MASTER DEVELOPMENT, MANUFACTURING, SUPPLY AND MARKETING AGREEMENT

CONFIDENTIAL

 

MASTER DEVELOPMENT, MANUFACTURING,
SUPPLY AND MARKETING AGREEMENT
BY AND BETWEEN
PUREPAC PHARMACEUTICAL CO.
( A WHOLLY OWNED SUBSIDIARY OF ALPHARMA INC.)
AND
ORCHID CHEMICALS & PHARMACEUTICALS LTD.

EFFECTIVE FEBRUARY 23, 2005

TABLE OF CONTENTS

ARTICLE 1. DEFINITIONS *

ARTICLE 2. DEVELOPMENT ACTIVITIES *

ARTICLE 3. SUPPLY, MARKETING AND DISTRIBUTION OF PRODUCTS *

ARTICLE 4. RECORDS, INSPECTIONS AND AUDITS *

ARTICLE 5. REPRESENTATIONS AND WARRANTIES; LIMITATIONS OF LIABILITY.           *

ARTICLE 6. QUALITY CONTROL AND ASSURANCES *

ARTICLE 7. INTELLECTUAL PROPERTY RIGHTS *

ARTICLE 8. PARAGRAPH IV PRODUCT LITIGATION *

ARTICLE 9. INDEMNIFICATION *

ARTICLE 10. INSURANCE *

ARTICLE 11. TERM AND TERMINATION *

ARTICLE 12. STEERING COMMITTEE *

ARTICLE 13. RESOLUTION OF DISPUTES; ARBITRATION *

ARTICLE 14. MISCELLANEOUS *

EXHIBIT A - COUNTRIES TO BE INCLUDED WITHIN THE EUROPEAN TERRITORYA-1

EXHIBIT B - PRODUCT LIST AND CORRESPONDING TERRITORY AND LAUNCH DATE   B-1

EXHIBIT C - DEVELOPMENT ACTIVITIES MILESTONE TIMETABLE    C-1

EXHIBIT D - QUALITY AGREEMENT   D-1

EXHIBIT E - GOOD FAITH ESTIMATE   E-1

EXHIBIT F - JOINT DEFENSE AGREEMENT   F-1

EXHIBIT G - ORCHEMUS PHARMA INC. CERTIFICATE OF INCORPORATION AND BYLAWS   G-1

EXHIBIT H - LICENSE AGREEMENT   H-1

MASTER DEVELOPMENT, MANUFACTURING, SUPPLY AND MARKETING AGREEMENT

This MASTER DEVELOPMENT, MANUFACTURING, SUPPLY AND MARKETING AGREEMENT (this " Agreement ") is entered into as of 23 February 2005 (the " Effective Date "), by and between Purepac Pharmaceutical Co, a corporation organized and existing under the laws of Delaware, US (" Alpharma "), a wholly owned subsidiary of Alpharma Inc. and Alpharma Inc., a corporation organized and existing under the laws of Delaware, US (" Alpharma Inc. "), solely with regards to the guarantee in Section 14.14 and Orchid Chemicals & Pharmaceuticals, Ltd., a corporation organized and existing under the laws of India (" Orchid ").

WHEREAS, Alpharma desires Orchid and/or its Affiliates to develop, manufacture and be the exclusive supplier of the Products (as hereinafter defined) in accordance with the requirements of this Agreement in order to facilitate the exclusive marketing and sale of the Products in the Territory (as hereinafter defined) by Alpharma and/or its Affiliates; and

WHEREAS, Orchid and/or its Affiliates desire to exclusively perform such development, manufacture and supply of the Products and Alpharma and/or its Affiliates desire to exclusively market and sell the Products in the Territory all upon the terms and conditions of this Agreement;

NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, Alpharma and Orchid hereby agree as follows:

ARTICLE 1.
DEFINITIONS

Definitions . The following terms shall have the meanings set forth below:

1.1     " 180 Day Period of Exclusivity " means a period of 180 days of marketing exclusivity within the U.S. Territory granted by the FDA under and pursuant to 21 U.S.C. Section 355(j)(5)(B)(iv) of the FDA Act.

1.2     " AAA " shall have the meaning set forth in Section 13.2.

1.3     " Affiliate " means a corporation which owns, or is owned by or is under common ownership with a party to this Agreement, where "own" or "ownership" means direct or indirect ownership of over 40% of the outstanding voting securities of a corporation or a comparable equity interest in any other type of entity.

1.4     " Agreement " shall have the meaning set forth in the Preamble and shall include any exhibits and attachments hereto.

1.5     " Alpharma " shall have the meaning set forth in the Preamble.

1.6     " ANDA " means an Abbreviated New Drug Application filed with the FDA pursuant to 21 U.S.C. 355(j) of the FDA Act for finished dosage forms of the Product(s) and any supplements and amendments which may be filed by the parties from time to time.

1.7     " API " means the active pharmaceutical ingredient contained in a Product.

1.8     " API Benchmark Price " shall have the meaning set forth in Section 2.4.

1.9     " API Development Fee " shall have the meaning set forth in Section 2.5.1.

1.10    " Applicable Laws " means all applicable laws, rules, regulations and guidelines that may apply to the development, manufacturing, exportation, importation, promotion, marketing, sale or distribution of the Products or the performance of either party's obligations under this Agreement, to the extent applicable and relevant, and including specifically but without limitation the FDA Act, the European Acts and all current Good Manufacturing Practices and current Good Clinical Practices or similar Regulatory Standards, Regulatory Requirements or guidelines promulgated by the FDA or European Union as applicable and including trade association guidelines, where applicable, as well as U.S. and European export control laws and the U.S. Foreign Corrupt Practices Act and any similar European equivalent.

1.11    " Anticipated Launch Date" means the anticipated Launch Date for each Product as set forth in Exhibit B and as the same may be amended from time to time upon written consent of the parties.

1.12    " Biostudy(ies)" means a pivotal clinical blood-level study used to demonstrate bioequivalence as required by the FDA Act and/or the European Acts, as applicable.

1.13    " Change of Control " means, with respect to any entity, a change in the legal, beneficial or equitable ownership, directly or indirectly of fifty percent (50%) or more of the capital stock (or other ownership interest, if not a corporation) ordinarily having voting rights of such entity if such controlling entity actively exercises management control over the entity in question, or (ii) more than fifty percent (50%) of the capital stock (or other ownership interest, if not a corporation) ordinarily having voting rights of such entity.

1.14    " Commercial Production " means, with respect to each Product the manufacture of such Product in commercially significant quantities (i.e. not for the purpose of a test or limited sample run).

1.15    " Commercial Sale " means with respect to each Product the first commercial sale of said Product on a country-to-country basis, as applicable, to a Customer.

1.16    " Confidential Information " shall have the meaning set forth in Section 14.2.

1.17    " Critical Countries " means those countries in the European Territory with an asterisks (*) next to them in Exhibit A.

1.18    " Customer " means a third party that is not an Affiliate of Alpharma and which purchases one or more Products from Alpharma and/or its Affiliate in an arm's length transaction.

1.19    " Data " shall have the meaning set forth in Section 7.1.

1.20    " Development Activities " shall have the meaning set forth in Section 2.1.

1.21    " Direct API Costs " means ****.

1.22    " Dispute Resolution Process " shall have the meaning set forth in Section 13.1.1.

1.23    " Dossier " means the underlying product information, including Manufacturing Information and data, necessary for filing with the relevant Regulatory Authority in order to receive Marketing Authorizations for a Product in one or more of the countries within the European Territory.

1.24    " Drug Master File " or " DMF " means the Drug Master File for manufacturing an API and/or ancillary components which is filed with the FDA and/or filed with the relevant Regulatory Authority in the European Territory on a country-to-country basis.

1.25    " Drug Product" means a drug product as defined in 21 C.F.R. Section 314.3 for administration to human subjects, or its equivalent under the European Act.

1.26    " Effective Date " means the date set forth in the Preamble.

1.27    " European Acts " means the statutes relating to the approval, manufacture, marketing and sale of pharmaceuticals in the European Territory, and any regulation promulgated thereunder, including, but not limited to all current good manufacturing practices as defined therein, in each case as amended from time to time.

1.28    " European Territory " means those countries listed in Exhibit A.

1.29    " Exclusive Seller " shall have the meaning set forth in Section 3.1.

1.30    " Exclusive Supplier " shall have the meaning set forth in Section 3.2.

1.31    " FDA " means the United States Food and Drug Administration or any successor agency.

1.32    " FDA Act " means the United States Food, Drug and Cosmetics Act, codified in 21 U.S.C. 301 and any regulation promulgated thereunder, including, but not limited to, all current good manufacturing practices as defined therein, in each case as amended from time to time.

1.33    " Final Decision " means a final non-appealable decision or judgment entered by the appropriate court in the United States on the issue of whether a Paragraph IV Product infringes all of the patents of a third party which are subject to certification pursuant to 21 U.S.C. Section 355(j)(2)(A)(vii)(IV) of the FDA Act and related to the Reference Listed Drug for the Product and listed in the Orange Book, or all patents which are subject to such certification and are related to the Reference Listed Drug for the Product and listed in the Orange Book are invalid or unenforceable, or a settlement or agreement between Alpharma, or its Affiliate or Orchid or its Affiliates on one hand and said third party patent holder which has the effect of fully and finally terminating or forestalling all litigation of the type referred to in this definition.

_____________________

**** Indicates that material has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

1.34    " Force Majeure " means the occurrence of an event which materially interferes with the ability of a party to perform its obligations or duties hereunder which is not within the reasonable control of the party affected, not due to malfeasance, and which could not with the exercise of due diligence have been avoided, including, but not limited to, fire, accident, labor difficulty, industry wide shortages, sabotage, terrorism, strike, riot, civil commotion, acts of God or change in law.

1.35    " Generic Product " means (i) a Drug Product sold in the U.S. Territory which is a Therapeutic Equivalent of a Listed Drug under the FDA Act and/or (ii) a Drug Product sold in the European Territory which is a Therapeutic Equivalent of an existing approved drug under the European Acts.

1.36    " Good Clinical Practice " means the current good clinical practice for performing clinical trials as set forth from time to time in the FDA Act and the European Acts.

1.37    " Good Faith Estimate " shall have the meaning set forth in Section 3.5.1.

1.38    " Good Manufacturing Practices " or " CGMP " means the current good manufacturing practices for manufacturing finished products as set forth from time to time in the FDA Act and European Acts, and any other current good manufacturing practices which are applicable to the Orchid Facility.

1.39    " Indemnified Party " shall have the meaning set forth in Section 9.3.

1.40    " Indemnifying Party " shall have the meaning set forth in Section 9.3.

1.41    " Individual Territory " mean either the U.S. Territory or European Territory but not both.

1.42    " Initial Firm Order" shall have the meaning set forth in Section 3.7.

1.43    " Intellectual Property Rights " shall include all rights and interests throughout the world, vested or arising out of any patent, copyright, design, trademark, service mark, trade secrets or goodwill whether arising from common law or by statute or any right to apply for registration under a statute in respect of those or like rights.

1.44    " Launch " means, with respect to each Product, the initial Commercial Sale of such Product by Alpharma on a country-by-country basis.

1.45    " Launch Date " means, with respect to each Product, the actual date such Product is Launched by Alpharma on a country-by-country basis in the Territory.

1.46    " Launch Ready " means, with respect to each Product, that the Product has received all necessary Regulatory Approvals and has been timely delivered to Alpharma in accordance with Alpharma's Initial Firm Order for such Product.

1.47    " Listed Drug " shall have the meaning set forth at 21 C.F.R Section 314.3, and shall include only drugs listed as having effective approval in the Orange Book. For clarity, each dosage strength of the drug products listed in the Orange Book, shall be treated as a separate Listed Drug.

1.48    " Loss " means any and all damages, fines, fees, settlements, payments, obligations, penalties, deficiencies, losses, costs and expenses (including, but not limited to, environmental losses, interest, court costs, reasonable attorneys fees, accountants and other experts and other reasonable expenses of litigation or other proceedings or of any claim, default or assessment).

1.49    " Marketing Authorization " or " MA " means a Marketing Authorization based on a Dossier which is required to manufacture, market and sell finished dosage forms of the Product(s) under the European Acts, and any supplements and amendments thereto which may be filed by the parties from time to time.

1.50    " Manufacturer Error " means the failure to perform any manufacturing or shipping obligation imposed upon or assigned to Orchid under this Agreement in compliance with Applicable Laws.

1.51    " Manufacturing Information " means all chemistry, formulation, manufacturing, manufacturing controls, packaging, quality control, stability, Biostudies and other information required to be included in an application for an ANDA filed with the FDA or an application for an MA filed in any country within the European Territory.

1.52    " Marketing Activities " shall have the meaning set forth in Section 3.4.

1.53    " Marketing Costs " means the costs and expenses for the Marketing Activities which shall be deemed to be equal to **** percent (****%) of Net Sales for each Product.

1.54    " Manufacturing Procedures " means the manufacturing procedures used by Orchid to manufacture the Products.

1.55    " Milestone Timetable " means the table set forth in Exhibit C specifying the dates upon which (i) Orchid is obligated to complete the specific components of the Development Activities with respect to each individual Product and (ii) Alpharma is obligated to make the payments to Orchid for the Development Activities.

1.56    " NCE Exclusivity" means the marketing exclusivity granted by the FDA pursuant to 21 C.F.R 314.108 (b) (2) for a New Chemical Entity.

1.57    " Net Profits " shall have the meaning set forth in Section 8.4.

1.58    " Net Sales " means with respect to each Product on a country-by-country basis, the dollar amount determined by deducting from the gross invoiced sales price billed for the Product sold by Alpharma, or by an Affiliate of Alpharma, as the case may be, in a particular country in the Territory the following, solely to the extent they relate directly to the sale of the Product to a Customer and are accrued in the ordinary course of business in accordance with US GAAP: ( a) any statutory or contractual liability for rebates to be paid to or for the benefit of any government entity directly resulting from sales of the Product including, but not limited to, rebates to be paid pursuant to the Medicaid rebate legislation and state and local government rebate or discount programs; (b) cash discounts for prompt payment of invoices for purchase of the Product by Customers; (c) administrative fees payable to Customers in connection with the purchase of the Product by Customers (d) any adjustments granted to Customers for chargebacks, allowances or credits for rejected, returned or expired Products, (e) retroactive price adjustments (e.g., floorstock adjustments), free Products provided to customers in lieu of discounts or rebates on such Products, damaged Products, rebates, promotional allowances, payments to customers in respect of margin-sharing arrangements, or other discounts and deductions and reserves (including reserves for bad debts which will equal **** percent (****% )of Net Sales of all Products and will be reconciled with actual bad debts (which cannot exceed **** percent (****%) of Net Sales of all Products) on an annual basis) required to be accrued in accordance with United States GAAP consistently applied , and (e) VAT or similar taxes directly related to the sale of the Product to the extent included in the invoice price and to the extent such taxes are remitted to the applicable taxing authority (but not including taxes assessed against the income derived from such sale), If Alpharma or an Affiliate sells any Products directly or indirectly to an Affiliate, and such Affiliate thereafter sells said Products to a Customer, only the revenues on the sale of such Products by such Affiliate to such Customer shall be used in the calculation of Net Sales; subject to all of the deductions set forth above.

1.59    " Net Sales Price " means, with respect to each Product, the Net Sales of the Product divided by the number of units of the Product invoiced and sold by Alpharma or its Affiliates in any period of time.

1.60    " Non-Withdrawing Party " shall have the meaning set forth in Section 8.5.

1.61    " Notice of Termination " means a written notice by either party to the other party terminating this Agreement with respect to one or more individual Product(s) in one or more individual countries specifically listed in such notice; provided that a Notice of Termination may not be delivered any earlier than upon the fifth (5 ^th ) anniversary of the Launch Date of that Product with respect to any individual Product or Products in any individual country or countries as to which said notice applies or, as to any country in the European Territory as to which there is no Launch Date, upon the fifth (5 ^th ) anniversary of the latest Launch Date in any other country in the European Territory unless otherwise permitted under Section 11.2 (Termination).

1.62    " Orange Book " means the edition of the "Approved Drug Products with Therapeutic Equivalence Evaluations" published by the FDA as in effect from time to time.

1.63    " Orchid " shall have the meaning set forth in the Preamble.

1.64    " Orchid API " shall have the meaning set forth in Section 2.6.

1.65    " Orchid Facility " means (i) with respect to manufacturing finished dosage forms of a Product, the Orchid manufacturing facility located in Chennai, India or, with the written consent of Alpharma, not to be unreasonably withheld, delayed or conditioned, any other Orchid or Orchid Affiliate owned manufacturing facility for the Products throughout the world which is able to deliver the Product for a Supply Price equal to or lower than that at Chennai or (ii) with respect to manufacturing APIs to be used in a Product, any price -competitive Orchid or Orchid Affiliate owned manufacturing facility throughout the world.

1.66    " Patent Infringement Damages " means damages awarded against Alpharma and/or Orchid, or any of their respective Affiliates, in a patent infringement action relating to patents listed in the Orange Book and which relate to a Paragraph IV Product plus any attorneys fees, costs or expenses in connection therewith.

1.67    " Paragraph IV Product " means a Product as to which the application for Regulatory Approval under the FDA Act has been requested pursuant to 21 U.S.C. Section 355(j)(2)(A)(vii)(IV) of the FDA Act.

1.68    " Product " means a Generic Product corresponding to a Listed Drug under either the FDA Act or an approved drug under the European Acts and which is set forth in Exhibit B. Each dosage strength shall be treated as a separate Product. For example, and by way of illustration only, **** tablets, **** tablets, **** tablets, **** tablets and **** tablets are five separate and distinct Products.

1.69    " Product Development Fee " shall have the meaning set forth in Section 2.5.2.

1.70    " Product Family " means any group of Products which (i) rely on the same Listed Drug or European Territory equivalent designation and (ii) have the same name and same dosage form but different dosage strengths. For example, and by way of illustration only, **** tablet, ***** tablet, ***** tablet, ***** tablet and ***** tablet are in the same Product Family. However, **** tablet and **** caps constitute two separate Product Families.

1.71    " Product Sale Price " shall mean an amount equal to ****.

1.72    " Product Termination Date " means the date which is two (2) years after (or sooner if an earlier Product Termination Date is provided by a party in accordance with Section 11.2 (Termination)) the valid delivery of a Notice of Termination with respect to an individual Product and individual country.

1.73    " Product Termination Event " shall mean with respect to a Product in an individual country a material (such materiality to be viewed with respect to all of the obligations for such Product in an individual country) breach of this Agreement by one party followed by the written notice of such material breach of the non-breaching party followed by the failure of the breaching party to remedy such material breach within sixty (60) days of the date upon which written notice of breach was given.

1.74     Reference Listed Drug " shall have the meaning set forth at 21 C.F.R Section 314.3.

1.75    " Regulatory Activity(ies) " means any and all actions reasonably necessary or required to obtain the Regulatory Approvals required for a Product on or before the Anticipated Launch Date listed in Exhibit B.

1.76    " Regulatory Approvals " means the approvals required under the FDA Act (i.e. the approval of an ANDA) and the European Acts (i.e. approval of a Dossier)) to sell and market the Products in each of those jurisdictions.

1.77    " Regulatory Authority(ies) " means the governmental authorities that are responsible for regulating and prescribing rules for the FDA Act and/or the European Acts.

1.78    " Regulatory Requirements " means any requirements under or pursuant to the FDA Act and/or the European Acts.

1.79    " Regulatory Standards " means with respect to each Product, (i) the facility license requirements and the Good Manufacturing Practice regulations applicable to the Orchid Facility or Orchid's production, packaging, storage or handling of such Product at the Orchid Facility, (ii) any standards of any Regulatory Authority applicable to the Orchid Facility or Orchid's production, packaging, storage or handling of all ingredients, API, raw materials used in the production or packaging of such Product and such Products, and (iii) any standards of any Regulatory Authority applicable to the importation, distribution and storage of such Product in the Territory.

1.80    " Section 306(a) or (b) " shall have the meaning set forth in Section 5.1.3.

1.81    " Specifications " mean the written methods, formulae, procedures, specifications, tests (and testing protocols), standards and other specifications pertaining to each of the Products as set forth in the ANDA, Dossier or Marketing Authorization (as applicable), as well as the labeling and packaging provided for herein, as modified from time to time as provided herein.

1.82    " Supply Price " means, with respect to a Product in an Individual Territory, ****. Orchid will determine direct material costs and conversion costs in accordance with a basis consistent with then current methods and practices applied to all other products manufactured by Orchid but in all events in accordance with generally accepted accounting principles (GAAP), consistently applied, as established under the jurisdiction of the Financial Accounting Standards Board (FASB) (United States). Development costs incurred by Orchid on the Development Activities related to a Product and its API shall not be included in the computation of Supply Price.

1.83    " Territory " means with respect to each Product the U.S. Territory and the European Territory.

1.84    " Term " shall have the meaning set forth in Section 11.1.

1.85    " Termination Event " means the (i) voluntary or involuntary filing of a petition for bankruptcy, insolvency or placing in receivership of either party that, in the case of involuntary proceedings, are not dismissed within one hundred twenty (120) days after the commencement thereof, or (ii) a material (such materiality to be viewed with respect to all of the obligations for all Products in all countries within the Territory) breach of this Agreement by one party followed by written notice of such material breach by the non-breaching party followed by the failure of the breaching party to remedy such material breach within sixty (60) days of the date upon which written notice of breach was given or (iii) a termination pursuant to Section 14.3 .

1.86    " Therapeutic Equivalent " shall have the meaning given to it by the FDA in the edition of the Orange Book or its equivalent meaning under the European Acts.

1.87    " U.S. Territory " means with respect to each Product, the United States and its territories and possessions.

1.88    " US Data " means the Data related to Products as to which an ANDA is held, has been filed or is under development.

1.89    " U.S. GAAP " means United States generally accepted accounting principles as in effect from time to time.

1.90    " Orchemus Pharma Inc. " means a corporation to be organized and existing under the laws of the State of Delaware or another state in the US within 90 days after the Effective Date as to which Orchid shall own 100% of its capital stock.

1.91    " Withdrawing Party " shall have the meaning set forth in Section 8.5.

ARTICLE 2.
DEVELOPMENT ACTIVITIES

2.1      Development . Orchid shall, at its own cost and expense, undertake and perform the product development in accordance with relevant CGMP and Good Clinical Practices requirements, including formulation, process development, analytical development, methods and process validation and all necessary Biostudies with respect to each Product, in the specific dosage form as designated on Exhibit B, and take all other developmental actions (including the preparation of technical and development reports) necessary or required to prepare an ANDA and/or Dossier, as applicable, in a form sufficient to complete the actions and activities required of Orchid by this Article 2 (the " Development Activities "). The specific objectives, scope, and Milestone Timetable for Orchid's Development Activities on an individual Product and country-by-country basis hereunder are set out in Exhibit C. Any breach of the Development Activities and/or any other obligations set forth in Sections 2.1 and/or 2.2 by Orchid (including, but not limited to, Orchid's failure to meet the timelines in the Milestone Table) shall be subject to the liquidated damages set forth in Section 2.5 (Development Fees). Such damages shall serve as Alpharma's sole and exclusive remedy with regard to such breaches other than Alpharma's right to terminate under Section 11.2. The parties agree that separate Biostudies shall be required for the U.S. Territory and the European Territory. The sites for each Biostudy and the protocols for each Biostudy shall be chosen by Orchid and approved by Alpharma, such approval not to be unreasonably withheld, conditioned or delayed. The parties hereby agree that Biostudies for Products being developed for the European Territory may be performed in ****. It is recognized and understood that Alpharma and Orchid may reasonably request an adjustment in the Milestone Timetable from time to time based upon actions or activities of third parties (such as patent filings) or other requirements (e.g., changes in Applicable Law) which would have an effect on the market for the Product. Subsequent to such request for adjustment the parties shall meet and discuss the required amendments to the Milestone Timetable, provided however , no adjustment to the Milestone Timetable can take place without the written consent of both parties which shall not be unreasonably withheld, conditioned or delayed.

2.2      Regulatory Filing .

2.2.1     U.S. Territory . ****, at its own cost and expense (except as otherwise set forth in this Article 2), shall use its best efforts to undertake and perform the Regulatory Activities for all Products which are to be sold in the U.S. Territory as set forth in Exhibit B. **** shall prepare, complete and file with the FDA the ANDA for each of the Products subject to this subsection in accordance with the requirements of the Milestone Timetable set forth in Exhibit C. **** shall provide **** with a draft of the original ANDA and with copies of all communications to and from the FDA in sufficient tine prior to the date required for filing under the Milestone Timetable to permit **** to review such materials and make comments to ****. Should ****, in its discretion, decide to comment on the ANDA application or FDA communications, it shall do so promptly to ensure **** has sufficient time to meet the Milestone Timetable and any Regulatory Requirements. Upon ****'s receipt of ****'s comments, or at such time as ****, in its discretion, decides that it can no longer wait for comments and maintain its obligations under the Milestone Timetable, **** shall reasonably consider any comments received from **** taking into account the efficiencies, delays, additional expenses and/or cost savings and overall increase in quality of the ANDA resulting from incorporating such comments into the ANDA or communications with the FDA. **** shall thereupon have the full and absolute discretion to reject any or all of ****'s comments or at ****'s expense, incorporate any changes to the ANDA or responses to the FDA suggested by **** to the extent it believes such to be timely, reasonably necessary and practicable.

2.2.2    European Territory . **** shall, at its sole cost and expense, use its best efforts to file or have its Affiliates file and correspond with the applicable Regulatory Authorities in no less than **** Critical Countries in the European Territory (and such other countries in the European Territory as **** determines is commercially reasonable) in order to obtain the required Regulatory Approvals for each Product; provided that at least **** of such Critical Countries are ****. ****, at its own cost and expense, shall use its best efforts to deliver or have its Affiliates deliver, in accordance with the Milestone Timetable, a Dossier for each Product which is sufficient and adequate to receive an MA. In addition, any additional information or documentation requested by the applicable Regulatory Authority(ies) shall be dealt with in accordance with Section 2.5.4. **** shall keep **** reasonably informed with respect to the filing and registration process. **** shall provide **** with copies of all communications from the Regulatory Authorities and a draft of all responses to the Regulatory Authorities prior to filing such responses and shall, at its cost, incorporate any changes to said responses reasonably requested by **** for the Products to the extent ****, in its full and absolute discretion, considers such inclusion reasonably necessary and practicable. The parties shall discuss such changes in accordance with the same procedure set forth in Section 2.2.1. ****, shall have the right to use and gain access to each Dossier and Marketing Authorization to file for parallel Regulatory Approvals in the name of **** or its Affiliates under the European Acts .

2.3      Ownership of Regulatory Approvals .

2.3.1    U.S. Territory . All ANDAs submitted by **** in the US Territory to the FDA and any approvals granted by the FDA shall be in ****'s name and owned by ****. Prior to the Product Termination Date in the US Territory and unless the Product has been made non-exclusive or the Product has been terminated from this Agreement with respect to the U.S. Territory, ****'s ANDAs shall only be used by ****, in connection with fulfilling its obligations under this Agreement. After the Product Termination Date or if the Product has been made non-exclusive, **** shall be permitted to use its ANDAs in the US Territory for any purpose whatsoever.

2.3.2    European Territory .

(a)   All Dossiers submitted by **** and any Marketing Authorizations granted in the European Territory therefor shall be in ****'s name and owned by ****. **** may, at its discretion and upon 20 business days written notice to ****, sell, license, or sublicense any Dossier or Marketing Authorization received in any country in the European Territory for such Product to a third party (other than to an Affiliate) for use by such third party solely within the European Territory on such terms and conditions as **** reasonably deems fair and reasonable, provided however , for all periods prior to the Product Termination Date, such terms shall include, in lieu of any payment under Section 3.5.6, the sharing with **** on a **** basis of any and all net revenues received by **** from the sale, license or other exploitation of the Dossier or Marketing Authorization, except any such payments which are intended to reimburse **** for some or all of the payments due to **** pursuant to Section 2.5 provided that , to the extent a Product is subject to such third party agreement, **** shall have no right to make the Product non-exclusive or otherwise exercise any termination rights hereunder prior to the Product Termination Date unless **** breaches its obligation to share revenues with **** as set forth above. **** shall use its best efforts to ensure that **** is the contracted supplier to the third party for products manufactured under such Marketing Authorization. **** agrees to negotiate in good faith with **** and the third party with respect to the appropriate terms relating thereto. For all periods prior to the Product Termination Date, **** shall receive from **** ****% of the net revenue received by **** or it's Affiliates from said third party in connection with the sale of Products (exclusive of the Supply Price and the **** net revenue sharing **** is to receive from **** as provided above) from such third party supply arrangement during the Term. Except as set forth in this subsection, prior to the Product Termination Date, as determined individually for each Product on an individual country basis, Alpharma's Marketing Authorization relating to the European Territory shall only be used by Alpharma and its Affiliates, in connection with Alpharma's obligations under this Agreement. After the Product Termination Date or if the Product has been made non-exclusive, Alpharma and its Affiliates shall be able to use the Marketing Authorizations and Dossier solely within the European Territory for any purpose whatsoever.

(b)   At any time, **** shall, at ****'s sole discretion, be free to file for parallel Marketing Authorizations using any of the Dossiers submitted by **** in any or all of the countries within the European Territory, provided however , such parallel Marketing Authorizations may not be used to sell or market Products in any part of the European Territory prior to the Product Termination Date, as determined individually for each Product on a country-by-country basis, unless the Product has been made non-exclusive. All such parallel Marketing Authorizations shall be in ****'s name and shall be owned and retained by ****.

2.3.3    No Inconsistent Actions . At no time prior to or after the Product Termination Date either party shall take any actions or knowingly assist any third party in taking any actions which would be inconsistent with or have a direct effect upon the ownership rights afforded to the other party in the Regulatory Approvals as described in Sections 2.3.1 and 2.3.2 above.

2.4      Use of API . Subject to the conditions set forth herein, both parties agree that it is desirable and appropriate to utilize in the Products APIs which are developed and manufactured by Orchid so long as Orchid agrees to provide the API at ****. If Alpharma has satisfactory evidence that a third party provides the API at the same quantity and quality as those manufactured by Orchid but at a lower price than **** (such price, an " API Benchmark Price ") and such third party is (i) a reputable API manufacturer with an approved DMF for the API in question and (ii) is able to supply the API at the API Benchmark Price to the US, EU or Japan in adequate quantities on a timely basis, Alpharma shall present Orchid with reasonably satisfactory evidence thereof and if such satisfactory evidence is presented by Alpharma at least thirty (30) business days prior to the Anticipated Launch Date and/or at least ten (10) business days prior to the beginning of the each calendar quarter Orchid shall, at Orchid's sole discretion, either agree to provide the API at the API Benchmark Price thereafter or utilize the third party API at the API Benchmark Price in its manufacture of the Product. If within ten (10) business days of each calendar quarter thereafter, Orchid has satisfactory evidence that such third party is no longer offering API's for sale at or below the API Benchmark Price or no longer meets the conditions set forth above, the API Benchmark Price shall be adjusted back to ****.

2.5      Development Fee . As payment for the Development Activities, Alpharma shall pay Orchid as follows:

2.5.1    API Development Fees . Alpharma shall pay Orchid, a sum of **** United States Dollars (US $****) for Orchid's Development Activities relating to the API of each **** Product and **** United States Dollars (US $****) for each **** Product (such fee for each API, an " API Development Fee "). The API Development Fee is to be paid only once for each API regardless of the number of Products or Product Families Orchids API is used for. The API Development Fee of US $**** or US $****, as the case may be, shall be paid by Alpharma to Orchid in two installments pursuant to the milestones set forth below (****).

(a)   The first installment shall be ****% of the API Development Fee, payable by Alpharma to Orchid within fifteen (15) days of the Effective Date of the Agreement;

(b)   The second installment shall be ****% of the API Development Fee, payable by Alpharma to Orchid within forty-five (45) days of the approval of the ANDA in accordance with the Milestone Timetable by the FDA.

2.5.2    Product Development Fees . Alpharma shall also pay Orchid a fee for the development of each Product Family set forth in Exhibit B (each a " Product Development Fee ") of **** United States Dollars (US $****) per Product Family, provided however , Alpharma shall pay Orchid a Product Development Fee of only **** United States Dollars (US $****) for any Product Family that contains the same API which is used in a previously developed Product Family and for which the full $**** Product Development Fee has already been paid or is payable to Orchid. The payments required for each Product Development Fee, shall be due and payable by Alpharma to Orchid in four installments pursuant to the milestones set forth below:

(a)   The first installment shall be ****% of the Product Development Fee for each Product Family set forth in Exhibit B, payable by Alpharma to Orchid within fifteen (15) days of the Effective Date of this Agreement.

(b)   The second installment shall be ****% of the Product Development Fee for each Product Family set forth in Exhibit B, payable by Alpharma to Orchid within forty-five (45) days of the successful completion of all of the US Biostudies for such Product Family.

(c)   The third installment shall be ****% of the Product Development Fee for each Product Family set forth in Exhibit B, payable by Alpharma to Orchid within forty-five (45) days of the FDA's acceptance (as opposed to approval) of the ANDA filing by Orchid for all Products in such Product Family, provided however ,

(1)   If the submission of an ANDA by Orchid with the FDA for a **** Product is delayed (other than due to a Force Majeure event) by more than fifteen (15) business days from the date stipulated in the Milestone Table, only ****% of the third installment shall be paid by Alpharma to Orchid and the balance ****% shall be withheld, to be paid along with the fourth installment if the Product is Launch Ready on the Anticipated Launch Date for such Product set forth in the Milestone Table;

(2)   If the submission of an ANDA by Orchid with the FDA is for a **** Product **** and the submission of the Product ANDA by Orchid is delayed (other than due to a Force Majeure event) by one (1) or more business days from the date stipulated in the Milestone Table, then the third installment shall be withheld by Alpharma, to be paid to Orchid along with the fourth installment if the Product is Launch Ready on the Anticipated Launch Date for such Product as set forth in the Milestone Table; and

(3)   If the submission of an ANDA by Orchid with the FDA is for a **** Product **** and the submission of the Product ANDA by Orchid is delayed (other than due to a Force Majeure event) by five (5) or more business days from the date stipulated in the Milestone Table, then only ****% of the third installment shall be paid by Alpharma to Orchid and the balance ****% shall be withheld, to be paid to Orchid along with the fourth installment if the Product is Launch Ready on the Anticipated Launch Date for such Product as set forth in the Milestone Table.

(4)   The fourth installment with respect to each Product Family shall be ****% of the Product Development Fee, payable by Alpharma to Orchid within forty-five (45) days that the Product Family is Launch Ready, provided however , if such Product Family is not either (i) Launch Ready on or before the Anticipated Launch Date set forth in the Milestone Table (other than due to a force majeure event) or (ii) Launch Ready on or before the date subsequent to the Anticipated Launch Date that a third party has received all necessary Regulatory Approvals, then Orchid shall forfeit the fourth installment of ****% with respect to such Product Family as well as any balance of any previous installments for such Product Family which were carried over due to a failure to meet such previous milestone date (other than due to a Force Majeure event). In addition, if Alpharma has previously paid Orchid any amounts under the third installment for such delayed Product Family, Alpharma may withhold such additional payment for such Product until it has recouped an amount equal to the amounts it paid for the third installment as set forth in Section 2.5.2(c)(3) above.

2.5.3    European Territory Biostudy Fees . Alpharma shall pay to Orchid an additional fee equal to ****, provided that , (i) Orchid has previously performed or is to perform a Biostudy for use in the U.S. Territory in connection with the filing of an ANDA for the same Product Family and (ii) the European Territory Biostudy has results which are acceptable to receive a Marketing Authorization for the Product to which the Biostudy relates under the European Acts. This European Territory Biostudy Fee shall be payable within forty-five (45) days of the successful completion of the European Territory Biostudy.

2.5.4    Additional Biostudy Fees . If the Regulatory Requirements in the U.S. Territory and/or European Territory dictate that more than one fed and one fasted Biostudy and/or additional Product development is required for a Product Family (e.g., there are several dosage strengths within the Product Family and/or more than one Reference Listed Drug is listed), then Alpharma and Orchid shall discuss whether to perform such additional Product Development and/or Biostudy in the Individual Territory and unless both parties agree not to proceed, Alpharma shall pay Orchid an additional fee equaling ****% of the actual cost of any additional Product development and/or any such additional US Territory and/or European Territory Biostudy. Such amounts shall be payable within fortyfive (45) days of the successful completion of such additional Product development and/or additional Biostudy as the case may be.

2.5.5    Additional Paragraph IV Product Fees . If Orchid is granted a 180 Day Period of Exclusivity for a Product and such 180 Day Period of Exclusivity is not (i) co-exclusive with any third party or (ii) withdrawn by the FDA or a court of competent jurisdiction within such 180 Day Period, then Alpharma shall pay Orchid an additional fee of **** United States Dollars (US $****); provided however , if such 180 Day Period of Exclusivity is co-exclusive with one or more third parties or is withdrawn by the FDA or a court of competent jurisdiction between the **** and **** day of such 180 Day Period, then Alpharma shall only pay Orchid an additional fee of **** Dollars (US $****). This Fee shall be payable to Orchid within forty-five(45) days of a Final Decision.

2.5.6    Product Termination Event . If a Product Termination Event occurs at anytime during the Development Activities for a Product, then Alpharma's remaining payment obligations for the Product under Sections 2.5.1 through 2.5.5 shall terminate. Notwithstanding the foregoing, the Product Termination Event shall not relieve or release the parties of any obligations accruing before the termination occurred including, without limitation, any payment obligations under Sections 2.5.1 through 2.5.5.

2.6     Exclusivity of Orchid APIs . During the Term, Orchid or its Affiliates may not sell an API used in a Product or in a Product Family for which it is entitled to receive the API Development Fee under this Agreement (the "Orchid API") to a third party in the Territory (other than Alpharma or its Affiliates) until **** in respect of **** Products and until **** for all other Products. However, Orchid shall be free to use or supply to a third party in the Territory such Orchid API for products which are not part of a Product Family. There is no restriction on Orchid ' s sales of Orchid API outside the Territory except neither Orchid nor its Affiliate s may issue any access letters that reference a DMF for any Product that will form part of an ANDA or Marketing Authorization applications until after a written acceptance from the relevant Regulatory Authority for a Product Family has been received by Orchid or Alpharma.

2.7     Payment for Sales of Orchid APIs to Third Parties . To the extent that any Orchid API is also sold by Orchid or an Orchid Affiliate to a third party (other than Alpharma or its Affiliates) for the use in the Territory, Orchid shall pay to Alpharma an amount equal to **** percent (****%) of the net sales determined in accordance with GAAP received by Orchid or its Affiliates for such Orchid API until the fifth (5 ^th ) anniversary of the Launch Date for the Product containing the Orchid API on a country-by-country basis. Such net sales price to a third party in the Territory shall not be less than ****. Orchid shall furnish to Alpharma, within 45 days after the end of each calendar quarter during the Term, a written report pertaining to the sales of each Orchid API in such quarter upon which payment is due pursuant to this Section as follows: each report shall show the amount received for the Orchid API sold by Orchid and its Affiliates, on a product by product basis, during the reporting period, together with the calculations of the share of such receipts payable to Alpharma. The applicable payment to Alpharma shall accompany this report.

2.8     First Right of Refusal . Before Orchid sells any Orchid API it manufactures for use in a Product to a third party for distribution by such third party in the Territory, Orchid shall inform Alpharma of its intention to do so. Thereafter, Alpharma shall be granted a first right of refusal to act as a distributor of the Orchid API on an exclusive basis in the Territory subject to the parties agreeing on satisfactory terms and conditions within thirty (30) days after Orchid has provided written notice thereof. If Orchid and Alpharma cannot come to agreement within such 30-day period, Orchid shall be free to sell the Orchid API to a third party so long as the supply price for the Orchid API is no less than that which was offered to Alpharma for the same quantity of forecasted purchase orders, provided that , this restriction shall apply only to sales of the Orchid API within the first six months of Orchid notifying Alpharma as set forth in the first sentence above. If Orchid has not sold an Orchid API to any third party at the end of such six month period Alpharma's right of first refusal as described herein shall be reinstituted.

ARTICLE 3
SUPPLY, MARKETING AND DISTRIBUTION OF PRODUCTS

1. 1. Exclusive Seller . Except to the extent Alpharma is permitted to purchase Products from third parties pursuant to Section 3.2 in the European Territory, Orchid hereby appoints Alpharma on behalf of itself and its Affiliates, and Alpharma, for itself and its Affiliates, hereby accepts such appointment, as the Exclusive Seller (as defined below) of the Products within the Territory commencing on the Effective Date and ending as to each individual Product, on a country-by-country basis, on the Product Termination Date. For purposes of this Agreement, " Exclusive Seller " means that, Alpharma and its Affiliates shall have the exclusive right to distribute and sell the Products in the Territory, provided however, Alpharma and its Affiliates shall not from the Effective Date until the end of the applicable Product Termination Date, (a) distribute, promote, market or sell Products manufactured by Orchid outside the Territory or (b) distribute, promote, market or sell Products manufactured by Orchid to third parties who Alpharma and/or its Affiliates know, or should know shall, in turn, distribute, promote, market or sell Products manufactured by Orchid outside the Territory. Until the Product Termination Date in each individual country in the Territory or until the Product has been made non-exclusive, Orchid and its Affiliates shall not approach or enter into any agreement with any third party to (a) supply any third party with a Product for sale or distribution by such third party in such country in the Territory or to an entity as to which Orchid knows or should know shall resell the Product within said country in the Territory or (b) market, sell or distribute Products within such country in the Territory unless Alpharma or its Affiliates has given its prior written consent hereto in connection with Alpharma or its Affiliates right to exploit the Dossiers and Marketing Authorizations in the European Territory as stated in Section 2.3.2.
   2. Exclusive Supplier . Alpharma hereby appoints Orchid on behalf of itself and its Affiliates, and Orchid, for itself and its Affiliates, hereby accepts such appointment, as the Exclusive Supplier (as defined below) of the Products in the U.S. Territory and the European Territory commencing on the Effective Date and ending as to each individual Product, on a country-by-country basis on the Product Termination Date or the deletion of the Product. " Exclusive Supplier " means that, Orchid shall be the exclusive supplier of the Products to Alpharma for distribution in the U.S. Territory and European Territory until the end of the applicable Product Termination Date or the Product has been made non-exclusive and Alpharma and its Affiliates shall not approach nor enter into any agreement with any third party to have the third party supply a Product in an individual country prior to the Product Termination Date applicable to said country; provided however, if it becomes reasonably apparent that a Product will not be Launch Ready on the Anticipated Launch Date in any one or more countries in the European Territory the parties shall discuss, and Orchid shall consider permitting (such permission not to be unreasonably withheld, conditioned or delayed), action to facilitate Alpharma's purchase of the Product from a third party for sale in such country(ies) within the European Territory. If Alpharma were to purchase any Product from a third party Alpharma shall inform Orchid hereof 20 business days in advance, and the Product shall become non-exclusive and Orchid shall not receive any payments under Section 3.5.6 with respect to any Products purchased from a third party pursuant to the preceding sentence.
   3. Agreement to Supply . During the Term Orchid agrees to manufacture at an Orchid Facility and supply to Alpharma, or at the direction of Alpharma to any one or more of its Affiliates, necessary quantities of the Products in accordance with the projected forecasts. Orchid shall, manufacture or procure, at its sole discretion, all API, other raw materials and packaging materials required in connection with the Products. Orchid shall supply the Products to Alpharma in finished packs ready for end-consumer use. Notwithstanding the foregoing, Alpharma shall have the option to request supply of the Products in bulk packs in which case packaging costs shall be accordingly adjusted to include the actual cost of the bulk packing.
   4. Agreement to Market, Distribute and Sell . During the Term and subject to the provisions hereof, Alpharma and its Affiliates shall, at their own cost and expense, use best efforts to market, promote, distribute and sell each Product within the U.S. or the European Territory in which Alpharma decides or is obligated to Launch (including actions and activities to encourage the listing of Products on relevant formularies maintained by governments and other entities) (altogether, " Marketing Activities "). Alpharma shall establish and provide Orchid with a separate yearly marketing plan for each of the Products in the U.S. Territory and the relevant countries of the European Territory. Alpharma's Marketing Activities shall consist of no less than those efforts, actions and activities used by Alpharma and its Affiliates for their other comparable products (whether manufactured by a third party or by Alpharma) in the countries which Alpharma decides or is obligated to Launch.
   5. 1. In the performance of Alpharma's Marketing Activities:
      2. 1. Alpharma and its Affiliates shall establish, maintain and provide appropriate facilities and services for the storage and continuous distribution, sale and promotion of the Products and shall comply (and cause its employees and the employees of their relevant Affiliates to comply) with all Applicable Laws in connection therewith ;
         2. no employee of Alpharma or of any of its Affiliates shall make any representation, statement, warranty or guaranty with respect to any Product that is not consistent with current labeling of such Product, that is deceptive or misleading or that would cause Orchid to have increased liability;
         3. Alpharma and its Affiliates shall conduct its marketing, promotion, advertisement, sale and distribution of the Products solely in (but not outside) the Territory;
         4. Alpharma and its Affiliates shall not sell the Products, directly or indirectly, to any third party in the Territory which Alpharma knows or should know intend to resell the Products outside the Territory;
         5. Alpharma and its Affiliate's shall not market, promote, distribute or sell the Products in violation of the warranty contained in Section 5.2.4.
         6. Alpharma shall process, administer and be financially responsible for all rebates pursuant to any government rebate programs and all commercial rebates, with respect to government claims for the Products sold by Alpharma; and
         7. Alpharma shall provide Customer/consumer support related to the Products and the appropriate intake of any reported adverse drug effects.
         8. Alpharma shall be responsible for compliance with all Health Care Financing Administration reporting obligations for the Products sold by Alpharma in the U.S. Territory and similar programs in other countries of the European Territory.
      3. In the event that, with respect to a Product,: (i) for reasons other than Force Majeure, Orchid's material breach of this Agreement, the non-issuance of all required Regulatory Approvals or as a result of the initiation of Paragraph IV litigation, Alpharma does not actually Launch such Product in the U.S. Territory or Launch such Product in at least **** Critical Countries (including **** countries) in the European Territory on or before ****; or (ii) after a period of **** from the Anticipated Launch Date in the U.S. Territory or the Anticipated Launch Dates of the **** mentioned Critical Countries, unless Alpharma was delayed by one of the conditions in (i) above, whichever is earlier, in an individual country, Orchid determines **** that Alpharma has failed to achieve Orchid's anticipated market position in the country with respect to such Product, then Orchid shall not be bound to retain Alpharma as Orchid's Exclusive Seller with respect to such Product in such country during the Term and, upon and after Orchid's proper notice to Alpharma that it is exercising its rights under this Section 3.4.2, the profit sharing provisions of Section 3.5.6 shall not apply to such Product in the country and Alpharma shall have the right to continue to sell the Product in accordance with this Agreement under the relevant Regulatory Approvals and Data. Such right to change Alpharma from an Exclusive Seller to a non-exclusive seller shall serve as Orchid's sole and exclusive remedy in respect of this section. Notwithstanding the foreg