-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H6hFAQeHreJ5VOFjYtz61ejmJETwE/kMWzJ1drL06TssXZPvBUJymfP35DD/y8kN n013DoBKw6jF9Qs690PXjw== 0000898432-02-000481.txt : 20020719 0000898432-02-000481.hdr.sgml : 20020719 20020719134312 ACCESSION NUMBER: 0000898432-02-000481 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010929 FILED AS OF DATE: 20020719 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PHARMACEUTICAL RESOURCES INC CENTRAL INDEX KEY: 0000878088 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 223122182 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-10827 FILM NUMBER: 02706438 BUSINESS ADDRESS: STREET 1: ONE RAM RIDGE RD CITY: SPRING VALLEY STATE: NY ZIP: 10977 BUSINESS PHONE: 9144257100 MAIL ADDRESS: STREET 1: ONE RAM RIDGE RD CITY: SPRING VALLEY STATE: NY ZIP: 10977 10-Q/A 1 tenqa.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- FORM 10-Q/A Amendment No. 3 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 29, 2001 Commission File Number 1-10827 PHARMACEUTICAL RESOURCES, INC. (Exact name of registrant as specified in its charter) NEW JERSEY 22-3122182 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) One Ram Ridge Road, Spring Valley, New York 10977 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (845) 425-7100 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 twelve 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_____ 32,016,652 Number of shares of Common Stock outstanding as of November 7, 2001 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ------ -------------------------------- (a) Exhibits: 10.40 License and Supply Agreement, dated as of April 26, 2001, between Elan Transdermal Technologies, Inc. and Par Pharmaceutical, Inc.* 10.41 Development and Supply Agreement, dated as of April 17, 2001, between Par Pharmaceutical, Inc., Dr. Reddy's Laboratories Limited, and Reddy-Cheminor, Inc.* * Exhibits 10.40 and 10.41 were previously attached to our Quarterly Report on Form 10-Q for the three months ended September 29, 2001, as amended by our Form 10-Q/A. Pursuant to a confidential treatment request filed with the Securities and Exchange Commission, certain portions of Exhibits 10.40 and 10.41 were omitted in our prior filing. The current filing reflects the Securities and Exchange Commission's decision regarding our confidential treatment request. SIGNATURE 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. PHARMACEUTICAL RESOURCES, INC. ------------------------------ Registrant) July 19, 2002 /s/ Kenneth I. Sawyer ----------------------------------------- Kenneth I. Sawyer Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer) July 19, 2002 /s/ Dennis J. O'Connor --------------------------------------- Dennis J. O'Connor Vice President - Chief Financial Officer and Secretary (Principal Accounting and Financial Officer) EX-10 3 exhibit10-40.txt EXHIBIT 10.40 EXHIBIT 10.40 EXECUTION COPY Dated April 26, 2001 ELAN TRANSDERMAL TECHNOLOGIES, INC. AND PAR PHARMACEUTICAL, INC. LICENSE AND SUPPLY AGREEMENT CONTENTS Clause I Preliminary Clause 2 The License Clause 3 Intellectual Property Clause 4 Competing Products Clause 5 Registration Of The Product Clause 6 Marketing And Promotion Of The Product Clause 7 Supply Of The Product Clause 8 Financial Provisions Clause 9 Payments, Reports And Audits Clause 10 Duration And Termination Clause 11 Warranty And Indemnity Clause 12 Customer Complaints, Product Recall And Insurance Clause 13 Miscellaneous Provisions Schedule 1 Product Schedule 2 Product Manufacturing Cost Schedule 3 Complaint Handling Procedures 2 THIS AGREEMENT is made on April 26, 2001. BETWEEN: (1) ELAN TRANSDERMAL TECHNOLOGIES, INC., a company organized under the laws of Florida, with offices at 3250 Commerce Parkway, Miramar, Florida 33025, United States of America ("Elan"); and (2) PAR PHARMACEUTICAL, INC., a company organized under the laws of New Jersey, with offices at One Ram Ridge Road, Spring Valley, New York 10977, United States of America ("Par"). RECITALS: A. Elan is beneficially entitled to the use of various information, including the Elan Know-How, in relation to the development and production of drug specific dosage forms for pharmaceutical products and processes. B. Elan is knowledgeable in the development of drug specific oral and transdermal dosage forms and has developed a unique range of delivery systems designed to provide newer and better formulations of medicaments. C. Elan is prepared to grant Par an exclusive license of the Elan Know-How to package, import, use, offer for sale and sell the Product in the Territory and to supply the Product to Par. D. Elan and Par are desirous of entering into an agreement to give effect to the arrangements described at Recital C. NOW IT IS HEREBY AGREED AS FOLLOWS: CLAUSE 1 - PRELIMINARY 1.1. DEFINITIONS: In this Agreement unless the context otherwise requires: AB RATEABLE shall have the meaning as defined and accepted by the FDA. AFFILIATE shall mean any corporation or entity controlling or controlled or under common control with Elan or Par, as the case may be. For the purposes of this Agreement, "control" shall mean the direct or indirect ownership of more than 50% of the issued voting shares or other voting rights of the subject entity to elect directors. cGCP, cGMP, cGLP shall mean respectively current Good Clinical Practice, current Good Manufacturing Practice and current Good Laboratory Practice as defined in the US Federal Food, Drug and Cosmetic Act and the regulations promulgated thereunder, as may be amended from time to time. 3 CFR shall mean the US Code of Federal Regulations 21, as amended from time to time. CMC SECTION shall mean the chemistry, manufacturing, and controls section of the Regulatory Filing, as defined in the CFR, as may be amended from time to time, and/or its equivalent in other Regulatory Filings. COMPETING PRODUCT shall mean a product AB Rateable to the Product, but shall exclude Clonidine marketed by Boehringer Ingelheim. DATE FOR LAUNCH shall mean the date on which Par is obliged to effect full commercial launch of the Product in the Territory pursuant to Clause 6.7. DMF shall mean Drug Master File, as defined in the CFR. EFFECTIVE DATE shall mean the date on which this Agreement is signed by the last of the Parties to do so. ELAN shall mean Elan Transdermal Technologies, Inc. and Affiliates and subsidiaries of Elan Corporation, plc. within the division of Elan Corporation, plc. carrying on business as Elan Pharmaceutical Technologies. For the avoidance of doubt, "Elan" shall exclude the Excluded Entities. ELAN KNOW-HOW shall mean all knowledge, information, trade secrets, data and expertise which is not generally known to the public, owned by Elan, or to which Elan has rights under the terms of a license or licenses in force on the Effective Date which permit(s) disclosure of same to Par relating to the Product, whether or not covered by any patent, copyright, design patent, trademark, trade secret or other industrial or any intellectual property rights. In the event that Elan acquires or merges with a third party entity, Elan Know-How shall not include any know-how to the extent that such know-how relates to a product containing the same active ingredient as the Product which has been approved for marketing or is in development by the said third party entity at the time of such acquisition or merger. For the avoidance of doubt, the occurrence of any such acquisition or merger shall not affect the license of the Elan Know-How granted to Par hereunder. EXCLUDED ENTITIES shall mean The Liposome Company, Inc. and its subsidiaries; Athena Neurosciences Finance LLC; Axogen Limited and Neuralab Limited; Dura Pharmaceuticals, Inc. and its subsidiaries; Elan Pharmaceuticals Research Corporation and its subsidiaries; and Affiliates (present or future) of Elan Corporation, plc. within the division of Elan Corporation, plc. carrying on business as Elan Pharmaceuticals which incorporates, inter alia, EPIL (only to the extent that it is the owner of patents, know-how or other intellectual property or technology invented and/or developed within the division of Elan Corp carrying on business as Elan Pharmaceuticals), Athena Diagnostics, Inc., Athena Neurosciences, Inc., Elan Diagnostics, Inc., Elan Pharmaceuticals, Inc. and Elan Europe Limited and its subsidiaries. 4 FDA shall mean the United States Food and Drug Administration or any other successor agency whose approval is necessary to market the Product in the Territory. FDA APPROVAL shall mean the final approval to market the Product in the Territory (notwithstanding that such approval may be subject to expiration of the 30 month Waxman Hatch patent stay) including post approval validation and scale up inspection and any other approval which is required to launch the Product in the normal course of business. FOB shall have the same meaning as such term is defined in the ICC Incoterms, 1990, International Rules for the Interpretation of Trade Terms, ICC Publication No. 460. FIRST COMMERCIAL SALE shall mean the first sale under this Agreement in an arm's length transaction to an independent third party. Par will provide Elan with written notice of the date of the same. IN MARKET shall mean the sale of the Product in the Territory by Par or its Affiliates, or where applicable by a permitted sub-licensee or distributor, to an unaffiliated third party, including but not limited to a wholesaler, chain store, distributor, managed care organization, hospital or pharmacy. LAUNCH STOCKS shall mean [****************]. MARKETING COMMITTEE shall have the meaning set forth in Clause 6.1. NET SALES PRICE ("NSP") shall mean in the case of Product sold by Par or an Affiliate or a permitted sub-licensee, that sum determined by deducting from the aggregate gross [***************] proceeds billed for the Product by Par or, its Affiliate or a permitted sub-licensee, as the case may be, in accordance with Elan's standard accounting principles, a maximum deduction of [***************] to cover the following: (a) customs duties or other taxes (excluding income or corporation tax), directly related to the sale of the Product which are paid by Par or its Affiliate or permitted sub-licensees as the case may be; (b) a discount from the gross sales proceeds to cover such normal costs as are incurred by Par or its Affiliates or permitted sub-licensees, as the case may be, in respect of transport, shipping insurance, returns, discounts or expenses rebates directly related to the sale of the Product. PAR shall mean Par Pharmaceutical, Inc. and any of its Affiliates. PAR TRADEMARK shall mean the trademark(s) of Par to be applied to the Product. PARTY shall mean Elan or Par as the case may be. Parties shall mean Elan and Par. PRODUCT shall mean [****************]. 5 PRODUCT MANUFACTURING COST shall mean [****************]. PRODUCT SPECIFICATIONS shall mean the specifications set forth in the Regulatory Filings, the specifications set forth in the Agreement, and such specifications as may from time to time be established by the applicable regulatory authorities, including without limitation, cGCPs, cGMPs and cGLPs, and such additional specifications for the Product as may be agreed by the Parties in writing. PROFIT shall mean [****************]. REGULATORY FILING shall include, but shall not be limited to, an abbreviated new drug application ("ANDA"), a new drug application ("NDA") or any other application acceptable to the FDA for marketing approval for the Product, which Elan will file in the Territory, including any supplements or amendments thereto. TECHNOLOGICAL COMPETITOR shall mean a company or corporation having a substantial part of its business in the oral or transdermal drug delivery, research, development and manufacturing areas of the pharmaceutical industry, with a market capitalization of at least $100 million, in the case of a publicly-held company, or at least $75 million of annual revenues, in the case of a privately-held company. TERRITORY shall mean the United States of America, its territories and possessions. $ shall mean United States Dollars. US OR USA shall mean the United States of America. 1.2. Interpretation: In this Agreement: 1.2.1. the singular includes the plural and vice versa, the masculine includes the feminine and vice versa and references to natural persons include corporate bodies, partnerships and vice versa. 1.2.2. any reference to a Clause or Schedule, unless otherwise specifically provided, shall be respectively to a Clause or Schedule of this Agreement. 1.2.3. the headings of this Agreement are for ease of reference only and shall not affect its construction or interpretation. CLAUSE 2 - THE LICENSE 2.1. LICENSE TO PAR: 2.1.1. Subject to the terms of this Agreement, Elan hereby grants to Par and Par hereby accepts for the term of this Agreement an exclusive license of the Elan Know-How to package, use, offer for sale and sell the Product in the Territory. 6 2.1.2. Elan shall possess all rights including, without limitation, the right to research, develop, experiment with, manufacture, sell, license or otherwise market the Product outside the Territory. 2.2. Sub-licensing by Par: 2.2.1. Par shall be entitled, subject to the prior written consent of Elan, which shall not be unreasonably withheld or delayed, to grant sub-licenses to package, import, use, offer for sale and sell the Product in the Territory, provided that Par shall not grant a sub-license to a Technological Competitor of Elan. 2.2.2. Any sub-license granted hereunder shall be in the same terms mutatis mutandis as the terms of this Agreement insofar as they are applicable, but excluding the right to grant a sub-license. 2.2.3. For the avoidance of doubt, Par shall ensure that Elan shall have the same rights of audit and inspection vis-a-vis a sub-licensee, as Elan has pursuant to this Agreement concerning Par. 2.2.4. Par shall be liable to Elan for all acts and omissions of any sub-licensee as though such acts and omissions were by Par and Par shall provide the indemnity to Elan outlined in Clause 11.7. 2.2.5. Where a sub-license has been granted under Clause 2.2.1, such sub-license shall automatically terminate if this Agreement terminates for the country or countries covered by the sub-license. 2.2.6. Par shall undertake to protect the confidentiality of Elan's formulation, engineering and manufacturing processes for the Product in its dealings with permitted sub-licensees and shall not disclose any information from the CMC Section and/or the DMF, as applicable, to any third party, including a permitted sub-licensee, without the prior written consent of Elan, which consent shall not be unreasonably withheld or delayed. Par shall include confidentiality provisions in any permitted sub-license with the same obligations as are set out in the confidentiality provisions of this Agreement. 2.2.7. For the avoidance of doubt: (1) the parties agree that any sub-license granted pursuant to this Clause 2.2 shall not be capable of surviving the termination of this Agreement; and (2) In Market sales of the Product by the sub-licensee shall be included in calculating NSP for the purposes of this Agreement. 7 CLAUSE 3 - INTELLECTUAL PROPERTY 3.1. OWNERSHIP OF ELAN KNOW-HOW: 3.1.1. Elan shall remain the sole owner of the Elan Know-How. 3.1.2. Elan shall be entitled to use the Elan Know-How, and all technical and clinical data whether generated by Elan or Par pursuant to this Agreement in connection with Elan's other commercial arrangements outside the Territory and, following termination of this Agreement, in the Territory. 3.2. INFRINGEMENTS 3.2.1. Par and Elan shall promptly inform the other in writing of any alleged infringement of which it shall become aware by the Product of a third party's patent rights ("Defense Infringement") or of any alleged infringement by a third party of any rights within the Elan Know-How ("Enforcement Infringement"). The Party with such knowledge shall provide the other Party with any available evidence of alleged infringement. Elan shall thereafter be entitled to conduct the defense of such claim (in its own name and/or that of Par) or, as the case may be, to institute and carry on proceedings (in its own name and/or that of Par) to prevent or cease any infringement or unauthorized use. In the event that Elan decides in writing that it does not wish to institute such enforcement proceedings, or as the case may be conduct such defense, Par may at its option elect to do so instead of Elan. 3.2.2. In the event of any alleged Defense Infringement, Elan and Par shall share equally the cost of any patent review. If such third party institutes proceedings against Par and/or Elan jointly or separately, the Parties shall share equally the litigation expenses in defending such an action (including the reasonable legal costs and expenses incurred by a Party who elects to have separate legal representation), including reasonable attorney fees, experts' fees, etc. 3.2.3. Par shall bear all and any liability to one or more third parties for patent infringement (including a court order for a lump sum, ongoing royalties or a settlement) and shall indemnify and keep indemnified Elan against any claim or order made against Par or Elan in respect of the same. 3.2.4. In each case where only one of the Parties ("THE LITIGATING PARTY") is a party to proceedings, whether in respect of an alleged Enforcement Infringement or an alleged Defense Infringement, the litigating party shall provide to the other Party ("THE NON-LITIGATING PARTY"): (i) updates as to its progress on a regular basis; and (ii) such other information concerning the litigation as the non-litigating party may reasonably request, subject always to the non-litigating party having provided undertakings as to confidentiality and the non-waiver of privilege to the reasonable satisfaction of the litigating party. PROVIDED THAT the litigating party shall be under no obligation to disclose to the non-litigating party any advice of outside attorneys. Furthermore the litigating party shall 8 discuss litigation strategy at reasonable times with the non-litigating party (but shall not be bound to follow any recommendation of the non-litigating party) and shall keep the non-litigating party informed of any actual or proposed change in outside counsel used in respect of the said litigation. 3.2.5. The non-litigating party shall provide all reasonable co-operation in the litigation, including without limitation Product technical expertise to the other Party to support any Defense Infringement litigation or Enforcement Infringement litigation (including complying with requests for orders for discovery and depositions). Any expenses incurred by Elan or Par in providing such Product technical expertise shall be included in the total patent review and legal expenses, in accordance with Clause 3.2.2. 3.2.6. Costs which are shared pursuant to this Clause 3.2 shall be paid in the first instance by Elan. Par shall pay its share of such costs to Elan as and when sufficient Profit becomes available to it to discharge such share PROVIDED THAT in the event of (i) the termination of this Agreement, howsoever arising; or (ii) Par not having effected full scale commercial launch of the Product in the Territory on or before the Date For Launch (whether or not Elan exercises its right of termination in respect of the same), the entire balance of Par's share of such costs shall become immediately due and payable. 3.2.7. Elan confirms that to the best of its knowledge and belief, the Product does not infringe patent number [****************] as listed in the Orange Book. 3.3. TRADEMARKS 3.3.1. Par may market, sell and/or distribute the Product under any trademark or trademarks and trade dress as Par or its customers may from time to time select. Such trademarks shall remain the sole property of Par or its customers as the case may be, and Elan shall not use any such trademark(s) whether during the term or thereafter, without the prior written consent of Par. 3.3.2. For the term of this Agreement Par shall grant Elan a royalty-free license to the applicable Par Trademarks solely to enable Elan to fulfill its obligations pursuant to the terms of this Agreement. CLAUSE 4 - COMPETING PRODUCTS Par shall not develop, market or sell any Competing Product in the Territory during the term of the Agreement (and for one year after the termination of this Agreement if the Agreement is terminated due to Par's default of its obligations hereunder beyond any applicable cure period). CLAUSE 5 - REGISTRATION OF THE PRODUCT 5.1. Elan shall be responsible for the compilation and filing of the Regulatory Filings in respect of the Product with the FDA and shall be 9 the holder of any FDA Approvals granted for the Product and the Party principally responsible for interaction with the FDA. 5.2. Elan shall notify Par of the date of submission of any Regulatory Filing for the Product in the Territory and shall also notify Par in writing of the FDA Approval as soon as is reasonably possible following said FDA Approval. Elan shall notify Par in writing as soon as possible of any notification received by Elan from the FDA to conduct an inspection of its manufacturing, clinical or other facilities as directly related to the Product. Copies of all correspondence with the FDA with respect to the Product post its acceptance for filing shall be provided to the other Party; such correspondence shall be subject to redaction by Elan to the extent that such correspondence relates to the confidential portions of the CMC Section relating to formulation and manufacturing processes. On or after the date of First Commercial Sale, Elan shall provide Par with a status update with regard to any audit or inspection conducted by FDA which relates directly to the Product. 5.3. Par shall be responsible for obtaining all applicable state and local regulatory approvals for the distribution of the Product in the Territory. Elan shall co-operate with Par in obtaining such approvals. 5.4. It is hereby acknowledged that there are inherent uncertainties involved in the registration of pharmaceutical products with the FDA in relation to achieving the Product Specifications and obtaining the FDA Approval and such uncertainties form part of the business risk involved in undertaking the form of commercial collaboration outlined in this Agreement. CLAUSE 6 - MARKETING AND PROMOTION OF THE PRODUCT 6.1. No later than January 2002 the Parties shall establish a Marketing Committee consisting of at least one representative from each Party who shall act as liaison between the Parties to ensure that Elan is up to date on the prevailing market conditions and Par's efforts at marketing and selling the Product. Within 90 days of the Regulatory Filing in the Territory with respect to the Product, Par will outline to Elan the structure of the promotional activities to be carried out by Par for the period up to the First Commercial Sale of the Product and for a period of I year thereafter. Par shall both prior to and subsequent to the launch of the Product communicate with Elan regarding its objectives for and performance of such Product in the Territory. At such meetings, Par shall report on the ongoing sales performance of the Product in the Territory, including marketing approaches, educational campaigns, promotional and advertising materials and campaigns, sales plans and results, performance against competitors, its objectives for the Product and its plans for the next year of the Agreement. In addition the Marketing Committee shall review the quarterly royalty statements. 6.2. Unless otherwise agreed by the Parties, the Marketing Committee shall meet at least once each calendar quarter, such meetings to continue until 2 years after launch of the last Product or such later time as may be agreed. Thereafter, the Parties shall meet on an annual basis. The Marketing Committee shall meet alternately at the offices of Elan 10 and Par or as otherwise agreed by the Parties. Each Party shall bear the cost of its own travel expenses. 6.3. Par shall control and shall be responsible for all decisions regarding the pricing policies and strategies with respect to the marketing and sales of the Product. Par shall control the format of the promotional campaign to be submitted to the FDA, but shall inform Elan thereof and provide to Elan a copy of each such promotional material for submission, at latest concurrent with its submission to the FDA. Par shall use reasonable efforts to obtain approval by the FDA of the promotional campaign for the Product and will provide to Elan any FDA correspondence thereto. 6.4. Par shall use reasonable efforts consistent with its normal business practices to market and promote the Product throughout the Territory to all appropriate classes of trade and in doing so, shall use the same level of effort as with other similar products of similar sales potential which it markets. 6.5. Par shall submit layout and designs for all trade packaging, cartons and labels and other printed materials to Elan at least 6 months prior to First Commercial Sale of the Product. Elan shall provide label and insert copy in the Regulatory Filing to the FDA in accordance with current FDA requirements. To the extent permitted by law, such materials shall include due acknowledgment that the Product is developed and manufactured by Elan. Such acknowledgment shall take into consideration regulatory requirements and Par's commercial requirements. 6.6. The Party responsible for packaging the Product shall mark or have marked all relevant patent number(s) (if any) on all relevant packaging and labelling of the Product, subject to FDA control and regulations of all packaging copy, or otherwise reasonably communicate to the trade the existence of any patents of Elan for the Territory in such a manner as to ensure compliance with, and enforceability under, applicable laws in the Territory. 6.7. Par shall effect the full scale commercial launch of the Product in the Territory as expeditiously as practical when allowed by law, subject to the receipt of Launch Stocks of the Product, PROVIDED THAT 6.7.1. Par shall not be required to launch the Product during a period in which Par would be at material risk of liability in damages arising from litigation instigated by Boehringer Ingelheim to enforce patent number [****************] as listed in the Orange Book or any equivalent patent; provided that notwithstanding such risk or litigation Par shall effect such launch not later than the later of (a) 3 May 2002; and (b) thirty (30) days after FDA Approval; 6.7.2. Par shall not be required to launch the Product during a period in which Par would be at material risk of liability in damages arising from litigation instigated to enforce any patent other than that numbered [****************] as listed in the Orange Book or any equivalent thereof; and 11 6.7.3. in no circumstances shall Par delay launch solely as a means of reducing the license fees payable under Clause 8.5. 6.8. Par warrants that it shall not use the Product as a "loss leader" in its marketing programs and shall at all times use its reasonable efforts in marketing the Product. CLAUSE 7 - SUPPLY OF THE PRODUCT 7.1. Save as otherwise provided in this Agreement, Elan shall produce and supply to Par on an exclusive basis its entire requirements of the Product for the Territory. Elan shall be the sole and exclusive supplier of the Product to Par in the Territory. Par shall purchase the Product exclusively from Elan in the Territory. 7.2. Elan shall deliver the Product to Par and/or any party designated by Par in proper packaging so as to permit safe storage and transport. 7.3. Product shall be manufactured by Elan in FDA approved manufacturing facilities containing active ingredients listed in the DMF from FDA approved facilities. 7.4. Within 120 days following the submission of the Regulatory Filing to the FDA, Par shall provide Elan with a forecast of Par's requirements for the Product for the 12 month period following the anticipated FDA Approval. The said forecast shall be updated monthly until the date on which Par places a firm order for Launch Stocks. Except as otherwise provided herein, all forecasts made hereunder shall be made to assist Elan in planning its production and Par in planning marketing and sales. Such forecasts shall not be binding purchase orders, and shall be without prejudice to Par's subsequent firm purchase orders for the Product in accordance with the terms of this Agreement. 7.5. The Parties shall negotiate in good faith as to the quantities of Launch Stocks. Par shall place a firm order for Launch Stocks not later than one hundred and fifty (150) days before the date on which it intends to launch the Product. Par shall in any event be responsible for ensuring that it has placed a firm order for Launch Stocks not later than one hundred and fifty (150) days before the Date For Launch (notwithstanding that such date may not be capable of determination at the time for the order). However, for the avoidance of doubt, the Parties hereby confirm that Elan's manufacturing obligations shall only arise on receipt of firm purchase orders. 7.6. Elan shall use its reasonable efforts to deliver the Product to Par within 120 days of the receipt of a firm purchase order therefor (150 days in the case of Launch Stocks). 7.7. Upon placing a firm order for Launch Stocks and on or before the 23rd day of each calendar month thereafter, Par shall provide a rolling 12 month forecast for the period beginning on the first day of the relevant calendar month. The first four calendar months of such 12 months' forecast shall be a binding purchase commitment of Par and shall be formalized by a firm purchase order from Par to Elan. 12 7.8. Elan shall make appropriate manufacturing arrangements in order to be able to supply Par with between 80% and 120% of the rolling annual forecasted requirements provided by Par for the Product. 7.9. Elan will use its reasonable efforts to fulfill Par's requirements in excess of 120% of forecasted amounts, but shall not be obliged to meet such requirements if it is not reasonably practicable to do so provided that Elan shall supply the Product so ordered as soon thereafter as reasonably practicable. 7.10. Elan shall advise Par of a minimum batch size for the manufacture and supply of each dosage strength of Product. 7.11. Save as otherwise agreed between the Parties, delivery of consignments of Product shall be effected by Elan FOB Miramar, Florida, or such other manufacturing facility(ies) designated by Elan and all risks therein shall pass to Par when each such consignment of the Product is loaded onto the vehicle of Par's agent on which it is to be dispatched from the manufacturing facility designated by Elan. 7.12. After receipt of a Product shipment, Par shall visually inspect the Product shipment and communicate rejection of all or part of such shipment as appropriate to Elan in writing. The Parties agree that Par's visual inspection consists of (i) comparing the applicable order against the documentation accompanying the shipment to verify that the delivery date, identity, quantity and exterior shipment labelling comply with the order and (ii) visually inspecting the exterior of the Product shipment to verify that the shipment appears to be in good condition. Elan is to provide Par with a copy of a fully executed Certificate of Analysis for each batch of Product shipped to Par. All claims for failure of any delivery of the Product to conform to Product Specifications under Clause 11 shall be made by Par to Elan in writing within 45 days following delivery except in the case of defects not identifiable upon visual inspection. Claims for defects not discovered during the visual inspection as set out above, shall be made by Par to Elan in writing within 30 days of discovery. Failure to make timely claims in the manner prescribed shall constitute acceptance of the delivery. 7.13. Product which has been delivered and which Par notifies Elan within the period designated in Clause 7.12. does not conform to the Product Specifications shall be replaced at Elan's cost within 90 days of the receipt by Elan of the failed Product except where such non-conformity is due to the negligent acts or omissions of Par. 7.14. In the event of an unresolved dispute as to conformity in all material respects of the Product with Product Specifications, the Parties shall within 30 days appoint an independent laboratory to undertake the relevant testing and its findings shall be conclusive and binding upon the Parties. All costs relating to this process shall be borne solely by the unsuccessful Party. In the event that the Product is shown to have complied with the Product Specifications or that the failure to do so is attributable to the negligent acts or omissions of Par, Par shall promptly pay Elan for the additional Product supplied. 13 CLAUSE 8 - FINANCIAL PROVISIONS 8.1. REGULATORY MANAGEMENT FEE In consideration of Elan's undertaking in Clause 5.1 hereof, Par shall pay to Elan a monthly payment of [************] for each of the next [************] to support required interaction by Elan with FDA for compilation and filing of the Regulatory Filings and regulated management activities, the first of which such payments shall be due on the date of acceptance of Elan's application for Regulatory Filing for the Product by the FDA. 8.2. MILESTONE PAYMENT Par shall pay to Elan a milestone payment of $1,000,000 [one million dollars] upon the grant of FDA Approval, subject to adjustment in accordance with Clause 8.5. 8.3. PRICE OF PRODUCT: 8.3.1. Elan shall supply the Product to Par at Product Manufacturing Cost in accordance with the terms of this Agreement. 8.3.2. Subject to the following paragraph, the Product Manufacturing Cost of the Product may be reviewed by Elan once per annum and may be adjusted for the following calendar year reflecting actual changes in direct manufacturing expenses. Elan shall provide Par with written notice of any such increase in the Product Manufacturing Cost 60 days before the end of each calendar year to take effect in the following calendar year. 8.3.3. Any increases or decreases in the cost of the active ingredient or any other components used in the Product in excess of 3% from the then current base are to be passed on in the Product Manufacturing Cost manufactured from the effective date of use of such active ingredient or any other component. 8.3.4. Payment for all Product delivered from Elan's manufacturing facility to Par shall be effected in U.S. Dollars ($) within thirty (30) days of the date of the delivery of the Product FOB the applicable Elan manufacturing facility. 8.4. ALLOCATION 8.4.1. [****************] 8.4.2. Within four weeks of the end of each calendar quarter, Par shall notify Elan of the NSP of Product for that previous calendar quarter. Payments shown by each calendar quarter report to have accrued but which have not yet been paid shall be included in calculating the NSP for that quarter. 8.4.3. Payment of Profit shall be made once in each calendar quarter within 45 days after the expiry of the relevant calendar quarter. 14 8.4.4. All payments due hereunder shall be made in U.S. Dollars. 8.4.5. In the event that Par or any Affiliate of Par shall sell the Product together with other products of Par to third parties (by the method commonly known in the pharmaceutical industry as "bundling"), Par shall not conduct such bundling in such a manner as to discount the Product at a greater proportion than the other products bundled by Par. 8.5. ADJUSTMENT 8.5.1. In this Clause 8.5: "Period of Exclusivity" means the period (if any) beginning on the Relevant Date and ending on the later of (a) the last day of any period of exclusivity granted to Elan under the terms of the FDA Approval; or (b) the date on which a Competing Product becomes actually available in the market for delivery and onward sale (whether or not exclusivity has been granted under the terms of the FDA Approval for all of such period or at all); and "Relevant Date" means the earlier of (a) the Date For Launch and (b) the date on which Par in fact effects a fall scale commercial launch of the Product in the Territory. 8.5.2. In the event of there being a Period of Exclusivity, in addition to the payments set out above, Par shall pay to Elan additional milestone payments in respect of the period referred to in the first column of the table appearing below equal to the sum in the corresponding second column. For the avoidance of doubt, such payments are cumulative and not alternative, but each shall only be payable where the whole of the period referred to falls within the Period of Exclusivity. ---------------------------- ---------------------------------- PERIOD ADDITIONAL MILESTONE PAYMENT ---------------------------- ---------------------------------- 30 days beginning on the $1,000,000 [one million dollars] Relevant Date ---------------------------- ---------------------------------- 60 days beginning 30 days $1,000,000 [one million dollars] after the Relevant Date ---------------------------- ---------------------------------- 90 days beginning 90 days $1,000,000 [one million dollars] after the Relevant Date ---------------------------- ---------------------------------- 8.5.3. A payment referred to in Clause 8.5.2 shall be due: (a) if the period in question falls within the Period of Exclusivity solely by reason of exclusivity granted to Elan under the terms of the FDA Approval, on the Relevant Date; (b) in each other case, within fourteen (14) days of the last day of the period in question. 15 8.5.4. In the event that there is a Period of Exclusivity, then in addition to the payments due to Elan under Clause 8.5.2, the royalty payable to Elan under Clause 8.4 shall be increased as follows: 8.5.4.1 if the Period of Exclusivity is not less than [****************] days but less than [****************] days in duration, to [****************] for the duration of the Period of Exclusivity (after the end of which such increase shall lapse); 8.5.4.2. if the Period of Exclusivity is not less than [****************] days in duration, to [****************] for the entire term of this Agreement. 8.6. FURTHER ADJUSTMENT 8.6.1. Where in a period in respect of which an additional milestone payment is payable under Clause 8.5.2: (a) Par is unable in all or part of that period to sell the Product by reason of Elan's failure to supply Product confirming to its Specification or at all (other than in circumstances of force majeure as described in Clause 13.5) or by reason of action taken by the FDA to restrain such sale; and (b) such inability to sell causes demonstrable and material harm to Par's commercial interests in respect of the Product - each additional milestone payment paid or payable under Clause 8.5.2 shall be reduced on a pro rata basis (or as the case may be eliminated) having regard to the proportion of the period in respect of which such payment is payable in which the circumstances set out in paragraphs (a) and (b) apply. 8.6.2. For the avoidance of doubt, the reduction or elimination of the additional milestone payment as provided for in Clause 8.6.1 shall be Par's sole remedy in respect of the consequences of the circumstances described in paragraph (a) of that Clause. CLAUSE 9 - PAYMENTS, REPORTS AND AUDITS 9.1. In accordance with its ordinary business practice, Par shall keep true and accurate records of gross sales of the Product, the items deducted from the gross amount in calculating the NSP, the NSP and the royalties payable to Elan under Clause 8. Par shall deliver to Elan a written statement ("the Statement") thereof within 28 days following the end of each calendar quarter, (or any part thereof in the first or last calendar quarter of this Agreement) for such calendar quarter. The Statement shall outline the calculation of the NSP from gross revenues during that calendar quarter, the applicable percentage rate, the units of Product sold, marketing, selling and distribution expenses allocated to the Product and a computation of the sums due to Elan. The Parties' 16 financial officers shall agree upon the precise format of the Statement. 9.2. Any income or other taxes which Par is required by law to pay or withhold on behalf of Elan with respect to royalties and any other monies payable to Elan under this Agreement shall be deducted from the amount of such NSP payments, royalties and other monies due. Par shall furnish Elan with proof of such payments. Any such tax required to be paid or withheld shall be an expense of and borne solely by Elan. Par shall promptly provide Elan with a certificate or other documentary evidence to enable Elan to support a claim for a refund or a foreign tax credit with respect to any such tax so withheld or deducted by Par. The Parties will reasonably co-operate in completing and filing documents required under the provisions of any applicable tax treaty or under any other applicable law, in order to enable Par to make such payments to Elan without any deduction or withholding. 9.3. All payments due hereunder shall be made to the designated bank account of Elan in accordance with such timely written instructions as Elan shall from time to time provide. 9.4. If meetings of the Marketing Committee have ceased, and where Elan so requests, to supplement the information available to Elan at the meetings of the Parties pursuant to Clause 6. 1, Par shall provide Elan with quarterly sales reports outlining the status of the Product in the Territory, including a summary of the market share for each of the Product in their respective market segments. 9.5. For the 90 day period following the close of each calendar year of the Agreement, Elan and Par will, in the event that the other Party reasonably requests such access, provide each other's independent certified accountants (reasonably acceptable to the other Party) with access, during regular business hours and subject to the confidentiality provisions as contained in this Agreement, to such Party's books and records relating to the Product, solely for the purpose of verifying the accuracy and reasonable composition of the calculations hereunder for the calendar year then ended. 9.6. In the event of a discovery of a discrepancy which exceeds 5% of the amount due or charged by a Party for any period, the cost of such audit shall be borne by the audited Party; otherwise, such cost shall be borne by the auditing Party. 9.7. During normal business hours and provided reasonable notice has been furnished by Par, Elan shall make (and where relevant shall procure that Elan's subcontractor shall make) that portion of its manufacturing, testing or storage facility where Product is manufactured, tested or stored, including all record and reference samples relating to the Product available for inspection by Par's duly qualified employee or by the relevant governmental or regulatory authority. The investigation shall be limited to determining whether there is compliance with the Regulatory Filing, cGMP and other requirements of applicable law. 17 CLAUSE 10 - DURATION AND TERMINATION 10.1. This Agreement shall be deemed to have come into force on the Effective Date and, subject to the rights of termination outlined in this Clause 10 will expire on the 15th anniversary of the date of First Commercial Sale of the Product in the Territory. 10.2. In addition to the rights of termination provided for elsewhere in this Agreement, either Party will be entitled forthwith to terminate this Agreement by written notice to the other Party if; 10.2.l. that other Party commits any material breach of any of the provisions of this Agreement, and in the case of a breach capable of remedy, fails to remedy the same within 60 days after receipt of a written notice giving full particulars of the breach and requiring it to be remedied; or 10.2.2. that other Party goes into liquidation (except for the purposes of amalgamation or reconstruction and in such manner that the company resulting therefrom effectively agrees to be bound by or assume the obligations imposed on that other Party under this Agreement); or 10.2.3. an encumbrancer takes possession or a receiver is appointed over any of the property or assets of that other Party; or 10.2.4. any proceedings are filed or commenced by that other Party under bankruptcy, insolvency or debtor relief laws or anything analogous to any of the foregoing under the laws of any jurisdiction occurs in relation to that other Party; or 10.2.5. the other Party fails to promptly secure or renew any material license, registration, permit, authorization or approval for the conduct of its business in any manner contemplated by this Agreement or if any such material license, registration, permit, authorization or approval is revoked or suspended and not reinstated within sixty (60) days; or 10.2.6. an award is made against Elan and/or Par in a patent infringement action (which is not appealed, or is unsuccessfully appealed) so that further development or marketing of the Product is prohibited or becomes economically unviable to Elan and/or Par. 10.3. In further addition to the rights and termination provided for elsewhere in this Agreement, Elan shall be entitled to terminate the license granted to Par under this Agreement for the Territory in the event that: 10.3.1. Par fails to effect the commercial launch of the Product required by Clause 6.7. in accordance with the provisions thereof or fails to place a firm order for Launch Stocks on or before the date required by Clause 7.5; or 10.3.2. Par notifies Elan in writing that it does not wish to commercialize the Product in the Territory. 18 10.3.3. a Technological Competitor of Elan or a company with a Competing Product acquires 20% or more of Par's voting stock or where 20% or more of such company's voting stock is acquired by Par; or 10.3.4. the net price payable to Elan (that is the price of Product and the percentage of Profit) is less than Manufacturing Cost plus 15% for a period of one year; or 10.3.5. if the innovator for such Product acquires more than 20% of Par's voting stock; or 10.3.6. in the event that Par should market any Competing Product in the Territory during the term of this Agreement, Elan shall be entitled to terminate the Agreement. 10.4. In further addition to the rights and termination provided for elsewhere in this Agreement, Par shall be entitled to terminate the Agreement for the Territory in the event that: - 10.4.1. Elan fails to file the Regulatory Filing for such Product within 2 years of the date of this Agreement or FDA Approval is not obtained within 30 months of the date of a Regulatory Filing, unless otherwise extended by the Parties in writing; or 10.4.2. Elan has submitted fraudulent filings to the FDA or has failed to respond to FDA deficiency correspondence as requested by FDA in a timely manner; or 10.4.3. the share of the Net Profits payable to Par is less than 15% of the Product Manufacturing Cost for the said Product for a period of one year. 10.5. Upon exercise of those rights of termination specified in this Clause 10 or elsewhere in this Agreement, this Agreement shall, subject to the provisions of the Agreement which survive the termination of the Agreement, automatically terminate forthwith and be of no further legal force or effect. 10.6. Upon termination of the Agreement by either Party, or upon termination by Elan of the license for the Product, the following shall be the consequences relating to the Product: 10.6.l. any sums that were due from Par to Elan under the provisions of Clause 8 or otherwise howsoever prior to the exercise of the right to terminate this Agreement as set forth herein shall be paid in full within 30 days of termination of this Agreement and Elan shall not be liable to repay to Par any amount of money paid or payable by Par to Elan up to the date of the termination of this Agreement; 10.6.2. all confidentiality provisions set out herein shall remain in full force and effect for a period of 5 years from the date of termination of this Agreement; 10.6.3. all responsibilities and warranties shall insofar as appropriate remain in full force and effect; 10.6.4. the rights of inspection and audit shall continue in force for the period referred to in the relevant provisions of this Agreement; 19 10.6.5. Elan shall be entitled to research, develop and commercialize the Product for its own benefit in the Territory; 10.6.6. Par shall have an ongoing right for a period of six (6) months to sell or otherwise dispose of the stock of any Product on hand as of the date of termination of the Agreement, which such sale shall be subject to Clause 8 and the other applicable terms of this Agreement. 10.7. Elan shall be entitled to use the Elan Know-How, and all technical and clinical data whether generated by Elan or Par pursuant to this Agreement in the Territory following termination of this Agreement. CLAUSE 11 - WARRANTY AND INDEMNITY 11.1. Elan represents and warrants as follows; 11.1.1. Except as set forth in this Clause 11.1.1, that it has the sole, exclusive and unencumbered right to grant the licenses and rights herein granted to Par, and that it has not granted any option, license, right or interest in or to the Elan Know-How to any third party which would conflict with the rights granted by this Agreement. The execution of this Agreement and the full performance and enjoyment of the rights of Par under this Agreement will not breach or in any way be inconsistent with the terms and conditions of any license, contract, understanding or agreement, whether express, implied, written or oral between Elan and any third party; 11.1.2. the Product supplied by Elan to Par under this Agreement will conform to the Product Specifications and regulations governing the conduct of clinical trials and stability requirements; 11.1.3. the Product sold by Elan to Par pursuant hereto shall be of good, merchantable and usable quality, free of defects, and shall not be adulterated or misbranded within the meaning of the US Food, Drug and Cosmetics Act; 11.1.4. Elan's manufacturing facilities conform in all material respects to applicable laws, regulations and approvals governing such facility and are adequate to produce the quantities of the Product contemplated hereby; 11.1.5. to the best of Elan's knowledge, all bulk active ingredient used in the manufacture of the Product shall be manufactured at an FDA-approved manufacturing facility in accordance with cGMP and current Bulk Drug Substances Guidelines, and shall be in compliance with the applicable specifications under the bulk product monograph. 11.2. Par represents and warrants as follows; 11.2.1. Par represents and warrants that it has the sole, exclusive and unencumbered right to enter into this Agreement and that it has not granted any obligations to any third party which 20 would conflict with the terms of this Agreement. The execution of this Agreement and the full performance and enjoyment of the rights of Elan under this Agreement will not breach or in any way be inconsistent with the terms and conditions of any license, contract, understanding or agreement, whether express, implied, written or oral between Par and any third party; and 11.2.2. Par is cognizant in all material respects of all Applicable statutes, ordinances and regulations of the Territory with respect to the handling, packaging, storage, distribution, marketing and sale of the Product including, but not limited to, the U.S. Federal Food, Drug and Cosmetic Act and regulations promulgated thereunder, including cGLP and cGMP and shall conduct such activities in a manner which complies with such statutes, ordinances, regulations and practices; 11.3. Each of Elan and Par represents and warrants to the other that: 11.3.l. it has such permits, licenses and authorizations of governmental or regulatory authorities as are necessary to own its respective properties, conduct its business and consummate the transactions contemplated hereby; and 11.3.2. each of Elan and Par represents and warrants to the other that it is not currently debarred, suspended or otherwise excluded by any United States governmental agency from receiving Federal contracts. 11.4. Except as expressly stated in this Clause 11, all other warranties, conditions and representations, express or implied, statutory or otherwise, including a warranty as to the quality or fitness for any particular purpose of the Product are hereby excluded. 11.5. Par represents and warrants that: 11.5.1. the execution of this Agreement and the full performance of its obligations and rights under this Agreement will not breach or in any way be inconsistent with the terms and conditions of any license, contract, understanding or agreement, whether express, implied, written or oral between Par and any third party; and 11.5.2. it acknowledges and agrees that it shall be a condition to the effectiveness of this Agreement that this Agreement does not require any filings under Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules promulgated thereunder (16 C.F.R. 801.1 et seq.). 11.6. Indemnification 11.6.1. Elan shall indemnify and hold Par and its Affiliates harmless from and against any claim, action, suit, proceeding, loss, liability, damage or expense (including without limitation reasonable attorneys' fees) arising directly or indirectly as a result of Elan's negligent acts or omission or breach of its representations, warranties, covenants or other obligations hereunder; provided, however that Elan shall not be required to indemnify Par with respect to any claim, action, suit, proceeding, loss, liability, damage or expense to the extent arising from or related to Par's breach of its 21 representations, warranties, covenants or other obligations hereunder, or from information supplied by Par to Elan or contained in regulatory filings or correspondence prepared or delivered by Par. 11.6.2. Par shall indemnify and hold Elan harmless from and against any claim, action, suit, proceeding, loss, liability, damage or expense (without limitation reasonable attorneys' fees) arising directly or indirectly as a result of Par's negligent acts or omission or breach of its representations, warranties, covenants or other obligations hereunder, provided; however that Par shall not be required to indemnify Elan with respect to any claim, action, suit, proceeding, loss, liability, damage or expense to the extent arising from or related to Elan's breach of its representations, warranties, covenants or other obligations hereunder, or from information supplied by Elan to Par or contained in regulatory filings or correspondence prepared or delivered by Elan. 11.7. With reference to Clause 2.2.4, Par shall indemnify and hold harmless Elan to the extent that any claims, damages, liabilities, claims, costs or expenses arise out of any such acts or omissions of any sub-licensee. 11.8. As a condition of obtaining an indemnity in the circumstances set out in Clauses 11.6 and/or 11.7, the Party seeking an indemnity shall: 11.8.1. fully and promptly notify the other Party of any claim or proceedings, or threatened claim or proceedings, provided that failure to do so shall not release the indemnifying Party of its obligations under this Clause 11 except to the extent that it is actually prejudiced; 11.8.2. permit the indemnifying Party to take full control of such claim or proceedings; 11.8.3. assist in the investigation and defense of such claim or proceedings; 11.8.4. neither the indemnifying Party or the Party to be indemnified shall compromise or otherwise settle any such claim or proceedings without the prior written consent of the other Party, which consent shall not be unreasonably withheld; and 11.8.5. take all reasonable steps to mitigate any loss or liability in respect of any such claim or proceedings. 11.9. This Clause 11 and the obligations contained herein shall survive termination of this Agreement, whether pursuant to Clause 10 hereof, by expiration of the Term, or otherwise. 11.10. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, ELAN AND PAR SHALL NOT BE LIABLE TO THE OTHER BY REASON OF ANY REPRESENTATION OR WARRANTY, CONDITION OR OTHER TERM OR ANY DUTY OF COMMON LAW, OR UNDER THE EXPRESS TERMS OF THIS AGREEMENT, FOR ANY INDIRECT, SPECIAL, CONSEQUENTIAL, INCIDENTAL OR PUNITIVE LOSS OR DAMAGE (WHETHER FOR LOSS OF PROFITS OR OTHERWISE) AND WHETHER OCCASIONED BY THE NEGLIGENCE OF 22 THE RESPECTIVE PARTIES, THEIR EMPLOYEES OR AGENTS OR OTHERWISE EXCEPT FOR THIRD PARTY PRODUCT LIABILITY CLAIMS. CLAUSE 12 - ADVERSE EVENTS, CUSTOMER COMPLAINTS, PRODUCT RECALLS AND INSURANCE 12.1. Par shall notify Elan promptly of any reports from third parties reported to Par involving any serious and unexpected adverse events resulting from the use of the Product in the Territory. Elan shall notify Par promptly of any reports from third parties reported to Elan involving any serious and unexpected adverse events resulting from the use of the Product outside of the Territory. 12.2. Par and Elan have established a procedure for formal adverse event handling and reporting as set out in Schedule 3. This procedure shall be reviewed by Elan and Par from time to time. It is envisaged that Par shall be responsible for furnishing post-marketing reports to Elan and where applicable, Elan will be responsible for furnishing such reports to the FDA. Par and Elan shall keep each other informed and shall copy the other Party with all communications with the FDA and other relevant regulatory agencies with respect to the Product. 12.3. Par and Elan will establish a procedure for complaint handling and reporting. It is envisaged that Par will have primary responsibility for addressing complaints, however Elan will provide support in addressing responses to technical queries as requested by Par. Par and Elan shall keep each other informed and copy the other party with all communications with the FDA and other relevant regulatory agencies with respect to the Product. 12.4. Subject to and without in any way limiting or altering Elan's statutory duties and obligations as the holder of the ANDA, Elan and Par shall consult when reviewing whether or not to perform a recall of Product and if so, the extent and method of such recall in the Territory. 12.5. In the event of any recall of the Product, as suggested or requested by any governmental authority: 12.5.1. Par shall perform the recall of the Product in the Territory; 12.5.2. if the recall arises from Par's acts or omissions in the transportation, storage, distribution, marketing or sale of the Product, the recall costs shall be borne by Par; 12.5.3. if the recall arises from Elan's acts or omissions in the manufacturing and packaging of the Product, the recall costs shall be borne by Elan. In such event, Elan shall be entitled but not obliged to take over and perform the recall of the Product and Par shall provide Elan at no cost with all such reasonable assistance as may be required by Elan; and 23 12.5.4. if the recall arises from any other reason than set out above, the recall costs shall be borne by Elan and Par in proportion to the percentage of Profit allocated to the Parties for such Product. 12.6. Par and Elan shall each maintain in force, during the term of this Agreement, products liability insurance coverage in minimum limits of $10,000,000 and, upon request, each Party shall furnish to the other a Certificate of Insurance; provided, however to so request such Certificate shall not be deemed a waiver to the Party's obligations hereunder. CLAUSE 13 - MISCELLANEOUS PROVISIONS 13.1. SECRECY: 13.1.1. Any information, whether written or oral (oral information shall be reduced to writing within one month by the Party giving the oral information and the written form shall be furnished to the other Party) pertaining to the Product that has been or will be communicated or delivered by Elan to Par, or by Par to Elan, including, without limitation, trade secrets, business methods, and cost, supplier, manufacturing and customer information, shall be treated by Par and Elan, respectively, as confidential information, and shall not be disclosed or revealed to any third party whatsoever or used in any manner except as expressly provided for herein; provided, however, that such confidential information shall not be subject to the restrictions and prohibitions set forth in this Clause to the extent that such confidential information: 13.1.1.1. is available to the public in public literature or otherwise, or after disclosure by one Party to the other becomes public knowledge through no default of the Party receiving such confidential information; or 13.1.1.2. was known to the Party receiving such confidential information prior to the receipt of such confidential information by such Party, whether received before or after the date of this Agreement; or 13.1.1.3. is obtained by the Party receiving such confidential information from a third party not subject to a requirement of confidentiality with respect to such confidential information; or 13.1.1.4. is required to be disclosed pursuant to: (A) any order of a court having jurisdiction and power to order such information to be released or made public; or (B) any lawful action of a governmental or regulatory agency provided that each Party shall notify the other in writing of any disclosure of information required under this sub-Clause prior to such disclosure, or 13.1.1.5. is independently discovered by the receiving Party without the aid or application of the confidential information. 24 13.1.2. Each Party shall take in relation to the confidential information of the other Party all such precautions as it normally takes with its own confidential information to prevent any improper disclosure of such confidential information to any third party; provided, however, that such confidential information may be disclosed within the limits required to obtain any authorization from the applicable FDA or any governmental or regulatory agency or, with the prior written consent of the other Party, which shall not be unreasonably withheld, or as may otherwise be required in connection with the purposes of this Agreement. 13.1.3. Each of the Parties agrees that it will not use, directly or indirectly, any know-how of the other Party, or other confidential information disclosed to it by the other Party or obtained by it from the other Party pursuant to this Agreement, other than as expressly provided herein. 13.1.4. Neither Party will publicize the existence of this Agreement in any way without the prior written consent of the other Party subject to the disclosure requirements of applicable laws and regulations. In the event that either Party wishes to make an announcement concerning the Agreement, that Party will seek the consent of the other Party. The terms of any such announcement shall be agreed in good faith but in any event shall refer to the Product as having been developed and manufactured by Elan. 13.2. ASSIGNMENTS/SUB-CONTRACTING: Neither Party shall be permitted to assign or sub-license any of its rights under this Agreement without the prior written consent of the other; provided that Elan and Par may assign this Agreement to an Affiliate without such consent provided that such assignment has no adverse tax consequences for the other Party (which shall not include consequences of an administrative nature only) and provided further that such assigning Party is not relieved of its obligations hereunder. Elan shall also have the right to subcontract all or any portion of the manufacturing or packaging of one or more of the Product to one or more third parties. Each Party shall be responsible for the acts and/or omissions of its respective Affiliates and subcontractors. 13.3. PARTIES BOUND: This Agreement shall be binding upon and inure for the benefit of Parties hereto, their successors and permitted assigns. 13.4. SEVERABILITY: If any provision in this Agreement is agreed by the Parties to be, or is deemed to be, or becomes invalid, illegal, void or unenforceable under any law that is applicable hereto: 13.4.1. such provision will be deemed amended to conform to applicable laws so as to be valid and enforceable or, if it cannot be so amended without materially altering the intention of the Parties, it will be deleted, with effect from the date of such agreement or such earlier date as the Parties may agree; and 25 13.4.2. the validity, legality and enforceability of the remaining provisions of this Agreement shall not be impaired or affected in any way. 13.5. FORCE MAJEURE: Neither Party to this Agreement shall be liable for delay in the performance of any of its obligations hereunder if such delay results from causes beyond its reasonable control, including, without limitation, acts of God, fires, strikes, acts of war, or intervention of a government authority, non-availability of raw materials, but any such delay or failure shall be remedied by such Party as soon as practicable. 13.6. RELATIONSHIP OF THE PARTIES: Nothing contained in this Agreement is intended or is to be construed to constitute Elan and Par as partners or members of a joint venture or either Party as an employee of the other. Neither Party hereto shall have any express or implied right or authority to assume or create any obligations on behalf of or in the name of the other Party or to bind the other Party to any contract, agreement or undertaking with any third party. 13.7. AMENDMENTS: No amendment, modification or addition hereto shall be effective or binding on either Party unless set forth in writing and executed by a duly authorized representative of both Parties. 13.8. WAIVER: No waiver of any right under this Agreement shall be deemed effective unless contained in a written document signed by the Party charged with such waiver, and no waiver of any breach or failure to perform shall be deemed to be a waiver of any future breach or failure to perform or of any other right arising under this Agreement. 13.9. NO EFFECT ON OTHER AGREEMENTS: No provision of this Agreement shall be construed so as to negate, modify or affect in any way the provisions of any other agreement between the Parties unless specifically referred to, and solely to the extent provided, in any such other agreement. 13.10. APPLICABLE LAW AND JURISDICTION: This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of law. For the purpose of this Agreement the Parties agree that any dispute shall be adjudicated upon and hereby submit to the jurisdiction of the United States District Court for the Southern District of the State of New York. Each Party consents to service of process pursuant to the notice provisions of this Agreement. 26 13.11. NOTICE: 13.11.1. Any notice to be given under this Agreement shall be sent in writing in English by registered airmail or telecopied to: Elan at Elan Transdermal Technologies, Inc. 3250 Commerce Parkway Miramar Florida 33025 United States of America Attention: Vice-President & General Counsel, Elan Pharmaceutical Technologies Telephone: +l 954 430 3340 Telefax :+1954 430 3390 with a copy to Lincoln House Lincoln Place Dublin 2 Ireland Telephone: +353 1709 4000 Telefax: +353 1709 4124 Attention: Vice-President & General Counsel, Elan Pharmaceutical Technologies Par at Par Pharmaceuticals One Ram Ridge Road Spring Valley, New York 10977 Attention: Office of the President Fax: +1 845 425 7922 or to such other address(es) and telecopier numbers as may from time to time be notified by either Party to the other hereunder. 13.11.2. Any notice sent by registered air mail shall be deemed to have been delivered within 7 working days after dispatch and any notice sent by telex or telecopy shall be deemed to have been delivered within 24 hours of the time of the dispatch. Notice of change of address shall be effective upon receipt. 27 13.12 SET-OFF Each of the Parties will be entitled but not obliged to set-off against any amount of money payable to it by the other Party hereunder, any amount of money payable by it to the other Party hereunder. IN WITNESS of which the Parties have executed this Agreement. Executed by PAR on April 26, 2001 By: /s/ Kenneth I. Sawyer --------------------------------- Name: Kenneth I. Sawyer Title: Chairman & CEO Executed by Elan on April 26, 2001 By: /s/ Larry A. Stenson --------------------------------- Name: Larry Stenson Title: Director 28 EX-10 4 exhibit10-41.txt EXHIBIT 10.41 EXHIBIT 10.41 DEVELOPMENT AND SUPPLY AGREEMENT AGREEMENT, dated April 17, 2001, is made between PAR PHARMACEUTICALS, INC., a _____________ corporation, maintaining its principal place of business at One Ram Ridge Road, Spring Valley, New York 10977 ("PAR"), DR. REDDY'S LABORATORIES LIMITED, an Indian corporation, maintaining its principal offices at 7-1-27 Ameerpet, Hyderabad - 500 016, India, and REDDY-CHEMINOR, INC., a New Jersey corporation, maintaining its principal office at 66 S. Maple Avenue, Ridgewood, New Jersey 07450, U.S.A. (collectively "REDDY"). WITNESSETH: WHEREAS, REDDY has expertise in the development of generic pharmaceutical products; and WHEREAS, PAR has expertise in the development, marketing and sale of such products in the United States; and WHEREAS, REDDY and PAR desire to collaborate in the development, marketing and sale of certain generic pharmaceutical products; and WHEREAS, REDDY desires to manufacture and supply to PAR and PAR desires to purchase exclusively from REDDY for sale in the Territory, as defined below, by PAR all of PAR's requirements for the Reddy Finished Products, as defined below; NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements hereinafter set forth, the parties agree as follows: 1. DEFINITIONS. (a) "Affiliate" means any corporation or business entity controlled by, controlling, or under common control with PAR or REDDY as the case may be. (For the purpose of this definition, "control" means direct or indirect beneficial ownership of greater than fifty percent (50%) of the voting stock of such corporation or other business entity, or a greater than fifty percent (50%) interest in the income of such corporation or other business entity, or the power to direct or cause the direction of the management and policies of such corporation or other business entity whether by ownership of voting securities, by contract or otherwise, or such other relationship as, in fact, constitutes control.) (b) "ANDA" means an Abbreviated New Drug Application filed with the FDA for a Reddy Finished Product or Par Finished Product in the United States. (c) Applicable Percentage" means [*********************] (d) "Bulk Product" means either REDDY's or a third party's bulk actives for Reddy Finished Product or PAR's or a third party's bulk actives for Par Finished Product. (e) "cGMP" means current good manufacturing practices for the methods to be used in, and the facilities and controls to be used for, the manufacture, storage and handling of each Reddy Finished Product and Par Finished Product, all as set forth from time-to-time by the FDA pursuant to the FD&C Act and the rules and regulations promulgated thereunder (including specifically, Title 21, part 211 of the Code of Federal Regulations of the United States). (f) "Commercial Expenses" means PAR's or REDDY's, as the case may be, commercially reasonable costs and expenses for marketing, advertising, promoting, and selling (including but not limited to costs and expenses for launch, sales force training and materials, samples, conventions, symposia, marketing, direct mailing, marketing research, public relations, printed materials, medical information, regulatory activities and distribution) each Reddy Finished Product or Par Finished Product, determined in accordance with PAR's or REDDY's customary accounting policies and practices and in a manner consistent with U.S. generally accepted accounting principles. (g) "Competing Product" means, with respect to a particular Reddy Finished Product or Par Finished Product, a generic pharmaceutical product which is in 2 the same dosage form, has the same active ingredient, the same strength and is for the same indication as the Reddy Finished Product or Par Finished Product but which is manufactured and supplied by or purchased and acquired from any Person other than REDDY or its Affiliates or PAR or its Affiliates, as the case may be. (h) "Development Costs" means the commercially reasonable costs and expenses of REDDY or PAR, as the case may be, incurred in the preparation and filing of a DMF for each Bulk Product and in obtaining the ANDA for each Reddy Finished Product or Par Finished Product, including but not limited to: allocated costs for manufacturing, personnel, packaging, stability, testing, analytical, Bulk Product supplied for ANDA submission (calculated at Manufacturing Cost) and all costs relating to the development of finished dosage including R&D, preformulation, formulation, bio-equivalence, ANDA preparation, validation, issuance and submission. (i) "DMF" means the drug master file for each Bulk Product, as the same may be amended or supplemented from time to time. (j) "Exclusivity Period" means, with respect to any Reddy Finished Product (or any strength or dosage form of a Reddy Finished Product) or Par Finished Product (or any strength or dosage form of a Par Finished Product), the granting of up to six (6) months of marketing exclusivity in the United States from the FDA for being first to file an ANDA with a patent certification for the given Reddy Finished Product or Par Finished Product enabling PAR to market such product during such period in the U.S. with no other generic competitor. (k) "FDA" means the United States Food and Drug Administration. (l) "FD&C Act" means the Federal Food, Drug and Cosmetic Act of 1938, as amended, and the regulations thereunder, including current good manufacturing practice regulations, as the same may be amended or revised. 3 (m) "Form 483" means the written notice of objectionable practices or deviations from the regulations that is prepared by the FDA investigator at the end of an inspection. 1. (n) "Group 2 Term" means, for each Reddy Group 2 Product, the date commencing upon the execution of this Agreement and ending on December 31, 2004. (o) "Indemnified Party" has the meaning set forth in Section 15(c) hereof. (p) "Indemnifying Party" has the meaning set forth in Section 15(c) hereof. (q) "Intellectual Property Costs" means REDDY's or PAR's, as the case may be, out-of-pocket payments to patent counsel (or other experts, including outside laboratories) in connection with pre- or post-marketing patent work, including patent litigation. (r) "Know-How" means all Reddy Finished Product or Par Finished Product, as the case may be, related technical knowledge, manufacturing procedures, expertise, methods, protocols and current and accumulated experiences which any party hereto acquires in connection with this Agreement and/or has acquired as a result of scientific research, practical experiences and otherwise which have a demonstrated usefulness in manufacturing, obtaining and maintaining Regulatory Approval, including but not limited to (i) plant validation protocols and specifications; (ii) process validation procedures; (iii) quality control procedures; (iv) analytical methods and procedures; (v) bio-equivalence testing protocols and procedures; (vi) cleaning validation protocols and procedures; (vii) procedures for preparation of applications for Regulatory Approval; (viii) ongoing regulatory compliance procedures; and (ix) galenical formulations and processes. (s) "Launch Date" means, with respect to each Reddy Finished Product or Par Finished Product, the date on which PAR makes its first commercial sale of such Reddy Finished Product or Par Finished Product in the Territory to an unrelated third party in an arm's length transaction but no later than the later of: thirty (30) days after the date on which all regulatory and governmental approvals for the manufacture, delivery, sale and distribution in the Territory have been obtained (including Regulatory Approval); thirty (30) days after 4 applicable patent expiration (including General Agreement on Trade and Tariffs extensions) or thirty (30) days after product exclusivity expiration. (t) "Manufacturing Cost" means the sum of (i) the [*******************] for either each Reddy Finished Product (other than Group 3 Products) incurred by REDDY and its Affiliates, or each Par Finished Product incurred by PAR and its Affiliates, as the case may be, calculated separately for each Reddy Finished Product or Par Finished Product, in each case determined in accordance with REDDY's or PAR's customary cost accounting policies and practices and in a manner consistent with U.S. generally acceptable accounting principles; (ii) [*******************] of such [*******************] (to cover [*******************]); and (iii) all transportation and related costs to deliver the Reddy Finished Product or Par Finished Product to its destination under Section 8 of this Agreement. Manufacturing Cost for Reddy Group 3 Product means the Manufacturing Cost as described above plus an additional [*******************] of such Manufacturing Cost. If the manufacturing of any Reddy Finished Product or Par Finished Product or any component thereof (including Bulk Product) is performed for REDDY or PAR, as the case may be, by a third party (which is not an Affiliate), then amounts paid to such third party in connection with the manufacturing of such Reddy Finished Product or Par Finished Product or any component thereof (including Bulk Product) shall be [*******************] . (u) "Net Margin" means [*********************]. (v) "Net Profit" means [*********************]. (w) "Net Sales" means that dollar amount determined by deducting the following items from the [*******************] billed for that particular Reddy Finished Product or Par Finished Product, as the case may be, sold by PAR and its Affiliates or REDDY and its Affiliates, as the case may be, in the Territory to unaffiliated third parties in arms length transactions: (i) trade, quantity or cash discounts, service allowances; (ii) credits or allowances for the Reddy Finished Product or Par Finished Product, if any, given or made on account of [*******************], returns, bad debts, 5 off-invoice promotional discounts, [******************], [*******************], any and all federal, state or local government rebates or discounts whether in existence now or enacted at any time hereafter, volume reimbursements, and the gross amount billed for that rejected Reddy Finished Product or Par Finished Product or that Reddy Finished Product or Par Finished Product recalled, seized or destroyed (voluntarily or at the request of any government agency, subdivision or department); (iii) any tax, excise or other government charge upon or measured by the production, sale, transportation, delivery or use of that Reddy Finished Product or Par Finished Product; and (iv) any surcharge, levy, tax or assessment mandated by any federal, state or local government or administrative agency to fund a compensation program or reserve for persons injured by that Reddy Finished Product or Par Finished Product; in each case determined in accordance with PAR's, REDDY's or any third party's customary accounting policies and practices in a manner consistent with U.S. generally accepted accounting principles. (x) "Par Applicable Percentage" means [*********************]. (y) "Par Change in Control" means the acquisition by any third party individual or entity (other than by Merck KGaA (but not a successor or assign) or an Affiliate of Merck KGaA (but not a successor or assign)) of more than 50% (in any one transaction or in any series of transactions) of the outstanding shares of capital stock of Pharmaceutical Resources, Inc. or PAR having the right to vote or generally to participate, in a manner similar to equity shares, in the profits and losses of Pharmaceutical Resources, Inc. or PAR. (z) "Par Finished Products" means [*********************]. 6 (aa) "Par Group 1 Products" means [*********************]. (bb) "Par Group 4 Products" means [*********************]. (cc) "Person" means an individual, partnership, joint venture, association, corporation, company and any other form of business organization, government regulatory or governmental agency, commission, department or instrumentality. (dd) "Promotional Expenses" means promotional payments or fees directly related to a Reddy Finished Product or Par Finished Product paid to REDDY's or PAR's customers, as the case may be. (ee) "Reddy Applicable Percentage" means [*********************]. (ff) "Reddy Change in Control" means the acquisition by any third party individual or entity of more than 50% (in any one transaction or in any series of transactions) of the outstanding shares of capital stock of REDDY having the right to vote or generally to participate, in a manner similar to equity shares, in the profits and losses of REDDY. (gg) "Reddy Finished Product" means [*********************]. (hh) "Reddy Group 1 Products" means [*********************]. (ii) "Reddy Group 2 Products" means [*********************]. (jj) "Reddy Group 3 Products" means [*********************]. (kk) Reddy Group 4 Products means [*********************]. (ll) "Reddy Group 5 Products" means [*********************]. (mm) "Reddy Group 6 Products" means [*********************]. (nn) "Regulatory Approval" means any ANDAs or other approvals, supplements, amendments, pre- and post-approvals, marketing authorizations based upon such approvals (including any prerequisite manufacturing approvals or authorizations related thereto) and labeling approval(s), technical, medical and scientific licenses, registrations or authorizations of any national, regional, state or local regulatory agency, department, bureau, commission, council or 7 other governmental entity, necessary for the manufacture, distribution, use, import, or sale of Reddy Finished Products or Par Finished Products. (oo) "Specifications" means the specifications required to obtain the ANDA of each Reddy Finished Product or Par Finished Product based on the NDA specifications of the innovator product and as contained in the DMF for Bulk Product unless changes are required as described in the United States Pharmacopoeia, as such specifications may be amended at the request of the FDA or by mutual agreement of the parties from time to time. (pp) "Technical Information" means all information and expertise which REDDY or PAR, as the case may be, acquires in connection with this Agreement and/or has acquired which have a demonstrated usefulness in manufacturing, packaging and labeling and/or obtaining and maintaining Regulatory Approval of the Reddy Finished Products or the Par Finished Products pursuant to this Agreement, including, but not limited to, all specifications, manuals and computer programs relating to manufacturing and similar materials and access to the DMF of Bulk Product. (qq) "Term" means, for each Reddy Finished Product (other than a Reddy Group 2 Product) or Par Finished Product, the later to occur of (i) the date commencing upon execution of this Agreement and ending seven (7) years after the date of execution of this Agreement or (ii) the date commencing on the Launch Date of each Reddy Finished Product or Par Finished Product and ending three (3) years after the Launch Date of such product. (rr) "Territory" means the United States, its territories, possessions and the Commonwealth of Puerto Rico. (ss) "Third Party Bulk Product" means a Bulk Product manufactured by an entity other than REDDY or PAR, as the case may be. 8 2. DEVELOPMENT OF PRODUCTS. (a) REDDY shall be responsible for the development of all Reddy Finished Products to be supplied by REDDY to PAR under this Agreement. REDDY shall use commercially reasonable efforts to develop each of the Reddy Finished Products. All Development Costs and Intellectual Property Costs, including, but not limited to, initiation, preformulation development, formulation development, scale-up and any legal costs and expenses incurred in connection with a Reddy Finished Product shall be the sole responsibility of REDDY. Nothing contained herein shall constitute a guarantee or warranty of REDDY that development of any Reddy Finished Product will be commenced or continued, that a submission for Regulatory Approval for such Reddy Finished Product will be filed within any specific time period, or that a Regulatory Approval for any Reddy Finished Product will be obtained. (b) REDDY shall prepare each application for Regulatory Approval for each Reddy Finished Product and shall use commercially reasonable efforts to obtain Regulatory Approval. REDDY shall hold all ANDAs for the Reddy Finished Product in its own name, provided that such ownership shall be subject to the exclusive licenses granted to PAR hereunder. Unless expressly agreed by the parties, in writing, it is the parties' intent that each Reddy Finished Product to be marketed and sold in the Territory under this Agreement will be sold under a REDDY label. REDDY shall ensure that all ANDAs provide for such labeling and take all steps reasonably necessary to ensure that under the Regulatory Approval for a Reddy Finished Product PAR can market, distribute, sell and promote the product in the Territory in packaging which includes both the PAR and REDDY names. In the event that REDDY elects to have PAR repackage and relabel a Reddy Finished Product under Section 6 of this Agreement, REDDY shall take all steps reasonably necessary to enable PAR to repackage and relabel under the Regulatory Approval for such Reddy Finished Product. (c) Notwithstanding Section 2(a) hereof or any other provision contained in this Agreement, REDDY shall have the right, upon written notice to PAR, to immediately terminate its obligations hereunder to develop and/or seek Regulatory Approval for a Reddy Finished Product(s) if, in the reasonable 9 opinion of REDDY, it is not commercially reasonable to develop such Reddy Finished Product or to seek to obtain or maintain a Regulatory Approval therefor. If REDDY shall terminate its obligations to develop and/or seek Regulatory Approval for a Reddy Finished Product, then (i) PAR may develop such product or license a Competing Product from any other third party for sale in the Territory and (ii) REDDY or its Affiliate shall not manufacture such product for sale in the Territory or license a Competing Product from a third party for sale in the Territory. (d) PAR shall be responsible for the development of all Par Finished Products. PAR shall use commercially reasonable efforts to develop each of the Par Finished Products. All Development Costs and Intellectual Property Costs, including, but not limited to, initiation, preformulation development, formulation development, scale-up and any legal costs and expenses incurred in connection with a Par Finished Product shall be the sole responsibility of PAR. Each Par Finished Product to be marketed and sold in the Territory under this Agreement will be sold under a PAR label. Nothing contained herein shall constitute a guarantee or warranty of PAR that development of any Par Finished Product will be commenced or continued, that a submission for Regulatory Approval for such Par Finished Product will be filed within any specific time period, or that a Regulatory Approval for any Par Finished Product will be obtained. For all purposes under this Agreement, PAR shall be deemed to be the manufacturer of the Par Finished Product and PAR shall assume any and all responsibilities and any liabilities associated therewith, arising from the manufacture of the Par Finished Product. (e) PAR shall prepare or cause to be prepared each application for Regulatory Approval for each Par Finished Product and shall use commercially reasonable efforts to obtain Regulatory Approval. PAR shall have the right to distribute all Par Finished Products and shall act as the United States agent for such Par Finished Products. (f) Notwithstanding Section 2(d) hereof or any other provision contained in this Agreement, PAR shall have the right, upon written notice to REDDY, to immediately terminate its obligations hereunder to develop and/or seek 10 Regulatory Approval for a Par Group 4 Product(s) if, in the reasonable opinion of PAR, it is not commercially reasonable to develop such Par Group 4 Product or to seek to obtain or maintain a Regulatory Approval therefor. If PAR shall terminate its obligations to develop and/or seek Regulatory Approval for a Par Group 4 Product, then (i) REDDY may develop such product or license a Competing Product from any other third party for sale in the Territory and (ii) PAR or its Affiliates shall not manufacture such product for sale in the Territory or license a Competing Product from a third party for sale in the Territory. (g) REDDY shall prepare the Scale-Up Post Approval Change ("SUPAC") to enable REDDY to manufacture the Reddy Group 6 Products. PAR shall provide REDDY with reasonable assistance in the preparation of the SUPAC. PAR shall file the SUPAC with the FDA and shall provide REDDY with reasonable assistance to develop the manufacturing capability for the Reddy Group 6 Products at REDDY's current manufacturing facility.. 3. SALES AND MARKETING. (a) PAR and REDDY shall establish a sales and marketing committee (the "Committee") consisting of an equal number of representatives from REDDY and PAR, which shall remain in effect through December 31, 2004. The PAR representatives and REDDY representatives shall meet, at such times and such places, as either party reasonably requests, provided that each group of representatives provides the other with reasonable advance notice of its desire to schedule a meeting of the Committee. The Committee shall determine the pricing and marketing strategy for the Reddy Group 2 Products, Reddy Group 4 Products and Reddy Group 5 Products and shall approve all pricing of the Reddy Group 2 Products, Reddy Group 4 Products and Reddy Group 5 Products to PAR's customers. In the event the PAR representatives and REDDY representatives cannot agree on any marketing decision, including, but not limited to, pricing, marketing budgets, marketing expenditures and marketing strategies, the decision 11 of the REDDY representatives shall control and shall be binding upon PAR in connection with the marketing and sale of the Reddy Group 2 Products, Reddy Group 4 Products and Reddy Group 5 Products. Notwithstanding the foregoing sentence, if PAR, in its commercially reasonable business judgment, determines that the pricing of any of the foregoing products is materially inconsistent with PAR's customary pricing methods, PAR shall notify REDDY, in writing, of the basis for its determination and REDDY shall make such adjustments as REDDY, in its commercially reasonable business judgment, determines to the pricing of any such product to eliminate the material inconsistency disclosed by PAR. (b) REDDY shall have the right to have one or more of its representatives travel with PAR sales representatives to PAR's accounts during all preliminary, pre-launch, launch and post-launch visits; provided, however, that REDDY representatives shall not participate in more than three (3) visits to a PAR account during any calendar year unless otherwise agreed to, in writing, by PAR. REDDY shall provide reasonable advance notice (but not less than thirty (30) days' prior notice) to PAR management of those PAR accounts where REDDY representatives shall participate. PAR shall provide reasonable notice of field visits where REDDY representatives have requested participation. During any visit with a PAR account, REDDY representative(s) shall participate in only the portion of the meeting which involves the Reddy Group 2 Products, Reddy Group 4 Products and/or Reddy Group 5 Products. Prior to January 1, 2005, REDDY representatives shall not meet with any PAR customer without a PAR representative being present at such meeting for purposes of discussing any Reddy Finished Product, (other than a Reddy Group 6 Product). 12 (c) In connection with the marketing and sale of a Reddy Finished Product or a Par Finished Product, REDDY or PAR, as the manufacturer of a product, shall be responsible to pay the "stocking charge" to a customer which purchases such Reddy Finished Product or Par Finished Product. In the case of a Reddy Finished Product, PAR shall reimburse REDDY for such stocking charge in two (2) installments of 50% each. The first installment shall be paid by PAR to REDDY within thirty (30) days after payment by REDDY to a customer and the second installment shall be paid by PAR to REDDY twelve (12) months thereafter. PAR shall deduct such reimbursement to REDDY from Net Sales to calculate Net Profit, as and when such reimbursements are made by PAR. In the case of a Par Finished Product, PAR shall amortize such stocking charge against Net Sales over two-year period to calculate Net Profit. (d) In connection with the marketing and sale of [*********************] during the Exclusivity Period, REDDY, at its sole cost and expense, shall provide PAR with an amount of sample product that PAR reasonably requires to market such product. (e) PAR and its Affiliates shall use commercially reasonable efforts to develop, market and sell each Reddy Finished Product and to actively and continuously promote the sale of each Reddy Finished Product in the Territory. Such efforts shall be not less than those used by PAR and its Affiliates to promote the sale of other products which they market in the Territory. PAR shall not have any minimum purchase obligation under this Agreement. (f) PAR and its Affiliates shall commit commercially reasonable but no less than equivalent promotional and sales efforts to the marketing and sale of [*********************] manufactured by REDDY as PAR, and its Affiliates will commit to the marketing and sale of [*********************]. (g) At such time as REDDY shall be able to manufacture the Reddy Group 6 Products, PAR and REDDY shall jointly determine which of the parties shall market and sell the Reddy Group 6 Products. 13 4. LICENSE AND SUPPLY - REDDY FINISHED PRODUCTS. (a) Subject to the provisions of Sections 3(g) and 4(e), during the Term, PAR shall have the exclusive right to market each Reddy Finished Product (other than a Reddy Group 2 Product) in the Territory and REDDY shall supply PAR's forecasted requirements of each Reddy Finished Product. Subject to the provisions of Section 2(d), during the Group 2 Term, PAR shall have the exclusive right to market each Reddy Group 2 Product in the Territory and REDDY shall supply PAR's forecasted requirements of each Reddy Group 2 Product. PAR shall commence marketing each Reddy Finished Product in the Territory no later than thirty (30) days after the date on which final, unqualified FDA approval to market the Reddy Finished Product in the Territory is received, provided REDDY has supplied PAR with Reddy Finished Product in accordance with PAR's orders therefor. (b) Except as provided in Section 3(g) and subject to the provisions of Section 4(e) below, upon Regulatory Approval of an ANDA for each Reddy Finished Product and during the Term or Group 2 Term, as the case may be, REDDY will grant PAR an exclusive license to sell the Reddy Finished Product in the Territory under the technology and Know-How included in the ANDA. (c) Except as set forth in Section 4(d) below, PAR agrees to buy each Reddy Finished Product exclusively from REDDY. PAR shall not (and it shall not authorize, permit or suffer any of its Affiliates to), directly or indirectly, manufacture, purchase, sell or distribute a Competing Product in the Territory at any time during the Term of this Agreement applicable to a Reddy Finished Product (including, for greater certainty, prior to receipt by REDDY or any of its Affiliate of Regulatory Approval for such Reddy Finished Product). (d) Notwithstanding any other provision of this Agreement, if REDDY is unable (or anticipates an inability) to manufacture or deliver a Reddy Finished Product to PAR, REDDY shall promptly notify PAR in writing of the period for which such inability (or anticipated inability) to so manufacture or deliver is expected. If REDDY is unable to meet PAR's forecasted requirements for a Reddy Finished Product as a result of circumstances or events beyond the 14 reasonable control of REDDY, then PAR's obligation to purchase that Reddy Finished Product exclusively from REDDY shall be suspended and PAR may purchase Competing Product for sale in the Territory; provided that if REDDY has an inventory of that Reddy Finished Product that it is ready, willing and able to deliver to PAR, PAR shall order such remaining inventory prior to ordering Competing Product from any other party. If at any time thereafter REDDY is able to manufacture and deliver that Reddy Finished Product to PAR in amounts sufficient to meet PAR's requirements, then, subject to PAR's contractual commitments with third parties (which shall only be made for the quantity of that Reddy Finished Product that REDDY and PAR reasonably determine that REDDY will be unable to supply to PAR), PAR's above stated obligation to exclusively order that Reddy Finished Product from REDDY and not to purchase Competing Product shall resume. (e) From and after January 1, 2005, REDDY and its Affiliates shall have the unrestricted right to market and sell Reddy Group 1 Products, Reddy Group 3 Products, Reddy Group 4 Products and Reddy Group 5 Products in the Territory; provided, however, such right to market and sell shall not include the right to license such products to a Person who is a manufacturer of generic pharmaceutical products and seeks approvals through ANDA filings. (f) If, prior to the expiration of six (6) months from the execution of this Agreement, PAR's current supplier of [*********************] does not consent to REDDY's exclusive supply to PAR of [*********************] , [*********************] under this Agreement, the following provisions shall apply: (i) REDDY shall not supply Reddy Group 1 Products (other than [*********************]) into the Territory through December 31, 2004; and (ii) PAR shall pay to REDDY, as additional consideration, the amounts set forth in Sections 10(c) of this Agreement. (g) During the Term or Group 2 Term, as the case may be, applicable to a Reddy Finished Product, neither PAR nor any of its Affiliates will directly 15 or indirectly sell such Reddy Finished Product outside of the Territory or to any Person in the Territory where it knows or has reason to believe that such Reddy Finished Product will be resold by such Person outside of the Territory. In the event the foregoing provision is or becomes unenforceable or is unlawful in the Territory, then it shall be deemed replaced by the most restrictive provision on marketing or sale of the Reddy Finished Product outside of the Territory as shall be lawful and enforceable in the Territory. If REDDY establishes that one of PAR's customers or a customer of any of its Affiliates is, directly or indirectly, exporting such Reddy Finished Product out of the Territory, PAR shall (and shall cause its Affiliates to) either cease to supply such customer or obtain an undertaking from such customer not to market Reddy Finished Product outside of the Territory (unless Par [or its Affiliate, as the case may be] is precluded from taking such action under applicable law). (ih) Except as expressly provided in Section 4(e) above, REDDY agrees that, during the Term or Group 2 Term applicable to a Reddy Finished Product, neither it nor any of its Affiliates shall, directly or indirectly, sell such Reddy Finished Product in the Territory or to any Person outside of the Territory where it knows or has reason to believe that such Reddy Finished Product will be resold by such Person in the Territory. In the event the foregoing provision is or becomes unenforceable or unlawful in the Territory, it shall be deemed to be replaced by the most restrictive provision on marketing or sale of the Reddy Finished Product in the Territory as shall be lawful or enforceable in the Territory. If PAR notifies REDDY that one of its customers (or a customer of its Affiliate) is, directly or indirectly, marketing the Reddy Finished Product in the Territory, REDDY shall (and shall cause its Affiliates to) either cease to supply such customer or obtain (and enforce if necessary) an undertaking from such customer not to market such Reddy Finished Product in the Territory (unless REDDY [or its Affiliate, as the case may be] is precluded from taking such action under applicable law). 16 (i) If for any reason during the Term PAR shall be unable to market and sell Par Group 1 Products, then PAR shall purchase Reddy Group 1 Products exclusively from REDDY pursuant to the terms of this Agreement. 4A. SUPPLY - [*********************] PAR and REDDY acknowledge that each of REDDY and PAR's current supplier may be required to commence manufacturing of [*********************] in order to have sufficient quantities of each product to meet PAR's requirements for the launch of such product. In the event that PAR's current supplier does not consent to REDDY's exclusive supply of [*********************], REDDY shall be reimbursed within thirty (30) days of the submission of an invoice for the Manufacturing Cost of the [*********************] manufactured by REDDY and not sold by PAR in the Territory. Said amount shall be deducted from Net Sales to calculate Net Profits of such product. If PAR's current supplier consents to REDDY's exclusive supply of [*********************], PAR's current supplier shall be reimbursed within thirty (30) days of the submission of an invoice for the manufacturing cost of product manufactured by PAR's current supplier and not sold by PAR in the Territory. Said amount shall be deducted form Net Sales to calculate Net Profit for such product. 5. FORECASTS, ORDERING, DELIVERY AND PURCHASE OBLIGATIONS - REDDY FINISHED PRODUCTS. (a) Within a reasonable period of time prior to the anticipated Launch Date of a Reddy Finished Product, PAR shall submit to REDDY a non-binding forecast of the quantity of each Reddy Finished Product that PAR anticipates ordering from REDDY for such Reddy Finished Product launch and during the first twelve (12) month period thereafter. PAR shall update such forecast every three (3) months thereafter with a rolling twelve (12) month forecast. (b) REDDY shall deliver Reddy Finished Product to PAR within one hundred twenty (120) days after the date of PAR's order therefor, unless PAR specifies a later date in such order. 17 (c) REDDY shall provide PAR with each shipment of a Reddy Finished Product a certificate from REDDY's quality assurance department that includes the results of quality control testing in accordance with the specifications and which indicates that the Reddy Finished Product contained in the shipment meets the Specifications. 6. PAR'S REPACKAGING RESPONSIBILITIES. (a) At the request of REDDY, and with commercially sufficient notice, PAR shall repackage and label any Reddy Finished Product into finished label units for sale in the territory in a cGMP approved facility and shall be responsible, with REDDY review for the printing of the labels in accordance with FDA guidelines for such. PAR will rely on the information contained on the labels of the bulk dosage product supplied by REDDY to PAR. PAR will rely, when pertinent, on REDDY for specifications for container closure systems and on stability data, moisture permeation data in carrying out packaging. 18 PAR will conduct ongoing stability where required by cGMP's as well as impurity identification where required all at the cost of REDDY. PAR will provide data to REDDY arising out of the stability program. In repackaging and labeling the Reddy Finished Product, PAR shall comply with (i) the Specifications for such Reddy Finished Product, (ii) applicable cGMP and (iii) all other applicable rules, regulations and requirements of the FDA and any other applicable governmental or regulatory bodies, agencies and officials in the Territory relative to repackaging and labeling of the Reddy Finished Product for sale in the Territory. All labels and all artwork concepts on all packaging material used by PAR in connection with labeling and packaging of a Reddy Finished Product shall be subject to the prior reasonable approval of REDDY, provided that the approval by REDDY of any label or artwork concept shall not relieve or otherwise affect PAR's obligations or responsibilities hereunder in relation to labeling and packaging of the Reddy Finished Product or arising out of the use of such labels or packaging material or the sale of Reddy Finished Product in the Territory so labeled and packaged. REDDY shall own all trade dress created hereunder. (b) Upon PAR's receipt of written notice from REDDY that PAR shall repackage and label any Reddy Finished Product, PAR and REDDY shall mutually agree upon an acceptable time schedule to transfer the repackaging and labeling of such Reddy Finished Product to PAR. All direct costs incurred by PAR in connection with repackaging and labeling of such Reddy Finished Product shall be treated as a Manufacturing Cost for purposes of calculating New Profits from the sale of such Reddy Finished Product. (c) REDDY shall supply to PAR all information and data relating to a Reddy Finished Product which it is obligated to provide PAR and its Affiliates as a repackager and labeler of such REDDY Finished Product pursuant to applicable laws. 19 It is not the intent that PAR shall be caused to make significant capital expenditures to satisfy the repackaging requirements. PAR and REDDY agree that if this should be required the parties will reach agreement as to funding. 7. PRODUCT REJECTION, NON-CONFORMING GOODS. (a) Within thirty-five (35) days from the date of receipt of each delivery of any Reddy Finished Product, PAR shall inspect such Reddy Finished Product (PAR hereby acknowledging that its failure to inspect shall not release it from the obligations it would otherwise have had it conducted an inspection as herein contemplated, or provide it with additional rights). PAR shall advise REDDY in writing (a "Rejection Notice") if a shipment of Reddy Finished Product is not in conformity with REDDY's obligations hereunder or is otherwise defective; provided, however, that PAR's failure to advise REDDY in a timely manner that a shipment of Reddy Finished Product does not conform shall not prejudice PAR's right to reject or return the Reddy Finished Product if the defect or other nonconforming condition which justifies rejection or return could not have been detected by PAR's inspection in accordance with cGMP. If PAR delivers a Rejection Notice in respect of all or any part of a shipment of Reddy Finished Product, then REDDY and PAR shall have thirty (30) days from the date of REDDY's receipt of such notice to resolve any dispute regarding whether all or any part of such shipment of Reddy Finished Product fails to conform with the Product Specifications or is otherwise defective. Disputes between the parties as to whether all or any part of a shipment rejected by PAR conforms with Specifications shall be resolved in accordance with the provisions of paragraph (b) below. Disputes between the parties as to whether all or any part of a shipment rejected by PAR is otherwise defective shall be submitted to arbitration in accordance with Section 22 of this Agreement. (b) If REDDY and PAR disagree concerning whether the Reddy Finished Product delivered pursuant to Section 5 meets Specifications, then PAR and REDDY shall jointly investigate whether the Reddy Finished Product meets Specifications. If the parties do not agree after their joint investigation, 20 they shall agree on an independent lab which shall determine whether the Reddy Finished Product meets Specifications. Initially, each party shall bear its own costs and expenses associated with performing such joint investigation and the parties shall share third party costs equally. If such joint investigation or the independent lab concludes that the Reddy Finished Product meets the Specifications, then PAR shall reimburse REDDY for REDDY's out-of-pocket costs and expenses associated with such investigation and the independent lab, and if such joint investigation or the independent lab concludes that the Reddy Finished Product does not meet the Specifications, then REDDY shall reimburse PAR for PAR's out-of-pocket costs and expenses associated with such investigation and the independent lab. (c) In the event any Reddy Finished Product is appropriately rejected by PAR, REDDY shall replace, at PAR locations, such Reddy Finished Product with conforming goods within sixteen (16) weeks. REDDY shall bear all transportation costs, import duties, if any, taxes, insurance and handling costs and any other costs or charges incurred in transporting such replacement Reddy Finished Product to the PAR location at which such nonconforming Reddy Finished Product is located and shall reimburse PAR for all transportation costs, import duties, if any, taxes, insurance and handling costs incurred by PAR in connection with such out of Specification nonconforming Reddy Finished Product. 8. TERMS AND CONDITIONS OF SALE. REDDY will retain title and risk of loss to all Reddy Finished Products until delivered CIP (as such term is defined in the ICC Incoterms 2000) on a duty paid basis to PAR's facility in Spring Valley, New York, or as otherwise directed by PAR within the Territory. Each shipment shall be segregated by lot and accompanied by an appropriate certification of analysis. 21 9. PRICE - REDDY FINISHED PRODUCT. (a) The price of a Reddy Finished Product delivered to PAR hereunder shall be an amount equal to (i) REDDY's [********************] thereof plus (ii) [********************] for each Reddy Finished Product multiplied by [********************], calculated separately for each Reddy Finished Product. (b) PAR agrees (i) that in calculating Net Sales it shall not include in the deductions from Net Sales any special discounts, rebates, volume reimbursements or other incentives for any Reddy Finished Product that are given as an inducement for the purchase of other PAR products; (ii) that any discounts, rebates or volume reimbursements offered by PAR on the basis of multiple product purchases which include Reddy Finished Product shall be allocated to the Reddy Finished Product on a [********************] based on the respective [********************]; (iii) that PAR shall not sell Reddy Finished Product as a [********************] or otherwise cause its sales of some other product to benefit at the expense of the Reddy Finished Product; and (iv) in calculating Commercial Expenses it shall not allocate commercial expenses for multiple products which include any Reddy Finished Product to the Reddy Finished Product in a manner that results in a disproportionate allocation of such expenses to the Reddy Finished Product. 22 10. ADDITIONAL CONSIDERATION TO REDDY. In further consideration for REDDY entering into this Agreement, during the Term PAR shall pay to REDDY, as additional consideration for the supply of the Reddy Finished Products hereunder, the following amounts: (a) [********************]. (b) [********************]. (c) If, pursuant to Section 4(f), REDDY does not supply PAR with Reddy Group 1 Products (other than [*********************]) under this Agreement, [*********************] on sales of Par Group 1 Products by PAR in the Territory. 11. ADDITIONAL CONSIDERATION TO PAR. In further consideration for PAR entering into this Agreement, REDDY shall pay to PAR the following amounts: (a) From and after January 1, 2005, and through the end of the Term, [*********************], Reddy Group 3 Products, Group 4 Products, Reddy Group 4 Products and Group 5 Products by REDDY in the Territory. (b) From and after January 1, 2005, [*********************] on sales by REDDY of (i) [*********************] (manufactured by REDDY) in the Territory through the later of December 31, 2005, or the expiration of three (3) years from the Launch Date of [*********************], and (ii) [*********************] (manufactured by REDDY) in the Territory through the later of December 31, 2006, or the expiration of three (3) years form the Launch Date of [*********************]. For purposes of clarification, the parties agree that PAR will receive its percentage of [*********************], whether sold by PAR or REDDY, for a period of three (3) years from the Launch Date of each respective product. (c) If PAR and REDDY determine that REDDY shall market and sell the Reddy Group 6 Products, the [*********************] on sales of Reddy Group 6 Products by REDDY in the Territory. 23 12. PAYMENT BY PAR. (a) REDDY shall invoice PAR for REDDY's Manufacturing Cost of each Reddy Finished Product estimated in good faith, delivered pursuant to Section 5 hereof and PAR shall pay such invoice within thirty (30) days after the later of (i) the receipt of such invoice from REDDY or (ii) the receipt of the Reddy Finished Product from REDDY. Within sixty (60) days following the end of each calendar year, REDDY shall calculate its actual Manufacturing Cost for each Reddy Finished Product delivered pursuant to Section 5 hereof during such calendar year and notify PAR of the amount by which REDDY has been overpaid or underpaid during such calendar year. Such notice shall be accompanied by a statement setting forth in detail by product the amounts used to calculate its Manufacturing Cost for each Reddy Finished Product for such calendar year. REDDY shall return to PAR any overpayment and PAR shall pay to REDDY any underpayment, as the case may be, with respect to each Reddy Finished Product within thirty (30) days thereafter. (b) (i) Within thirty (30) days following the end of each calendar quarter, PAR shall pay to REDDY the amounts due to REDDY pursuant to Sections 9(a)(ii) and 10(a), (b), (c) and (dc) for such calendar quarter. Each payment shall be accompanied by the following in respect of each Reddy Finished Product supplied hereunder: A. a sales summary reasonably satisfactory to REDDY showing all sales of such Reddy Finished Product and Par Finished Product by Units (SKUs); B. a detailed statement showing all returns, adjustments, credits, rebates and other debits and credits relevant to the calculation of Net 24 Sales of such Reddy Finished Product and Par Finished Product for the quarter in question, together with copies of all documentation to support allowable deductions used in computing Net Sales during such quarter; C. a detailed statement showing Cost of Goods Sold for such Reddy Finished Product and Par Finished Product; D. a certificate signed by the Chief Financial Officer of PAR certifying that, to the best of his knowledge, information and belief, after reasonable investigation, the foregoing statements contemplated in A, B and C above are true and correct and do not omit any material information required to be provided pursuant to this Section; and E. a summary of the calculation of the Net Profits payable to REDDY on such date. For purposes of this Agreement, a sale shall be considered to have been made at the time the Product is shipped by PAR or its Affiliates to its customer. (ii) PAR shall provide to REDDY and shall cause its Affiliates to provide to REDDY, promptly following a request therefor, such additional information concerning any sales of a specific Reddy Finished Product (including, without limitation, in respect of any sale, the date of the shipment, the name of the customer, the number of Units of the Reddy Finished Product (by SKU, if requested) sold to such customer and the invoice price charged by PAR or its Affiliates), chargebacks, credits, returns, adjustments and other credits and debits relevant to the calculation of Net Sales and Net Profits in respect of a Reddy Finished Product as REDDY may reasonably request. (c) REDDY maintains a standard set of cost accounting policies and practices in accordance with U.S. generally accepted accounting principles which 25 are applicable to all products manufactured by REDDY. The cost accounting policies and practices implemented by REDDY for this Agreement shall not deviate in any material respect from REDDY's standard cost accounting policies and practices. REDDY shall notify PAR, in writing, of any material change in its standard cost accounting policies and practices which would adversely impact PAR under this Agreement. The cost accounting policies and practices to be implemented by REDDY for this Agreement shall be in accordance with U.S. generally accepted accounting principles and shall not deviate in any material respect from the standard cost accounting policies and practices being implemented by REDDY generally. REDDY shall notify PAR, in writing, of any significant change in these standard cost accounting policies and practices which would adversely impact PAR under this Agreement. (d) PAR shall keep and maintain complete and accurate records of the Net Sales and Net Profit for each calendar year and shall retain such records for a period of three (3) years thereafter. REDDY shall keep and maintain complete and accurate records of Manufacturing Cost for each calendar year and shall retain such records for a period of three (3) years thereafter. Each party shall have the right to nominate a firm of independent certified public accountants reasonably acceptable to the other party to have access to the records of such other party during reasonable business hours for the purpose of verifying, at the auditing party's expense, Net Sales and Net Profit in the case of an audit of PAR and Manufacturing Cost in the case of an audit of REDDY; provided that this right may not be exercised more than once in any calendar year (except as set forth below) or for any period for which such other party is not obligated to keep records hereunder. The results of the accountant's audit shall be final and binding on both parties. A party required to reimburse the other party for an underpayment (in any amount) shall do so within thirty (30) days of its receipt of notice from the other party of the results of the accountant's audit. In the event that the auditing accountant finds that an underpayment of five percent (5%) or more has been made, the party who made the underpayment shall also: (a) pay the cost of that audit (within thirty (30) days 26 of its receipt of notice of the results of the audit) and (b) be subject to semi-annual audits for the following two (2) years. In the event that the auditing accountant finds that an overpayment was made, the party which received the overpayment shall reimburse the other party within thirty (30) days of its receipt of notice of the results of the audit. (e) All amounts payable hereunder shall be paid in U.S. dollars. 13. PAYMENTS BY REDDY. (a) (i) Within thirty (30) days following the end of each calendar quarter, REDDY shall pay to PAR the amounts due to PAR pursuant to Sections 11(a) and 11(b) for such calendar quarter. Each payment shall be accompanied by the following: A. a sales summary reasonably satisfactory to PAR showing all sales by REDDY of such Reddy Finished Product by Units (SKUs); B. a detailed statement showing all returns, adjustments, credits, rebates and other debits and credits relevant to the calculation of Net Sales of such Reddy Finished Product for the quarter in question, together with copies of all documentation to support allowable deductions used in computing Net Sales during such quarter; C. a detailed statement showing Manufacturing Cost for such Reddy Finished Product; 27 D. a certificate signed by the Chief Financial Officer of REDDY certifying that, to the best of his knowledge, information and belief, after reasonable investigation, the foregoing statements contemplated in A, B and C above are true and correct and do not omit any material information required to be provided pursuant to this Section; and E. a summary of the calculation of the Net Profits payable to PAR on such date. For purposes of this Agreement, a sale shall be considered to have been made at the time the Product is shipped by REDDY or its Affiliates to its customer. (ii) REDDY shall provide to PAR and shall cause its Affiliates to provide to PAR, promptly following a request therefor, such additional information concerning any sales of a specific Reddy Finished Product (including, without limitation, in respect of any sale, the date of the shipment, the name of the customer, the number of Units of the Reddy Finished Product (by SKU, if requested) sold to such customer and the invoice price charged by REDDY or its Affiliates), chargebacks, credits, returns, adjustments and other credits and debits relevant to the calculation of Net Sales and Net Profits in respect of a Reddy Finished Product as PAR may reasonably request. 14. REPRESENTATIONS, WARRANTIES AND COVENANTS. (a) REDDY makes the following representations, warranties and covenants: (i) REDDY shall submit to the FDA, and shall maintain, a DMF for each Bulk Product that REDDY shall manufacture; (ii) REDDY shall submit to the FDA, and, if issued, shall maintain, an ANDA for each Reddy Finished Product; 28 (iii) REDDY shall permit the FDA to inspect REDDY's manufacturing facilities for each Bulk Product and each Reddy Finished Product in connection with the review and approval of REDDY's applications for registration of each Reddy Finished Product; (iv) each Reddy Finished Product (1) shall be manufactured in conformance with the ANDA for the Reddy Finished Product and with all applicable statutes, ordinances and regulations (including without limitation the FD&C Act) as the same may be amended or revised from time to time, (2) shall be manufactured in conformance with the Specifications, (3) shall not be adulterated or misbranded within the meaning of the FD&C Act, and (4) shall not be a product which would violate any section of the FD&C Act if introduced into interstate commerce; and 29 (v) each Bulk Product manufactured by REDDY (1) shall be manufactured in conformance with the DMF therefor and with all applicable statutes, ordinances and regulations (including, without limitation, the FD&C Act) as the same may be amended or revised from time to time, (2) shall be manufactured in conformance with the Specifications, (3) shall not be adulterated or misbranded within the meaning of the FD&C Act, and (4) shall not be a product which would violate any section of the FD&C Act if introduced into interstate commerce. (b) PAR makes the following representations, warranties and covenants: (i) PAR shall permit the FDA to inspect PAR's facilities used for the packaging and storing of each Reddy Finished Product in connection with the review and approval of REDDY's applications for registration of the Reddy Finished Product; (ii) each Reddy Finished Product packaged at PAR's facilities (1) shall be packaged and labeled in conformance with all applicable requirements of the FDA, the ANDA for the Reddy Finished Product and with all applicable statutes, ordinances and regulations (including, without limitation, the FD&C Act), as the same may be amended or revised from time to time, (2) shall be packaged and labeled in conformance with the Specifications, (3) shall not be adulterated or misbranded within the meaning of the FD&C Act, and (4) shall not be a product which would violate any section of the FD&C Act if introduced into interstate commence. (iii) each Par Finished Product (1) shall be manufactured in conformance with the ANDA for the Par Finished Product 30 and with all applicable statutes, ordinances and regulations (including without limitation the FD&C Act) as the same may be amended or revised from time to time, (2) shall be manufactured in conformance with the Specifications, (3) shall not be adulterated or misbranded within the meaning of the FD&C Act, and (4) shall not be a product which would violate any section of the FD&C Act if introduced into interstate commerce; (iv) each Bulk Product manufactured for Par Finished Product (1) shall be manufactured in conformance with the DMF therefor and with all applicable statutes, ordinances and regulations (including, without limitation, the FD&C Act) as the same may be amended or revised from time to time, (2) shall be manufactured in conformance with the Specifications, (3) shall not be adulterated or misbranded within the meaning of the FD&C Act, and (4) shall not be a product which would violate any section of the FD&C Act if introduced into interstate commerce; and (v) PAR and its Affiliates shall use commercially reasonable promotional and sales efforts to market and sell the Reddy Finished Products and Par Finished Products, and such efforts shall be not less than efforts used by PAR and its Affiliates to promote the sale of other products marketed in the Territory. (c) Each party represents, warrants and covenants to the other that: (i) such party is not debarred under the Generic Drug Enforcement Act of 1992 and that it does not and will not use in any capacity the services of any person 31 debarred under the Generic Drug Enforcement Act of 1992; neither such party, nor, to the best of its knowledge, any of its employees, agents or contractors, has engaged in any activity which could lead to it becoming debarred under the Generic Drug Enforcement Act of 1992; (ii) such party is duly authorized to execute and deliver this Agreement and consummate the transactions contemplated hereby; and (iii) neither the execution, delivery or performance of this Agreement, nor the consummation of the transactions contemplated hereby, (a) will violate or conflict with such party's articles of incorporation or by-laws, (b) will result in any breach of or default under any provision of any contract or agreement to which such party is bound, or to which such party's properties or assets are subject, (c) is prohibited by, or requires such party to obtain authorization, approval, registration or to make any filing under, any law, rule, regulation, order or judgment, or of any other person (except as contemplated herein), or (d) will result in the creation or imposition of any lien, claim, charge, restriction, equity or encumbrance of any kind whatsoever upon or give to any other person any interest or right (including the right of termination or cancellation) in or with respect to any of the properties, assets, contracts or agreements of such party. 32 15. INDEMNIFICATION. (a) REDDY agrees to indemnify, defend and hold harmless, and to pay and reimburse, PAR, its Affiliates, and its and their respective employees, agents and representatives, from and against any and all third party claims and losses, damages and liabilities, including reasonable attorney's fees, relating thereto, incurred by any of them arising out of, relating to or occurring as a result of REDDY's negligence or the breach of any representation or warranty made by REDDY in this Agreement. (b) PAR agrees to indemnify, defend and hold harmless, and to pay and reimburse, REDDY, its Affiliates, and its and their respective employees, agents and representatives, from and against any and all third party claims and losses, damages and liabilities, including reasonable attorney's fees, relating thereto, incurred by any of them arising out of, relating to or occurring as a result of PAR's negligence or the breach of any representation or warranty made by PAR in this Agreement. (c) If PAR, REDDY or an Affiliate (in each case an "Indemnified Party") receives any written claim which it believes is the subject of indemnity hereunder, the Indemnified Party shall, as soon as reasonably practicable after forming such belief, give notice thereof to the other (the "Indemnifying Party"), including all particulars of such claim to the extent known to the Indemnified Party; provided that the failure to give timely notice to the Indemnifying Party as contemplated hereby shall not release the Indemnifying Party from any liability to the Indemnified Party except to the extent the Indemnifying Party is materially prejudiced in defending any claim by such failure. The Indemnifying Party shall have the right, by prompt notice to the Indemnified Party, to assume the defense of such claim with counsel of its choice reasonably satisfactory to the Indemnified Party, and at the cost of the Indemnifying Party. If the Indemnifying Party assumes such defense, the Indemnified Party may participate in the action through counsel of its choice, but the cost of such counsel shall be at the expense of the Indemnified Party. If the Indemnifying Party does not so assume the defense of such claim, or, having assumed such defense fails to vigorously prosecute such defense, the 33 Indemnified Party may assume such defense, with counsel of its choice, to be paid or reimbursed by the Indemnifying Party. (d) The party not assuming the defense of any such claim shall render all reasonable assistance to the party assuming such defense, and all reasonable out-of-pocket costs of such assistance shall be promptly paid or reimbursed by the Indemnifying Party. (e) No such claim shall be settled and no admission may be made other than by the party defending the same, and then only with the consent of the other party, which shall not be unreasonably withheld; provided that the Indemnified Party shall have no obligation to consent to any settlement of any such claim which imposes on the Indemnified Party any liability or obligation which will not be assumed and performed in full by the Indemnifying Party. 16. RECALL OR SEIZURE - REDDY FINISHED PRODUCT. (a) In the event PAR believes that a Recall may be necessary and/or appropriate, prior to taking any action PAR shall immediately notify REDDY, and PAR and REDDY shall cooperate and cause their respective Affiliates to cooperate with each other in determining the necessity and nature of the action to be taken. (b) With respect to any recall, REDDY shall make all contacts with the FDA and shall be responsible for coordinating all of the activities required in connection with such recall. PAR and REDDY and their respective Affiliates shall cooperate with each other in recalling the affected Reddy Finished Product. (c) In the event of any recall or seizure of any Reddy Finished Product arising out of, relating to, or occurring as a result of, any act or omission by REDDY, REDDY shall, at the election of PAR, either: (i) replace the amount of Reddy Finished Product recalled or seized; or (ii) give credit to PAR against outstanding receivables due from PAR in an amount equal to the amount paid by PAR 34 for the Reddy Finished Product so recalled or seized or otherwise owing by PAR hereunder; plus reimburse (or at the election of PAR, credit) PAR for the Commercial Expenses allocated thereto (in the same proportion as such quantity of recalled or seized product bears to the total quantity of product sold during such calendar year), and all transportation costs, export or import duties, if any, taxes, insurance and handling costs incurred by PAR in respect of such recalled or seized product. (d) In the event of any recall or seizure of any Reddy Finished Product arising out of, relating to or occurring as a result of, any act or omission of PAR, PAR shall be solely responsible for and shall exclude for purposes of calculating Net Profit REDDY's Manufacturing Cost allocated thereto (in the same proportion as such quantity of recalled or seized product bears to the total quantity of product sold in such calendar year) and all transportation costs, import duties, if any, taxes, insurance and handling costs incurred by PAR in respect of such recalled or seized product. (e) For purposes of this Section 16, "recall" means (i) any action by REDDY, PAR or any Affiliate of either to recover title to or possession of any Reddy Finished Product sold or shipped and/or (ii) any decision by PAR not to sell or ship product to third parties which would have been subject to recall if it had been sold or shipped, in each case taken in the good faith belief that such action was appropriate under the circumstances. For purposes of this Section 16, "seizure" means any action by any government agency to detain or destroy product. (f) Any and all disputes or controversies arising under this Section 16 regarding the respective fault of the parties for recalls shall be submitted to arbitration in accordance with Section 23 of this Agreement and the award of the arbitrator or arbitrators designated thereunder shall, subject to law, be final and binding upon the parties hereto. 35 17. TERMINATION. (a) Notwithstanding any other provision of this Agreement, either party may terminate this Agreement, or any Reddy Finished Product or Par Finished Product under this Agreement, by notice in writing to the other upon or at any time after the occurrence of any of the following events: (i) if the other commits a material breach of this Agreement which (a) in the case of a breach capable of a remedy, shall not have been remedied within sixty (60) days of the receipt by the other of a notice identifying the breach and requesting its remedy and (b) continues to exist at the time notice of termination is given; provided that if the breaching party is diligently pursuing in good faith the remedy of any breach, then such sixty (60) day cure period shall be extended for such period as may be reasonably required to effectuate such cure; or (ii) if the other is unable to pay its debts, becomes bankrupt or insolvent, or enters into liquidation whether compulsorily or voluntarily, or convenes a meeting of its creditors, or has a receiver appointed over all or part of its assets, or takes or suffers any similar action in consequence of a debt, or ceases for any reason to carry on business. (b) Notwithstanding any other provision of this Agreement, if during any rolling twelve (12) month period after the Launch Date of any Reddy Finished Product or Par Finished Product, the Net Profit for such Reddy Finished Product or Par Finished Product shall be less than ten percent (10%) of Net Sales, then either party may terminate this Agreement, solely with respect to such Reddy Finished Product or Par Finished Product, by notice in writing to the other, given no later than one hundred twenty (120) days after the end of such rolling twelve (12) month period; provided, however, a party may not terminate the Agreement as to a Product under this Section 17(b) if its own breach of this 36 Agreement has caused the Net Profit for such twelve (12) month period to be less than ten percent (10%) of Net Sales. (c) Notwithstanding any other provision of this Agreement, PAR may terminate any Reddy Finished Product under this Agreement, by notice in writing to REDDY given with sixty (60) days after PAR receives notice of any of the following events: (i) Prior to June 30, 2004, a Reddy Change in Control shall have occurred; (ii) REDDY has received a Form 483 report with respect to a Reddy Finished Product or the manufacturing facility therefor and it has not complied with such Form 483 within a reasonable time thereafter and is not diligently pursuing corrective action in response thereto; (iii) REDDY has violated the fraud provisions of the FD&C Act in connection with a Reddy Finished Product or the manufacturing facility therefor; or (iv) REDDY has entered into a consent agreement with the FDA, or a similar event has occurred, which significantly impairs REDDY's ability to manufacture or sell a Reddy Finished Product. (d) Notwithstanding any other provision of this Agreement, REDDY may terminate any Reddy Finished Product or Par Finished Product under this Agreement, by notice in writing to PAR given within sixty (60) days after REDDY receives notice or otherwise becomes aware of any of the following events: (i) Prior to June 30, 2004, a Par Change in Control shall have occurred; (ii) There has occurred a material negative diminishment in the sales/marketing capability of PAR, including, but not limited to, a significant change in the sales/marketing personnel of PAR and, after notice and a reasonable opportunity to cure, such personnel are not 37 replaced with individuals as a group possessing comparable experience; (iii) PAR has received Form 483 with respect to packaging or labeling or the packaging or labeling facility for a Reddy Finished Product and it has not complied with such Form 483 within a reasonable time thereafter and it is not diligently pursuing corrective action in response thereto; (iv) PAR (or its current supplier of Par Finished Product or its manufacturer of Bulk Product used to manufacture any Par Finished Product) has received a Form 483 report with respect to a Par Finished Product or the manufacturing facility therefor and it has not complied with such Form 483 within a reasonable time thereafter and is not diligently pursuing corrective action in response thereto; (v) PAR (or its current supplier of Par Finished Product or its manufacturer of Bulk Product used to manufacture any Par Finished Product) has violated the fraud provisions of the FD&C Act in connection with a Reddy Finished Product or Par Finished Product; (vi) PAR has entered into a consent agreement with the FDA, or a similar event has occurred, which significantly impairs PAR's ability to sell a Reddy Finished Product; or (vii) PAR (or its current supplier of Par Finished Product or its manufacturer of Bulk Product used to manufacture any Par Finished Product) has entered into a consent agreement with the FDA, or a similar event has occurred which significantly impairs REDDY's ability to sell a Par Finished Product. (e) Expiration or termination of this Agreement shall be without prejudice to the right of any party to receive all payments accrued and unpaid 38 at the effective date of such expiration or termination, without prejudice to the remedy of either party in respect to any previous breach of the representations, warranties or covenants herein contained, without prejudice to any rights to indemnification set forth herein and without prejudice to any other provision hereof which expressly or necessarily calls for performance after such expiration or termination. Without limiting the generality of the foregoing, Sections 3(c), 7, 12, 13, 14, 15, 16, 19, 20 and 21 shall survive expiration or termination of this Agreement. (f) Notwithstanding any other provision of this Agreement, either party may terminate this Agreement as to any specific Reddy Finished Product which does not receive Regulatory Approval within one year after the later of the patent expiration date or the product exclusivity expiration date; provided, however, that in the event of a termination by one party, the other party shall have the right to use all information and data generated pursuant to this Agreement that is or would be contained in the ANDA relating to that specific Reddy Finished Product. (g) If PAR terminates the Agreement with respect to a particular Reddy Finished Product pursuant to Section 17(b), PAR shall not (and shall not authorize, cause or permit any of its Affiliates to), directly or indirectly, manufacture, purchase, sell or distribute in the Territory any Competing Product to any Reddy Finished Product as to which this Agreement has been so terminated for the balance of the Term of such Reddy Finished Product. (h) If REDDY terminates this Agreement with respect to a particular Reddy Finished Product pursuant to Section 17(b), REDDY shall not (and shall not authorize, cause or permit any of its Affiliates to), directly or indirectly, sell or distribute such Reddy Finished Product in the Territory for the balance of the Term of such Reddy Finished Product. 39 18. RIGHT TO INSPECT. REDDY and PAR shall have access to and the right, upon reasonable notice and at reasonable times, to inspect the manufacturing and warehousing facilities, supporting systems, documents and records (including, without limitation, adverse drug reactions, annual product reviews, stability reports and complaints) of the other that are associated with a Reddy Finished Product or Par Finished Product. After an inspection, the inspecting party shall provide the inspected party with a copy of its inspection report and the inspected party shall promptly provide the other with a written response to such report. If needed the parties will arrange to meet to discuss the results and recommendations contained in such inspection report. 19. ADVERSE DRUG REACTIONS. REDDY and PAR shall keep the other fully informed of (i) any notification or other information, whether received directly or indirectly, which might affect the marketability, safety or effectiveness of any Reddy Finished Product or Par Finished Product, or which might result in liability issues or otherwise necessitate action on the part of either party, or which might result in recall or seizure of any Reddy Finished Product or Par Finished Product and (ii) nonclinical reports with respect to any Reddy Finished Product or Par Finished Product. 20. CONFIDENTIALITY AND NON-USE. (a) Except as otherwise expressly provided in Section 2(e) of this Agreement, during the Term of this Agreement and any renewal thereof, and for a period of five (5) years thereafter, each party shall hold in confidence, not disclose and not use for the benefit of any party, except the disclosing party, any and all confidential information provided by the disclosing party, except with the express prior written consent of the disclosing party, provided that non-disclosing party shall not be prevented from disclosing information which: (i) at, prior or subsequent to the time of such disclosure is independently known to the receiving party without obligation of secrecy or non-use to a third party; 40 (ii) at, prior or subsequent to the time of disclosure, becomes part of the public knowledge through no breach hereof by the receiving party; (iii) subsequent to the time of such disclosure is the subject of another agreement between the parties hereto which explicitly permits use or disclosure; or (iv) is required by law or judicial process to be disclosed. Specific information received by either party hereunder shall not be deemed to fall within any of the foregoing exceptions merely because it is embraced by general information within any such exceptions. In addition, any combination of features received as confidential information by either party hereunder shall not be deemed to fall within any of the foregoing exceptions merely because individual features are separately within any such exception, but only if the combination itself, and its principles of operation, are within such exception. (b) In the event that either party shall be legally compelled or required by a court of competent jurisdiction to disclose all or any part of the Confidential Information of the other (or its Affiliates), it shall provide prompt notice to the other so that such other party (or its Affiliates) may determine whether or not to seek a protective order or any other appropriate remedy. If a protective order or other appropriate remedy is not obtained before such disclosure is required, the party required to make disclosure will disclose only those portions of the Confidential Information in question which it is advised by written opinion of counsel (which opinion shall be addressed to such party and to the other party), it is legally required to disclose and will exercise its best efforts to obtain reliable assurances that confidential treatment will be accorded such Confidential Information. (c) Without limiting the generality of the foregoing, each party shall limit disclosure of the confidential information to its employees who need 41 to receive the confidential information in order to further the activities contemplated in this Agreement. Each party shall take sufficient precautions to safeguard the confidential information, including obtaining appropriate commitments and enforceable confidentiality agreements. Each party understands and agrees that the wrongful disclosure of confidential information will result in serious and irreparable damage to the other party, that the remedy at law for any breach of this covenant may be inadequate, and that the party seeking redress hereunder shall be entitled to injunctive relief, without prejudice to any other rights and remedies to which such party may be entitled. (d) It is acknowledged that confidential information may be disclosed not only in writing or other tangible form, but also through discussions between each party's respective representatives, demonstrations, observations and other intangible methods. (e) The above notwithstanding, each party shall have the right, with the exercise of discretion, and insofar as practical under written confidentiality agreements having provisions no less stringent than those contained herein, to make disclosures of such portions of confidential information to third party consultants, attorneys, contractors, advisors, Affiliates and governmental agencies where in the recipient's judgment such disclosure is essential to development, approval or marketing of a Reddy Finished Product pursuant to this Agreement. (f) Except as otherwise set forth in this Agreement, upon termination of this Agreement and at the written request of the disclosing party, the receiving party shall return all the confidential information of the disclosing party (including all copies thereof) or destroy such confidential information at the option of the disclosing party. 42 21. INSURANCE. Each of PAR and REDDY shall (and shall cause their respective Affiliates to), during the Term or Group 2 Term, as the case may be, and for a period of not less than thirty-six (36) months following termination of this Agreement, maintain product liability insurance (including blanket contractual liability) in a minimum amount of $10,000,000 U.S., combined single limit, to cover product liability claims of PAR and REDDY relating to each Reddy Finished Product or Par Finished Product with the manufacturer's insurance coverage being primary with respect to any claim thereunder. Each of Par and REDDY shall, at the request of the other, provide evidence to such requesting party of compliance with its insurance obligation (and those of its Affiliates) under this Section 21 and evidence of renewals of any such policy from time to time. 22. ARBITRATION. Any controversy or claim pursuant to Sections 7 and 16(f) of this Agreement or the breach thereof shall be referred for decision forthwith to a senior executive of each party not involved in the dispute. If no agreement is reached within thirty (30) days of the request by one party to the other to refer the same to such senior executive, then such controversy or claim shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association; such arbitration to be held in Newark, New Jersey on an expedited basis. Judgment upon the award rendered by the Arbitrator(s) may be entered in any court having jurisdiction thereof. 23. MISCELLANEOUS. (a) This Agreement does not constitute or create (and the parties do not intend to create hereby) a joint venture, pooling arrangement, partnership, or formal business organization of any kind between and among any of the parties, and the rights and obligations of the parties shall be only those expressly set forth herein. The relationship hereby established between PAR and REDDY is solely that of buyer and seller, each is an independent contractor engaged in the operation of its own respective business. Neither party shall be 43 considered to be an agent of the other for any purpose whatsoever. Each party shall be responsible for providing its own personnel and workers' compensation, medical coverage or similar benefits and shall be solely responsible for the payment of social security benefits, unemployment insurance, pension benefits, withholding any required amounts for income and other employment-related taxes and benefits of its own employees, and shall make its own arrangements for injury, illness or other insurance coverage to protect itself, its Affiliates, its subcontractors and personnel from any damages, loss and/or liability arising out of the performance of this Agreement. Neither party has the power or authority to act for, represent or bind the other (or its Affiliates) in any manner. (b) Any notice provided for under this Agreement shall be in writing, shall be given either by hand or by mail, telegram, facsimile message or other written means, and shall be deemed sufficiently given if and when received by the party to be notified at its address first set forth below. Either party may, by notice to the other, change its address for receiving such notices. If to REDDY: DR. REDDY'S LABORATORIES LIMITED 7-1-27 Ameerpet Hyderabad - 500 016 India Attention: CEO Telefax: 0119140291955 -and- REDDY-CHEMINOR, INC. 66 South Maple Avenue Ridgewood, New Jersey 07450 U.S.A. Attention: Strategic Business Unit Head Telefax: 12014441456 If to PAR: PAR PHARMACEUTICALS, INC. One Ram Ridge Road Spring Valley, New York 10977 Attention: _________ Telefax: ___________ 44 (c) This Agreement shall be deemed to have been made in the State of New Jersey, and shall be construed in accordance with and governed by such law without regard to the choice of law principles thereof. Any action between PAR and REDDY which relates in any way to this Agreement or any Reddy Finished Product shall also be governed by New Jersey law without regard to choice of law principles. Except with respect to disputes regarding the respective fault of the parties in the event of a recall or seizure as controlled by Sections 7 and 16(f), the parties agree to submit all disputes which relate in any way to this Agreement or any Reddy Finished Product, to the jurisdiction of the Superior Court of New Jersey. (d) This Agreement may not be assigned by either party without consent of the other party. (e) If the manufacture, transportation, delivery, receipt or use by either party of any material or services covered hereby is prevented, restricted or interfered with by reason of any event or cause whatsoever beyond the reasonable control of the party so affected, such party, upon prompt notice to the other party, shall be excused from making or taking deliveries hereunder to the extent of such prevention, restriction or interference. (f) This Agreement constitutes the entire agreement between the parties with reference to the subject matter hereof, supersedes any prior agreements with respect to such subject matter, and may not be changed or modified orally, but only by an instrument in writing, signed by the parties, which states that it is an amendment to this Agreement. The terms and conditions of sale contained in either PAR's or REDDY's purchase order and PAR's or REDDY's invoice shall not modify, alter or add any term or condition of or to this Agreement. (g) Neither party shall be liable to the other party for lost profits or special, consequential, punitive or indirect damages in connection 45 with any claim or cause of action arising out of the subject matter of this Agreement. (h) The Parties agree that costs or expenses which are inadvertently omitted from a party's calculation of Manufacturing Costs, Net Sales or Profit may be included by that party in its calculation of same in a later period. Similarly, should a change occur resulting in a cost or expense increase or decrease (after a calculation and the related payment is made), the increase or decrease shall be included in the calculation in the next period. (i) This Agreement may be executed in one or more counterparts each of which shall for all purposes be deemed to be an original and all of which shall constitute one and the same instrument. IN WITNESS WHEREOF, this Agreement has been executed as of the date first above written. PAR PHARMACEUTICALS, INC. By: /s/ Kenneth I. Sawyer --------------------------------------- Name: Title: DR. REDDY'S LABORATORIES LIMITED By: /s/ Cameron Reid --------------------------------------- Name: Title: REDDY-CHEMINOR, INC. By: /s/ Cameron Reid --------------------------------------- Name: Title: 46 -----END PRIVACY-ENHANCED MESSAGE-----