchase price for all such quantities of Bulk Compound, together with quantities of Bulk Compound distributed by Forest as Samples and used for Development activities for such region, shall be adjusted by dividing (x) the amount of such excess by (y) the total quantities of Bulk Compound represented by Net Sales for such Quarter in such region, and subtracting such quotient from the price per kilogram paid pursuant to Section 2.1(a) for all such Bulk Compound.  Forest shall receive a credit equal to the aggregate amount of excess purchase price paid for such Bulk Compound for a Quarter, and such credit shall be applied against royalty payments due to Pierre Fabre pursuant to the Trademark License Agreement for such Quarter and each subsequent Quarter as necessary until the total amount of such credit has been applied.

(ii)In connection with each Royalty Report for the final Quarter of Forest’s fiscal year, the parties shall determine the purchase price for Bulk Compound represented by Net Sales in North America, distributed by Forest as Samples and used by Forest for Development activities on an annual basis for the immediately preceding four Quarters for purposes of commercial sale in such region. Forest shall make an additional payment, or Pierre Fabre shall issue a credit which shall be applied against royalty payments due to Pierre Fabre pursuant to the Trademark License Agreement for such final Quarter and each subsequent Quarter as necessary until the total amount of such credit has been applied, as required so that the purchase price per kilogram for all Bulk Compound thus represented, distributed or used by Forest during such four Quarters for such region shall equal the lesser of (A) [***] per kilogram for such fiscal year for such region and (B) [***] of Net Sales per kilogram for such fiscal year for such region (determined in accordance with subsection (i) above applied on an annual basis).

For the avoidance of doubt, the Parties agree that the intention of subsections (i) and (ii) above is to determine the amount of any required adjustment to the purchase price for Bulk Compound on a per kilogram basis by taking into account only the quantity of Bulk Compound represented by Net Sales in North America in the applicable period and, once such adjustment has been so calculated, to apply it (on a per kilogram basis) to the aggregate of all quantities of Bulk Compound represented by Net Sales in such region, distributed as Samples and used in Development activities for the period to which such adjustment applies.  An example of the calculation and application of this adjustment is set forth on Schedule 2.2 hereto.

At least [***] prior to the anticipated date of first commercial sale of a Product in Latin America, the Parties will commence good faith discussions with a view to determining an appropriate Net Sales percentage cap with respect to Bulk Compound requested by Forest for commercial sale in Latin America to be applied to all supply of Bulk Compound for Latin America, determined taking into account royalty percentages, anticipated price levels, forecasts and cost of goods, in each case applicable to the Bulk Compound and Product to be distributed in Latin America and [***]  In the event that the Parties, following such good faith discussions, cannot determine [***] Pierre Fabre shall supply Bulk Compound to Forest [***].

(b)Subject to the provisions of Section 7.12, from the date a Generic Equivalent is sold in the United States, Pierre Fabre will supply Forest with Bulk Compound at the following price conditions with respect to North America :

(i)Bulk Compound requested by Forest for commercial sale of a Product sold by Forest under a Trademark will be supplied by Pierre Fabre [***].

(ii)Bulk Compound requested by Forest for commercial sale of a Generic Equivalent sold by Forest will be supplied by Pierre Fabre [***].

(c)Subject to the provisions of Section 7.12, from the date a Generic Equivalent is sold in the United States, Pierre Fabre will supply Forest with Bulk Compound at the following price conditions with respect to Latin America:

(i)Bulk Compound requested by Forest for commercial sale of a Product sold by Forest under a Trademark will be supplied by Pierre Fabre [***].

(ii)Bulk Compound requested by Forest for commercial sale of a Generic Equivalent sold by Forest will be supplied by Pierre Fabre [***].

(iii)From the date Generic Equivalents in a country of Latin America capture a market share (as measured by unit volume) of at least [***] of the aggregate market share (as measured by unit volume) of the Products (based on data provided by a reliable third party data source used by Forest in its business generally) in such country, Bulk Compound requested by Forest for commercial sale of a Product sold by Forest under the Trademark, or of a Generic Equivalent sold by Forest, will be supplied by Pierre Fabre [***].

(d)Bulk Compound supplied hereunder will be invoiced to Forest at the time of shipment, in US Dollars using the exchange rate between USD Dollar to Euro of the last business day of the month immediately preceding the date of issuance of the invoice, as reported by Reuters page ECBREF=.  Payments of such invoices will be made by Forest to Pierre Fabre in US Dollars within [***] of receipt of invoice.

(e)Pierre Fabre will provide quantities of Bulk Compound to Forest [***] for use in free Samples pursuant to Section 4.6(c) of the License Agreement during the periods described therein (“[***] Compound”).  [***] days prior to the start of each Contract Year in which [***] Compound is to be provided, the Parties shall determine the total amount (in kilograms) of [***] Compound required to be provided in such Contract Year by Pierre Fabre, based on Pierre Fabre’s Cost of Goods for such Contract Year (the “Annual [***] Compound Amount”) and the MWG shall establish the delivery plan for such Annual [***] Compound Amount.  Thereafter within [***] of the end of each Contract Year, the Parties shall determine the total amount (in kilograms) of free Samples distributed by Forest during such Contract Year (the “Annual [***] Sample Amount”) and shall make a reconciliation between the Annual [***] Compound Amount delivered by Pierre Fabre to Forest and the Annual [***] Sample Amount used by Forest during such Contract Year.  If the Annual [***] Compound Amount exceeds the Annual [***] Sample Amount for such Contract Year, then Forest shall pay Pierre Fabre for such excess Compound at a price per kilogram for Bulk Compound determined in accordance with Section 2.2(a)(ii) above.  Forest shall maintain records regarding actual Samples distribution and shall periodically provide to Pierre Fabre summaries of the information contained in such records and shall make such records available to Pierre Fabre, at reasonable times and upon reasonable notice.

(f)Pierre Fabre shall maintain books and records which accurately reflect its Cost of Goods (per kilogram of Bulk Compound) for a period of at least [***] after the end of the period to which they relate.  Forest shall have the right, by an accountant or other authorized representative to which Pierre Fabre shall have no reasonable objection, to inspect, audit and copy such books and records no more than once per calendar year upon reasonable advance notice solely for purposes of verifying the purchase price for Bulk Compound payable to Pierre Fabre hereunder.  Such inspection shall be at Forest’s expense, provided, however, that in the event the inspection determines that Forest has overpaid or underpaid for Bulk Compound, the Parties shall promptly make the appropriate payments or refunds to correct such payment and if an overpayment was by [***] or more for a consecutive [***], Pierre Fabre will be responsible for the reasonable cost of such inspection or audit.

2.3.Exclusive Supplier.

(a)During the Term, subject to Sections 7.11 and 7.12, Pierre Fabre will be the exclusive supplier to Forest of Bulk Compound, and Forest agrees that it shall purchase from Pierre Fabre all of its requirements and requirements of its sublicensees of Bulk Compound for commercial sales of the Product in the Territory, Development activities and Samples.

(b)In the event Pierre Fabre is unable to supply to Forest Compound requested in a Purchase Order, in whole or part, due to a shortage of production capacity or Raw Materials for any reason (except to the extent caused by Forest or any of its sublicensees), then, in addition to any other rights that may be available to Forest under this Agreement, Pierre Fabre shall promptly notify Forest, in writing, of such shortage of production capacity or Raw Materials, and, if possible, the date such shortage of production capacity or Raw Materials is expected to end. In such event, without limiting the provisions of Section 5, Pierre Fabre shall allocate its available production capacity and/or Raw Materials for the production of Compound [***].

3.MANUFACTURING WORKING GROUP.  The Parties shall establish a manufacturing and supply chain working group (“MWG”) to oversee manufacturing of the Compound and Product in accordance with the Parties’ respective responsibilities under Section 4.7 of the License Agreement.  The Parties shall collaborate through such MWG to oversee manufacturing of Compound and Product for clinical supplies and for commercial distribution and sale.  The MWG will act by consensus with the objective of achieving reliable supply on a cost effective basis, provided however that in the event that the members of the MWG are unable to agree on a particular issue, then the decision making process described in Section 3.1(c) of the License Agreement shall apply and Pierre Fabre shall have final decision making authority with respect to manufacturing of Compound and Forest shall have final decision making authority with respect to manufacturing of Product, provided that in each case, such party’s decision is consistent with the Compound Specifications, cGMPs and other Applicable Laws.

4.FORECASTS AND PURCHASE ORDERS.

4.1.Forecasts.  During the Term, Forest and its sublicensees shall follow the following forecast and order procedures.

(a)On the first business day of each calendar quarter during the period from the Effective Date until the first day of the one-year period immediately preceding the calendar quarter during which the Commencement Date is scheduled to occur, Forest shall submit to Pierre Fabre a Delivery Forecast for the [***] period beginning on the first day of the calendar month immediately following the date of submission of such Delivery Forecast. Each Delivery Forecast provided during this period shall provide quarterly forecasts for the applicable [***] period and shall be consistent with the Development Plan, including as to quantities of Compound which will be required for each Party to perform its respective responsibilities under the Development Plan. Such Delivery Forecast shall include supplies of Bulk Compound required for formulation development and clinical trials prior to the estimated Commencement Date. In addition, the Delivery Forecast submitted in January of each year during this period shall also include a forecast for the [***] period immediately following the [***] period covered by such Delivery Forecast. Each Delivery Forecast submitted during this period will be a non-binding estimate and shall not obligate Forest to purchase any quantity of Bulk Compound, except that Forest shall submit to Pierre Fabre a binding purchase order no fewer than [***] prior to any delivery date indicated by Forest in a Delivery Forecast during this period.

(b)Beginning on the first day of the fourth calendar quarter immediately preceding the calendar quarter during which the Commencement Date is scheduled to occur, and on the first day of each calendar month thereafter, Forest shall submit to Pierre Fabre a rolling Delivery Forecast for the [***] period beginning on the first day of the calendar month immediately following the date of submission of such Delivery Forecast (e.g., submission on [***] of a Delivery Forecast for the period from [***] through [***]). Each Delivery Forecast provided during this period shall provide [***] In addition, the Delivery Forecast submitted in [***] of each year during this period shall also include a forecast for the [***] period immediately following the [***] period covered by such Delivery Forecast. Each Delivery Forecast submitted during this period will be a non-binding estimate and shall not obligate Forest to purchase any quantity of Bulk Compound, except as expressly provided below with respect to the first [***] of such Delivery Forecast (an illustration of the following rules is provided in Exhibit II):

(i)The first [***] of such Delivery Forecast shall constitute a binding purchase order (“Purchase Order”) for both Parties, meaning that Forest agree to purchase and Pierre Fabre agrees to supply the quantities of Bulk Compound indicated in the Purchase Order;

(ii)The quantities of Bulk Compound indicated in each of the [***] months of such Delivery Forecast may reflect an increase or decrease of up to [***] compared to the quantity specified for the same calendar month in the immediately preceding Delivery Forecast;

(iii)The quantities of Bulk Compound indicated in each of the [***] months of such Delivery Forecast may reflect an increase or decrease of up to [***] compared to the quantity specified for the same calendar month in the immediately preceding Delivery Forecast; and

(iv)The quantities of Bulk Compound indicated in the [***] of such Delivery Forecast shall equal [***] of the aggregate quantities specified for the [***] of the [***] period in the immediately preceding Delivery Forecast, plus or minus [***].

At Forest’s request, the MWG shall in good faith consider, in lieu of the monthly forecast delivery provided above, the development and adoption of a quarterly forecast mechanism.

4.2.Postponement.  Prior to the calendar month during which the Commencement Date is scheduled to occur, Forest may change the Commencement Date, at no cost to Forest, by notifying Pierre Fabre in writing. Thereafter, Forest may postpone the Commencement Date one or more additional times (each, a “Postponement”) upon written notice to Pierre Fabre. In the event of a Postponement, other than due to a delay by Pierre Fabre, Forest shall be responsible for the costs of Bulk Compound ordered under any Purchase Order (whether such orders have been delivered by Pierre Fabre or not) subject to the conditions set forth in Sections 5 and 6.4, and Forest shall have no other responsibility to Pierre Fabre as a result of such Postponement. Pierre Fabre agrees that there shall be no limit on the number of Postponements or the duration of any Postponement that may be made by Forest.

4.3.Quantity of Orders.  The Parties agree that forecasts and orders of Bulk Compound to be provided by Forest will be expressed by multiples of twenty kilograms of Bulk Compound.

5.DELIVERY.  Subject to compliance with the forecast and order procedure set forth in Section 5, Pierre Fabre agrees to deliver Bulk Compound to Forest, in such quantities and on such monthly delivery dates as are specified in Purchase Orders. With respect to orders not submitted in accordance with the forecast and order procedure, Pierre Fabre will use Commercially Reasonable Efforts to supply Forest with the quantities so ordered but shall have no obligation. Deliveries shall be made FCA Paris Airport (ICC Incoterms 2010) and shall be shipped to Forest’s address set forth in this Agreement, or as otherwise directed by Forest in writing. Bulk Compound delivered to Forest shall be appropriately packaged by Pierre Fabre at its expense for export shipment to the Territory. Delivery of Bulk Compound will be made by Pierre Fabre in conformity with a shipment protocol to be mutually agreed within the Manufacturing Working Group.

6.QUALITY ASSURANCE CONTROL – ACCEPTANCE.

6.1.Minimum Time to Retesting Compound.  Bulk Compound supplied hereunder shall have a minimum time to retesting of at least [***], as approved by the FDA, or, with respect to Bulk Compound supplied for use in countries of the Territory other than the United States, such longer period as may be required by Applicable Law and Regulatory Authorities in such countries.  Pierre Fabre agrees to use Commercially Reasonable Efforts, including but not limited to conducting stability studies on Compound, to obtain approval of the FDA and other regulatory authorities in the Territory to increase the minimum time to retesting of Compound to [***].  Pierre Fabre shall provide Forest with a report of all data that Pierre Fabre obtains in such stability studies conducted by or on behalf of Pierre Fabre.  At the time of delivery of Bulk Compound pursuant to Section 5, no more than [***] shall have expired of the minimum time to retesting period applicable to Compound at such time.

6.2.Quality Agreement.  Within [***] from the Restatement Effective Date, Forest and Pierre Fabre will amend the Quality Agreement as necessary to reflect the addition of Latin America to the Territory.

6.3.Specifications; Testing.

(a)Batch Testing.  Pierre Fabre will perform standard analytical testing of each manufactured batch to be delivered to Forest hereunder to verify that it Conforms according to the procedure described in the corresponding documentation or as required by applicable laws, regulation and authorities prior to shipment of each batch of Bulk Compound.

(b)Quality Control Sample.  Together with each delivery of any batch of Bulk Compound, Pierre Fabre shall provide Forest with written confirmation that the corresponding batch record has been reviewed and approved by Pierre Fabre’s Quality Assurance Department.

(c)Quality Control Problem.  In addition, in the event Forest or Pierre Fabre identifies a quality problem with respect to a quality control sample or any batch sample of Compound, then, if requested by Forest in writing, Pierre Fabre shall authorize Forest to review at Pierre Fabre’s facilities the full batch records corresponding to the applicable quality control sample or applicable batch.

(d)Certificate of Analysis.  Pierre Fabre shall also provide a certificate of analysis (the “Certificate of Analysis”) to Forest with each shipment of Bulk Compound supplied hereunder. Such Certificate of Analysis shall certify with respect to each shipment and batch (identified by batch number) (i) the quantity of the shipment, and (ii) that the Bulk Compound delivered Conforms, as well as any further information required by the relevant Regulatory Authorities that Forest may have previously notified Pierre Fabre is necessary. Forest shall be under no obligation to accept any shipment of Bulk Compound without an accompanying Certificate of Analysis.

6.4.Acceptance and Rejection.

(a)Bulk Compound Testing.  Within [***] of receipt of any batch delivery (or portion thereof) of Bulk Compound at Forest’s facilities or such other destination as may be designated by Forest, Forest or its designee shall perform such samplings and tests that are designed, in accordance with the methods of analysis and Compound Specifications, to determine whether the Bulk Compound Conforms. If Forest rejects any shipment of Bulk Compound, Forest shall within such [***] period inform Pierre Fabre of its refusal to accept such shipment, and the reasons therefor; otherwise, Forest shall be deemed to have accepted said shipment; provided that such acceptance shall not preclude a subsequent rejection of any shipment of Bulk Compound by Forest following discovery of latent defects in such Bulk Compound (including, without limitation, discovery of any substance that would cause Bulk Compound to be adulterated within the meaning of the FD&C Actor other Applicable Law with respect to the Product supplied for use in countries in the Territory other than the United States) that would not reasonably be detectable in accordance with industry standards in the Territory in the stated time period, provided that Forest notifies Pierre Fabre in writing within [***] of discovery of such latent defect.

(b)Replacement of Bulk Compound and Dispute Procedure.  Following any notice of rejection of Bulk Compound by Forest, Pierre Fabre shall send a quality control sample within [***] of notice of rejection and furthermore, shall send a replacement batch of Bulk Compound within [***] of approval by Forest of such quality control sample. Pierre Fabre and Forest shall investigate any failed test result, in accordance with the procedure described in the Quality Agreement and as required by applicable cGMPs. As part of this investigation, Forest and Pierre Fabre may mutually select an independent laboratory to perform tests on representative samples from the rejected portion of the shipment and determine if it Conforms. The entire cost of such audit shall be paid by Pierre Fabre in the event it is determined such Bulk Compound did not Conform, and by Forest in the event it is determined that such Bulk Compound did Conform. The results of such tests shall be binding upon Forest and Pierre Fabre. The entire process described in this Section 6.4(b), including any testing performed by an independent laboratory, shall be conducted diligently and within a maximum period of [***] from the date of notice of rejection by Forest.

(c)Cost of Replacement of Rejected Bulk Compound.  If it is determined with or without reference to an independent laboratory that the rejected Bulk Compound did not Conform, the replacement batch shall be provided by Pierre Fabre at no other cost to Forest other than the original price already paid for such non-Conforming Bulk Compound, with the same quantity of Bulk Compound which Conforms. Rejected Bulk Compound shall be returned to Pierre Fabre or disposed of at Pierre Fabre’s expense in accordance with Pierre Fabre’s instructions, in which case Forest shall deliver to Pierre Fabre an appropriate certificate of destruction.

7.MANUFACTURE OF BULK COMPOUND.

7.1.Manufacture of Bulk Compound.  Bulk Compound supplied pursuant to this Agreement shall be manufactured in accordance with the Compound Specifications, cGMPs and other applicable rules and regulations of the FDA and other governmental or regulatory agencies with jurisdiction over the manufacture, use or sale of the Compound, as then in effect. The Parties shall promptly notify each other of any new instructions or specifications required by the FDA or such governmental or regulatory authority, and of other Applicable Laws. The Parties shall confer with each other with respect to the best means to comply with such requirements and Pierre Fabre will bear the costs for implementing such changes.

7.2.Multiple Suppliers.  Pierre Fabre agrees that, beginning on the date of the first Purchase Order and thereafter during the Term, it shall use Commercially Reasonable Efforts to have qualified more than one supplier for each Starting Material. Furthermore, Pierre Fabre agrees that it shall update Forest through the Manufacturing Working Group of the number of Pierre Fabre Suppliers for each Raw Material, including Starting Materials.

7.3.Changes to the Compound Specifications or to the Manufacturing Process.The Compound Specifications for Compound to be supplied hereunder for a country in the Territory shall be revised to comply with the relevant Regulatory Approval for such country and the Parties shall discuss each such revision through the Manufacturing Working Group and, if there are multiple ways to implement a revision to comply with such Regulatory Approval, agree on how such revision will be implemented through the Parties’ respective Alliance Managers prior to implementation.  Notwithstanding the foregoing, (a) Pierre Fabre shall obtain the prior written consent of Forest (such consent not to be unreasonably withheld) with respect to any revisions to the Compound Specifications, and any change in the Raw Materials, equipment, process or procedures used to manufacture the Bulk Compound (the “Manufacturing Process”) that would require pre-approval of the FDA or other applicable Regulatory Authority of any country of the Territory (the “Pre-Approved Changes”) and (b)Pierre Fabre shall not require the consent of Forest for any revisions to the Compound Specifications, or the Manufacturing Process that would not require pre-approval of the FDA or other applicable Regulatory Authority of any country of the Territory (“Other Changes”). Any changes to the Compound Specifications or to the Manufacturing Process for Product supplied for use in any country in the Territory shall be in compliance with the Regulatory Approval in such country for the Product and shall be implemented in accordance with a standard operating procedure to be later defined by the Manufacturing Working Group. The costs for implementing any changes to the Compound Specifications or to the Manufacturing Process at the manufacturing facility of Pierre Fabre and/or the manufacturing facility maintained by a Third Party contractor retained by Pierre Fabre will be borne by Pierre Fabre. Pierre Fabre will inform the Manufacturing Working Group upon implementation of any Pre-Approved Changes and shall discuss any proposed Pre-Approved Changes with the Manufacturing Working Group. Once the changes are effective, all references to the Compound Specifications shall thereafter be deemed to refer to the Compound Specifications, as so modified, and all references to the Manufacturing Process, shall thereafter be deemed to refer to the Manufacturing Process, as so modified.  Exhibit I shall be updated to reflect any changes to the Compound Specifications implemented in accordance with this Section7.3.

7.4.Forest’s Right to Audit Facilities.  Forest and its sublicensee shall have the right, at their own expense, to conduct at mutually agreed times, but not more than [***] a year (unless a major modification to the Manufacturing Process occurs or unless a quality problem has arisen), quality control and quality assurance audits and/or inspection of manufacturing documentation and the facilities where Bulk Compound is manufactured (including, without limitation, any Second Source Facility or any facility maintained by a Third Party contractor retained by Pierre Fabre). Pierre Fabre will provide (or cause its Third Party contractor to provide) Forest with reasonable access, during business hours upon reasonable prior notice, to the facilities where Bulk Compound is manufactured, to review the manufacturing operations and assess its compliance with cGMPs and quality assurance standards and the opportunity to discuss any manufacturing issues with manufacturing and management personnel. Upon Forest’s written request, Pierre Fabre shall authorize (or cause its Third Party contractor to authorize) Forest to review on site manufacturing records, including its master and production batch records, for the purposes of assuring product quality and compliance with the Quality Agreement and cGMPs. Forest acknowledges that all documentation relating to manufacturing records shall be considered Confidential Information of Pierre Fabre and shall ensure that its sublicensees who have access to such records are bound by at least the same level of confidentiality obligations as contemplated by Section 8 of the License Agreement.

7.5.Compliance with Laws.  Pierre Fabre shall comply (or cause its Third Party contractor to comply) with all applicable present and future orders, regulations, requirements and laws of the Territory, and of local authorities and agencies of the Territory, as well as with all laws and regulations of other territories applicable to the actions that it undertakes pursuant to this Agreement. Pierre Fabre represents and warrants to Forest that it has and will maintain (or cause its Third Party contractor to have and maintain) during the Term all government permits, including without limitation health, safety and environmental permits, necessary for the conduct of the actions and procedures that it undertakes pursuant to this Agreement. Forest shall provide Pierre Fabre with written notice of any additional regulatory requirements of countries of the Territory other than the United States of which Forest is aware that relate to the manufacture of the Bulk Compound for such other territories.

7.6.FDA and Regulatory Support.  Pierre Fabre agrees (i) to establish and maintain a Type II FDA Drug Master File (“DMF”) in accordance with the requirements of the FDA, as well as any comparable files required by regulatory authorities in other countries within the Territory, (ii) to provide Forest and its sublicensees with letters of authorization to the DMF and any other comparable files, (iii) to further provide Forest and its sublicensees with all necessary Information and data regarding the manufacture of Bulk Compound to the extent necessary for Forest and its sublicensees to prepare and defend any inquiries from the FDA and any other regulatory agencies in the Territory or to the extent necessary to Forest to exercise the Manufacturing Right set forth in Section 7.11, and to satisfy regulatory requirements in the Territory, and (iv) at Forest’s request, to provide Forest and its sublicensees with all Information and data regarding the manufacture and testing of Compound to the extent necessary for Forest and its sublicensees to prepare and submit the chemistry, manufacturing and controls section of the NDA for the Product and any corresponding sections of Regulatory Approvals submitted in other jurisdictions.  Pierre Fabre further agrees to use Commercially Reasonable Efforts to assist Forest and its sublicensees in obtaining FDA approval for its NDA with respect to the Product, as well as approvals from any other government or agency which may be required for the marketing of the Product in any other country within the Territory.  In addition, Pierre Fabre specifically agrees to cooperate with any inspection by the FDA or other regulatory agency, including but not limited to any inspection prior to approval of Forest’s NDA for the Product. Pierre Fabre shall notify Forest and its sublicensees of which Pierre Fabre is aware within two business days of any Regulatory Authority inspection relating to Compound or any Compound related facility and, at the conclusion of such inspection, shall be promptly furnished with a copy of all documentation, including any Form 483 or comparable form and Pierre Fabre response thereto, relating to such inspection. In addition, Pierre Fabre shall promptly notify Forest and its sublicensees of any other regulatory actions or communications (other than ministerial, non-substantive communications) relating to Compound or any Compound related facility.

7.7.Documentation.  Pierre Fabre shall keep complete, accurate and authentic accounts, notes, data and records of the work performed under this Agreement. Each Party shall maintain complete and adequate records pertaining to the methods and facilities used for the manufacture, processing, testing, packing, labeling, holding and distribution of the Bulk Compound in accordance with the applicable regulations in the Territory so that the Bulk Compound may be used in the production of the Product for human use.

7.8.Reprocessing and Reworking of Bulk Compound.  Pierre Fabre agrees that any reprocessing or reworking of any batch or lot of Bulk Compound for use in any country in the Territory shall be made in full compliance with the procedures described in the DMF or the corresponding regulatory filing in such country, or, if not made in compliance with the procedures described in the DMF or such other filings, as applicable, Pierre Fabre shall obtain the prior written consent of Forest, which consent shall not be unreasonably withheld or delayed.

7.9.Buffer Stock.    

(a)Requirement of Pierre Fabre Buffer Stock.  Beginning on the date that is [***] and thereafter during the Term, Pierre Fabre shall have available (including as a result of Compound manufactured by any Second Source Facility) a buffer stock of Compound (the “Buffer Stock”), as determined by the Manufacturing Working Group on at least an annual basis subject to Section 7.9(b).  In establishing the level of the Buffer Stock, the Manufacturing Working Group may consider the Compound and Product inventory levels that will be maintained by Forest and its sublicensees. The level of Buffer Stock will be expressed as a number of months of supply of Compound and will be determined based upon the quantities specified in the most recent applicable months of the Delivery Forecast (including Purchase Orders).  For example, if the level of Buffer Stock is a six month supply, then the Buffer Stock will be an amount of Compound equal to the quantities of Compound specified in the first six months of the most recent Delivery Forecast, including the four months that constitute Purchase Orders and the two months immediately following such four months.

(b)Maximum and Minimum Buffer Stock.  The Buffer Stock determined by the Manufacturing Working Group (i) shall not exceed (A) [***] of Compound, if there is only one manufacturing facility available for the manufacture of Compound by or for Pierre Fabre or (B) [***] of Compound if there is more than one manufacturing facility available for the manufacture of Compound by or for Pierre Fabre, unless agreed in writing by Pierre Fabre; and (ii) shall not be less than (x) [***] of Compound at any time there is only one manufacturing facility available for the manufacture of Compound by or for Pierre Fabre, or (y) [***] of Compound at any time there is more than one manufacturing facility available for the manufacture of Compound by or for Pierre Fabre (the “Minimum Buffer Stock”).

(c)Information on Buffer Stock; Depletion.  Each month, within [***] after receipt of the applicable Delivery Forecast, Pierre Fabre will calculate the amount of Buffer Stock based on the latest Delivery Forecast and will compare it to the actual current amount of Buffer Stock (the “Current Buffer Stock”). Pierre Fabre will provide Forest with information regarding the Current Buffer Stock from time to time. In the event that, at any time, the Current Buffer Stock is less than the Minimum Buffer Stock (a “Shortfall”), including (without limitation) as a result of a force majeure described in Section 10.11, then Pierre Fabre shall, within [***] of the discovery of the Shortfall, provide written notice to Forest of such Shortfall and a written, commercially reasonable plan detailing its plans to address any problems or issues contributing to such Shortfall (a “Correction Plan”). If Pierre Fabre provides Forest a Correction Plan within such [***], Pierre Fabre shall increase the amount of Buffer Stock to at least the Minimum Buffer Stock within the following periods (as applicable) following the date on which such Shortfall occurred: (i) a [***] period if there is then only one manufacturing facility available for the manufacture of Compound, or (ii) a [***] period if there is then more than one manufacturing facility available for the manufacture of Compound. If Pierre Fabre does not increase the level of the Current Buffer Stock to at least the Minimum Buffer Stock within the [***] or [***] period, as applicable, or notifies Forest that it reasonably believes in good faith that it will be unable to cure the Shortfall within such applicable period, or Pierre Fabre does not provide a Correction Plan within the [***] period described above, Forest shall have the right, immediately upon notice to Pierre Fabre, to exercise the Manufacturing Right under 7.11.

(d)Cost of Carrying Buffer Stock; Audit.  The cost of carrying the Buffer Stock and insuring the same shall be borne by Pierre Fabre. The cost of carrying an inventory of Compound and Product maintained by Forest or its sublicensees and insuring the same shall be borne by Forest or its sublicensees. Beginning three months after Commencement Date, Forest shall have the right to audit the Compound inventory levels of Pierre Fabre and the Second Source Facility, if applicable, to verify Pierre Fabre’s compliance with this Section 7.9, and Pierre Fabre shall have the right to audit the Compound inventory levels of Forest and its sublicensees, which audits shall be conducted at the auditing Party’s expense, at reasonable times and upon reasonable advance written notice.

7.10.Primary Facility; Second Source Facility.

(a)Pierre Fabre will manufacture the Compound to be supplied to Forest under this Agreement solely at Pierre Fabre’s manufacturing facility in Gaillac, France or through a Third Party at a facility to which Forest has no reasonable objection (the “Primary Facility”).  No later than [***] and thereafter during the Term, Pierre Fabre shall have qualified and keep qualified an additional manufacturing facility (a “Second Source Facility”), in addition to the Primary Facility, for the production of Compound to ensure a second source of supply of Compound to Forest. The Second Source Facility must be a second facility operated by Pierre Fabre or any licensee or subcontractor of Pierre Fabre with quality and reliability in manufacturing, and capacity available for manufacturing of Compound, comparable to the Primary Facility.  Such Second Source Facility must be approved by the FDA or other relevant regulatory authorities for the countries of the Territory such that the Products containing Compound manufactured by the Second Source Facility may be lawfully sold by Forest.

(b)Promptly following the Restatement Effective Date, Pierre Fabre and Forest agree to work within the Manufacturing Working Group to evaluate in good faith alternative solutions to the qualification of a Second Source Facility, including among other things increasing the level of buffer stock required to be maintained by Pierre Fabre hereunder.  If any proposed alternative solutions are acceptable to the Parties in their sole discretion, such changes will be reflected in amendments to the relevant provisions of this Agreement,it being understood that if no such agreement is reached by [***], this Section 7.10(b) shall have no further import and provisions of this Section 7.10(a) shall continue in full force an effect.

7.11.Manufacturing Rights.    

(a)Qualification.  At any time during the Term, Forest shall have the right, but not the obligation, to qualify itself or a Third Party as an additional manufacturing facility that may undertake the manufacture of Bulk Compound, but may not exercise the right to manufacture except as expressly provided in Section 7.11(b).

(b)Manufacturing Right.  Without limiting any other right of Forest under this Agreement, Forest shall have the right, but not the obligation, to make itself, or have made by a Third Party, Compound in order to satisfy Forest’s and its sublicensees’ requirements of Bulk Compound (the “Manufacturing Right”), all pursuant to the license granted under Section 7.11(d), if one of the following events occurs:

(i)If it appears substantially likely that Forest will exercise its rights in respect of a Shortfall pursuant to Section 7.9(c) or Forest in fact exercises such rights;

(ii)If Forest terminates the License Agreement pursuant to Section 10.3 (Breach of Pierre Fabre) or 10.4 (Bankruptcy of Pierre Fabre) thereof (and in accordance with Section 10.5(c) thereof) or this Agreement pursuant to Section 9.2(a) hereof; or

(iii)If this Agreement expires and the provisions of Section 9.3(c) hereof are applicable in connection with such expiration.

In the event Forest to exercise the Manufacturing Right, Forest shall provide Pierre Fabre with written notice thereof no fewer than [***] in advance of the effective date of such exercise (the “Exercise Date”).

(c)Duration of Manufacturing Right.  It is agreed by the Parties that:

(i)If Forest has exercised the Manufacturing Right under Section 7.11(b)(i), the Manufacturing Right shall continue until Pierre Fabre has resumed and restored its capability to manufacture and supply Forest’s and its sublicensees’ requirements of Bulk Compound and recommences its manufacture and supply of Bulk Compound, or if longer, for the duration of any commercially reasonable obligation to a Third Party supplier entered into in connection with the exercise of the Manufacturing Right. If Forest continues to have obligations to a Third Party supplier entered into in connection with the exercise of the Manufacturing Right after Pierre Fabre has resumed its capability to manufacture and supply under this Agreement, Forest will purchase such portion, if any, of its requirements of Bulk Compound from Pierre Fabre pursuant to this Agreement as can be purchased given the obligations to such Third Party supplier. When assessing Third Party suppliers in connection with the exercise of the Manufacturing Right, Forest will consider any Third Party suppliers suggested by Pierre Fabre and will in good faith attempt to select a Third Party supplier that will permit Pierre Fabre to resume manufacture and supply under this Agreement as promptly as possible after it is able to do so, subject to commercially reasonable considerations of material differences in qualification, reliability, pricing, quality and other similar factors, considered as a whole, with respect to such potential Third Party suppliers. Pierre Fabre shall provide Forest with written notice of its ability to recommence manufacturing and supplying Forest with its requirements and its sublicensees’ requirements of Bulk Compound no less than [***] months in advance.

(ii)If Forest has exercised the Manufacturing Right under Section 7.11(b)(ii) or (iii), then the Manufacturing Right shall be perpetual.

(d)License.  Effective upon the Exercise Date, Forest will be entitled to use the license granted in Section 2.1 (Grant of License) of the License Agreement under the Pierre Fabre Patents, Pierre Fabre Know-How and the Manufacturing Know-How to make and have made Compound to the extent provided under this Agreement so long as the Manufacturing Right continues to be in effect under Section 7.11(c). In the event Forest exercises the Manufacturing Right, Pierre Fabre shall promptly transfer to Forest such Pierre Fabre Patents, Pierre Fabre Know-How and Manufacturing Know-How and any other information and data concerning and related to the manufacture and supply of Bulk Compound and shall assist Forest in the implementation thereof.

(e)Provision of Information.  In furtherance of the foregoing, if Forest exercises the Manufacturing Right, Pierre Fabre shall provide Forest (without cost to Forest, except as provided in Section 9.3(c), if applicable) with copies of all reasonable relevant data and Manufacturing Know-How necessary or useful for Forest to qualify an alternative facility or to manufacture Bulk Compound, as applicable.  In such event, Pierre Fabre also agrees to send to the location designated by Forest such specialized technical and scientific personnel as Pierre Fabre deems necessary [***].

(f)Reimbursement of Costs.  Without limiting any other right of Forest under this Agreement, upon the Exercise Date if the Manufacturing Right is exercised pursuant to Section 7.11(b)(i) or (ii), Pierre Fabre agrees to reimburse Forest for all reasonable and documented out-of-pocket costs incurred by Forest in exercising the Manufacturing Right, including, without limitation, documented costs incurred for transferring the Manufacturing Know-How, laboratory trials, and writing and filing of a DMF and any corresponding filings in the Territory outside of the United States. The amounts owed by Pierre Fabre for reimbursement of such costs will be fully credited against earned royalties due by Forest to Pierre Fabre under Section 5.3 of the License Agreement.

7.12.Third Party Outsourcing.  On a country by country basis, Pierre Fabre shall remain the exclusive supplier of Compound to Forest and its sublicensees until commercial launch of a Generic Equivalent in such country, subject to the terms of this Agreement. In the event of commercial launch of a Generic Equivalent, including, without limitation, any planned launch of a Generic Equivalent by Forest or its sublicensee(s), in a country of the Territory, then Pierre Fabre will remain exclusive supplier of the Compound to Forest and its sublicensees for such country, as long as Pierre Fabre can supply Compound to Forest and its sublicensee(s), including, without limitation, any quantities of Compound for Generic Equivalent for commercial launch in the event Forest or its sublicensee(s) launch the first Generic Equivalent, at a price no greater than [***] above the price quoted by a Third Party generic supplier (a “Generic Supplier”) for Compound that Conforms. Forest may, from time to time, provide notice to Pierre Fabre of its or its sublicensee’s intent to purchase Compound from a Generic Supplier (the “Outsourcing Notice”), together with documentation evidencing the lower price for the Compound that Conforms to be supplied by such Generic Supplier for such country; provided, that:

(a)if, within [***] following Pierre Fabre’s receipt of the Outsourcing Notice, Pierre Fabre has not provided written notice to Forest indicating its agreement to lower the price of the Compound for the applicable country to a level not exceeding [***] above the price quoted by the Generic Supplier, then, Forest may notify Pierre Fabre its decision to terminate the obligation to purchase all Compound requirements for such country from Pierre Fabre under this Agreement, as provided in Section 9.2(b). Upon receipt of said notice by Pierre Fabre, Forest may terminate this Agreement with respect to such country under Section 9.2(b); and

(b)if, within [***] following Pierre Fabre’s receipt of the Outsourcing Notice, Pierre Fabre has provided written notice to Forest lowering the price of the Compound for the quantity in the applicable country so that the price of Compound for such quantity and such country is no greater than [***] above the price quoted by the Generic Supplier, then Forest will remain obligated to purchase Compound from Pierre Fabre in accordance with the provisions of this Agreement.

7.13.Recall of Product.  For any Product, in the event that (i) any governmental agency or authority issues a request or directive or order that Product be recalled or retrieved; (ii) a court of competent jurisdiction orders that Product be recalled or retrieved; or (iii) Forest or any of its sublicensees reasonably determines, after reasonable, good faith discussion with Pierre Fabre, that Product should be recalled or retrieved, Forest shall promptly notify Pierre Fabre of such event and shall conduct such activity and take appropriate corrective actions, and Pierre Fabre shall provide such assistance to Forest and its sublicensees as is reasonably necessary to carry out such activities. All reasonable costs and expenses of such recall and corrective actions shall be the responsibility of Forest or its sublicensees, provided that Pierre Fabre shall indemnify Forest and its sublicensees for such cost and expense in accordance with Section 8.2 of this Agreement.

8.WARRANTIES, INDEMNIFICATION, INSURANCE AND ADDITIONAL COVENANTS.

8.1.Product Warranty.  Pierre Fabre warrants that Compound delivered hereunder will: (a) Conform at the time of delivery; (b) be manufactured by Pierre Fabre in accordance with cGMP and other Applicable Laws; (c) have the Minimum Time to Retesting; and (d) not be adulterated or misbranded within the meaning of the FD&C Actor any corresponding law in the Territory outside of the United States. The Parties acknowledge that Pierre Fabre will be responsible for the stability of the Bulk Compound for the shelf life indicated in the Compound Specifications, subject to Forest evidencing that, during its total shelf life, transportation, storage and use of the Bulk Compound have been made in accordance with Pierre Fabre’s instructions.

8.2.Indemnification.

(a)Pierre Fabre shall indemnify, defend (subject to Section 8.2.b)) and hold Forest (including for this purpose its Affiliates, employees, officers, directors and agents) harmless from and against any direct costs, expenses (including, without limitation, reasonable attorneys’ fees), or damages which arise (i) from a Third Party action or claim to the extent caused by a material breach by Pierre Fabre or its Affiliates of any of its representations, covenants, warranties or obligations set forth herein, (ii) from the manufacture, use, handling and storage of Compound by Pierre Fabre, its Affiliates, licensees and sub-contractors (other than Forest or its sublicensees), except to the extent such damages are caused by or arise from the negligence or willful misconduct of Forest or its Affiliates or by Forest’s breach of this Agreement, (iii) any recall and corrective actions taken under Section 7.13, to the extent caused by (x) any breach by Pierre Fabre of its obligations or representations under this Agreement, or (y) any intentional or negligent act or omission of Pierre Fabre or its Affiliates or any of their directors, officers, employees or agents in connection with the manufacture and supply of Compound. 

(b)Forest shall indemnify, defend (subject to Section 8.2.(a)) and hold Pierre Fabre (including for this purpose its Affiliates, employees, officers, directors and agents) harmless from and against any direct costs, expenses (including, without limitation, reasonable attorneys’ fees), or damages which arise (i) from a Third Party action or claim to the extent caused by a material breach by Forest or its Affiliates of any of its representations, covenants, warranties or obligations set forth herein or (ii) from the Development, manufacturing, marketing, sale or distribution of the Products by Forest in the Territory, except to the extent that such damages were caused by or arise from the negligence or willful misconduct of Pierre Fabre or its Affiliates or by Pierre Fabre’s breach of this Agreement or the License Agreement. 

(c)The Party obligated to provide indemnity pursuant to this Section (a) is hereinafter referred to as the “Indemnifying Party.”

(d)The obligations of this Section shall survive the termination or expiration of this Agreement until the expiration of all applicable statutes of limitation with respect to Third Party claims covered by this Section.

8.3.Indemnification Procedures.  Promptly after the receipt by any Party hereto of notice of (i) any claim or (ii) the commencement of any action or proceeding, such Party will, if a claim with respect thereto is to be made against any Party obligated to provide indemnification pursuant to Section 8.2 hereof, give such Indemnifying Party written notice of such claim or the commencement of such action or proceeding.  Such Indemnifying Party shall have the right, at its option, to defend, at its own expense and by its counsel, such claim.  Failure to notify the Indemnifying Party shall not relieve the Indemnifying Party of any liability that the Indemnifying Party might have to the other party (the “Indemnified Party”) unless and to the extent such failure can be demonstrated to have materially prejudiced the Indemnifying Party’s position.  In the event that any Indemnifying Party intends to undertake to defend any such claim, it shall promptly notify the Party seeking indemnification of its intention to do so, and the Party seeking indemnification agrees to cooperate fully with the Indemnifying Party and its counsel in the defense against any such claim.  In any event, the Indemnified Party shall have the right, at its own expense, to participate in the defense of such asserted liability, provided that, subject to Section 8.4, the Indemnifying Party shall make all final decisions concerning the defense or compromise or settlement of such litigation.

8.4.Representation; Cooperation.  Each of the Parties hereto shall be entitled to be represented at any proceedings brought by the other Party under this Article 8 by its own counsel, at its own expense, and shall fully cooperate with the other Party in any such proceeding, provided it is adequately reimbursed for its out-of-pocket costs and expenses, including attorneys’ fees, reasonably incurred in providing such requested cooperation.  No Indemnifying Party shall be authorized to settle or compromise any indemnified matter without the consent of the other Party, such consent not to be unreasonably withheld or delayed.

8.5.Insurance.  Each Party shall maintain at its sole cost and expense, an adequate liability insurance or self-insurance program (including product liability insurance) to protect against potential liabilities and risk arising out of activities to be performed under this Agreement and any Related Agreement and upon such terms (including coverages, deductible limits and self-insured retentions) as are customary in the pharmaceutical industry for the activities to be conducted by such Parties under this Agreement and are appropriate to cover the Parties’ respective indemnification obligations hereunder. Such product liability insurance or self-insurance program shall insure against all liability, including without limitation personal injury, physical injury or property damage arising out of the manufacture, sale, distribution or marketing of the Product by such Party.  Each Party shall furnish to the other evidence of such insurance and/or self insurance upon request.  Such insurance information shall be kept in confidence in the same manner as any other Confidential Information disclosed by one Party to the other hereunder.

8.6.Limitation on Liability.  NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY PUNITIVE, SPECIAL, INDIRECT, CONSEQUENTIAL, INCIDENTAL OR EXEMPLARY DAMAGES IN CONNECTION WITH THIS AGREEMENT OR THE RELATED AGREEMENTS OR ANY LICENSES GRANTED HEREIN, PROVIDED HOWEVER THAT THE FOREGOING LIMITATION OF LIABILITY SHALL NOT APPLY TO THE LIABILITIES ARISING FROM EITHER PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OR ARISING FROM A PARTY’S INDEMNIFICATION OBLIGATIONS FOR THIRD PARTY CLAIMS UNDER THIS SECTION 8.6OR UNDER THE LICENSE AGREEMENT OR THE RELATED AGREEMENTS.

8.7.Mutual Representations and Warranties.  Each Party represents and warrants to the other that, as of the Effective Date:

(a)Power.  It is duly organized and validly existing under the laws of its jurisdiction of incorporation or formation, and has full power and authority to enter into this Agreement and to carry out the provisions hereof.

(b)Due Authorization.  It is duly authorized to execute and deliver this Agreement and to perform its obligations hereunder, and the person or persons executing this Agreement on its behalf has or have been duly authorized to do so by all requisite action.

(c)Binding Agreement.  This Agreement is legally binding upon it, enforceable in accordance with its terms.  The execution, delivery and performance of this Agreement by it does not conflict with any agreement, instrument or understanding, oral or written, to which it is a Party or by which it may be bound, nor violate any material law or regulation of any court, governmental body or administrative or other agency having jurisdiction over it.

(d)Grant of Rights; Maintenance of Agreements.  It has not, and will not during the Term, grant any right to any Third Party that would conflict with the rights granted to the other Party hereunder. It has (or will have at the time performance is due) maintained and will maintain and keep in full force and effect all agreements (including license agreements) and filings (including patent filings) necessary to perform its obligations hereunder.

8.8.Pierre Fabre Representations. Pierre Fabre hereby represents and warrants to Forest as of the Effective Date(or as of the Restatement Effective Date with respect to the amendment and restatement of this Agreement to incorporate Latin America) as follows:

(a)Pierre Fabre is a corporation or entity duly organized and validly existing under the laws of the state or other jurisdiction of its incorporation or formation.  The execution and delivery by Pierre Fabre of this Agreement and the performance by Pierre Fabre of its obligations hereunder have been duly authorized by all necessary corporate action on the part of Pierre Fabre, and do not conflict with the terms of any other contract, agreement, arrangement or understanding to which Pierre Fabre is a party or by which it is bound.

(b)Pierre Fabre is the sole owner of the Manufacturing Know-How, the Pierre Fabre Patents and the Pierre Fabre Know-How and has the right to perform its obligations hereunder and to grant the licenses to the Manufacturing Know-How, the Pierre Fabre Patents and Pierre Fabre Know-How in accordance with the terms and conditions hereof.  Pierre Fabre has received no notice, whether in writing or otherwise, of any pending actions, suits, judgments, settlements or claims, and is not aware of any reasonable basis for any claims, actions, suits or judgments, against Pierre Fabre with respect to (i) Pierre Fabre Patents, Pierre Fabre Know-How or Manufacturing Know-How (collectively, the “Pierre Fabre Technology”) that, if determined adversely to Pierre Fabre, would have a material adverse effect upon its ability perform its obligations hereunder or to grant to Forest the rights under, or upon the ability of Forest to fully utilize, the Pierre Fabre Technology or (ii) Pierre Fabre’s right to enter into and perform its obligations hereunder. To the best of Pierre Fabre’s knowledge, neither Pierre Fabre, nor any of its Affiliates has received notice, whether in writing or otherwise, of any threatened claims or litigation, and is not aware of any reasonable basis for any claims or litigation, from any Third Party (including, without limitation, by officers, directors, employees, consultants or other personnel of Pierre Fabre or any predecessor) seeking to invalidate, or alleging the invalidity of, any of the Pierre Fabre Patents.  Pierre Fabre’s right to the Pierre Fabre Technology is not subject to any encumbrance, including any license obligation, royalty obligation, lien, claim or restriction, in favor of any Third Party (including, without limitation, in favor of any current or former officers, directors, employees, consultants or personnel of Pierre Fabre or any predecessor), and Pierre Fabre covenants to maintain throughout the Term the Pierre Fabre Technology free and clear of any such encumbrances.  No Pierre Fabre Technology is subject to, or was developed pursuant to any funding agreement with, any government or government agency pursuant to which such government or agency retains any rights to practice any of such technology.  Pierre Fabre is not in breach of any material provisions of any agreements with Third Parties relating to the Pierre Fabre Technology nor is Pierre Fabre aware of any breach by any Third Party of any such agreements.

8.9.All of Pierre Fabre’s employees, officers, and consultants involved in the performance of this Agreement or having access to Confidential Information provided hereunder (other than employees who perform primarily ministerial functions) have executed agreements or have existing obligations under law, or will execute such agreements or have such obligations under law requiring assignment to Pierre Fabre of all Improvements made by such individuals during the course of and as the result of their association with Pierre Fabre, and obligating such individuals to maintain as confidential Pierre Fabre’s Confidential Information, as well as the Confidential Information of persons doing business with Pierre Fabre that such individuals may receive during the course of and as the result of their association with Pierre Fabre, to the extent required to support Pierre Fabre’s obligations under this Agreement.  Pierre Fabre shall remain responsible for ensuring that all employees take such actions as required to enable Pierre Fabre to comply with its obligations hereunder.

9.TERM; TERMINATION.

9.1.Term.  The term of Pierre Fabre Supply Obligation commenced on the Effective Date and shall continue for a period of [***] from the date upon which Forest, its Affiliate and/or its sublicensee commercially launches the Product in the United States, Mexico or Brazil, whichever is later, unless sooner terminated in accordance with Section 9.2 (the “Term”). [***] prior to the expiration of the Term, Forest and Pierre Fabre will mutually decide whether or not the supply relationship should be extended and if the Parties mutually agree to extend such supply relationship, the Parties shall attempt to agree on the terms of such supply relationship.

9.2.Early Termination.  

(a)Termination for Cause by Either Party.

(i)Termination for Bankruptcy.  This Agreement may be terminated by either Party upon at least [***]’ written notice if the other Party makes an assignment for the benefit of creditors, is the subject of proceedings in voluntary or involuntary bankruptcy instituted on behalf of or against such party, or has a receiver or trustee appointed for all or substantially all of its property, provided that in the case of an involuntary bankruptcy proceeding such right to terminate shall only become effective if the Party consents to the involuntary bankruptcy or such proceeding is not dismissed within [***] after the filing thereof; or

(ii)Termination for Breach.  Each Party shall have the right to terminate this Agreement and its obligations hereunder for material breach by the other Party, (provided that the existence of a Shortfall and the exercise of the Manufacturing Right in connection therewith shall not constitute a breach of a material provision of this Agreement by Pierre Fabre so long as Pierre Fabre complies with its obligations under Section 7.11) which breach remains uncured for [***], in the case of a payment breach, or [***], in the case of any other breach, after written notice is provided to the breaching Party specifying the nature of the breach in reasonable detail and demanding its cure; provided that in the case of a non-payment related material breach, if such breach cannot be cured within the [***] cure period, this Agreement shall not terminate if the breaching Party has made diligent efforts to cure such breach within the [***] period and this Agreement shall remain in effect for such period after notice of breach as may be reasonable in the circumstances as long as the breaching Party continues to use diligent efforts to pursue the cure.  In the event the Parties dispute the existence of a material breach or a Party’s diligence in attempting to cure a material breach, termination of this Agreement shall not be deemed to occur unless and until such dispute has been referred for resolution by an expedited arbitration in accordance with Section 16.2 of the License Agreement, material breach of the Agreement or failure to make diligent efforts to cure such breach has been established by such arbitration, and if such breach can be cured by the payment of money or the taking of specific actions, the breaching party does not pay the amount so determined to be due or take or commit to take the required actions within [***] of receipt of an agreement of the Parties or arbitration decision.  Recognizing the importance of expediting the resolution of any such dispute, the Parties agree to appoint arbitrators as promptly as practicable following receipt of notice of the institution of the arbitration, and to instruct and cooperate with such arbitrators to act to achieve resolution of the issue on an expedited basis.

(b)Termination by Forest.  Forest may terminate its rights and obligations under this Agreement with respect to the applicable country, if within [***] following receipt of an Outsourcing Notice sent by Forest pursuant to Section 7.12, Pierre Fabre has not provided written notice to Forest agreeing to lower the price of the Compound to a level not exceeding [***] above the price quoted by a Generic Supplier.

(c)Termination of the License Agreement.  This Agreement shall automatically terminate upon early termination of the License Agreement by Pierre Fabre pursuant to Sections 10.3 (Pierre Fabre right of termination), 10.4 (Termination for breach of Forest), 10.5 (Termination for Bankruptcy of Forest), 11 (Force majeure), 16.3 (Change of control) of the License Agreement.

9.3.Effect of Expiration; Termination; Surviving Obligations.

(a)Upon early termination of this Agreement by Forest pursuant to Section 9.2(a), Sections 7.11(b), 7.11(c), 7.11(d), 7.11(e) and 9.3(c) shall survive such termination.

(b)Upon early termination of this Agreement by Pierre Fabre pursuant to Section 9.2(a), then:

(i)all rights granted to Forest hereunder shall terminate and Forest and its Affiliates and sublicensees shall cease all use of such Manufacturing Know-How and shall comply with its obligations under the Agreement with respect to Pierre Fabre’s Confidential Information; and

(ii)the License Agreement shall automatically terminate with the consequences described in Section 10.5(d) of the License Agreement.

(c)Expiration or early termination of this Agreement shall not relieve the Parties of any obligation accruing hereunder prior to such expiration or termination.  Except as set forth below or elsewhere in this Agreement, the obligations and rights of the Parties under Sections 8.2 (Indemnification), 8.3 (Indemnification Procedures), 9.3 (Effect of Expiration; Termination; Surviving Obligations), 9.4 (Exercise of Right to Terminate), 9.5 (Damages; Relief), 10.1 (Dispute Resolution and Arbitration), 10.2 (Confidentiality) and 10.3 (Governing Law and Venue) shall survive expiration or termination of this Agreement.  However, in the event that this Agreement is not extended because Pierre Fabre is unable or unwilling to agree to the same financial terms as set forth herein at the time such negotiation occurs and there is no qualified supplier of Compound then able to supply Compound on commercially reasonable terms without such entity’s requiring a manufacturing license from Pierre Fabre, then the provisions of Section 7.11(b), 7.11(c), 7.11(d) and 7.11(e) shall apply, as if the Manufacturing Right had been duly exercised under those sections, and shall survive the expiration of this Agreement, except that, in such a case, Forest shall reimburse Pierre Fabre for its reasonable and documented costs associated with the transfer of the Manufacturing Know-How, including the assistance provided by Pierre Fabre if requested by Forest.

(d)In the event that, upon expiration of the Term, this Agreement is not extended pursuant to Section 9.1, then subject to Section 9.3(c) all rights granted to Forest hereunder shall terminate as of the last day of the Term, and Forest, its Affiliates and sublicensees shall cease all use of the Manufacturing Know-How and shall comply with the provisions of Section 8 of the License Agreement with respect to Pierre Fabre’s Confidential Information.

(e)All licenses granted under this Agreement will be deemed licenses of rights to intellectual property for purposes of Section 365(n) of the U.S. Bankruptcy Code and a licensee under this Agreement will retain and may fully exercise all of its rights and elections under the US Bankruptcy Code.

9.4.Exercise of Right to Terminate.  The use by either Party hereto of a termination right provided for under this Agreement shall not give rise to the payment of damages or any other form of compensation or relief to the other Party with respect thereto.

9.5.Damages; Relief.  Unless otherwise provided in this Agreement, termination of this Agreement shall not preclude either Party from claiming any other damages, compensation or relief that it may be entitled to upon such termination.

10.GENERAL PROVISIONS.

10.1.Dispute Resolution and Arbitration.  In the event of a dispute arising in connection with this Agreement, the provisions of Section 16.2 of the License Agreement shall apply.

10.2.Confidentiality.  Pierre Fabre and Forest agree that the provisions of Section 8 of the License Agreement regarding the obligations of both Pierre Fabre and Forest with respect to Confidential Information shall also govern the Parties’ obligations under this Agreement. Further, the Parties agree that the term “Confidential Information” as defined in the License Agreement shall also include all information furnished to it by the other Party pursuant to this Agreement, including Manufacturing Know-How which may be disclosed by Pierre Fabre to Forest.

10.3.Governing Law.  This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York excluding its conflicts of laws principles.

10.4.Entire Agreement; Modification.  This Agreement is both a final expression of the Parties’ agreement and a complete and exclusive statement with respect to all of its terms. The Exhibits referred to in this Agreement are incorporated herein and made a part of this Agreement by this reference. No rights or licenses with respect to any intellectual property of either Party are granted or deemed granted hereunder or in connection herewith, other than those rights expressly granted in this Agreement. No trade customs, courses of dealing or courses of performance by the Parties shall be relevant to modify, supplement or explain any term(s) used in this Agreement. This Agreement may not be modified or supplemented by any purchase order, change order, acknowledgment, order acceptance, standard terms of sale, invoice or the like. This Agreement may only be modified or supplemented in a writing expressly stated for such purpose and signed by the Parties to this Agreement.

10.5.Relationship Between the Parties.  The Parties’ relationship, as established by this Agreement, is solely that of independent contractors. This Agreement does not create any partnership, joint venture or similar business relationship between the Parties. Neither Party is a legal representative of the other Party, and neither Party can assume or create any obligation, representation, warranty or guarantee, express or implied, on behalf of the other Party for any purpose whatsoever.

10.6.Non-Waiver.  The failure of a Party to insist upon strict performance of any provision of this Agreement or to exercise any right arising out of this Agreement shall neither impair that provision or right nor constitute a waiver of that provision or right, in whole or in part, in that instance or in any other instance. Any waiver by a Party of a particular provision or right shall be in writing, shall be as to a particular matter and, if applicable, for a particular period of time and shall be signed by such Party.

10.7.Assignment.  This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective assigns and successors in interest.  Neither Party shall have the right to assign its obligations or rights hereunder, except to an Affiliate, without the prior written consent of the other Party, which shall not be unreasonably withheld with due regard to the objectives of, and respective responsibilities of the Parties under, this Agreement, subject to rights of sublicense specifically provided herein. Any assignment not in accordance with the terms hereof shall be null and void.

10.8.No Third Party Beneficiaries.  This Agreement is neither expressly nor impliedly made for the benefit of any Party other than those executing it.

10.9.Severability.  If, for any reason, any part of this Agreement is adjudicated invalid, unenforceable or illegal by a court of competent jurisdiction, such adjudication shall not affect or impair, in whole or in part, the validity, enforceability or legality of any remaining portions of this Agreement. All remaining portions shall remain in full force and effect as if the original Agreement had been executed without the invalidated, unenforceable or illegal part.

10.10.Notices.  Any notice, request, delivery, approval or consent required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been delivered upon receipt and may be delivered in person, transmitted by facsimile (receipt verified) or sent by international express courier service (signature required) or international registered letter, return receipt requested (or its equivalent), to the Party to which it is directed at its address or facsimile number shown below or such other address or facsimile number as such Party shall have last given by notice to the other Party.

If to Pierre Fabre, notices must be addressed to:

Pierre Fabre Médicament SAS

Parc Industriel de la Chartreuse

81106 Castres, Cédex

France

Attention:  President

with a copy to:

Pierre Fabre Médicament SAS

La Chartreuse I

81106 Castres, Cédex

France

Attention:  General Counsel

Facsimile:  [***]

If to Forest, notices must be addressed to:

Forest Laboratories Holdings Limited

Milner House

18 Parliament Street

Hamilton HM 11, Bermuda

                Facsimile No.: [***]

with a copy to:

Forest Laboratories, Inc.

909 Third Avenue

New York, NY10022

Attention:  Chief Executive Officer

Facsimile:  [***]

10.11.Force Majeure.  Except for the obligation to make payment when due, and without limiting Forest’s rights under Sections 7.9 and 7.11, each Party shall be excused from liability for the failure or delay in performance of any obligation under this Agreement by reason of any event beyond such Party’s reasonable control including but not limited to Acts of God, fire, flood, explosion, earthquake, or other natural forces, war, civil unrest, accident, destruction or other casualty, any lack or failure of transportation facilities, any lack or failure of supply of raw materials, any strike or labor disturbance, or any other event similar to those enumerated above. Such excuse from liability shall be effective only to the extent and duration of the event(s) causing the failure or delay in performance and provided that the Party has not caused such event(s) to occur. Notice of a Party’s failure or delay in performance due to force majeure must be given to the other Party within [***] after its occurrence. In no event shall any Party be required to prevent or settle any labor disturbance or dispute.  If a suspension of performance which, but for the occurrence of such force majeure, would constitute a material breach hereunder continues or is reasonably anticipated to continue for more than one hundred and [***] after the date of the occurrence, the unaffected party shall have the right to terminate this Agreement, which, in connection with a termination by Forest, shall entitle Forest to exercise the Manufacturing Right under Section 7.11.

10.12.Interpretation.    

(a)Captions & Headings.  The captions and headings of clauses contained in this Agreement preceding the text of the articles, sections, subsections and paragraphs hereof are inserted solely for convenience and ease of reference only and shall not constitute any part of this Agreement, or have any effect on its interpretation or construction.

(b)Singular & Plural.  All references in this Agreement to the singular shall include the plural where applicable, and all references to gender shall include both genders and the neuter.

(c)Articles, Sections & Subsections.  Unless otherwise specified, references in this Agreement to any article shall include all sections, subsections, and paragraphs in such article; references in this Agreement to any section shall include all subsections and paragraphs in such sections; and references in this Agreement to any subsection shall include all paragraphs in such subsection.

(d)Days.  All references to days in this Agreement shall mean calendar days, unless otherwise specified.

(e)Ambiguities.  Ambiguities and uncertainties in this Agreement, if any, shall not be interpreted against either Party, irrespective of which Party may be deemed to have caused the ambiguity or uncertainty to exist.

10.13.Amendment and Restatement. This Agreement is an amendment and restatement of the Original Agreement. With respect to (i) any date or time period occurring and ending prior to the Restatement Effective Date, the Original Agreement shall govern the respective rights and obligations of the Parties and shall for such purposes remain in full force and effect; and (ii) any date or time period occurring or ending on or after the Restatement Effective Date, the rights and obligations of the Parties shall be governed by this Agreement. From and after the Restatement Effective Date, the provisions of this Agreement shall prevail in the event of any conflict or inconsistency between such provisions and those of the Original Agreement. Each reference to the Original Agreement in any other document, instrument or agreement shall mean and be a reference to this Agreement. Nothing contained herein, unless expressly herein stated to the contrary, is intended to amend, modify or otherwise affect any other instrument, document or agreement executed and or delivered in connection with the Original Agreement.

10.14.Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original document, and all of which, together with this writing, shall be deemed one instrument.

IN WITNESS WHEREOF, the Parties hereto have each caused this Agreement to be signed and delivered by its duly authorized officer or representative as of the date first set forth above.

PIERRE FABRE MÉDICAMENT SAS

By:/s/Frédéric Duchesne                                                                           

Name:  Frédéric Duchesne

Title:    President

FOREST LABORATORIES HOLDINGS LIMITED

By:/s/ David Solomon                                                                                                

Name:  David Solomon

Title:    Assistant Secretary

EXHIBIT I

COMPOUND SPECIFICATION

[***]

[***]

EXHIBIT II

EXAMPLES OF CHANGES IN FORECASTS

[***]

SCHEDULE 2.2

EXAMPLE OF PURCHASE PRICE ADJUSTMENT

FOR NORTH AMERICA

[***]

EX-10.14

Please see pdf version of:

Exhibit 10.14

EX-10.15

Please see pdf version of:

Exhibit 10.15

EX-10.16

EX-10.17

Please see pdf version of:

Exhibit 10.17

EX-10.18

Please see pdf version of:

Exhibit 10.18

EX-10.19

    ex1019meury.htm
    
    
    

EX-10.20

    ex1020walsh.htm
    
    
    

EX-10.21

Please see pdf version of:

Exhibit 10.21

EX-10.22

    ex1022simmerman.htm
    
    
    

EX-10.23

    ex1023ling.htm
    
    
    

EX-31.1

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Francis I. Perier, Jr., certify that:

1.  I have reviewed this quarterly report on Form 10-Q of Forest Laboratories, Inc. ("the Company");

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4.  The Company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and we have:

a.  designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.  designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.  evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.  disclosed in this report any change in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter (the Company's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

5.  The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent functions):

a.  all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and

b.  any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting.

Date:  February 6, 2014

/s/ Francis I. Perier, Jr.         

Francis I. Perier, Jr.

Executive Vice President, Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Forest Laboratories, Inc. (the "Company") on Form 10-Q for the period ended December 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Brenton L. Saunders, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.           The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Brenton L. Saunders

Brenton L. Saunders

Chief Executive Officer and President

February 6, 2014

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Forest Laboratories, Inc. (the "Company") on Form 10-Q for the period ended December 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Francis I. Perier, Jr., Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.           The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Francis I. Perier, Jr.        

Francis I. Perier, Jr.

Executive Vice President, Chief Financial Officer

February 6, 2014

XML

Debt (Details) (USD $)			3 Months Ended
	Dec. 31, 2013	Mar. 31, 2013	Dec. 31, 2013 5.00% Senior Notes [Member]
Debt Instrument [Line Items]
Issuance date of senior notes			Dec. 10, 2013
Senior Notes	$ 1,200,000,000	$ 0	$ 1,200,000,000
Interest rate on senior notes (in hundredths)			5.00%
Maturity date of senior notes			Dec. 15, 2021
Deferred financing costs			18,500,000
Interest expense			3,500,000
Amortization of deferred financing fees			100,000
Senior notes fair value			$ 1,200,000,000

XML

License and collaboration agreements (Details) (USD $)	3 Months Ended		9 Months Ended		12 Months Ended		3 Months Ended		3 Months Ended		9 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Sep. 30, 2013 Saphris [Member]	Dec. 31, 2013 Saphris [Member]	Dec. 31, 2013 Fetzima [Member]	Dec. 31, 2013 Trevena [Member]	Dec. 31, 2013 Ironwood [Member]	Dec. 31, 2012 Ironwood [Member]	Dec. 31, 2013 Ironwood [Member]	Dec. 31, 2012 Ironwood [Member]	Dec. 31, 2013 moksha8 [Member]	Mar. 31, 2014 Subsequent Event [Member] Saphris [Member]	Jan. 10, 2014 Subsequent Event [Member] Saphris [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Agreement to purchase exclusive rights						$ 240,000,000								$ 85,000,000	$ 155,000,000
Marketable securities and investments								30,000,000
Milestone payment							30,000,000		230,000,000		230,000,000
Potential future milestone payment under collaboration agreement											100,000,000
Funding amount													19,200,000
Cumulative funding amount													101,900,000
Revenue [Abstract]
Net sales	846,784,000	677,967,000	2,455,066,000	2,121,750,000	150,000,000		8,000,000		51,044,000	19,227,000	114,251,000	19,227,000
Cost of sales [Abstract]
Cost of sales	182,270,000	153,311,000	511,355,000	471,257,000					2,133,000	770,000	5,539,000	770,000
Selling, general and administrative [Abstract]
Payment to/ (receipt from) Ironwood for the Commercialization pool									3,968,000	(8,369,000)	(13,799,000)	(13,884,000)
Research and development [Abstract]
Payment to/ (receipt from) Ironwood for the Development pool									595,000	(949,000)	1,602,000	(2,350,000)
Maximum financial financing													125,000,000
Period to achieve business goal													2 years
Fixed price to acquire moksha8													157,000,000
Fixed price at which moksha8 shareholders can put all assets of moksha8													$ 144,000,000
Loan term													6 years

XML

License and collaboration agreements (Tables)

9 Months Ended

Dec. 31, 2013

License and collaboration agreements [Abstract]

Schedule of activity related to collaborative arrangement

The following illustrates activity related to the Ironwood collaboration agreement for the periods presented:

(In thousands)

	Three Months Ended					Nine Months Ended
	December 31,					December 31,
	2013		2012			2013			2012
Revenue
Net Sales attributed to the Ironwood
collaboration agreement	$	51,044	$	19,227		$	114,251		$	19,227
Cost of sales
Cost of sales attributed to the
Ironwood collaboration agreement		2,133		770			5,539			770
Selling, general and administrative
Payment to/ (receipt from) Ironwood
for the Commercialization pool		3,968		(8,369	)		(13,799	)		(13,884	)
Research and development
Payment to/ (receipt from) Ironwood
for the Development pool		595		(949	)		1,602			(2,350	)

XML

Income taxes (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Income taxes [Abstract]
Additional interest accrued in period for income tax matters			$ 13.20
Total accrual for interest related to the resolution of various income tax matters	$ 63.50		$ 63.50
Effective tax rate (in hundredths)	19.50%	16.60%	26.90%	(2.50%)

XML

Inventories

9 Months Ended

Dec. 31, 2013

Inventories [Abstract]

Inventories

3. Inventories:

Inventories, net of reserves for obsolescence, consist of the following:

(In thousands)

	December 31, 2013		March 31, 2013
Raw materials	$	158,641	$	127,508
Work in process		1,028		1,333
Finished goods		278,333		265,060
	$	438,002	$	393,901

XML

Accounts receivable (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Mar. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable, net	$ 369,881	$ 478,032
Trade [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable, net	312,008	403,331
Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable, net	$ 57,873	$ 74,701

XML

Restructuring initiative (Tables)

9 Months Ended

Dec. 31, 2013

Restructuring initiative [Abstract]

Liability balance for the cost savings initiative

The liability balance for the cost savings initiative as of December 31, 2013 is as follows:

(In thousands)

	December 31, 2013
Beginning Balance as of October 1, 2013	$	–
Charges		45,000
Adjustments		–
Cash Payments		–
Balance	$	45,000

XML

Inventories (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Mar. 31, 2013
Inventories [Abstract]
Raw materials	$ 158,641	$ 127,508
Work in process	1,028	1,333
Finished goods	278,333	265,060
Inventories, net	$ 438,002	$ 393,901

XML

Fair value measurements (Details) (USD $)	3 Months Ended	9 Months Ended
	Dec. 31, 2013	Dec. 31, 2013	Mar. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Money market accounts	$ 1,329,814,000	$ 1,329,814,000	$ 818,474,000
Municipal bonds and notes	12,484,000	12,484,000	46,877,000
Commercial paper	483,082,000	483,082,000	168,639,000
Variable rate demand notes	33,970,000	33,970,000	1,500,000
Auction rate securities	3,198,000	3,198,000	3,198,000
Certificates of deposit	73,443,000	73,443,000	90,268,000
Corporate bonds	1,661,037,000	1,661,037,000	1,509,870,000
Government agency bonds	246,091,000	246,091,000	278,804,000
Purchases or sales of level 3 investments	0	0
Long-term debt carrying value	1,200,000,000	1,200,000,000	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Money market accounts	1,329,814,000	1,329,814,000	818,474,000
Municipal bonds and notes	0	0	0
Commercial paper	2,850,000	2,850,000	31,815,000
Variable rate demand notes	0	0	0
Auction rate securities	0	0	0
Certificates of deposit	0	0	5,981,000
Corporate bonds	0	0	0
Government agency bonds	0	0	0
Significant Other Observable Market Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Money market accounts	0	0	0
Municipal bonds and notes	12,484,000	12,484,000	46,877,000
Commercial paper	480,232,000	480,232,000	136,824,000
Variable rate demand notes	33,970,000	33,970,000	1,500,000
Auction rate securities	0	0	0
Certificates of deposit	73,443,000	73,443,000	84,287,000
Corporate bonds	1,661,037,000	1,661,037,000	1,509,870,000
Government agency bonds	246,091,000	246,091,000	278,804,000
Unobservable Market Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Money market accounts	0	0	0
Municipal bonds and notes	0	0	0
Commercial paper	0	0	0
Variable rate demand notes	0	0	0
Auction rate securities	3,198,000	3,198,000	3,198,000
Certificates of deposit	0	0	0
Corporate bonds	0	0	0
Government agency bonds	$ 0	$ 0	$ 0

XML

Accounts receivable

9 Months Ended

Dec. 31, 2013

Accounts receivable [Abstract]

Accounts receivable

2.   Accounts receivable:

Accounts receivable, net, consist of the following:

(In thousands)

	December 31, 2013		March 31, 2013
Trade	$	312,008	$	403,331
Other		57,873		74,701
	$	369,881	$	478,032

XML

Marketable securities (Details) (USD $)	9 Months Ended		12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Mar. 31, 2013	Jun. 30, 2013
Schedule of Available-for-sale Securities [Line Items]
Total available-for-sale debt securities: Estimated fair value	$ 2,111,302,000		$ 2,050,518,000
Total available-for-sale debt securities: Gains in accumulated other comprehensive income	4,738,000		7,206,000
Total available-for-sale debt securities: Losses in accumulated other comprehensive income	(6,448,000)		(2,966,000)
Proceeds from sales of available-for-sale debt securities	851,200,000	2,500,000,000
Gross realized gains on sales of available-for-sale debt securities	500,000	1,100,000
Net unrealized holding gains (losses) on available-for-sale debt securities	(1,700,000)		4,200,000
Investment in Ironwood Pharmaceuticals, Inc.	24,200,000		38,100,000
Investment in Trevena, Inc.				30,000,000
Contractual maturities of available-for-sale debt securities, fair value [Abstract]
Within one year	701,671,000
1-5 years	1,367,236,000
5-10 years	2,400,000
After 10 years	39,995,000
Total available-for-sale debt securities: Estimated fair value	2,111,302,000		2,050,518,000
Current [Member]
Schedule of Available-for-sale Securities [Line Items]
Estimated fair value, current	701,671,000		739,198,000
Gains in accumulated other comprehensive income	866,000		1,445,000
Losses in accumulated other comprehensive income	(71,000)		(45,000)
Noncurrent [Member]
Schedule of Available-for-sale Securities [Line Items]
Estimated fair value, non-current	1,409,631,000		1,311,320,000
Gains in accumulated other comprehensive income	3,872,000		5,761,000
Losses in accumulated other comprehensive income	(6,377,000)		(2,921,000)
Municipal Bonds and Notes [Member] | Current [Member]
Schedule of Available-for-sale Securities [Line Items]
Estimated fair value, current	7,146,000		34,025,000
Gains in accumulated other comprehensive income	11,000		34,000
Losses in accumulated other comprehensive income	0		0
Municipal Bonds and Notes [Member] | Noncurrent [Member]
Schedule of Available-for-sale Securities [Line Items]
Estimated fair value, non-current	5,338,000		12,852,000
Gains in accumulated other comprehensive income	22,000		37,000
Losses in accumulated other comprehensive income	0		0
Government Agency Bonds [Member} | Current [Member]
Schedule of Available-for-sale Securities [Line Items]
Estimated fair value, current	90,746,000		87,227,000
Gains in accumulated other comprehensive income	141,000		125,000
Losses in accumulated other comprehensive income	(1,000)		(10,000)
Government Agency Bonds [Member} | Noncurrent [Member]
Schedule of Available-for-sale Securities [Line Items]
Estimated fair value, non-current	155,345,000		186,577,000
Gains in accumulated other comprehensive income	172,000		434,000
Losses in accumulated other comprehensive income	(267,000)		(19,000)
Commercial Paper [Member] | Current [Member]
Schedule of Available-for-sale Securities [Line Items]
Estimated fair value, current	104,363,000		144,293,000
Gains in accumulated other comprehensive income	0		0
Losses in accumulated other comprehensive income	0		0
Commercial Paper [Member] | Noncurrent [Member]
Schedule of Available-for-sale Securities [Line Items]
Estimated fair value, non-current	5,834,000
Gains in accumulated other comprehensive income	0
Losses in accumulated other comprehensive income	0
Certificates of Deposit [Member] | Current [Member]
Schedule of Available-for-sale Securities [Line Items]
Estimated fair value, current	43,453,000		47,977,000
Gains in accumulated other comprehensive income	5,000		0
Losses in accumulated other comprehensive income	(8,000)		(2,000)
Certificates of Deposit [Member] | Noncurrent [Member]
Schedule of Available-for-sale Securities [Line Items]
Estimated fair value, non-current	3,000,000		22,999,000
Gains in accumulated other comprehensive income	0		0
Losses in accumulated other comprehensive income	0		0
Corporate Bonds [Member] | Current [Member]
Schedule of Available-for-sale Securities [Line Items]
Estimated fair value, current	455,963,000		425,676,000
Gains in accumulated other comprehensive income	709,000		1,286,000
Losses in accumulated other comprehensive income	(62,000)		(33,000)
Corporate Bonds [Member] | Noncurrent [Member]
Schedule of Available-for-sale Securities [Line Items]
Estimated fair value, non-current	1,202,946,000		1,084,194,000
Gains in accumulated other comprehensive income	3,678,000		5,290,000
Losses in accumulated other comprehensive income	(5,358,000)		(2,150,000)
Auction Rate Securities [Member] | Noncurrent [Member]
Schedule of Available-for-sale Securities [Line Items]
Estimated fair value, non-current	3,198,000		3,198,000
Gains in accumulated other comprehensive income	0		0
Losses in accumulated other comprehensive income	(752,000)		(752,000)
Variable Rate Demand Note [Member] | Noncurrent [Member]
Schedule of Available-for-sale Securities [Line Items]
Estimated fair value, non-current	33,970,000		1,500,000
Gains in accumulated other comprehensive income	0		0
Losses in accumulated other comprehensive income	$ 0		$ 0

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Restructuring initiative (Details) (USD $)	3 Months Ended	9 Months Ended
	Dec. 31, 2013	Dec. 31, 2013
Restructuring Cost and Reserve [Line Items]
Estimates cost savings result from reduction in headcount		$ 110,000,000
Restructuring Reserve
Beginning Balance as of October 1, 2013	0
Charges	45,000,000
Adjustments	0
Cash Payments	0
Balance	45,000,000	45,000,000
Rejuvenate Project [Member]
Restructuring Cost and Reserve [Line Items]
Cost savings expected to be realized	500,000,000
Pre-tax restructuring expenses relating to post-employment benefits	45,000,000
Rejuvenate Project [Member] | Minimum [Member]
Restructuring Cost and Reserve [Line Items]
Expected cost savings to be recognized by the end of fiscal 2015 (in hundredths)	65.00%
Estimated implementing cost	150,000,000
Rejuvenate Project [Member] | Maximum [Member]
Restructuring Cost and Reserve [Line Items]
Expected cost savings to be recognized by the end of fiscal 2015 (in hundredths)	75.00%
Estimated implementing cost	200,000,000
Rejuvenate Project [Member] | R&D Organization [Member]
Restructuring Cost and Reserve [Line Items]
Cost savings expected to be realized	270,000,000
Rejuvenate Project [Member] | Marketing Expenses [Member]
Restructuring Cost and Reserve [Line Items]
Cost savings expected to be realized	150,000,000
Rejuvenate Project [Member] | General and Administrative Expenses [Member]
Restructuring Cost and Reserve [Line Items]
Cost savings expected to be realized	$ 80,000,000

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Condensed Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Mar. 31, 2013
Current assets:
Cash (including cash equivalent investments of $1,731,817 at December 31, 2013 and $867,112 at March 31, 2013)	$ 2,322,433	$ 935,675
Marketable securities	701,671	739,198
Accounts receivable, less allowance for doubtful accounts of $2,040 at December 31, 2013 and $2,003 at March 31, 2013	369,881	478,032
Inventories, net	438,002	393,901
Deferred income taxes	274,980	266,455
Prepaid and other current assets	186,151	134,525
Total current assets	4,293,118	2,947,786
Non-current assets:
Marketable securities and investments	1,463,818	1,349,424
Property, plant and equipment, less accumulated depreciation of $388,901 at December 31, 2013 and $362,742 at March 31, 2013	395,573	376,960
Goodwill	713,091	713,091
License agreements, product rights and other intangibles, less accumulated amortization of $425,740 at December 31, 2013 and $322,689 at March 31, 2013	2,072,079	2,127,639
Other assets	121,063	114,682
Total assets	9,058,742	7,629,582
Current liabilities:
Accounts payable	77,467	157,349
Accrued expenses and other liabilities	962,563	840,342
Total current liabilities	1,040,030	997,691
Long-term liabilities:
Long-term debt	1,200,000	0
Income tax liabilities	528,447	567,311
Deferred tax liabilities	257,031	283,245
Other long-term liabilities	39,903	36,080
Total liabilities	3,065,411	1,884,327
Contingencies (Note 11)
Stockholders' equity:
Preferred stock, $1.00 par; shares authorized 1,000; no shares issued or outstanding
Common stock, $.10 par; shares authorized 1,000,000; 433,995 and 430,385 shares issued at December 31, 2013 and March 31, 2013, respectively	43,400	43,039
Additional paid-in capital	1,951,124	1,799,071
Retained earnings	9,166,570	9,055,344
Accumulated other comprehensive income	3,887	10,116
Treasury stock, at cost (164,044 shares at December 31, 2013 and 163,886 shares at March 31, 2013)	(5,171,650)	(5,162,315)
Total stockholders' equity	5,993,331	5,745,255
Total liabilities and stockholders' equity	$ 9,058,742	$ 7,629,582

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Cash flows from operating activities:
Net income (loss)	$ 111,226	$ (77,546)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation	41,908	34,496
Amortization	100,758	73,695
Stock-based compensation expense	58,614	53,259
Deferred income tax benefit	(34,739)	(39,260)
Decrease (increase) in:
Accounts receivable, net	108,151	73,875
Inventories, net	(44,101)	(83,728)
Prepaid and other current assets	(49,322)	33,546
Increase (decrease) in:
Accounts payable	(79,882)	(84,992)
Accrued expenses	122,221	101,673
Income tax liabilities	(38,864)	3,517
Other liabilities	12,287	0
Other	22,615	1,766
Net cash provided by operating activities	330,872	90,301
Cash flows from investing activities:
Purchase of property, plant and equipment	(75,932)	(50,557)
Sale of property, plant, and equipment	13,750	0
Purchase of marketable securities	(911,986)	(2,982,108)
Redemption of marketable securities	851,202	2,526,325
Purchase of trademarks	(44,500)	(125,000)
Other investing activities	(49,231)	(108,077)
Net cash used in investing activities	(216,697)	(739,417)
Cash flows from financing activities:
Proceeds from long-term debt	1,200,000	0
Net proceeds from common stock options exercised by employees under stock option plans	86,096	19,729
Tax benefit related to stock-based compensation	7,704	1,867
Treasury stock transactions	(9,335)	(10,841)
Other financing activities	(18,468)	0
Net cash provided by financing activities	1,265,997	10,755
Effect of exchange rate changes on cash	6,586	7,749
Increase (decrease) in cash and cash equivalents	1,386,758	(630,612)
Cash and cash equivalents, beginning of period	935,675	1,579,515
Cash and cash equivalents, end of period	$ 2,322,433	$ 948,903

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Stockholders' equity (Details) (USD $) Share data in Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Shares available for grant (in shares)	30.3		30.3
Compensation expense	$ 24,100,000	$ 24,800,000	$ 58,614,000	$ 53,259,000
Compensation expense, net of tax	$ 16,300,000	$ 17,500,000	$ 39,500,000	$ 37,900,000
Minimum [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Share-based payment awards, award vesting period			3 years
Maximum [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Share-based payment awards, award vesting period			5 years
Exercisable period for stock option grants from the date of issuance			10 years
2007 Equity Incentive Plan [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Shares authorized to be issued to employees under 2007 Plan (in shares)			28
Amended 2007 Equity Incentive Plan [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Shares authorized to be issued to employees under 2007 Plan (in shares)			57

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Inventories (Tables)

9 Months Ended

Dec. 31, 2013

Inventories [Abstract]

Inventories, net of reserves for obsolescence

Inventories, net of reserves for obsolescence, consist of the following:

(In thousands)

	December 31, 2013		March 31, 2013
Raw materials	$	158,641	$	127,508
Work in process		1,028		1,333
Finished goods		278,333		265,060
	$	438,002	$	393,901

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Business segment information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013 Segment	Dec. 31, 2012
Business segment information [Abstract]
Number of operating segments			1
Segment Reporting Information [Line Items]
Net sales	$ 846,784	$ 677,967	$ 2,455,066	$ 2,121,750
Central Nervous System [Member]
Segment Reporting Information [Line Items]
Net sales	512,806	441,871	1,538,579	1,479,574
Cardiovascular [Member]
Segment Reporting Information [Line Items]
Net sales	136,202	116,429	404,954	345,661
Gastrointestinal [Member]
Segment Reporting Information [Line Items]
Net sales	51,044	19,227	114,251	19,227
Respiratory [Member]
Segment Reporting Information [Line Items]
Net sales	56,698	29,647	145,085	66,961
Other [Member]
Segment Reporting Information [Line Items]
Net sales	$ 90,034	$ 70,793	$ 252,197	$ 210,327

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Marketable securities (Tables)

9 Months Ended

Dec. 31, 2013

Marketable securities [Abstract]

Available-for-sale debt securities

Available-for-sale debt securities consist of the following:

(In thousands)	December 31, 2013
	Estimated fair value		Gains in accumulated other comprehensive income		Losses in accumulated other comprehensive income
Current:
Municipal bonds and notes	$	7,146	$	11	$	–
Government agency bonds		90,746		141		(1	)
Commercial paper		104,363		–		–
Certificates of deposit		43,453		5		(8	)
Corporate bonds		455,963		709		(62	)
Total current securities		701,671		866		(71	)
Non-current:
Municipal bonds and notes		5,338		22		–
Government agency bonds		155,345		172		(267	)
Commercial paper		5,834		–		–
Certificates of deposit		3,000		–		–
Corporate bonds		1,202,946		3,678		(5,358	)
Auction rate securities		3,198		–		(752	)
Variable rate demand notes		33,970		–		–
Total non-current securities		1,409,631		3,872		(6,377	)
Total available-for-sale debt securities	$	2,111,302	$	4,738	$	(6,448	)

(In thousands)	March 31, 2013
	Estimated fair value		Gains in accumulated other comprehensive income		Losses in accumulated other comprehensive income
Current:
Municipal bonds and notes	$	34,025	$	34	$	–
Government agency bonds		87,227		125		(10	)
Commercial paper		144,293		–		–
Certificates of deposit		47,977		–		(2	)
Corporate bonds		425,676		1,286		(33	)
Total current securities		739,198		1,445		(45	)
Non-current:
Municipal bonds and notes		12,852		37		–
Government agency bonds		186,577		434		(19	)
Certificates of deposit		22,999		–		–
Corporate bonds		1,084,194		5,290		(2,150	)
Auction rate securities		3,198		–		(752	)
Variable rate demand notes		1,500		–		–
Total non-current securities		1,311,320		5,761		(2,921	)
Total available-for-sale debt securities	$	2,050,518	$	7,206	$	(2,966	)

Contractual maturities of available-for-sale debt securities

Contractual maturities of available-for-sale debt securities at December 31, 2013 are as follows:

(In thousands)

	Estimated FV
Within one year	$	701,671
1-5 years		1,367,236
5-10 years		2,400
After 10 years		39,995
	$	2,111,302

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Basis of presentation

9 Months Ended

Dec. 31, 2013

Basis of presentation [Abstract]

Basis of presentation

1.   Basis of presentation:

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information, Accounting Standards Codification (ASC) Topic 270-10 and with the instructions to Form 10-Q.  Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.  In management’s opinion, all adjustments considered necessary for a fair presentation have been included in the interim periods presented and all adjustments are of a normal recurring nature.  The Company has evaluated subsequent events through the date of this filing.  Operating results for the three and nine-month periods ended December 31, 2013 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2014.  When used in these notes, the terms “Forest” or “the Company” mean Forest Laboratories, Inc. and subsidiaries.  The March 31, 2013 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP.  You should read these unaudited interim condensed consolidated financial statements in conjunction with the consolidated financial statements and footnotes hereto incorporated by reference in the Company's Annual Report on Form  10-K for the fiscal year ended March 31, 2013.

For the third quarter of fiscal 2014, the Company modified the presentation of its Consolidated Statements of Operations effective for all periods presented, whereby Interest income, interest expense and other miscellaneous income/expense is presented in the ‘Interest and other income (expense)’ caption below Operating income (loss).  The modified presentation is consistent with industry practice and conforms with the requirements of Regulation S-X 5.03.  There were no changes in the Company’s accounting policies, methodology for estimates or the activity included in the respective captions in the Consolidated Statements of Operations.

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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Dec. 31, 2013	Mar. 31, 2013
Current assets:
Cash equivalent investments	$ 1,731,817	$ 867,112
Accounts receivable, allowance for doubtful accounts	2,040	2,003
Non-current assets [Abstract]
Accumulated depreciation	388,901	362,742
Accumulated amortization	$ 425,740	$ 322,689
Stockholders' equity:
Preferred stock, par value (in dollars per share)	$ 1.00	$ 1.00
Preferred stock, shares authorized (in shares)	1,000	1,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.10	$ 0.10
Common stock, shares authorized (in shares)	1,000,000	1,000,000
Common stock, shares issued (in shares)	433,995	430,385
Treasury stock, shares (in shares)	164,044	163,886

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Contingencies

9 Months Ended

Dec. 31, 2013

Contingencies [Abstract]

Contingencies

11. Contingencies:

The Company is a defendant in three federal actions filed on behalf of individuals who purchased Celexa and/or Lexapro for pediatric use, all of which have been consolidated for pretrial purposes in a MDL proceeding in the U.S. District Court for the District of Massachusetts under the caption “In re Celexa and Lexapro Marketing and Sales Practices Litigation.”  These actions, two of which were originally filed as putative nationwide class actions, and one of which is a putative California-wide class action, allege that the Company marketed Celexa and/or Lexapro for off-label pediatric use and paid illegal kickbacks to physicians to induce prescriptions of Celexa and Lexapro.  The complaints assert various similar claims, including claims under the Missouri and California consumer protection statutes, respectively, and state common laws.  On February 5, 2013, the district judge overseeing the MDL denied all plaintiffs’ motions for class certification.  On February 18, 2013, the plaintiff in the California action filed a petition seeking leave to appeal this decision to the U.S. Court of Appeals for the First Circuit.  On April 16, 2013, the First Circuit denied the petition.  On April 30, 2013, plaintiffs in the other two actions filed an amended complaint seeking to certify state-wide class actions in Illinois, Missouri, and New York under those states’ consumer protection statutes.  Plaintiffs moved for class certification in all these three states on June 28, 2013.  On January 13, 2014, the district judge denied plaintiffs’ motion with respect to the proposed Illinois and New York classes and allowed it with respect to the proposed Missouri class.  Forest filed a petition seeking leave to appeal this decision to the U.S. Court of Appeals for the First Circuit on January 27, 2014.

On May 3, 2013, an action was filed in the U.S. District Court for the Central District of California on behalf of individuals who purchased Lexapro for adolescent use, seeking to certify a state-wide class action in California and alleging that our promotion of Lexapro for adolescent depression has been deceptive.  This action was transferred to the MDL mentioned in the preceding paragraph and, on July 29, 2013, the Company moved to dismiss the complaint.  The motion was argued before the Court on September 20, 2013, and a decision is pending.

On November 13, 2013, an action was filed in the U.S. District Court for the District of Minnesota seeking to certify a nationwide class of third-party payor entities that purchased Celexa and Lexapro for pediatric use.  The complaint asserts claims under the federal Racketeer Influenced and Corrupt Organizations Act, alleging that Forest engaged in an off-label marketing scheme and paid illegal kickbacks to physicians to induce prescriptions of Celexa and Lexapro.  This action was transferred to the MDL mentioned in the preceding paragraphs, and the Company filed a motion to dismiss the complaint on January 15, 2014.

The Company intends to continue to vigorously defend against these cases.  At this time, the Company believes an unfavorable outcome is less than probable and are unable to estimate the reasonably possible loss or range of possible loss, but do not believe losses, if any, would have a material effect on the results of operations or financial position taken as a whole.

The Company is also named as defendants in two actions filed on behalf of entities or individuals who purchased or reimbursed certain purchases of Celexa or Lexapro for pediatric use pending in the Missouri Circuit Court, Twenty-Second Judicial Circuit, and arising from similar allegations as those contained in the federal actions described in the preceding paragraphs.  The first action, filed on November 6, 2009 under the caption “St. Louis Labor Healthcare Network et al. v. Forest Pharmaceuticals, Inc. and Forest Laboratories, Inc.,” is brought by two entities that purchased or reimbursed certain purchases of Celexa and/or Lexapro.  The complaint asserts claims under the Missouri consumer protection statute and Missouri common law, and seeks unspecified damages and attorneys’ fees.  The Company has reached an agreement with the plaintiffs to resolve this action for payments that are not material to our financial condition or results of operations.  The second action, filed on July 22, 2009 under the caption “Crawford v. Forest Pharmaceuticals, Inc.,” and now known as “Luster v. Forest Pharmaceuticals, Inc.,” is a putative class action on behalf of a class of Missouri citizens who purchased Celexa for pediatric use.  Only Forest Pharmaceuticals, Inc., which is headquartered in Missouri, is named as a defendant.  The complaint asserts claims under the Missouri consumer protection statute and Missouri common law, and seeks unspecified damages and attorneys’ fees.  In October 2010, the court certified a class of Missouri domiciliary citizens who purchased Celexa for pediatric use at any time prior to the date of the class certification order, but who do not have a claim for personal injury.  Discovery is currently ongoing and a trial date has been set in March 2014.  On December 9, 2013, the Company filed a motion for summary judgment, which was argued on January 8, 2014.  A decision on this motion is pending.  The Company intends to continue to vigorously defend against this action.  At this time, the Company believes an unfavorable outcome is less than probable and are unable to estimate the reasonably possible loss or range of possible loss, but do not believe losses, if any, would have a material effect on the results of operations or financial position taken as a whole.

Forest is currently defending approximately 195 product liability lawsuits.  Thirteen of the lawsuits allege that Celexa or Lexapro caused or contributed to individuals committing or attempting suicide.  The remainder of the lawsuits allege that Celexa or Lexapro caused various birth defects.  Each lawsuit seeks substantial compensatory and punitive damages.  The Company is vigorously defending these suits.

An MDL was established for the majority of the suicidality-related litigation, with the federal court cases being transferred to Judge Rodney Sippel in the U.S. District Court for the Eastern District of Missouri.  The MDL has concluded and the remaining twelve cases have been remanded to the federal district courts in which they were filed originally.  Several trials involving completed suicides have been scheduled in those federal district courts in 2014 and 2015 and Forest expects more trial dates to be established.  A state court case involving a young woman who allegedly attempted suicide is set for trial in February 2014 in Montgomery, Alabama.

The majority of the birth defect cases are consolidated for pretrial purposes in Cole County Circuit Court in Missouri.  Two cases are set for trial in Cole County in May 2014 and September 2014.  Nineteen cases are pending in the U.S. District Court for the District of New Jersey.  Fact discovery closes in March 2014.  One case is pending in Orange County, California and is set for trial in June 2014.  The Company expects that the state court consolidation will ease the burden of defending these cases.  The Company believes that the consolidated proceedings will promote the economical and efficient resolution of these lawsuits and provides the Company with a meaningful opportunity to vindicate our products.  However, litigation is inherently subject to uncertainty and the Company cannot predict or determine the outcome of this litigation.  Forest generally maintains $140 million of product liability coverage (annually, per “occurrence” on a claims-made basis, and in the aggregate).

In December 2013, the Company was named as a defendant in an action brought by Teva Pharmaceuticals USA, Inc. and Mayne Pharma International Pty Ltd. in the U.S. District Court for the District of Delaware under the caption “Teva Pharmaceuticals USA, Inc. and Mayne Pharma International Pty Ltd. v. Forest Laboratories, Inc.”  The complaint alleges that Forest infringes U.S. Patent No. 6,194,000 by making, using, selling, offering to sell, and importing Namenda XR.  The relief requested includes preliminary and permanent injunctive relief, and damages.  The Company intends to vigorously defend against this action.  At this time, the Company believes an unfavorable outcome is less than probable and are unable to estimate the reasonably possible loss or range of possible loss, but do not believe losses, if any, would have a material effect on the results of operations or financial position taken as a whole.

In January 2014, Forest and its licensors for Namenda XR, Merz Pharma GmbH & Co. KgaA (Merz) and Adamas Pharmaceuticals, Inc. (Adamas), brought actions for infringement of certain patents in the U.S. District Court for the District of Delaware against Wockhardt USA LLC (Wockhardt), Teva Pharmaceuticals USA, Inc. (Teva), Sun Pharma Global FZE (Sun), and related subsidiaries and affiliates thereof.  These companies have notified Forest that they have filed ANDAs with the FDA seeking to obtain approval to market generic versions of Namenda XR before these certain patents expire.  Specifically, the lawsuits allege that Wockhardt’s, Teva’s, and Sun’s ANDA submissions infringe some or all of U.S. Patent No. 5,061,703 (the ‘703 patent), U.S. Patent No. 8,168,209 (the ‘209 patent), U.S. Patent No. 8,173,708 (the ‘708 patent), U.S. Patent No. 8,283,379 (the ‘379 patent), U.S. Patent No. 8,329,752 (the ‘752 patent), U.S. Patent No. 8,362,085 (the ‘085 patent), and U.S. Patent No. 8,598,233 (the ‘233 patent).  (The ‘703 patent expires in April 2015, the ‘009 patent expires in March 2029, and the ‘209, ‘708, ‘379, ‘752, ‘085, and ‘233 patents expire in November 2025.)  This lawsuit triggered an automatic stay of approval of the applicable ANDAs that expires no earlier than June 2016 (unless a court issues a decision adverse to the Company, Merz, and Adamas sooner).

The Company is also subject to various legal proceedings that arise from time to time in the ordinary course of its business.  Litigation is subject to many factors which are difficult to predict and there can be no assurance that the Company will not incur material costs in the resolution of these matters.

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Document and Entity Information	9 Months Ended
	Dec. 31, 2013	Feb. 05, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	FOREST LABORATORIES INC
Entity Central Index Key	0000038074
Current Fiscal Year End Date	--03-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		270,960,901
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Dec. 31, 2013

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Debt

9 Months Ended

Dec. 31, 2013

Debt [Abstract]

Debt

12. Debt:

On December 10, 2013 the Company issued $1.2 billion of 5.00% Senior Notes (the 5.00% Senior Notes), which mature on December 15, 2021.  The 5.00% Senior Notes accrue interest per annum, payable semi-annually in arrears on June 15 and December 15, commencing on June 15, 2014.  The Company incurred $18.5 million in deferred financing costs associated with the 5.00% Senior Notes which will be amortized over the term of the notes.   For the three months ended December 31, 2013, the Company recorded $3.5 million of interest expense and $0.1 million of  amortization of deferred financing fees related to the 5.00% Senior Notes.  The 5.00% Senior Notes have a fair value of $1.2 billion which is based on a market approach using Level 2 inputs.

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Condensed Consolidated Statements of Operations (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Condensed Consolidated Statements of Operations (unaudited) [Abstract]
Net sales	$ 846,784	$ 677,967	$ 2,455,066	$ 2,121,750
Contract revenue	31,612	38,314	99,555	158,426
Total revenue	878,396	716,281	2,554,621	2,280,176
Cost of goods sold	182,270	153,311	511,355	471,257
Gross profit	696,126	562,970	2,043,266	1,808,919
Operating expenses
Selling, general and administrative	454,981	428,380	1,307,408	1,185,578
Research and development	219,506	325,290	596,288	723,295
Total operating expenses	674,487	753,670	1,903,696	1,908,873
Operating income (loss)	21,639	(190,700)	139,570	(99,954)
Interest and other income (expense), net	683	6,409	12,648	24,278
Income (loss) before income taxes	22,322	(184,291)	152,218	(75,676)
Income tax expense (benefit)	4,361	(30,683)	40,992	1,870
Net income (loss)	$ 17,961	$ (153,608)	$ 111,226	$ (77,546)
Net income (loss) per common share:
Basic (in dollars per share)	$ 0.07	$ (0.58)	$ 0.41	$ (0.29)
Diluted (in dollars per share)	$ 0.07	$ (0.58)	$ 0.41	$ (0.29)
Weighted average number of common shares outstanding:
Basic (in shares)	269,481	266,018	268,385	266,967
Diluted (in shares)	272,901	266,018	270,832	266,967

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License and collaboration agreements

9 Months Ended

Dec. 31, 2013

License and collaboration agreements [Abstract]

License and collaboration agreements

6.  License and collaboration agreements:

Saphris license

On November 29, 2013, the Company entered into an Asset Purchase Agreement (APA) with Merck Sharp & Dohme B.V., a wholly owned subsidiary of Merck & Co., Inc. (Merck) pursuant to which the Company purchased exclusive rights in the United States (U.S.) for Saphris® (asenapine) sublingual tablets, a treatment for adult patients with schizophrenia and, as monotherapy or adjunctive therapy, of manic or mixed episodes associated with bipolar I disorder.  Upon the closing of the transaction on January 10, 2014, the Company paid Merck $155 million and entered into a supply agreement pursuant to which it will purchase the product from Merck at an agreed purchase price.

In addition, the Company is obligated to pay up to an additional $85 million to Merck for costs and expenses incurred in connection with post-marketing clinical trials conducted for Saphris during calendar 2013 which is expected to be paid during the fourth quarter of fiscal 2014.  The agreement also includes certain sales milestone payments to Merck upon the achievement of certain net sales thresholds.

Saphris is an atypical antipsychotic approved by the U.S. Food and Drug Administration (FDA) and launched in 2009.

Fetzimaapproval

In July 2013, the Company received FDA approval for FetzimaTM (levomilnacipran extended-release capsules), a once-daily serotonin and norepinephrine reuptake inhibitor for the treatment of Major Depressive Disorder in adults.  The product was launched in December 2013 and recorded sales of $8.0 million of initial trade stocking for the three months ended December 31, 2013.  The Company licensed the rights to levomilnacipran in the U.S. and Canada from Pierre Fabre Laboratories, and was obligated to pay a milestone payment of $30 million upon FDA approval.  Such milestone payment was capitalized as an intangible asset and is currently being amortized over the life of the patent for Fetzima.

Trevena

On May 9, 2013, the Company entered into a collaborative licensing option agreement with Trevena for the development of TRV027, a novel beta-arrestin biased ligand of the angiotensin II type 1 receptor for the treatment of acute decompensated heart failure.  Pursuant to the agreement, the Company purchased $30 million of Trevena preferred stock in a round of private placement financing which is recorded in the non-current ‘Marketable securities and investments’ caption in the condensed consolidated Balance Sheet.  This investment is accounted for using the cost method and will be reviewed for impairment annually or more frequently if a triggering event is deemed to have occurred.

Ironwood collaboration

In September 2007, the Company entered into a collaboration agreement with Ironwood to jointly develop and commercialize Linzess® (linaclotide) for the treatment of irritable bowel syndrome with constipation (IBS-C) and chronic idiopathic constipation (CIC).  Under the terms of the agreement, the Company shares equally with Ironwood all profits and losses from the development and commercialization of Linzess in the U.S.  In addition, Forest obtained exclusive rights to the linaclotide license in Canada and Mexico, for which the Company will pay royalties to Ironwood based on net sales in those territories, subject to receiving regulatory approval.

The agreement included contingent milestone payments as well as a contingent equity investment based onthe achievement of specific clinical and commercial milestones.  As of December 31, 2013, payments totaling $230 million relating to development and approval milestones have been made.  The Company may be obligated to pay up to an additional $100 million if certain sales milestones are achieved.

Linzess received FDA approval as a once-daily treatment for adult men and women suffering from    IBS-C and CIC in August 2012.  For the three and nine-month periods ended December 31, 2013, Linzess sales in the U.S. totaled $51.0 million and $114.3 million, respectively.

Based on the nature of the arrangement (including its contractual terms), the nature of the payments and applicable guidance, the Company records receipts from and payments to Ironwood in two pools: the Development pool, which consists of research and development (R&D) expenses, and the Commercialization pool, which consists of revenue, cost of sales and selling, general and administrative (SG&A) expense.  The net payment to or receipt from Ironwood for the Development pool is recorded in R&D expense and the net payment to or receipt from Ironwood for the Commercialization pool is recorded in SG&A expense.

The following illustrates activity related to the Ironwood collaboration agreement for the periods presented:

(In thousands)

	Three Months Ended					Nine Months Ended
	December 31,					December 31,
	2013		2012			2013			2012
Revenue
Net Sales attributed to the Ironwood
collaboration agreement	$	51,044	$	19,227		$	114,251		$	19,227
Cost of sales
Cost of sales attributed to the
Ironwood collaboration agreement		2,133		770			5,539			770
Selling, general and administrative
Payment to/ (receipt from) Ironwood
for the Commercialization pool		3,968		(8,369	)		(13,799	)		(13,884	)
Research and development
Payment to/ (receipt from) Ironwood
for the Development pool		595		(949	)		1,602			(2,350	)

moksha8

On October 22, 2012, the Company announced an agreement with moksha8, a privately-held pharmaceutical company which markets products in Latin America.  The agreement included an exclusive license from Forest to moksha8 to commercialize Viibryd, and potentially other Forest products, in Latin America.  In addition, the Company agreed to provide up to $125 million in debt financing to moksha8 in several tranches over a two-year period, conditioned upon moksha8 achieving certain business goals.  The agreement also included an option for Forest to acquire moksha8 at a fixed price of $157 million at the end of the two year period, subsequent to which the shareholders of moksha8 had an option to put to Forest all interests of moksha8 at a fixed price of $144 million.

As of December 31, 2013, a total of $101.9 million has been funded of which $19.2 million was funded during the nine months ended December 31, 2013.  The loan, which has a term of 6 years from the date of initial funding, is collateralized by the assets of moksha8.  The Company has recorded a loan receivable as a long term asset in the Company’s condensed consolidated Balance Sheet which is included in the ‘Other assets’ caption.

The Company accounts for the loan using the cost method and performed an impairment analysis during the third quarter of fiscal 2014 with the fair value of the loan being determined based on the fair value of the collateral.  The loan is a level 3 financial instrument and the fair value was determined using a discounted cash flow model with the key inputs including revenue projections, weighted average cost of capital and discount rates.  Based on the analysis performed, the value of the loan was deemed to be appropriate.

In January 2014, the Company and moksha8 amended the terms the original agreement which terminated Forest’s obligation to provide additional funding to moksha8. The amendment also terminated Forest’s option to acquire moksha8 as well as the shareholders of moksha8’s option to put to Forest all interests of moksha8.  moksha8 retains the exclusive license to commercialize Viibryd and continues to work with the Company to obtain licenses to additional products in Latin America.

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Marketable securities

9 Months Ended

Dec. 31, 2013

Marketable securities [Abstract]

Marketable securities

5. Marketable securities:

Available-for-sale debt securities consist of the following:

(In thousands)	December 31, 2013
	Estimated fair value		Gains in accumulated other comprehensive income		Losses in accumulated other comprehensive income
Current:
Municipal bonds and notes	$	7,146	$	11	$	–
Government agency bonds		90,746		141		(1	)
Commercial paper		104,363		–		–
Certificates of deposit		43,453		5		(8	)
Corporate bonds		455,963		709		(62	)
Total current securities		701,671		866		(71	)
Non-current:
Municipal bonds and notes		5,338		22		–
Government agency bonds		155,345		172		(267	)
Commercial paper		5,834		–		–
Certificates of deposit		3,000		–		–
Corporate bonds		1,202,946		3,678		(5,358	)
Auction rate securities		3,198		–		(752	)
Variable rate demand notes		33,970		–		–
Total non-current securities		1,409,631		3,872		(6,377	)
Total available-for-sale debt securities	$	2,111,302	$	4,738	$	(6,448	)

(In thousands)	March 31, 2013
	Estimated fair value		Gains in accumulated other comprehensive income		Losses in accumulated other comprehensive income
Current:
Municipal bonds and notes	$	34,025	$	34	$	–
Government agency bonds		87,227		125		(10	)
Commercial paper		144,293		–		–
Certificates of deposit		47,977		–		(2	)
Corporate bonds		425,676		1,286		(33	)
Total current securities		739,198		1,445		(45	)
Non-current:
Municipal bonds and notes		12,852		37		–
Government agency bonds		186,577		434		(19	)
Certificates of deposit		22,999		–		–
Corporate bonds		1,084,194		5,290		(2,150	)
Auction rate securities		3,198		–		(752	)
Variable rate demand notes		1,500		–		–
Total non-current securities		1,311,320		5,761		(2,921	)
Total available-for-sale debt securities	$	2,050,518	$	7,206	$	(2,966	)

Proceeds from the sale of available-for-sale debt securities were $851.2 million and $2.5 billion for the nine months ended December 31, 2013 and December 31, 2012, respectively.  Gross realized gains on those sales were $0.5 million and $1.1 million, respectively.  In order to determine gross realized gains and losses, the Company uses average cost.  The Company records holding gains and losses on available for sale securities in the ‘Accumulated other comprehensive income’ caption in the condensed consolidated Balance Sheet.  The Company had a net unrealized holding loss of $1.7 million at December 31, 2013 and a net unrealized holding gain of $4.2 million at March 31, 2013.  The preceding tables do not include the Company’s equity securities for Ironwood Pharmaceuticals, Inc. (Ironwood) and Trevena, Inc. (Trevena).  The carrying value of the Company’s equity securities in Ironwood, which were measured at fair market value based on quoted market prices for the related security, was $24.2 million and $38.1 million at December 31, 2013 and March 31, 2013, respectively.  The Company purchased $30 million of Trevena preferred stock during the first quarter of fiscal 2014.  Refer to Note 6 for additional information.

Contractual maturities of available-for-sale debt securities at December 31, 2013 are as follows:

(In thousands)

	Estimated FV
Within one year	$	701,671
1-5 years		1,367,236
5-10 years		2,400
After 10 years		39,995
	$	2,111,302

Actual maturities may differ from stated maturities because some borrowers have the right to call or prepay obligations with or without call penalties.

The Company invests funds in variable rate demand notes that have major bank liquidity agreements, municipal bonds and notes, government agency bonds, commercial paper, corporate bonds, certificates of deposit, and auction rate securities.  Certain securities are subject to a hard-put option(s) where the principal amount is contractually assured by the issuer and any resistance to the exercise of these options would be deemed as a default by the issuer.  Such a potential default would be reflected in the issuer’s respective credit rating, for which the Company maintains investment grade requirements pursuant to its corporate investment guidelines.  While the Company believes its investments that have net unrealized losses are temporary, declines in the value of these investments may be deemed other-than-temporary if the credit and capital markets were to deteriorate in future periods.  The Company has the ability and intends to hold its investments until a recovery of fair value, which may be at maturity.  The Company does not consider these investments to be other-than-temporarily impaired and will continue to monitor global market conditions to minimize the risk of impairments in future periods.

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Fair value measurements (Tables)

9 Months Ended

Dec. 31, 2013

Fair value measurements [Abstract]

Fair value hierarchy of financial assets

The following table presents the levels within the fair value hierarchy at which the Company’s financial assets are carried at fair value and measured on a recurring basis:

(In thousands)
Description	Fair value at December 31, 2013		Quoted prices in active markets for identical assets (Level 1)		Significant other observable market inputs (Level 2)		Unobservable market inputs (Level 3)
Money market accounts	$	1,329,814	$	1,329,814	$	–	$	–
Municipal bonds and notes		12,484		–		12,484		–
Commercial paper		483,082		2,850		480,232		–
Variable rate demand notes		33,970		–		33,970		–
Auction rate securities		3,198		–		–		3,198
Certificates of deposit		73,443		–		73,443		–
Corporate bonds		1,661,037		–		1,661,037		–
Government agency bonds		246,091		–		246,091		–

Description	Fair value at March 31, 2013		Quoted prices in active markets for identical assets (Level 1)		Significant other observable market inputs (Level 2)		Unobservable market inputs (Level 3)
Money market accounts	$	818,474	$	818,474	$	–	$	–
Municipal bonds and notes		46,877		–		46,877		–
Commercial paper		168,639		31,815		136,824		–
Variable rate demand notes		1,500		–		1,500		–
Auction rate securities		3,198		–		–		3,198
Certificates of deposit		90,268		5,981		84,287		–
Corporate bonds		1,509,870		–		1,509,870		–
Government agency bonds		278,804		–		278,804		–

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Restructuring initiative

9 Months Ended

Dec. 31, 2013

Restructuring initiative [Abstract]

Restructuring initiative

13. Restructuring initiative:

During the third quarter of fiscal 2014, the Company announced Project Rejuvenate, a $500 million cost savings initiative with a goal of streamlining operations and reducing the Company’s operating cost base.  Project Rejuvenate is focused on three areas: flattening and broadening the organization to reduce layers and increase spans of control, increase the Company’s productivity and profitability by decreasing costs and streamlining work to reduce low value activities.

The Company expects annualized savings of approximately $270 million associated with the streamlining and realigning the R&D organization, $150 million in savings associated with the reduction of marketing expenses and $80 million in cost savings from a reduction in general and administrative expenses.  Forest currently estimates that approximately $110 million of the cost savings will result from a reduction in headcount.  The Company expects to achieve 65%-75% of the cost savings from Project Rejuvenate by the end of fiscal 2015 and the remainder by the end of fiscal 2016.

The Company expects the total cost to implement Project Rejuvenate to be in the range of $150 million to $200 million.  During the three months ended December 31, 2013, Forest recorded $45 million in pre-tax restructuring expenses relating to post-employment benefits.  These expenses were recorded in R&D expense and SG&A expense, as appropriate.

The liability balance for the cost savings initiative as of December 31, 2013 is as follows:

(In thousands)

	December 31, 2013
Beginning Balance as of October 1, 2013	$	–
Charges		45,000
Adjustments		–
Cash Payments		–
Balance	$	45,000

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Business segment information

9 Months Ended

Dec. 31, 2013

Business segment information [Abstract]

Business segment information

9. Business segment information:

The Company operates in only one segment.  Net sales by therapeutic class is as follows:

	Three Months Ended				Nine Months Ended
(In thousands)	December 31,				December 31,
	2013		2012		2013		2012
Central nervous system	$	512,806	$	441,871	$	1,538,579	$	1,479,574
Cardiovascular		136,202		116,429		404,954		345,661
Gastrointestinal		51,044		19,227		114,251		19,227
Respiratory		56,698		29,647		145,085		66,961
Other		90,034		70,793		252,197		210,327
	$	846,784	$	677,967	$	2,455,066	$	2,121,750

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Net income (loss) per share

9 Months Ended

Dec. 31, 2013

Net income (loss) per share [Abstract]

Net income per share

7. Net income (loss) per share:

A reconciliation of shares used in calculating basic and diluted net income per share follows:

(In thousands)

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2013		2012		2013		2012
Basic		269,481		266,018		268,385		266,967
Incremental shares attributable to share
based compensation plans		3,420		–		2,447		–
Diluted		272,901		266,018		270,832		266,967

Options to purchase approximately 1.8 million shares of common stock at exercise prices ranging from $42.61 to $59.05 per share and options to purchase approximately 5.0 million shares of common stock at exercise prices ranging from $35.63 to $59.05 per share were not included in the computation of diluted shares for three and nine-month periods ended December 31, 2013, respectively, because their effect would be anti-dilutive.  These options expire through 2023.  Options to purchase approximately 16.6 million shares at exercise prices ranging from $20.55 to $59.05 per share were not included in the computation of diluted shares for the three and nine-month periods ended December 31, 2012, respectively, because their effect would be anti-dilutive.  The weighted average number of diluted common shares outstanding is reduced by the treasury stock method which, in accordance with the provisions of ASC 718-10 Compensation–Stock Compensation, takes into consideration the compensation cost attributed to future services not yet recognized.

On November 26, 2013, the Board terminated the previously outstanding 50 million share repurchase authorization and authorized the repurchase of up to $1 billion of shares of common stock based on prevailing prices from time to time. The new authorization became effective immediately and has no set expiration date.

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Stockholders' equity

9 Months Ended

Dec. 31, 2013

Stockholders' equity [Abstract]

Stockholders' equity

8. Stockholders’ equity:

Stock based compensation: In August 2013, the Company’s stockholders approved an amendment to the Company’s 2007 Equity Incentive Plan (the 2007 Plan) whereby an additional 28 million shares were authorized to be issued to employees of the Company.  Under the 2007 Plan, as amended, a total of 57 million shares have been authorized to be issued.  The 2007 Plan provides for the granting of incentive and nonqualified stock options, restricted stock, stock appreciation rights and stock equivalent units.  These awards generally vest in three to five years.  Stock options, granted at prices not less than the fair market value of the common stock at the date of the grant, may be exercisable for up to ten years from the date of issuance.  As of December 31, 2013, 30.3 million shares were available for grant under the amended 2007 Plan.  Stock based compensation expense of $24.1 million ($16.3 million net of tax) and $58.6 million ($39.5 million net of tax) was recorded for the three and nine-month periods ended December 31, 2013, respectively.  For the three and nine-month periods ended December 31, 2012, compensation expense of $24.8 million ($17.5 million net of tax) and $53.3 million ($37.9 million net of tax) respectively, was recorded.  This expense is charged to Cost of sales, SG&A expense and R&D expense, as appropriate.

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Income taxes

9 Months Ended

Dec. 31, 2013

Income taxes [Abstract]

Income taxes

10.  Income taxes:

The Company’s income tax returns for fiscal years prior to 2003 in most jurisdictions and prior to 2008 in Ireland are no longer subject to review as such fiscal years are generally closed.  Tax authorities in various jurisdictions are in the process of reviewing the Company’s income tax returns for various post-2002 fiscal years, including the Internal Revenue Service (IRS), which has recently concluded its examination of the Company’s U.S. federal income tax returns for fiscal years 2004, 2005 and 2006.

In connection with that examination, the Company agreed to an assessment related to intercompany transfer pricing.  Such assessment resulted in additional U.S. federal and state corporation tax within previously established tax reserves and did not have a material impact on the Company’s results of operations.

Fiscal years 2007, 2008 and 2009 are currently under review by the IRS.  It is unlikely that the outcome will be determined within the next 12 months.  Potential claims for years under review could be material.

The Company’s continuing practice is to recognize net interest related to income tax matters in income tax expense.  For the nine months ended December 31, 2013, the Company accrued an additional $13.2 million in interest for a total of $63.5 million related to the resolution of various income tax matters.

Our effective tax rate was 19.5% and 26.9% for the three and nine-month periods ended December 31, 2013, respectively, as compared to 16.6% and (2.5%) for the same periods last year.  The increase in the current three and nine-month periods compared to last year was primarily due to a change in the mix of earnings by jurisdiction, the expiration of the U.S. Research & Experimentation Tax Credit as of December 31, 2013, the write-off of a note receivable related to the termination of the Nabriva development program, partially offset by the impact of Project Rejuvenate.

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Net income (loss) per share (Details) (USD $) In Billions, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Reconciliation of shares used in calculating basic and diluted net income per share [Abstract]
Basic (in shares)	269,481,000	266,018,000	268,385,000	266,967,000
Incremental shares attributable to share based compensation plans (in shares)	3,420,000	0	2,447,000	0
Diluted (in shares)	272,901,000	266,018,000	270,832,000	266,967,000
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Number of shares authorized to repurchase under previous plan (in shares)	50,000,000		50,000,000
Stock repurchase amount authorized	$ 1
Anti-Dilutive Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive options to purchase common stock outstanding during the period (in shares)	1,800,000	16,600,000	5,000,000	16,600,000
Exercise price range, lower range limit (in dollars per shares)	$ 42.61	$ 20.55	$ 35.63	$ 20.55
Exercise price range, upper range limit (in dollars per share)	$ 59.05	$ 59.05	$ 59.05	$ 59.05
Contract Expiration			Dec. 31, 2023

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Accounts receivable (Tables)

9 Months Ended

Dec. 31, 2013

Accounts receivable [Abstract]

Accounts receivable

Accounts receivable, net, consist of the following:

(In thousands)

	December 31, 2013		March 31, 2013
Trade	$	312,008	$	403,331
Other		57,873		74,701
	$	369,881	$	478,032

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Net income (loss) per share (Tables)

9 Months Ended

Dec. 31, 2013

Net income (loss) per share [Abstract]

Reconciliation of shares used in calculating basic and diluted net income per share

A reconciliation of shares used in calculating basic and diluted net income per share follows:

(In thousands)

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2013		2012		2013		2012
Basic		269,481		266,018		268,385		266,967
Incremental shares attributable to share
based compensation plans		3,420		–		2,447		–
Diluted		272,901		266,018		270,832		266,967

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Subsequent events (Details) (USD $)			0 Months Ended		0 Months Ended
	Dec. 31, 2013	Mar. 31, 2013	Jan. 07, 2014 Subsequent Event [Member] Aptalis Pharmaceutical [Member]	Jan. 31, 2014 Subsequent Event [Member] Aptalis Pharmaceutical [Member]	Jan. 31, 2014 Subsequent Event [Member] Aptalis Pharmaceutical [Member] 4.375% senior unsecured notes due 2019 [Member]	Jan. 31, 2014 Subsequent Event [Member] Aptalis Pharmaceutical [Member] 4.875% senior unsecured notes due 2021 [Member]
Subsequent Event [Line Items]
Date of definitive agreement			Jan. 07, 2014
Acquiring costs			$ 2,900,000,000
Common stock, par value (in dollars per share)	$ 0.10	$ 0.10	$ 0.001
Cash on hand				1,200,000,000
Business acquisition funded through cash from foreign subsidiary				650,000,000
Issuance of aggregate principal senior unsecured notes				$ 1,800,000,000	$ 1,050,000,000	$ 750,000,000
Stated interest rate of unsecured senior notes (in hundredths)					4.375%	4.875%
Maturity date of senior notes					Feb. 01, 2019	Feb. 15, 2021

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Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) [Abstract]
Net income (loss)	$ 17,961	$ (153,608)	$ 111,226	$ (77,546)
Other comprehensive income (loss):
Foreign currency translation gains (losses)	2,946	2,933	8,997	(3,569)
Pension liability adjustment, net of tax	0	108	(1,444)	3,468
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period, net of tax	269	3,937	(13,782)	4,732
Other comprehensive income (loss)	3,215	6,978	(6,229)	4,631
Comprehensive income (loss)	$ 21,176	$ (146,630)	$ 104,997	$ (72,915)

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Fair value measurements

9 Months Ended

Dec. 31, 2013

Fair value measurements [Abstract]

Fair value measurements

4. Fair value measurements:

The following table presents the levels within the fair value hierarchy at which the Company’s financial assets are carried at fair value and measured on a recurring basis:

(In thousands)
Description	Fair value at December 31, 2013		Quoted prices in active markets for identical assets (Level 1)		Significant other observable market inputs (Level 2)		Unobservable market inputs (Level 3)
Money market accounts	$	1,329,814	$	1,329,814	$	–	$	–
Municipal bonds and notes		12,484		–		12,484		–
Commercial paper		483,082		2,850		480,232		–
Variable rate demand notes		33,970		–		33,970		–
Auction rate securities		3,198		–		–		3,198
Certificates of deposit		73,443		–		73,443		–
Corporate bonds		1,661,037		–		1,661,037		–
Government agency bonds		246,091		–		246,091		–

Description	Fair value at March 31, 2013		Quoted prices in active markets for identical assets (Level 1)		Significant other observable market inputs (Level 2)		Unobservable market inputs (Level 3)
Money market accounts	$	818,474	$	818,474	$	–	$	–
Municipal bonds and notes		46,877		–		46,877		–
Commercial paper		168,639		31,815		136,824		–
Variable rate demand notes		1,500		–		1,500		–
Auction rate securities		3,198		–		–		3,198
Certificates of deposit		90,268		5,981		84,287		–
Corporate bonds		1,509,870		–		1,509,870		–
Government agency bonds		278,804		–		278,804		–

The Company determines fair value based on a market approach using quoted market values, significant other observable inputs for identical or comparable assets or liabilities, or discounted cash flow analyses. The Company determines the value of its auction rate securities portfolio based upon a discounted cash flow model.  The assumptions used in the valuation model include estimates for interest rates, timing and amount of cash flows, and expected holding periods for the auction rate securities.

There were no purchases or sales of Level 3 investments during the three and nine-month periods ended December 31, 2013.

The Company also issued long-term debt with a carrying value of $1.2 billion during the three months ended December 31, 2013.  See Note 12 for further information.

The majority of the Company’s non-financial assets and liabilities are not required to be carried at fair value on a recurring basis.  However, the Company is required on a non-recurring basis to use fair value measurements when assessing asset impairment as it relates to goodwill, license agreements, product rights, other intangible assets and other long-lived assets.  The carrying amount of cash, accounts receivable and accounts payable and other short-term financial instruments approximate their fair value due to their short-term nature.

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Business segment information (Tables)

9 Months Ended

Dec. 31, 2013

Business segment information [Abstract]

Net sales by therapeutic class

Net sales by therapeutic class is as follows:

	Three Months Ended				Nine Months Ended
(In thousands)	December 31,				December 31,
	2013		2012		2013		2012
Central nervous system	$	512,806	$	441,871	$	1,538,579	$	1,479,574
Cardiovascular		136,202		116,429		404,954		345,661
Gastrointestinal		51,044		19,227		114,251		19,227
Respiratory		56,698		29,647		145,085		66,961
Other		90,034		70,793		252,197		210,327
	$	846,784	$	677,967	$	2,455,066	$	2,121,750

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Contingencies (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Dec. 31, 2013 Case Lawsuits Action State Entity
Contingencies [Abstract]
Number of federal actions filed against the Company on behalf of individuals who purchased Celexa and/or Lexapro for pediatric use	3
Number of federal actions filed as putative nationwide class actions	2
Number of federal actions filed as putative California-wide class action	1
Number of action filed by plaintiffs as an amended complaint	2
Number of states in which plaintiffs moved for class certification	3
Number of actions filed against the company as defendant pending in the Missouri Circuit Court	2
Number of entities that brought action against the company who purchased or reimbursed certain purchases of Celexa or Lexapro	2
Number of product liability lawsuits filed against the Company	195
Number of active product liability lawsuits alleging Celexa or Lexparo caused or contributed to individuals committing or attempting suicide	13
Number of cases remanded to the federal district courts	12
Number of cases set for trial in Cole County Circuit Court in Missouri	2
Number of cases pending in the U.S. District court for the District of New Jersey	19
Number of cases pending in Orange County	1
Product liability coverage	$ 140

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Subsequent events

9 Months Ended

Dec. 31, 2013

Subsequent events [Abstract]

Subsequent events

14. Subsequent events:

Aptalis acquisition

On January 7, 2014, Forest Laboratories, Inc. (FLI), FRX Churchill Holdings, Inc., a wholly owned subsidiary of FLI (Holdings), FRX Churchill Sub, LLC, a wholly owned subsidiary of Holdings (Merger Sub), and Aptalis Holdings, Inc. (Aptalis), entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which the Company would acquire Aptalis for $2.9 billion minus Aptalis’ existing indebtedness and related fees and costs, minus certain of Aptalis’ expenses, plus the aggregate exercise price applicable to Aptalis’ outstanding options immediately prior to the effective time of the Aptalis Acquisition (the “Effective Time”) and plus certain cash amounts, all as further described in the Merger Agreement.  On January 31, 2014, pursuant to the terms of the Merger Agreement, Merger Sub merged with and into Aptalis, with Aptalis continuing as the surviving corporation and indirect wholly owned subsidiary of Holdings (the “Merger”).  The Company funded the Merger using $1.2 billion of cash on hand, including $650.0 million in cash from a foreign subsidiary, and the proceeds from the issuance of aggregate principal $1.8 billion of Senior Notes on January 31, 2014.

Upon the effectiveness of the Merger, each share of Aptalis common stock, par value $0.001 per share, issued and outstanding immediately prior to the Effective Time, other than any dissenting shares and any shares held by Aptalis, Holdings or any of their respective subsidiaries, was converted into the right to receive its pro rata share (the “Per Share Merger Consideration”), without interest and less applicable income or employment tax withholding, of an aggregate purchase price equal to $2.9 billion, minus Aptalis’ existing indebtedness and related fees and costs, minus certain of Aptalis’ expenses, plus the aggregate exercise price applicable to Aptalis’ outstanding options immediately prior to the Effective Time and plus certain cash amounts, all as further described in the Merger Agreement.

Aptalis is an international, specialty pharmaceutical company that focuses on developing, manufacturing, licensing and marketing therapies for certain cystic fibrosis- and gastrointestinal -related disorders.  Aptalis’ business focuses on therapeutic areas that are currently underserved by large pharmaceutical companies and are characterized by products used for chronic conditions. Aptalis has manufacturing and commercial operations in the U.S., Europe and Canada, and its products include Zenpep®, Canasa®, Carafate®, Pylera®, Rectiv®, Viokace®, Ultresa®, Lacteol®, Delursan®, Panzytrat® and Salofalk®.  Aptalis also formulates and develops enhanced pharmaceutical and biopharmaceutical products through the use of its proprietary technology platforms.

With this acquisition, the Company gained numerous strategic benefits, including an increased presence both domestically and internationally, expansion of its key therapeutic areas and customer base, a positive impact on its financial condition in the current period and moving forward and an opportunity to realize greater efficiencies in its operations.

The acquisition of Aptalis had no impact on the Company’s Condensed Consolidated Financial Statements as of and for the periods ended December 31, 2013 and 2012.  The preparation of the closing balance sheet for Aptalis is currently underway and the Company will perform valuation procedures to determine the fair value of assets acquired and liabilities assumed upon completion of the closing balance sheet. As such, the information necessary to determine the fair value of assets acquired and liabilities assumed is not yet available.

 $1.8 billion aggregate principal senior unsecured notes

In conjunction with the acquisition of Aptalis, the Company issued a private placement offering of $1.8 billion aggregate principal amount of senior unsecured notes on January 31, 2014 to fund the acquisition.  This comprised of $1.05 billion aggregate principal amount of its 4.375% senior unsecured notes due 2019 and $750 million aggregate principal amount of its 4.875% senior unsecured notes due 2021.