COMMERCIAL MANUFACTURING AGREEMENT Salix Pharmaceuticals, Inc., Mesalamine Controlled Release Capsules

Exhibit 10.66

*Portions of this document marked [*] are requested to be treated confidentially.

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COMMERCIAL MANUFACTURING AGREEMENT

Salix Pharmaceuticals, Inc., Mesalamine Controlled Release Capsules

This Commercial Manufacturing Agreement (“ Agreement ”) is made effective as of this 9 ^th day of September, 2008 (“ Effective Date ”), by and between Salix Pharmaceuticals, Inc., a California corporation, with a place of business at 1700 Perimeter Park Drive, Morrisville, NC, 27560 (“ Client ”), and Catalent Pharma Solutions, LLC, a Delaware limited liability company with a place of business at 14 Schoolhouse Road, Somerset, New Jersey 08873 (“ Catalent ”).

RECITALS

A. Client is a pharmaceutical company that develops, markets and sells pharmaceutical products, including the Product;

B. Catalent provides contract pharmaceutical development, manufacturing, packaging and analytical services to the pharmaceutical industry;

C. Client desires to engage Catalent to provide certain services to Client in connection with the processing of Client’s Product, and Catalent desires to provide such services, all pursuant to the terms and conditions set forth in this Agreement.

THEREFORE, in consideration of the mutual covenants, terms and conditions set forth below, the parties agree as follows:

ARTICLE 1

DEFINITIONS

The following terms have the following meanings in this Agreement:

1.1 “ Acknowledgement ” has the meaning set forth in Section 4.3.

1.2 “ Affiliate(s) ” means, with respect to Client or any third party, any corporation, firm, partnership or other entity that controls, is controlled by or is under common control with such entity; and with respect to Catalent, Catalent Pharma Solutions, Inc. (“ CPS, Inc. ”) and any corporation, firm, partnership or other entity controlled by CPS, Inc. For the purposes of this definition, “ control ” shall mean the ownership of at least 50% of the voting share capital of an entity or any other comparable equity or ownership interest.

1.3 “ Agreement ” has the meaning set forth in the introductory paragraph, and includes all its Attachments and other appendices (all of which are incorporated herein by reference) and any amendments to any of the foregoing made as provided herein or therein.

1.4 “ API ” means the compound 5-Amino Salicylic Acid, as further described in the Specifications, as provided in this Agreement.

1.5 “ API Inventions ” has the meaning set forth in Article 11.

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1.6 “ Applicable Laws ” means all laws, ordinances, rules and regulations of the United States applicable to the Processing or any aspect thereof and the obligations of Catalent or Client, as the context requires, under this Agreement, as amended from time to time, including (A) all applicable federal, state and local laws and regulations of the United States, (B) the U.S. Federal Food, Drug and Cosmetic Act and (C) cGMP.

1.7 “ Batch ” means a defined quantity of Product that has been or is being Processed in accordance with the Specifications.

1.8 “ Catalent ” has the meaning set forth in the introductory paragraph, or any successor or permitted assign. Catalent shall have the right to cause any of its Affiliates to perform any of its obligations hereunder, and Client shall accept such performance as if it were performance by Catalent; provided that any Affiliate shall, at its cost, comply with all Applicable Laws, including without limitation, the Regulatory Approval for the Product, unless Client requests the addition of the Affiliate to the Regulatory Approval.

1.9 “ Catalent Indemnitees ” has the meaning set forth in Section 13.2.

1.10 “ Catalent IP ” has the meaning set forth in Article 11.

1.11 “ cGMP ” means current Good Manufacturing Practices promulgated by the Regulatory Authorities, including within the meaning of 21 C.F.R. Parts 210 and 211, as amended.

1.12 “ Client ” has the meaning set forth in the introductory paragraph, or any successor or permitted assign.

1.13 “ Client Indemnitees ” has the meaning set forth in Section 13.1.

1.14 “ Client IP ” has the meaning set forth in Article 11.

1.15 “ Client-supplied Materials ” means any materials to be supplied by or on behalf of Client to Catalent for Processing, as provided in Attachment B , including API.

1.16 “ Commencement Date ” means the first date upon which a Regulatory Authority approves Catalent as a manufacturer of any Product.

1.17 “ Confidential Information ” has the meaning set forth in Section 10.2.

1.18 “ Contract Year ” means, with respect to Contract Year 1, the period beginning on the Effective Date and ending on December 31st of the first anniversary of the calendar year following the Commencement Date, and with respect to each Contract Year thereafter, each consecutive calendar year period beginning on January 1st and ending on December 31st.

1.19 “ Defective Product ” has the meaning set forth in Section 5.1.

1.20 “ Effective Date ” has the meaning set forth in the introductory paragraph.

1.21 “ Exception Notice ” has the meaning set forth in Section 5.1.

 

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1.22 “ Facility ” means Catalent’s facility located in Winchester, Kentucky, USA or such other facility as agreed in writing by the parties.

1.23 “ Firm Commitment ” has the meaning set forth in Section 4.2.

1.24 “ Invention ” has the meaning set forth in Article 11.

1.25 “ Losses ” has the meaning set forth in Section 13.1.

1.26 [*] .

1.27 “ Process ” or “ Processing ” means the compounding, filling or pressing, producing and bulk packaging (but not secondary or retail packaging) of the API and Raw Materials into Product, in accordance with the Specifications and under the terms of this Agreement.

1.28 “ Processing Date ” means the day on which Product is scheduled to be compounded by Catalent, as identified in an Acknowledgement in accordance with Section 4.3.

1.29 “ Process Inventions ” has the meaning set forth in Article 11.

1.30 “ Product ” means the fully compounded bulk pharmaceutical product containing the API that has been Processed in accordance with the Specifications.

1.31 “ Product Maintenance Services ” has the meaning set forth in Section 2.3.

1.32 “ Purchase Order ” has the meaning set forth in Section 4.3.

1.33 “ Quality Agreement ” has the meaning set forth in Section 9.7.

1.34 “ Raw Materials ” means all raw materials, supplies, components and packaging necessary to manufacture and ship Product in accordance with the Specifications, as provided in Attachment B , but not including Client-supplied Materials.

1.35 “ Recall ” has the meaning set forth in Section 9.6.

1.36 “ Regulatory Approval ” means any approvals, permits, product and/or establishment licenses, registrations or authorizations, including approvals pursuant to U.S. Investigational New Drug applications, New Drug Applications and Abbreviated New Drug Applications, as applicable, of any Regulatory Authorities that are necessary or advisable in connection with the development, manufacture, testing, use, storage, exportation, importation, transport, promotion, marketing, distribution or sale of Product in the Territory.

1.37 “ Regulatory Authority ” means the international, federal, state or local governmental or regulatory bodies, agencies, departments, bureaus, courts or other entities in the United States (including the United States Food and Drug Administration) responsible for (A) the regulation

 

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(including pricing) of any aspect of pharmaceutical or medicinal products intended for human use or (B) health, safety or environmental matters generally.

1.38 “ Review Period ” has the meaning set forth in Section 5.1.

1.39 “ Rolling Forecast ” has the meaning set forth in Section 4.2.

1.40 “ Specifications ” means the procedures, requirements, standards, quality control testing and other data and the scope of services as set forth in Attachment B , along with any valid amendments or modifications thereto, in accordance with Article 8.

1.41 “ Supplier ” has the meaning set forth in Section 3.2(B).

1.42 “ Term ” has the meaning set forth in Section 16.1.

1.43 “ Territory ” means the United States of America, and any other country that the parties agree in writing to add to this definition of Territory in an amendment to this Agreement.

1.44 “ Unit Pricing ” has the meaning set forth in Section 7.1(B).

1.45 “ Validation Services ” has the meaning set forth in Section 2.1.

ARTICLE 2

VALIDATION, PROCESSING & RELATED SERVICES

2.1 Validation Services . Catalent shall perform the qualification, validation and stability services described in Attachment A (the “ Validation Services ”). Notwithstanding anything to the contrary in this Agreement, the Validation Services shall apply to Client’s [*] for Contract Year 1.

2.2 Supply and Purchase of Product . Catalent shall Process Product in accordance with the Specifications, the Applicable Laws and the terms and conditions of this Agreement.

2.3 Product Maintenance Services . Client will receive product maintenance services (the “ Product Maintenance Services ”), [*] , as applicable. In the event Client does not [*] pursuant to Section 4.1 herein. Catalent shall keep accurate records of any Product Maintenance Services utilized by Client during a given Contract Year. Beginning at the end of Contract Year 2, either, party may request an annual review of the actual usage of Product Maintenance Services and Client shall be entitled to audit Catalent’s records regarding Product Maintenance Services rendered to Client. Thereafter, the parties shall [*] .

2.4 Other Related Services . Catalent, shall provide such Product-related services, other than Validation Services, Processing or Product Maintenance Services, as agreed to in writing by the parties from time to time. Such writing shall include the scope and fees for any such services and

 

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be appended to this Agreement. The terms and conditions of this Agreement shall govern and apply to such services.

ARTICLE 3

MATERIALS

3.1 API .

A. Client shall supply to Catalent for Processing, at Client’s sole cost and risk, API, and any other Client-supplied Materials, in quantities sufficient to meet Client’s requirements for Product, as set forth in Article 4. Client shall deliver such items, together with associated certificates of analysis, to the Facility no later than [*] days before, but not earlier than [*] months prior to, the Processing Date upon which such items will be used by Catalent. Client shall be responsible at its expense for securing any necessary export or import clearances or permits required in respect of supply to Catalent of such items. Catalent shall use such items solely and exclusively for Processing of the Product. Prior to delivery of any such items, Client shall provide to Catalent a copy of all associated material safety data sheets, and shall promptly provide any updates or revisions thereto.

B. Within 30 days of receipt of API or any other Client-supplied Materials by Catalent, Catalent shall inspect such items to verify their identity and test such items to confirm that they meet the associated specifications or certificate of analysis. In the event that Catalent detects a nonconformity with Specifications, Catalent shall give Client prompt oral and written notice of such nonconformity. Catalent shall not be liable for any defects in API or any other Client-supplied Materials, or in Product as a result of defective API or any other Client-supplied Materials, unless Catalent failed to properly perform the foregoing obligations. Catalent shall follow Client’s reasonable written instructions in respect of return or disposal of defective API or any other Client-supplied Materials, at Client’s sole cost and risk.

C. Client shall retain title to API and any other Client-supplied Materials at all times and shall [*] .

3.2 Raw Materials .

A. Catalent shall be responsible for sourcing and qualifying third-party suppliers of Raw Materials. Catalent shall also be responsible for procuring, inspecting and releasing adequate Raw Materials as necessary to, meet the Firm Commitment, unless otherwise agreed to by the parties in writing. Unless a particular Raw Material can be replaced with the same raw material from another supplier, Catalent shall not be liable for any delay in delivery of Product if (i) Catalent, exercising commercially reasonable efforts, is unable to obtain, in a timely manner, a particular Raw Material necessary for Processing and (ii) Catalent placed orders for such Raw Materials promptly following receipt of Client’s Firm Commitment. In the event that any Raw Material becomes subject to purchase lead time beyond the Firm Commitment time frame, the

 

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parties will negotiate in good faith an appropriate amendment to this Agreement, including Sections 3.4 and 4.2.

B. In certain instances, Client may require a specific supplier, manufacturer or vendor (“ Supplier ”) to be used for Raw Material. In such an event, (i) such Supplier will be identified in the Specifications, (ii) Client shall be responsible for the timeliness, quantity, and quality of supply of Raw Materials from such Supplier, (iii) Catalent shall not be liable for any defects in Raw Materials from such Supplier, or in Product as a result of such defective Raw Materials, unless Catalent failed to properly perform any testing required by the Specifications, and (iv) the Raw Materials from such Supplier shall be deemed, for purposes of liability hereunder, Client-supplied Materials. If the cost of the Raw Material from any such Supplier is greater than Catalent’s costs for the same raw material of equal quality from other suppliers, Catalent shall notify Client in writing and provide Client with documentary evidence of the same. If Client does not, within 20 business days of its receipt of such notice, designate a lower cost supplier identified in such notice, then Catalent shall [*] . If the documented cost of the Raw Material from any supplier mandated by Client is less than Catalent’s documented cost for the same raw material of equal quality from other suppliers, then Catalent shall [*] . [*] will be responsible for all costs associated with qualification of any such Supplier who has not been previously [*] . Catalent shall maintain an inventory of Raw Materials in sufficient quantities to be able to supply up to [*] per dose strength that is included in the Firm Commitment portion of the most recent Client forecast. Notwithstanding anything to the contrary in this Section 3.2(B), a sole supplier of any Raw Material shall not be deemed a Supplier required by Client, nor shall the Raw Material supplied by such supplier be deemed Client-supplied Materials.

3.3 Artwork and Packaging . Client shall provide or approve, prior to the procurement of applicable components, all artwork, advertising and packaging information necessary for Processing, if any. Such artwork, advertising and packaging information is and shall remain the exclusive property of Client, and Client shall be solely responsible for the content thereof. Such artwork, advertising and packaging information or any reproduction thereof may not be used by Catalent in any manner other than performing its obligations hereunder.

3.4 Reimbursement for Materials . In the event of (A) a Specification change for any reason, (B) obsolescence of any Raw Material or (C) further to Section 16.3(C), termination or expiration of this Agreement, [*] shall bear the cost of any unused Raw Materials (including packaging), so long as [*] .

ARTICLE 4

[*], PURCHASE ORDERS & FORECASTS

4.1 [*] .

4.2 Forecast . On or before the 15 ^th day of each calendar month, beginning at least 90 days prior to the anticipated Commencement Date, Client shall furnish to Catalent a written [*] rolling

 

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forecast of the quantities of Product that Client intends to order from Catalent during such period (“ Rolling Forecast ”). The first [*] months of such Rolling Forecast shall constitute a binding order for the quantities of Product specified therein (“ Firm Commitment ”) and the following [*] ; of the Rolling Forecast shall be non-binding, good faith estimates; provided however that Client shall be obligated to provide purchase orders for the Firm commitment. If Client fails to timely provide a Rolling Forecast, the most recently provided Rolling Forecast shall be deemed resubmitted for the then-current [*] .

4.3 Purchase Orders .

A. From time to time as provided in this Section 4.3(A), Client shall submit to Catalent a [*] purchase order for Product specifying the number of Batches to be Processed, the Batch size (to the extent the Specifications permit Batches of different sizes) and the requested delivery date for each Batch (“ Purchase Order ”); provided , that no Purchase Order may be for less than [*] . Concurrently with the submission of each Rolling Forecast, Client shall submit a Purchase Order for the Firm Commitment. Purchase Orders for quantities of Product in excess of the Firm Commitment shall be submitted by Client at least [*] days in advance of the delivery date requested in the Purchase Order (“Lead Time Requirement”). Catalent shall be obligated to accept any Purchase Order that meets the Lead Time Requirement and that is for a quantity of Product that does not exceed [*] of the quantity of Product set forth and agreed upon in the Firm Commitment. Catalent may reject Purchase Orders in excess of [*] more than the Firm Commitment. Failure to provide a Purchase Order does not absolve Client of its obligation regarding the Firm Commitment.

B. Catalent shall confirm in writing that a Purchase Order has been accepted within [*] business days of receipt thereof by written acknowledgement (“ Acknowledgement ”) that it accepts or rejects such Purchase Order. Each Acknowledgement shall include the Processing Date and shall either confirm the delivery date set forth in the Purchase Order or set forth a reasonable alternative delivery date; provided that any alternative delivery date proposed by Catalent is within [*] business days of the delivery date set forth in the Purchase Order. Catalent’s failure to timely provide an Acknowledgement shall be deemed an acceptance of Client’s Purchase Order.

C. Notwithstanding Section 4.3(A), Catalent shall use commercially reasonable efforts to supply Client with quantities of Product which are up to [*] % in excess of the quantities specified in the Firm Commitment, subject to Catalent’s other supply commitments and manufacturing, packaging and equipment capacity; provided , that Catalent’s failure to supply Client with quantities in excess of the quantities specified in the Firm Commitment shall not constitute a breach of this Agreement by Catalent.

D. In the event of a conflict between the terms of any Purchase Order or Acknowledgement and this Agreement, the terms of this Agreement shall control.

 

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4.4 Postponement of Processing Date . Notwithstanding Section 4.5, Catalent reserves the right to postpone the Processing Date of all, or any part of, a Purchase Order upon written notice to Client, if Client refuses or fails to timely supply conforming API or any other Client-supplied Materials in accordance with Section 3.1. In such event, Catalent shall exercise commercially reasonable efforts to reschedule the Processing Date within a reasonable time and the parties shall negotiate in good faith a reasonable alternative delivery date for the Product subject to the affected Purchase Order.

4.5 Modification of Purchase Orders . An accepted Purchase Order may be modified only, by a written change order signed by both parties. Unless otherwise specifically agreed by the parties pursuant to a written change order, both Client shall remain responsible for the Firm Commitment and Catalent shall Process the Product in accordance with the Firm Commitment.

4.6 Delivery . Catalent shall use commercially reasonable efforts to deliver in the quantity and on the shipment date specified for it on the Purchase Order, via the mode(s) of transportation and to the party and destination specified on such Purchase Order. Catalent shall provide Client with as much advance notice as possible (and will use its best efforts to provide at least [*] days advance notice where possible) if Catalent determines that any Processing will be delayed or eliminated for any reason.

4.7 Observation of Processing . In addition to Client’s audit right pursuant to Section 9.5, Client may send up to [*] representatives to the Facility to observe Processing for a maximum of [*] days per Contract Year (unless otherwise agreed by Catalent in writing), so long as Client provides Catalent at least [*] days’ advance written notice of the attendance of such Client representatives, including the name and title of each such representative. [*] shall be given access to Catalent’s Facility only upon Catalent’s consent, which consent shall not be unreasonably withheld. Such representatives shall abide by all Catalent safety rules and other applicable employee policies and procedures, and Client shall be responsible for such compliance. [*] .

4.8 Inability to Supply . If Catalent determines that it will not be able to supply Products to Client in material satisfaction of the most recent Firm Commitment, Catalent shall promptly notify Client in writing of such determination, which notice shall provide Client with the details on the extent of the expected shortfall of supply, the causes of such inability to supply, and Catalent’s proposed solution to the problem. Upon such notice of a supply problem, or in any event upon Catalent’s failure to timely deliver Product in accordance with Client’s Purchase Order, (i) Client and Catalent will immediately meet and work together, in good faith, to identify an appropriate resolution to the supply problem, provided that Section 4.9 shall become applicable in the absence of any such resolution, and (ii) Catalent shall, during any such shortfall of supply, use commercially reasonable efforts to continue to supply Products to Client.

4.9 Back-Up Trigger . In. the event that Catalent is unable for any reason to timely supply Client with Purchase Orders made in accordance with Article 4 other than for reasons attributable to Client’s negligence, intentional wrongful actions, failure to supply API, or default

 

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hereunder and such inability to supply lasts longer than [*] consecutive days, then in addition to, and without limitation of, any legal or equitable remedies available to Client as a result of any breach of this Supply Agreement by Catalent, Client shall be free to engage a third party manufacturer for the Product or manufacture it directly upon written notice to Catalent, and Catalent shall reasonably cooperate with Client and such third party to effectuate the limited transfer of Product from Catalent to Client or such third parry, as appropriate, to enable Client or the third party to manufacture Product; provided, however, that, during the Initial Term, upon receiving notice from Catalent that Catalent is in a position to [*] .

ARTICLE 5

TESTING; SAMPLES; RELEASE

5.1 Testing; Releasing; Rejection . Within [*] days after Catalent completes Processing of a Batch, Catalent shall provide Client or its designee with a certificate of analysis for such Batch. Client shall be responsible for final release of Product (including testing), at its cost. Following Client’s receipt of a shipment of a Batch, Client or Client’s designee may test samples of such Batch to confirm that the Specifications have been met. Unless within [*] days after Client’s receipt of a Batch (“ Review Period ”), Client or its designee notifies Catalent in writing (an “ Exception Notice ”) that such Batch does not meet the warranty set forth in Section 12.1 (“ Defective Product ”), the Batch shall be deemed accepted by Client and Client shall have no right to reject such Batch. However, Client’s acceptance of a Batch shall not preclude a subsequent rejection of such Batch or any portion thereof following discovery of latent defects in such Batch, including discovery of any substance that would cause Product to be adulterated within the meaning of the United States Food, Drug, and Cosmetic Act. Client must notify Catalent in writing within [*] days of discovery of a latent defect, and such discovery shall not exceed [*] after Processing. Upon timely receipt of an Exception Notice from Client, Catalent shall conduct an appropriate investigation in its discretion to determine whether or not it agrees with Client that Product is Defective Product and to determine the cause of any nonconformity.

If a shipment or partial shipment is rejected by Client pursuant to the provisions of this Section 5.1, Client shall return to Catalent at Catalent’s request and expense (or, at the election of Client, destroy and provide evidence of such destruction to Catalent) any such rejected portion of the Batch. Catalent shall (i) credit the original invoice and credit the amount, if any, paid by Client in respect of the rejected portion of the Batch (provided that if there are no additional Purchase Orders under this Agreement, the amount of the credit shall be converted into a refund and Catalent shall refund such amount to Client) if Catalent agrees that the applicable portion of the Batch is non-conforming, and (ii) adjust the invoice to Client for any portion of the Batch that was not rejected, payment of which is due in accordance with the terms of the original invoice. However, the provisions of this Section 5.1 are subject to Limitations of Liability contained in Article 14.

 

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During the pendency of any rejection discussions Catalent shall, at Client’s request, use commercially reasonable efforts to promptly supply Client with additional Product, which Client shall purchase on the same terms as Product that is the subject of the rejection discussions.

5.2 Discrepant Results . In the event of a disagreement between the parties regarding whether Product is Defective Product, which disagreement cannot be resolved by the parties within [*] days of the date of the Exception Notice, the parties shall cause a mutually agreeable independent third party to review records, test data and to perform comparative tests and/or analyses on samples of the alleged Defective Product and its components, including API and other Client-supplied Materials. The independent party’s results as to whether or not Product is Defective Product and the cause of any nonconformity shall be final and binding. Unless otherwise agreed to by the parties in writing, the costs associated with such testing and review shall be borne by [*] . In the event the cause of nonconformity cannot be determined or assigned, the costs associated with the Defective Product and the replacement of the same shall be shared equally between the parties.

5.3 Defective Processing . Catalent will, at Client’s option, either replace any Batch of Defective Product, or credit any payments made by Client for such rejected Batch. THE OBLIGATION OF CATALENT TO REPLACE DEFECTIVE PRODUCT OR CREDIT PAYMENTS MADE BY CLIENT FOR DEFECTIVE PRODUCT SHALL BE [*] .

5.4 Supply of Material for Defective Product . In the event Catalent replaces Defective Product pursuant to Section 5.3, Client shall supply, at Catalent’s cost, subject to Section 14.1 herein, Catalent with sufficient quantities of API, and other Client-supplied Materials in order for Catalent to complete such replacement Batch.

ARTICLE 6

DELIVERY

6.1 Delivery . Catalent shall segregate and store all Product until acceptance as set forth in Section 5.1. Catalent shall tender Product for delivery [*] the Facility promptly following Catalent’s release of Product. [*] shall be responsible for all costs and risk of loss associated with shipment of the Product. Client shall designate a qualified carrier to Catalent.

6.2 Failure to Take Delivery . If Client fails to take delivery of any Product on any scheduled delivery date, Catalent shall store such Product as Client’s agent, and [*] . For each such Batch of stored Product, Client agrees that: (A)  [*] , (B)  [*] , (C)  [*] , (D)  [*] , and (E)  [*] . Within 5 days following a written request from Catalent, Client shall provide Catalent with a letter confirming items (A) through (E) of this Section for each Batch of stored Product.

 

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ARTICLE 7

PAYMENTS

7.1 Fees . In consideration for Catalent performing services hereunder:

(A) Client shall pay to Catalent any unpaid fees for Validation Services set forth on Attachment A . Such fees shall be paid within [*] days following invoice, which invoice shall be submitted to Client by Catalent upon the completion of the relevant phase of the Validation Services.

(B) Client shall pay Catalent the unit pricing for Product set forth on Attachment C (“ Unit Pricing ”). Such fees shall be paid within [*] days following invoice, which invoice shall be submitted to Client by Catalent upon tender of delivery of Product as provided in Section 6. l.

(C) Subject to Section 2.3, Client shall [*] set forth on Attachment C . Such [*] shall be submitted to Client by Catalent upon the anniversary of each Contract Year during the Term. However, [*] will be [*] .

(C) Other Fees . Client shall pay Catalent for all other fees and expenses of Catalent owing in accordance with the terms of this Agreement, including pursuant to Sections 2.4, [*] , [*] and 16.3. Such fees and expenses shall be paid within [*] days [*] , which invoice shall be submitted to Client by Catalent as and when appropriate.

7.2 Unit Pricing Adjustments . Beginning on January 1, [*] , the U