COLLABORATION AGREEMENT

Exhibit 10.8

 

Execution Copy

 

COLLABORATION AGREEMENT

 

This COLLABORATION AGREEMENT is entered into as of November 9, 2005 (the “Effective Date”), by and between PAIN THERAPEUTICS, INC., a Delaware corporation having an address of 416 Browning Way, South San Francisco, California 94080 (“PTI”), and KING PHARMACEUTICALS, INC., a Tennessee corporation having an address of 501 Fifth Avenue, Bristol, Tennessee 37620 (“King”). Each of King and PTI is sometimes referred to individually herein as a “Party” and collectively as the “Parties.”

 

WHEREAS, PTI owns or controls certain technology and intellectual property rights relating to the preparation of tamper-resistant opioid formulations;

 

WHEREAS, King is engaged in the development and marketing of human therapeutics;

 

WHEREAS, King is entering into this Agreement based on, among other things, PTI’s specialized skill, knowledge, and expertise with respect to the technology and intellectual property relating to the preparation of tamper-resistant opioid formulations; and

 

WHEREAS, the Parties desire to enter into a collaboration for the purpose of Developing Remoxy and other Products and to give King the right to Market and manufacture Products, in each case, derived from PTI technology and intellectual property;

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration the receipt and sufficiency of which are acknowledged by the Parties, the Parties hereto, intending to be legally bound, agree as follows.

 

1. DEFINITIONS

 

Capitalized words and phrases used in this Agreement have the meanings ascribed to such terms in Annex A attached hereto.

 

2. ADMINISTRATION OF THE COLLABORATION

 

2.1 Establishment and Function of JOC. PTI and King shall establish the JOC within thirty (30) days of the Closing Date, which shall have the responsibilities set forth in this Agreement, including Section 2.2. Each Party shall appoint, in its sole discretion, three members to the JOC (which members shall be employees of such Party), with those members designated primarily to represent such Party with respect to clinical/regulatory, sales/marketing/finance and manufacturing matters. King and PTI each shall designate a co-chairman (each a “Co-Chairman” and together the “Co-Chairmen”). Upon the approval of both Co-Chairmen (or the remaining Co-Chairman in the event of a substitution in that position), which approval shall not be unreasonably withheld, each Party may substitute individuals, on a permanent or temporary basis, for any of its previously designated representatives to the JOC, by giving written notice thereof to the other Party. PTI and King shall each bear all out-of-pocket expenses of their respective JOC members related to their participation on the JOC and attendance at JOC meetings.

 

***	Confidential treatment request pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

2.2 JOC Responsibilities. The JOC shall administer and monitor all matters with respect to the Collaboration, including the following matters:

 

2.2.1 oversight of the Development Plans and Manufacturing/CMC Plans, including all related strategy and objectives, timelines and activities thereunder, and changes with respect thereto on a quarterly basis; such oversight will confer to each Party, through its JOC representative, an ongoing right of Consultation;

 

2.2.2 review and approval of all budgets to support the Program Plans;

 

2.2.3 review of the management and allocation of resources of the Collaboration;

 

2.2.4 review of all Patent Rights and Technology used in connection with Product;

 

2.2.5 review and approval (prior to execution by either Party) of (a) all Third Party licenses (including all amendments thereto), and (b) all subcontracts, sublicenses, and other agreements (including all amendments thereto) that are required or to be entered into in connection with the Development Program and that either (i) require payments by a Party to a Third Party of greater than [***] U.S. dollars ($[***]) over the life of the contract or (ii) are otherwise material, or reasonably likely to become material, to the Collaboration, such review in each case to include a determination, with respect to each such subcontract, sublicense, license, or agreement, regarding whether it is appropriate to require the inclusion of the protections set forth in Section 3.8 hereof; and

 

2.2.6 performance of such other functions as appropriate to further the purposes of this Agreement and the Collaboration as determined from time to time by the Parties.

 

2.3 Dispute Resolution.

 

2.3.1 In the event that the JOC shall not be able, within 10 days, to reach a decision or take an action on any matter, then such unresolved matter shall first be referred for resolution to the Chief Executive Officer of each Party for attempted resolution by good faith negotiation. Such good faith negotiation may include the appointment by either Party, at its own expense, of an unaffiliated Consultant, who shall be an expert chosen based on such person’s experience and expertise in the particular type of issue that is unresolved to advise such officers on the matter.

 

2.3.2 If such officers are unable to resolve the matter within 10 days, then, except as provided in Section 3.4.6 or 3.9, and subject to Section 3.3.2:

 

(a) the following matters shall be finally decided by PTI: (i) all matters related to the Development Plan in the U.S. Territory until immediately prior to the Phase II Meeting with respect to a Product (subject to Section 3.4.3); and (ii) all CMC matters relating to the Manufacturing/CMC Plan through the Regulatory Approval of an NDA for a Product;

 

***	Confidential treatment request pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

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(b) the following matters shall be finally decided by King: (i) all matters related to the Development Plan in the U.S. Territory after the Regulatory Approval of an NDA for a Product; (ii) all matters relating to the Development Plan in the ROW; (iii) all CMC matters relating to the Manufacturing/CMC Plan after the Regulatory Approval of an NDA for a Product; (iv) all non-CMC matters relating to the Manufacturing/CMC Plan that impact commercial supply (i.e., matters relating to choice of secondary packaging, secondary labeling, logistics, and the like); and (v) all matters relating to the Yearly Brand Plan; and

 

(c) notwithstanding the foregoing provisions of this Section 2.3.2, neither Party shall have final decision-making authority with respect to the following: (i) all matters related to the Development Plan in the U.S. Territory during the period immediately prior to the Phase II Meeting until the Regulatory Approval of an NDA for a Product (subject to Section 3.4.3) and (ii) all other matters not otherwise described in Sections 2.3.2(a) and (b) above, including, subject to the parameters set forth in Sections 3.3.2 and 3.7, final decisions with respect to budgets and spending funds in excess of approved budgets (or in excess of [***] percent ([***]%) of the [***] under the budget of a Development Plan, as provided in Section 3.7.2).

 

2.3.3 Disputes not subject to the final decision-making authority of either Party, as described in Section 2.3.2(c) above, will be resolved by binding arbitration in accordance with the rules of the American Arbitration Association (the “AAA”), unless another non-profit professional dispute resolution organization knowledgeable with respect to drug development is agreed to by the Parties within five (5) days, and the provisions of this Section 2.3.3.

 

(a) The Party desiring to initiate an arbitration proceeding will send a written notice to the other Party requesting the commencement of the arbitration proceeding and specifying the issue to be resolved. Following such notice, the JOC will work in good faith to select one neutral arbitrator, who will be an expert with respect to drug development and the pharmaceuticals industry so as to better understand the legal, business, and scientific issues addressed in the arbitral proceeding. In the event that, within 10 business days of such notice, the JOC is unable to agree upon an arbitrator, who is available to participate in the arbitration proceeding, then, each Party will designate one neutral arbitrator within 15 days thereafter. Within an additional 15 days thereafter, the first two arbitrators will designate a third. Each arbitrator will be a neutral arbitrator, who is an expert in drug development and the pharmaceuticals industry. If either Party fails to choose an arbitrator within the foregoing time period, the AAA (or equivalent organization) will choose an arbitrator on behalf of that Party. Disputes about arbitration procedure will be resolved by the arbitrators or, failing agreement, by the AAA (or equivalent organization) in San Francisco, California. Unless otherwise agreed by the Parties, the arbitration proceedings will be conducted in San Francisco, California.

 

(b) Within 5 days of the selection of the final arbitrator, the Parties will deliver to the arbitrators a joint letter (i) stating each of the issues that is the subject of the dispute, (ii) setting forth each Party’s final position with respect to each such issue, and (iii) directing the arbitrators to resolve the dispute by selecting the final position of one of the Parties; provided that, if the Parties cannot agree on a joint letter, each Party will submit a letter setting forth its position on each issue, and the failure of any Party to submit such a joint letter will not prevent the arbitration from proceeding. In addition, each Party may submit with the joint letter

 

***	Confidential treatment request pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

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supporting documentation for such Party’s final position or a request that the arbitrators permit the Parties to undertake limited discovery. In resolving the dispute, the arbitrators will have no authority to make a decision on any issue other than by selecting the final position of one of the Parties.

 

(c) An arbitration decision will be rendered in writing within 30 days of the submission of the letter described above, which award will be final and binding on the Parties and will be deemed enforceable in any court having concurrent jurisdiction of the subject matter hereof and the Parties. In selecting the final position of one of the Parties, the arbitrators will have the authority to grant specific performance and allocate costs between the Parties (excluding attorneys’ fees, which each Party must bear itself); provided that the arbitrators will have no authority to award punitive damages or any damages in excess of the limitations contained in this Agreement.

 

2.4 Committees. The JOC shall have the right and power to appoint and delegate its responsibilities to committees, and the composition and eligibility requirements for the same shall be agreed upon by the members of the JOC. Except as otherwise mandated by the JOC, each committee established by the JOC shall be governed by the rules and guidelines applicable to the JOC set forth in this Agreement.

 

2.5 Meetings.

 

2.5.1 Schedule of Meetings. The JOC shall establish a schedule of times for meetings, taking into account the planning needs of the Development Program and the need of the JOC to consult and render decisions. In no event shall the JOC meet less frequently than quarterly. Meetings shall alternate between the respective offices of the Parties in (i) Princeton, New Jersey or Cary, North Carolina and (ii) San Francisco, California, or another mutually agreed upon location; provided, however, that the Parties may mutually agree to meet by teleconference or video conference or may act by a written memorandum executed by the members of the JOC.

 

2.5.2 Quorum; Voting; Decisions. At each JOC meeting, the attendance of at least one member representing each Party shall constitute a quorum. All decisions of the JOC shall be made by unanimous vote. Representatives of each Party or of its Affiliates who are not members of the JOC may attend JOC meetings or committee meetings as non-voting observers at the invitation of either Party with the prior approval of the other Party, which approval shall not be unreasonably withheld.

 

2.5.3 Agenda and Minutes. An agenda for each JOC meeting shall be circulated no less than three days prior to the meeting, to the extent practicable. The JOC shall keep accurate minutes of its deliberations that record all proposed decisions and all actions recommended or taken. Drafts of the minutes shall be delivered to the members of the JOC within a reasonable time, not to exceed 10 days after the meeting. The responsibility for the preparation and circulation of the draft minutes shall alternate between the Parties. Draft minutes then shall be edited by the Co-Chairmen and shall be issued in final form within a reasonable time not to exceed 14 days after the meeting.

 

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3. DEVELOPMENT PROGRAM

 

3.1 Development of Products.

 

3.1.1 Initial Product Designations. The Parties shall Develop no less than four (4) Products under the Collaboration. The Parties agree that the first such Product shall be Remoxy, the second such Product shall be a product within the Field containing [***] as its opioid API, and the third such Product shall be a product within the Field containing [***] as its opioid API. The fourth Product, and all additional Products, shall be selected as set forth in Section 3.1.2 below.

 

3.1.2 Designation of Additional Products. In Consultation with PTI and review by the JOC and in accordance with the strategies of the Program Plans, King shall have the right to designate which products within the Field, in addition to the three (3) Products listed in Section 3.1.1 above, shall be selected for Development and Marketing under the Development Program. Upon King’s designation of a product within the Field for inclusion in the Development Program, PTI shall inform Durect of such selection, and provided that such product is a product that may be developed under the DLA, PTI shall exercise its rights under Section 2.1 of the DLA to designate such product a “Licensed Product,” and the Parties shall thereafter promptly generate the Program Plans for such Product, all as further described in this Article 3.

 

3.1.3 Minimum Development and Marketing Obligations.

 

(a) King shall ensure that it is Marketing or funding the Development of a minimum of at least [***] different Products under the Collaboration at all times; provided that beginning on [***], such minimum number of different Products shall increase to [***]. In order to satisfy the foregoing requirement that King is Marketing or funding the Development of at least [***] different Products under the Collaboration by [***], King further agrees that it will designate a [***] Product to be Developed and Marketed hereunder no later than [***]. King further agrees that in the event King (i) does not designate a [***] Product by [***] or (ii) notifies PTI of its intention to terminate Development and Marketing of a Product pursuant to Section 3.1.4, is required pursuant to Section 3.1.4 to designate a replacement Product, and fails to select such a replacement Product within the applicable time frame specified thereunder (and such failure would result in a default of King’s obligations under this Section 3.1.3), PTI will be entitled to designate such Product on King’s behalf. For purposes of this Section 3.1.3, King shall be deemed to be “funding the Development” of a Product if King has (A) designated such Product for inclusion within the Collaboration pursuant to Section 3.1.2, (B) has used commercially reasonable efforts to have the JOC promptly approve a Development Plan and Manufacturing/CMC Plan for such Product, and (C) is meeting its material funding obligations under all existing Program Plans.

 

(b) Subject to King’s satisfaction of its funding obligations pursuant to Section 3.1.3(a) above, PTI shall ensure that it is Developing, together with the Products King is Marketing, a minimum of at least [***] different Products under the Collaboration at all times; provided that beginning on [***], such minimum number of different Products shall increase to [***].

 

***	Confidential treatment request pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

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3.1.4 Product Termination. King shall have the right to terminate Development and Marketing of a Product (the “Terminated Product”) hereunder by providing written notice to PTI [***] days prior to the effective date of such termination and, if necessary to comply with its obligations for maintaining a minimum number of Products, as provided in Section 3.1.3(a) above, designating a replacement Product in such notice, which shall be treated as a Product designation in accordance with Section 3.1.2 above, and the provisions of Section 9.2.2(a) shall apply to such Terminated Product in all respects. If a replacement Product is required to be designated, such notice of termination for such Terminated Product shall not be effective until a replacement Product has been selected and a Development Plan for such replacement Product has been approved by the JOC.

 

3.2 Durect License Agreement. Notwithstanding anything herein to the contrary, King acknowledges and agrees that PTI is subject to certain obligations under the Durect License Agreement as set forth in Section 2.4 of the License Agreement.

 

3.3 Program Plans. Disputes relating to the matters set forth in this Section 3.3 will be governed by Section 2.3.2.

 

3.3.1 Generally. In consultation with the JOC and in accordance with the strategy and objectives of the Program Plans, each Party shall be primarily responsible for those tasks assigned it as set forth in each Program Plan and such obligations set forth in this Agreement. The Parties will take such actions necessary to define, generate, and approve the Program Plans for each Product following the Effective Date. The Parties shall ensure that the Program Plans, including all timelines set forth therein, are consistent with each other, accurately reflect the objectives of the Development Program, and meet all of PTI’s obligations to Durect under the DLA. Each Program Plan shall be in writing and shall set forth objectives and tasks to be performed by each of the Parties for the period covered by the Program Plan as agreed by such Party and as specifically set forth in this Agreement. Any Program Plan may be amended at any time in accordance with the same procedures applicable to the adoption thereof. Although not specifically a part of a Program Plan, all issues and activities relating to Patent Rights and Technology used in connection with a Product shall be subject to review of the JOC.

 

3.3.2 Program Plan Budgets.

 

(a) Each Program Plan shall set forth an annual budget with respect to all material tasks required to be conducted by the Parties pursuant to such Program Plan. Each Party shall use commercially reasonable efforts to complete all tasks assigned to it pursuant to the Program Plans in accordance with the funding allocated to such tasks in the budget. All overruns and additional expenditures will be governed by Section 3.7.

 

(b) PTI will provide the JOC with updated budgets for each Development Plan and Manufacturing/CMC Plan on a [***], which updated budgets shall specify the funding which PTI projects to be required during the following [***] to perform its obligations under such Development Plans and Manufacturing/CMC Plans. Each

 

***	Confidential treatment request pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

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such budget will be subject to review and approval of the JOC (such approval not to be unreasonably withheld); provided that it is understood that such budgets may include expenses for Third Party services extending beyond the [***] period covered by such budget if incurring such expenses is contractually required in obtaining such services.

 

(c) Notwithstanding anything to the contrary herein, the Parties agree that the Collaboration Costs budgeted for PTI’s activities under the Development Plan(s) and Manufacturing/CMC Plan(s) with respect to Remoxy between the [***] shall be at least [***]. The Parties further agree that King’s financial commitment with respect to Products other than Remoxy shall be commensurate with the foregoing commitment to Remoxy, taking into account such factors as the stage of development and potential market of such Products relative to the stage of development and potential market of Remoxy and the regulatory strategy with respect to the Product; provided that the total Collaboration Costs budgeted for PTI’s activities under the Development Plans and Manufacturing/CMC Plans for all Products shall not exceed [***] a year in any of the first [***] Years following the inception of this Agreement, or a cumulative total of one hundred million U.S. dollars ($100,000,000). Notwithstanding the foregoing, the Parties agree that the JOC may (but the arbitrators may not) waive the preceding spending limits if, in its reasonable judgment, such increases in spending are warranted. For purposes of calculating the foregoing annual and cumulative spending limits, as well as the foregoing minimum financial commitment with respect to Remoxy, Collaboration Costs as used in this section shall exclude (i) any [***], (ii) costs of [***], including costs incurred in [***], (iii) all costs and expenses related to [***], and (iv) costs incurred in connection with [***], it being understood that the [***]. The Parties further agree that with respect to Products subsequent to Remoxy, prompt Development and Regulatory Approval shall mean the speediest Development Plan needed to reach Development and Regulatory Approval of any dosage form of such Products in the U.S. Territory, consistent with patients’ safety and all applicable regulatory rules and regulations. If the Program Plans need to be amended to maintain these annual and cumulative limits, King will propose those amendments it believes are required, subject to review and approval of PTI, which approval shall not be unreasonably withheld.

 

3.4 Development Plans.

 

3.4.1 PTI, in Consultation with King, will prepare, and provide the JOC with a copy of, a Development Plan for each Product, which will include pre-clinical, clinical, and regulatory timelines and an annual budget, including a general overview of the expected schedule of meetings, discussions, and correspondence with Regulatory Authorities and the expected Regulatory Filings to be completed and maintained by the Collaboration. The Development Plan will be subject to review and approval of the JOC, including ongoing review as provided in Section 2.2.1, which approval not to be unreasonably withheld; provided that the

 

***	Confidential treatment request pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

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JOC shall not withhold its approval or otherwise object to the budget in such Development Plan on any grounds that are inconsistent with the criteria and objectives set forth in Section 3.3.2(c) above.

 

3.4.2 Subject to Sections 3.4.5 and 3.4.6 below, the provisions of this Section 3.4.2 will apply to all matters relating to the Development Plan in the U.S. Territory. Until the Completion of Phase II for a Product (but immediately prior to the Phase II Meeting), PTI, in Consultation with King, will have sole control and responsibility for execution of all matters described in the Development Plan with respect to a Product. Following the Completion of Phase II for a Product but prior to the Regulatory Approval of an NDA for such Product, King and PTI will assume joint control and responsibility, through the JOC, for all matters described in the Development Plan with respect to such Product; provided that PTI, in Consultation with King, will continue to be responsible for execution of matters under such plan. Following such Regulatory Approval, King, in Consultation with PTI, will have sole control and responsibility for execution of all matters described in the Development Plan with respect to such Product. In addition, each Party will be given the opportunity to review and comment on draft and final development plans and all associated protocols, reports, and Regulatory Filings on an ongoing basis. Draft documents will be provided to a Party in electronic or written form in advance of finalization or submission to Regulatory Authorities.

 

3.4.3 In the event the FDA, during the Phase II Meeting for a Product, determines that the Development of such Product may not proceed to Phase III, or the Parties otherwise agree that additional Development should be performed before proceeding to Phase III, King and PTI will jointly develop a revised Development Plan for such Product, and PTI will then reassume sole control and responsibility for execution of such Development Plan until Completion of Phase II for a Product (immediately prior to the Phase II Meeting), as provided herein.

 

3.4.4 King, in Consultation with PTI, will have sole control and responsibility for execution of all Product Development and associated regulatory matters described in the Development Plan with respect to a Product in the ROW. King, or its Affiliates or Sublicensees, shall be responsible for all clinical and regulatory expenses incurred in seeking Regulatory Approval in markets in the ROW.

 

3.4.5 Upon the FDA’s approval of an NDA for a Product in the U.S. Territory, PTI, in Consultation with King, shall continue to have sole control and responsibility for the execution of any post-approval commitments mandated by the FDA with respect to such Product and the first Regulatory Approval thereof, and King, in Consultation with PTI, shall assume sole control and responsibility for execution of further Product Development of the Product.

 

3.4.6 In the event an NDA for Remoxy has not been accepted for filing by the FDA within [***] months of the Effective Date, King may elect to assume sole control and responsibility for execution of all matters under the Development Plan (and all CMC matters under the Manufacturing/CMC Plans) with respect to Remoxy in the U.S. Territory by providing PTI with written notice thereof. In such event, notwithstanding the provisions of Section 2.3.2, PTI will not have final decision-making authority with respect to matters related to Remoxy under the Development Plan, but King will have the final decision-making authority with respect

 

***	Confidential treatment request pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

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to all such matters. Both Parties agree that such transfer of control and responsibility from PTI to King described in this Section 3.4.6 shall in no way diminish PTI’s or Durect’s right to receive royalties or milestones, as provided in the License Agreement. King agrees to use commercially reasonable efforts to diligently proceed with execution of the Development Plan in good faith and consistent with PTI’s obligations under the DLA and this Agreement and shall use commercially reasonable efforts and diligence in Developing and seeking Regulatory Approval of Remoxy in the U.S. Territory in accordance with its business, legal, medical, and scientific judgment and in undertaking investigations and actions required to obtain appropriate Regulatory Approvals necessary to market Remoxy in the U.S. Territory and to meet its obligations hereunder. In addition, following such transfer of control and responsibility, King will provide PTI with such plans, budgets, data, and other information as PTI had been obligated to provide to King prior to the assumption of control by King under this Section 3.4.6.

 

3.4.7 Upon transfer of control and responsibility of a Product, the Parties will cooperate with each other in effecting a Tech Transfer of such matters to King with respect to such Product.

 

3.4.8 PTI shall use commercially reasonable efforts to complete all tasks assigned to it pursuant to the Development Plans in accordance with the budget; provided, however, that PTI may spend the funds allocated to such task plus an additional [***]% of such funds, which additional expenditures shall be paid by King. If the actual costs under a particular Development Plan will likely exceed [***]% of the funds allocated to such task, the provisions of Section 3.7 shall govern.

 

3.4.9 During the period in which the Parties share joint control of matters under the Development Plan, both Parties agree that only PTI may initiate or respond to FDA communications (including e-mail) regarding a Product; provided, however, that PTI shall keep King informed regarding all important communications, whether written or oral, between PTI and the FDA and shall provide King with an opportunity to review and comment on all important written correspondence (including all e-mail correspondence) and participate in all planned meetings and telephone calls, between PTI and the FDA.

 

3.4.10 All INDs and NDAs for a Product in the U.S. Territory will be owned and maintained in the name of PTI; provided that, upon Regulatory Approval of a Product, ownership and maintenance of INDs and NDAs for such Product will be transferred to King. In connection with such transfer to King, PTI will transfer all underlying clinical data and regulatory filings in an electronic format, to the extent available, agreed upon by the Parties. PTI shall transfer the NDA for each approved Product to King within [***] days of the receipt of Regulatory Approval of such Product. PTI further agrees to transfer the applicable INDs, clinical data, and other regulatory filings within [***] days of the Regulatory Approval of the Product to which they relate. All INDs and NDAs for a Product in the ROW will be owned and maintained by King. PTI hereby grants King access to, and right of reference to, any INDs and NDAs for Products in the Territory owned and maintained in the name of PTI to the extent necessary for King to perform its obligations hereunder or conduct Product Development in the Territory. King hereby grants PTI access to, and right of reference to, any INDs and NDAs for Products in the Territory owned and maintained in the name of King to the extent necessary for PTI (a) to perform its obligations hereunder, (b) to develop products

 

***	Confidential treatment request pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

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that are within the Field (including Products) outside the Territory, (c) to develop [***] pursuant to the terms of this Agreement and the License Agreement, (d) to develop products outside the Field, including [***], or (e) as otherwise reasonably requested by PTI. For purposes of clarity, the rights granted by King to PTI in the preceding sentence shall include the right to permit Third Parties to access or reference such Regulatory Filings, so long as such Third Parties have agreed to confidentiality obligations that are at least as stringent as those set forth herein; provided that PTI agrees that it will not provide such rights of access or reference to Third Parties who are not engaged in a research, development, manufacturing, or marketing relationship with PTI.

 

3.4.11 PTI will use commercially reasonable efforts and diligence in Developing and seeking Regulatory Approval of each Product in the U.S. Territory in accordance with its business, legal, medical, and scientific judgment and in undertaking investigations and actions required to obtain appropriate Regulatory Approvals necessary to market Products in the U.S. Territory and to meet its obligations hereunder.

 

3.4.12 Subject to Section 2.1.4 of the License Agreement, following the acceptance for review by a Regulatory Authority in the U.S. Territory of an NDA for a Product, King will use commercially reasonable efforts and diligence in conducting Product Development and seeking Regulatory Approval of such Product in the Major Market Countries in the ROW in accordance with its business, legal, medical, and scientific judgment and in undertaking investigations and actions required to obtain appropriate Regulatory Approvals necessary to market such Product in the Major Market Countries and to meet its obligations hereunder. In exercising its business, legal, medical, and scientific judgment, King may take the following factors, among other things, into consideration: [***]; provided that the level of efforts and diligence used by King in conducting Product Development and seeking Regulatory Approval of Products in the ROW shall at all times be at least a level of efforts sufficient to ensure that PTI’s obligations to Durect under the DLA are satisfied. Notwithstanding anything herein or in the License Agreement to the contrary, in the event PTI obtains Regulatory Approval for a [***] in any country in the Territory, including a Major Market Country, before King obtains in such country Regulatory Approval for the Product that contains the same opioid agonist as its API as such [***], King shall not be obligated to conduct Product Development, seek Regulatory Approval, or Market such Product in such country.

 

3.5 Manufacturing/CMC Plans.

 

3.5.1 King and PTI will jointly prepare each Manufacturing/CMC Plan and provide a copy to the JOC for its review and approval. Notwithstanding the foregoing, the Parties agree that PTI shall be solely responsible for preparing a Manufacturing/CMC Plan for

 

***	Confidential treatment request pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

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Remoxy, it being understood that King will be given an opportunity to review and offer recommendations regarding such plan during its preparation, which recommendations PTI will consider in good faith.

 

3.5.2 PTI, in Consultation with King, will have control and responsibility for execution and implementation of all CMC development of a Product throughout the Territory until the first Regulatory Approval for such Product in the applicable country, including responsibility for provision of CTM, CMC information for such Product in Regulatory Filings, and pre-market validation of such Product. Notwithstanding the foregoing, PTI, in Consultation with King, will continue to have control and responsibility for execution and implementation of all CMC development after the first Regulatory Approval of a Product for all changes in formulation, including changes in dosage strength, requiring a further pre-market clearance by the FDA or other Regulatory Authority. Such changes in formulation may include line extension developments or reformulations that are, in PTI’s reasonable judgment, within the scope of the DLA. For purposes of clarity, with respect to novel Product formulations, PTI and Durect shall be responsible for determining the qualitative and quantitative composition of each novel formulation with respect to excipients and API and setting technical and regulatory specifications for each such excipient and API used in creating such novel formulation. King shall have the right to select the manufacturer of such excipients and API prior to the manufacture of Phase III CTM, so long as the excipients supplied by King’s selected manufacturer comply with the technical and regulatory specifications set by PTI and Durect. King shall have the right to negotiate and enter into supply agreements for API and excipients and to be the assignee with respect to agreements that may be in place for such Product excipients and API as of the Effective Date, in each case to the extent permitted under such supply agreements, and in compliance with the DLA and Section 2.1.3 of the License Agreement.

 

3.5.3 Except as provided in Section 3.5.2 above, King, in Consultation with PTI, will have control and responsibility for execution and implementation of post-approval support of each Product immediately upon the Regulatory Approval of an NDA for such Product, including logistics planning relating to such Product. To the extent PTI is obligated to purchase any excipients, additives, solvents, API, bulk form of Product, or other ingredients or materials from Durect pursuant to the terms of the DLA and which ingredients or materials, under the terms of the DLA, would be required to be used by King in its manufacture of Products, PTI shall sell to King such ingredients or materials so purchased by PTI at PTI’s actual cost, without any mark-up. In connection with the transfer of control and responsibility, upon filing of an NDA for a Product, the Parties will cooperate with each other to develop a plan for the completion of the Tech Transfer of such matters; and, with respect to all information, files, and documentation available as of the date of such NDA filing, within sixty (60) days from the acceptance by a Regulatory Authority of the NDA filing for a Product, the Parties will complete the Tech Transfer of such matters, including transferring files necessary for chemistry and manufacturing, to King with respect to such Product. Thereafter, the Parties will continue to perform Tech Transfer in a timely manner with respect to all other information, files, and documentation relating to such matters, including permitting King to witness pre-market validation and manufacture and quality operations. PTI agrees to assist, as requested by King, in post-approval support (including providing technical assistance, troubleshooting, and provision of post-marketing clinical supplies) to maximize the market opportunity for the Products and to assure uninterrupted supply.

 

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3.5.4 In Consultation with King, PTI may enter into such agreements covering the clinical supply and manufacture of Products as are reasonably necessary to accomplish the objectives and purposes of the Development Program; and King agrees to abide by the terms of any such agreements which King has approved or which has been unanimously approved by the JOC pursuant to its oversight and approval functions set forth in Section 2.2.5. King may enter into such agreements covering the commercial supply and manufacture of component materials and API following the Completion of Phase II as are reasonably necessary to accomplish the objectives and purposes of the Development Program. King may at any time enter into an agreement covering manufacture of commercial Product.

 

3.5.5 The Parties agree that PTI’s existing plan for manufacturing and quality operations with respect to Remoxy will continue to be followed by the Collaboration, with a commercial supply agreement being entered into with Mallinckrodt-Hobart as the primary manufacturer. King acknowledges that PTI’s current understanding with Mallinckrodt-Hobart contemplates a term for such supply agreement of at least [***] of commercial launch in the United States. PTI, in Consultation with King, may continue negotiating an agreement with Mallinckrodt-Hobart; provided that any such agreement will include a provision that the agreement [***]; and provided further that [***]. The Mallinckrodt-Hobart supply agreement, with respect to Remoxy, will be assigned by PTI to King at a time mutually agreed to by the Parties, but no later than upon FDA approval of an NDA for Remoxy. Except with King’s consent, not to be unreasonably withheld, the Mallinckrodt-Hobart supply agreement will have provisions such that the supply of Remoxy is independent of the supply of any other products covered by the agreement (including provisions so that a breach by PTI of its obligations with respect to the other products will not affect the supply of Remoxy) and permit the assignment of the supply agreement with respect to Remoxy independent of any other products, it being understood that King shall not withhold its consent to PTI’s entering into the Mallinckrodt-Hobart supply agreement if PTI agrees to indemnify King and hold King harmless with respect to damages which King may incur as a result of Mallinckrodt-Hobart’s cross-termination of the supply agreement with respect to Remoxy as a result of a PTI’s breach of its obligations thereunder with respect to a product other than Remoxy. PTI will use commercially reasonable efforts to have provisions of the type described in the preceding sentence included in the Mallinckrodt-Hobart supply agreement.

 

3.5.6 Except with respect to Remoxy, which is addressed by Section 3.5.5 above, King will have control and responsibility for the commercial supply of Products in the Territory. Except as provided for Remoxy in Sections 3.5.1, 3.5.2, and 3.5.5 above, King may, in its sole discretion, decide to include its own manufacturing facility as a primary manufacturing site in the initial Regulatory Filings for any Products. Upon PTI’s request and with King’s consent (such consent not to be unreasonably withheld), King agrees to enter into an agreement

 

***	Confidential treatment request pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

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with respect to King’s commercial supply of Products to PTI or its licensee in Australia and New Zealand, the terms of such agreement to be negotiated in good faith. In the event that King agrees to supply Product to PTI and PTI agrees to purchase Product from King for commercial supply in Australia and New Zealand, then such Product will be sold by King to PTI [***].

 

3.5.7 Upon PTI’s written request, a second manufacturing site will be qualified for each Product at such time as any of the following shall occur: (a) such [***], or (b) there is an [***], or (c) [***]. With respect to Remoxy, such qualification will be obtained on a post-approval basis and may include, at King’s discretion, a King facility or other contract manufacturer. With respect to all other Products, if the primary site for such Product is a King manufacturing site, PTI may require that the second manufacturing site not be a King manufacturing site.

 

3.5.8 In connection with the Manufacturing/CMC Plans, each Party

 

(a) will, upon written request of the other Party, provide the other with the following documents to the extent that such documents being requested are available and in the possession or control of the Party to whom the request is made: for each Product, pharmaceutics development report and history, copies of CMC section submitted as part of any Regulatory Filings, and minutes from any meeting or correspondence with any Regulatory Authority regarding pharmaceutics development or CMC; and

 

(b) will allow the other Party to examine and copy, at the site where such records are normally stored and at a time that is mutually acceptable to the Parties, the following: (i) CMC development protocols and reports, (ii) for each batch of API and each batch of Product produced as CTM, batch records, analytical monograph (tests and specifications), certificate of analysis for Good Manufacturing Practices release, a table containing initial release and stability testing results (which table will be updated each time a stability pull point is analyzed), copies of any out of specification or laboratory investigation report events, and report of any failed batches and any corrective action; and (iii) for each batch of Product produced as CTM, packaging and labeling batch records.

 

The Manufacturing/CMC Plans will include a list and brief description of protocols to be developed thereunder. The reports described in clause (a) above and the protocols in the Manufacturing/CMC Plans that King notifies PTI that King would like to review will be developed in Consultation with the other Party and will be made available to the other Party in draft form with sufficient time for such Party to review and comment on the foregoing, as well as being provided to the other Party in final form when such materials are completed. In addition, each Party will make available to the other Party such additional documentation reasonably related to such other Party’s performance of its obligations hereunder that is in the possession or control of the Party to whom the request is made as such documentation is reasonably requested by the other Party.

 

3.6 Yearly Brand Plans. King will prepare each Yearly Brand Plan for each Product and provide a copy to the JOC for its review and comment. King, in Consultation with PTI, will

 

***	Confidential treatment request pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

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have control and responsibility for Marketing each Product and for all matters under the Yearly Brand Plan, including determining the packaging, trade dress, and labeling (to the extent not dictated by any applicable Regulatory Approval) for the distribution and sale of Product. Subject to Section 2.1.4 of the License Agreement, King shall use commercially reasonable efforts and diligence to Market the Product commensurate with industry standards; provided that in no event shall such level of efforts and diligence be less than King uses in marketing its own products of similar market potential and at a similar stage in development as the applicable Product, taking into account the competitiveness of the marketplace, the proprietary position of the Product, and the efforts and resources available to a company having a comparable market capitalization and taking into account then-current market conditions. King will spend at least [***] on Marketing for Remoxy in the U.S. Territory (excluding expenses related to a sales force) between the Closing Date and the date of Regulatory Approval of Remoxy by the FDA; provided that King will be entitled to suspend such spending in the event the JOC decides to cease pursuing Regulatory Approval of Remoxy in the U.S. Territory, such suspension to only remain in effect until such time as the JOC elects to resume pursuing Regulatory Approval of Remoxy in the U.S. Territory; provided further that King may propose changes in spending levels, with respect to which changes PTI will not unreasonably withhold its consent, in the event of (a) the FDA not accepting the NDA covering Remoxy for filing (or refusal to file), (b) a determination by the FDA that such NDA is not approvable, or (c) a failure by the FDA to approve such NDA within eighteen (18) months of the date of the FDA’s acceptance of an NDA for Remoxy.

 

3.7 Collaboration Costs, Overruns, and Additional Expenditures.

 

3.7.1 Subject to the terms and conditions of this Agreement, including Section 3.3.2, (a) all Collaboration Costs incurred by either Party on and after the Closing Date shall be paid by King; and (b) all Collaboration Costs incurred by either Party on or after the Effective Date but prior to the Closing Date will be paid by King, with such payment not to be paid prior to the Closing Date, so long as this Agreement is not terminated prior to Closing and such Collaboration Costs comply with the terms and conditions of this Agreement, as it will be in effect as of the Closing Date. Except as otherwise provided herein, PTI shall be entitled to reimbursement for the Collaboration Costs incurred by it in connection with the Collaboration; provided that all such Collaboration Costs must be included in the budget governing the activities for which such costs were incurred, subject to the provisions of this Section 3.7. All payments made by King hereunder shall be treated for all purposes, including all tax and accounting purposes, as the expenses of King and any applicable deductions shall be wholly allocable to King.

 

3.7.2 The Parties understand and agree that a Product may generate new data or may be the subject of new regulatory guidance at any time for any reason during a Calendar Year and that such changes may require substantial revisions to the clinical development activities associated with a Product or may cause PTI, in Consultation with King, or Durect to re-work a Product. In the event either Party anticipates or becomes aware that the actual costs of any given task assigned to it may or will likely exceed the funds allocated to such task in the applicable Program Plan budget, such Party shall promptly notify the JOC in writing. If the actual aggregate costs of conducting a particular Program Plan will likely exceed the aggregate annual funds budgeted for such Program Plan under the applicable Program Plan budget (or in the case of work conducted under a Development Plan, if the actual aggregate costs of conducting a

 

***	Confidential treatment request pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

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particular Development Plan will likely exceed [***] of the aggregate annual funds budgeted for such Development Plan under the applicable Development Plan budget), the JOC shall work in good faith for up to thirty (30) days to approve a budget amendment that provides for the continued prompt clinical Development and Regulatory Approval of a Product. Such amendment may include increasing the budget, readjusting the budget to allocate additional funds to such task, revising the scope of such task to permit satisfactory completion at the then-budgeted funding level, or all three. In the event no decision is reached, the matter shall be subject to the arbitration provisions of Section 2.3.3 hereof. For purposes of clarity, neither Party shall be obligated to perform any additional services in connection with such task if the JOC does not approve increasing the budget to pay for such additional services.

 

3.7.3 Notwithstanding the foregoing, either Party may, in its discretion, spend additional amounts above and beyond those allocated in the applicable budget (“Discretionary Funding”) on any task assigned to such Party pursuant to the Program Plans or on any other task the JOC has approved. In such event, the Party wishing to expend Discretionary Funding shall first inform the second Party of such first Party’s intent to do so. If the second Party consents to the Discretionary Funding being deemed a Collaboration Cost, which consent shall not be unreasonably withheld, the Discretionary Funding shall constitute a Collaboration Cost. If the second Party does not consent, then the Discretionary Funding shall not constitute a Collaboration Cost, but shall be borne solely by the Party undertaking the Discretionary Funding.

 

3.7.4 Except to the extent this Agreement expressly provides for payments that do not require JOC approval, and except to the extent the JOC has approved any payment hereunder, neither Party shall (a) be obligated to incur any costs or expend any funds that have not been approved by such Party or (b) have the authority to cause the other Party to incur any costs or expend any funds that have not been approved by such other Party.

 

3.8 Third Party Licenses and Collaborations. Subject to the review and the approval of the JOC as provided in Section 2.2.5, King may enter into such other Third Party licenses and collaboration agreements as are reasonably necessary to accomplish the objectives and purposes of the Development Program; and subject to the review and the approval of the JOC as provided in Section 2.2.5, PTI may enter into such Third Party licenses and collaborations agreements as are reasonably necessary to accomplish the objectives and purposes of the Collaboration. Except with the other Party’s consent, not to be unreasonably withheld, each such agreement shall (a) if only one Party is a party to the agreement, name the other Party as a third party beneficiary to such agreement, (b) include an assignment of all right, title, and interest in and to all work product and all inventions arising from the performance of such agreement, and all intellectual property rights attaching thereto to the contracting Party, and (c) bind the relevant Third Party by obligations of confidentiality and non-use with respect to all such work product, inventions, and intellectual property rights that are at least as stringent as those set forth herein. In order to ensure the ability of a Party (the “Non-Defaulting Party”) to proceed with the Development Program notwithstanding certain conduct of the other Party (the “Defaulting Party”) or the termination of this Agreement by the Non-Defaulting Party pursuant to Section 9.2.3, the JOC may require the inclusion, in those subcontracts, licenses, and other agreements (including manufacturing and supply agreements) entered into in connection with the Development Program (“Third Party Agreements”) that are or are likely to become material to the conduct of the Development Program, of (i) an enforceable provision granting to the Non-Defaulting

 

***	Confidential treatment request pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

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Party hereto the same rights, benefits, and obligations as those granted to the Defaulting Party under that Third Party Agreement (whether by automatic assignment, a direct agreement, or otherwise), contingent upon a Default by the Defaulting Party of that Third Party Agreement or the termination of this Agreement by the Non-Defaulting Party pursuant to Section 9.2.3, and (ii) the applicable Third-Party’s unconditional consent to such provision.

 

3.9 Failure to Perform.

 

3.9.1 General. In the event that a Party does not perform a task or tasks assigned to it under a Program Plan, including due to a dispute as to the budget or scope of such task, or otherwise fails to perform its Development or Marketing obligations hereunder, including meeting timelines and budgets set forth in the Program Plans, PTI and King will negotiate in good faith with respect to remedying such failures. In the event such negotiations do not result in a resolution of such issues satisfactory to both Parties within thirty (30) days of the initiation of such negotiations, the matter shall be submitted to arbitration as set forth in Section 2.3.3.

 

3.9.2 Remedy. In the event the arbitrators determine that the failure to perform was intentional or willful (but not as a result of a failure to perform because of a disagreement about budget matters or regulatory strategy, which disagreement prevents the Parties from continuing to perform their obligations), the arbitrators may grant the non-breaching Party the right, but not the obligation, to perform the task or tasks of the breaching Party. In addition, in the event of any breach, including a failure to use commercially reasonable efforts to perform a Party’s obligations, the arbitrators may award the non-breaching Party monetary damages.

 

3.9.3 No Waiver. In the event a Party is granted a right to perform the other Party’s task, a Party’s election to perform such task will not be deemed a waiver with respect to such electing Party’s ability to exercise any other rights hereunder, including any rights under Section 9.2.2 or 9.2.3.

 

4. INFORMATION EXCHANGE

 

4.1 Records.

 

4.1.1 Record Keeping. Each of PTI and King shall maintain records in sufficient detail and in accordance with Good Laboratory Practice, Good Clinical Practice, and Good Manufacturing Practice, and as will properly reflect and document, in a manner appropriate for purposes of supporting the filing of potential patent applications and Regulatory Filings, all work done and results achieved in the performance of the Development Program (including all data in the form required under any Applicable Law); provided, however, that prior to King’s election to assume control and responsibility of execution of all matters under the Development Plan with respect to a particular Product, PTI shall be responsible for maintaining master files in accordance with Good Clinical Practices, Good Laboratory Practices, and Good Manufacturing Practices, to the extent applicable; provided, further, that upon such election by King, PTI shall transfer such records to King with respect to such Product. Subject to Section 6.4.3 hereof, PTI and King each hereby grants the other the right to inspect and copy such records to the extent reasonably required for the performance of its obligations or exercise of its rights under this Agreement, and neither Party shall use such records or information except to the extent otherwise permitted by this Agreement.

 

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4.1.2 Reports. Each Party shall keep the JOC reasonably informed about the status of the Development Program, including furnishing the JOC with copies of all material reports that relate to the Development Program. In particular, without limitation, each Party shall (a) provide periodic reports in reasonable detail to the JOC, at least each Calendar Quarter and as requested from time to time by the JOC; (b) provide the other Party with access to all Technology and information employed in or arising out of the Development Program solely for the purpose of conducting their respective roles hereunder; (c) provide the other Party with the information and reports described in Section 3.5.8 at least each Calendar Quarter and as requested from time to time by the other Party; and (d) provide the other Party with information concerning the Development Program as such other Party shall reasonably request. For purposes hereof, “information” will include data, results, reports, records, and similar information.

 

4.2 Updates; Adverse Event Information.

 

4.2.1 Adverse Event Reports. In addition to the reports described in Section 4.1.2 above, each Party shall provide the JOC with all adverse event information and product complaint information required by such Party to be disclosed to any Regulatory Authority in connection with the Development, Marketing, or sale of any Product, within time frames consistent with reporting obligations under Applicable Law.

 

4.2.2 Confidential Information. Except as otherwise required in connection with disclosures to Regulatory Authorities required by Applicable Law, all reports, updates, adverse event, or product complaint and other information provided by a Party under this Agreement (including under this Section 4.2) shall be considered Confidential Information of both Parties, regardless of who provided the same, and shall be subject to the terms of Article 8.

 

4.3 Sales Report. Starting immediately following the First Commercial Sale of a Product and for the Term of this Agreement, King, at its own expense, shall provide PTI with such U.S. sales reports that King has obtained for itself from a third party vendor of King’s choice (such as IMS or NDC). Such report shall be provided to PTI on a timely basis in electronic form, if available, each Calendar Quarter and shall include no less than the following data (provided that King has obtained or can obtain such data without undue burden): (a) Product sales by territory, by prescriber, and by strength, (b) Product sales by hospital, clinic, or mail-order services, independent pharmacies, chains, mass merchandisers, and food stores, (c) a comparison of actual Product sales versus King’s forecast sales, (d) wholesale volume reports, (e) top 250 hospital report, and (f) a summary of managed care accounts by volume of Product. In addition, starting immediately following the First Commercial Sale of a Product and for eighteen (18) months thereafter, King, at its own expense, shall (i) provide PTI with a weekly Product sales report in electronic form and (ii) provide telephonic (or in-person) access to King’s national sales manager for purposes of holding an accurate discussion of a Product’s commercial sales trends, general market trends, and the like. PTI agrees that all information, data, and reports provided by King to PTI hereunder shall be considered Confidential Information of King, subject to the requirements of Article 8.

 

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5. CERTAIN OTHER PROVISIONS

 

5.1 Product Liability Costs. The Parties understand and agree that, because of the nature of the collaborative effort set forth in this Agreement, should any Third Party claims be asserted against either Party or both Parties or any of their Affiliates, agents, or representatives that are in the nature of product liability claims (“Claims”), the Parties will cooperate through the JOC to ensure that such claims are defended and settled or compromised in a manner that best protects the interests of the Parties. In addition, the Parties will procure and maintain product liability insurance with first-class carriers in coverages and amounts and with deductibles not less than those determined by the JOC; provided that:

 

(a) PTI shall obtain such insurance for a Product for Claims arising prior to the Completion of Phase II, at PTI’s sole cost, which coverage shall continue until the earlier of (i) the initiation of Phase III for such Product and (ii) five years after the Completion of Phase II for such Product;

 

(b) If Phase III for a Product is initiated, PTI shall obtain such insurance for such Product for Claims arising following Completion of Phase II but prior to the First Commercial Sale of such Product, at PTI’s and King’s joint and equal cost, which coverage shall continue until the earlier of (i) the First Commercial Sale of such Product and (ii) five years after the first to occur of (A) the completion of Phase III, (B) the decision of the JOC not to proceed with the commercial sale of such Product, and (C) the termination of this Agreement in its entirety pursuant to Article 9 or with respect to such Product pursuant to Section 9.2.2(a), unless PTI or any of its Affiliates or its sublicensee continues to Develop the Product following such termination, in which case clause (d) below will apply;

 

(c) As of the First Commercial Sale of a Product, King shall, at its sole cost, have obtained such insurance for a Product for Claims arising following the First Commercial Sale of such Product, such insurance to be in an appropriate level (at a minimum of $[***]) exclusive of self-insured amounts and shall be in amounts maintained by King for other products of King of similar market potential and at a similar stage in development as the applicable Product, taking into account any particular risks related to such Product, which coverage shall continue until the earlier of (i) the termination of this Agreement in its entirety pursuant to Article 9 or with respect to such Product pursuant to Section 9.2.2(a), so long as PTI or any of its Affiliates or its sublicensee continues to sell the Product following such termination, and (ii) five years after the last commercial sale of the Product pursuant to this Agreement; and

 

(d) PTI shall, at its sole cost, obtain such insurance for a Product for Claims arising following the termination of this Agreement in its entirety or with respect to such Product, so long as PTI or any of its Affiliates or its sublicensee continues to Develop or sell the Product following such termination, such insurance to be in an appropriate level (at a minimum of $[***] in the case of Marketed Products) exclusive of self-insured amounts and shall be in amounts maintained by PTI for other products of PTI of similar market potential and at a similar stage in development as the applicable Product, taking into account any particular risks related to such Product, which coverage shall continue until five years after (i) termination of the Development of such Product if PTI elects not to sell such Product commercially or (ii) the last commercial sale of the Product, as applicable.

 

***	Confidential treatment request pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

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The costs incurred to obtain the insurance described in this Section 5.1 shall not be deemed Collaboration Costs. The insurance described in this Section 5.1 shall name each Party as a co-insured.

 

5.2 Product Packaging. The Parties agree that packaging and package inserts for each finished Product sold to consumers will include King’s and PTI’s names and logos prominently displayed, subject to the approval of the applicable Regulatory Authorities. PTI agrees that it shall not use, and it will prohibit its Affiliates or sublicensees from using, trademarks, trade dress (including product intaglio), packaging, or marketing material with respect to the Marketing of products in the Field in Australia and New Zealand that is confusingly similar with the Product Trademarks and any Product trademarks, trade dress, packaging, or marketing material in the Territory, except with respect to the use of PTI’s name or logo. For clarity, PTI has the right to develop and market for use in Australia and New Zealand the identical formula, including colorants and inks, and container-closure system, as is developed and marketed for each Product in the Territory; provided, however, that all secondary packaging components must be different.

 

5.3 Mutual Financial Reporting. Each Party covenants to provide the other Party written notice at such time as (a) such Party enters the “zone of insolvency,” as defined in Applicable Law, including interpretations in applicable case law, (b) such Party’s liabilities exceed its assets, (c) such Party is unable to pay its debts as they become due, (d) there is an occurrence of a Default by such Party with respect to any of its debt or payment obligations or any agreement material to the Development Program, or (e) such Party suspends, closes, or otherwise ceases to operate a majority of its business relating to this Agreement and the License Agreement. In addition, within 15 days of a written request of either Party (such request not to be made more than four times during any Calendar Year), the other Party covenants to provide the requesting Party with its most recent audited financial reports. Each Party will treat all notices and financial reports (and the information contained therein) as Confidential Information of the other Party, subject to the terms of Article 8.

 

6. CLOSING; PAYMENTS

 

6.1 Closing.

 

6.1.1 Covenants Pending Closing.

 

(a) Reasonable Efforts. Subject to the terms and conditions of this Agreement, each of the Parties agrees to use all reasonable efforts to do, or cause to be done, all things necessary and appropriate to satisfy all conditions of and to consummate the transactions contemplated by this Agreement, including the satisfaction of the applicable conditions set forth in Section 6.1.3 below.

 

(b) Filings. The Parties shall cooperate with one another in the preparation, execution, and filing of all documents that are required or permitted to be filed on or before the Closing, including filings pursuant to the HSR Act and will promptly file the same after the Effective Date. The related filing fees shall be borne by King, and the costs and expenses incurred by each Party shall be paid by such Party.

 

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6.1.2 Closing. As promptly as practicable after the Effective Date and after the satisfaction by each Party or, if permissible, waiver of the conditions set forth in Sections 6.1.3(a) and (b), the Parties hereto shall cause the Closing to occur on the Closing Date. The Closing shall be held at the offices of Jones Day, 222 East 41st Street, New York, New York 10017, or such other place as the Parties shall agree, for the purpose of confirming the satisfaction or waiver, as the case may be, of the conditions set forth in Sections 6.1.3(a) and (b). If the Closing Date has not occurred prior to February 9, 2006, either Party may terminate this Agreement upon written notice to the other Party; provided, however, that, as of such date, the Party terminating this Agreement is not in default under this Agreement.

 

6.1.3 Conditions to Closing.

 

(a) The obligation of PTI to close shall be subject to the satisfaction on or before the Closing Date of the following conditions, any or all of which may be waived in whole or in part by PTI:

 

(i) the expiration or termination of all applicable waiting periods under the HSR Act, unless a joint determination is made by PTI and King (by certification from PTI and King to each other) that notification under the HSR Act is not required;

 

(ii) the representations and warranties made by King in Article 10 shall be true and correct in all material respects as of the Effective Date and as of the Closing Date with the same force and effect as if they had been made as of the Closing Date, and King shall have performed all obligations and conditions herein required to be performed or observed by it on or prior to Closing;

 

(iii) the provision by King to PTI of an officer’s certificate certifying that (i) and (ii) above are true and correct as of the Closing Date;

 

(iv) the provision by King to PTI of an opinion of counsel, in form reasonably satisfactory to PTI, that the execution of this Agreement and the License Agreement and the transactions contemplated hereby and thereby are duly authorized by all corporate action on the part of King;