DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT

Exhibit 10.4

DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT

by and between

BANNER PHARMACAPS INC.,
a Delaware
Corporation

and

JDS PHARMACEUTICALS, LLC,
a Delaware Limited
Liability Company

dated

April 26, 2007

TABLE OF CONTENTS

Page

Article 1.		Definitions and Construction Principles			3
Article 2.		Registration; Regulatory Matters; Product Development; Milestone Payments			7
Article 3.		Purchase/Supply of Product(s); Exclusivity; Non-Competition			13
Article 4.		Terms of Purchase of Product(s) from Banner			17
Article 5.		Supply of Ingredients, Finishing, and Packaging			22
Article 6.		Performance Standards			23
Article 7.		Product(s) Complaints; Recalls; Withdrawals			24
Article 8.		Product(s) Marketing and Sales			28
Article 9.		Term and Termination			29
Article 10.		Treatment of Confidential Information			32
Article 11.		Indemnities; Insurance			32
Article 12.		Intellectual Property			34
Article 13.		Miscellaneous			40
Appendix A.		Active Ingredient, Product(s), Specifications
Appendix B.		Agreement Indications
Appendix C.		Shipping Instructions
Sch. 3.4		Non-Competition
Sch. 12.1.		Banner Intellectual Property			1

THIS DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT (“Agreement”) is entered into as of the 26 ^th day of April, 2007 (the “Commencement Date”), by and between BANNER PHARMACAPS INC. (“Banner”), a Delaware corporation, having an office at 4125 Premier Drive, High Point, North Carolina 27265, and JDS PHARMACEUTICALS, LLC, (“JDS”) a Delaware Limited Liability Company, having an office at The Chrysler Building, 405 Lexington Avenue, 59th Floor, New York, New York 10174.

RECITALS

a. Banner possesses expertise in the manufacture of pharmaceutical Product(s) in softgel and other dosage forms. Banner has filed (or intends to file) an NDA(s) for FDA approval to market and sell the Product(s) (as such capitalized terms are defined below).

b. JDS possesses expertise in the marketing and sales of pharmaceuticals and desires to obtain the rights to market and sell the Product(s) consistent with the NDA(s) filed by Banner and to have Banner supply the Product(s) in accordance with the terms of this Agreement.

c. Both parties desire this Agreement to set forth the terms and conditions pursuant to which Banner will supply for sale to JDS, and JDS will purchase from Banner and market the Product(s) in the Territory based on Banner’s NDA(s).

NOW, THEREFORE, in consideration of the premises and the mutual promises hereinafter set forth, the parties agree as follows:

Article 1. Definitions and Construction Principles.

1.1 Definitions. The terms defined in this Section 1.1 shall for all purposes of this Agreement have the meanings specified in this Section 1.1. These definitions are applicable in the possessive, singular and plural forms.

“Act” shall mean the United States Food, Drug and Cosmetic Act and its associated regulations, all as amended from time to time.

“Active Ingredient” shall mean the active pharmaceutical ingredient listed in Appendix A attached hereto.

“Adverse Event” shall mean any event associated with the Product(s), whether or not considered drug-related, that could reasonably be expected to have an adverse impact on the Regulatory Approval, safety, efficacy or marketability of the Product(s).

“Affiliate” shall mean any corporation, partnership, association, trust, or other business entity or organization, directly or indirectly controlling, controlled by, or under common control with such party. For purposes of this definition, “control” shall mean (a) in the

case of corporate entities, direct or indirect ownership of more than fifty percent (50%) of the stock or shares having the right to vote for the election of directors and (b) in the case of non-corporate entities, direct or indirect ownership of at least fifty percent (50%) of the equity interest with the power to direct the management and policies of such noncorporate entity.

“Agreement Indications” shall mean ***.

“Applicable Law” shall mean all applicable laws, rules, regulations and guidelines (including any amendments, extensions or replacements thereto) of a Governmental Body, including, without limitation, cGMPs and the Act.

“cGMPs” shall mean current Good Manufacturing Practices as further defined in regulations promulgated by the FDA under the Act.

“CNS Physicians” shall mean ***.

“Commercially Available” shall mean (i) that all validation required by the FDA is completed as to the applicable Product, and (ii) that Banner has made and is ready to deliver at least *** Unit batches of each dosage strength listed on Appendix A for the applicable Product to JDS, for shipment by JDS to its third party customers and/or for physician samples as determined and allocated by JDS.

“Commencement Date” shall have the meaning assigned to it in the first paragraph of this Agreement.

“Direct Competitor” shall mean ***.

“Dispute” shall have the meaning assigned to it in Section 13.3.

“FDA” shall mean the United States Food and Drug Administration and any of its successor agencies or departments.

“First Commercial Sale” shall mean the date of the first sale of Product(s) on a Product by Product basis by JDS to JDS’s third party customer.

“Generally Applicable Technology” shall mean technology used or useful to make Product(s) which is owned or controlled by Banner and which has general application to the development, use or manufacture of soft gelatin capsules and, as such, the technology is not predominately or exclusively used or useful for Product(s).

“Governmental Body” shall mean any nation or government, any state, province, or other political subdivision thereof, or any entity with legal authority to exercise executive, legislative, judicial, regulatory, or administrative functions or pertaining to government in the Territory.

“Initial Term” shall have the meaning assigned to it in Section 9.1.

“Initial Valproic Acid EnteriCare™ Minimum Royalty Period” shall mean the period of time commencing with the First Commercial Sale of the Valproic Acid EnteriCare™ Product and continuing for *** following the occurrence of the First Commercial Sale of the Valproic Acid EnteriCare™ Product.

“Initial Valproic Acid Versatrol™ Minimum Royalty Period” shall mean the period of time commencing with the First Commercial Sale of the Valproic Acid Versatrol™ Product and continuing for *** following the occurrence of the First Commercial Sale of the Valproic Acid Versatrol™ Product.

“Intellectual Property” shall mean any patent, patent application, trademark, service mark, trade name, trade dress, copyright, trade secret, proprietary know-how, discovery, development or invention, whether or not patentable.

“Latent Defect” shall mean any instance where Product fails to conform to the applicable Specifications, and such failure would not be discoverable upon visual inspection of such Product by JDS. For the purposes of this Agreement, “visual inspection” shall mean: (a) comparing the applicable Purchase Order against documentation accompanying the shipment to verify that the delivery date, identity, quantity and exterior shipment labeling comply with the Purchase Order, and (b) visually inspecting the exterior of the shipment of Products to verify that the shipment appears to be in good condition.

“Minimum Royalty Payment(s)” shall mean the sum(s) payable by JDS to Banner in accordance with Section 3.3.

“NDA” shall mean a duly prepared New Drug Application filed with the FDA for the purpose of obtaining Regulatory Approval to market the Product(s) in the Territory.

“Net Sales Revenue” shall mean gross revenue invoiced by JDS for sales of the Product(s) to unrelated third parties reduced by (a) reasonable customer discounts, and (b) amounts repaid or credited, returns, chargebacks, rebates (including government mandated rebates) and allowances given in the ordinary course of business (including amounts refunded or credited for Product that was rejected, spoiled, damaged, outdated or returned). JDS shall determine Net Sales Revenue in accordance with generally accepted accounting principles.

“Nonconformity” means a Product(s) characteristic that causes any Product(s) to fail to conform to the Specifications.

“Opt Out Right” shall mean ***

“Packaged Product” shall mean quantities of Product(s) packaged in retail size containers or as physician samples, as the case may be, and not intended for repackaging or re-labeling under the Act.

“Product(s)” shall mean either the Valproic Acid EnteriCare™ Product or the Valproic Acid Versatrol™ Product, or both of them, in Packaged Product form, which are intended for resale for the Agreement Indications.

“Purchase Forecast” shall have the meaning assigned to it in Section 4.4.

“Purchase Order” shall have the meaning assigned to it in Section 4.4.

“Recall” shall mean removal of Product(s) from distribution or retail locations or from patients ordered or directed by the FDA or other Governmental Body.

“Regulatory Approval” shall mean the approval by the FDA necessary and effective for the commercial manufacture, distribution, marketing, promotion, offer of sale, sale and use of the Product(s) in the Territory including, without limitation, the approval of the NDA, but not including pricing and third party reimbursement approvals.

“Royalty Payment” shall mean a royalty payment made by JDS to Banner under Section 4.1 (e) of this Agreement.

“Section 2.3(b) Notice” shall have the meaning set forth in Section 2.3(b).

“Shipping Instructions” shall have the meaning set forth in Section 7.2(e).

“Specifications” shall mean those specifications, tests and associated values contained in the NDA, as approved by the FDA, for the composition and manufacture of the Product(s) including the imprinting and packaging thereof.

“Term” shall mean the periods of time measured separately with respect to the Valproic Acid Versatrol™ Product and to the Valproic Acid EnteriCare™ Product as defined in Section 9.1.

“Territory” shall mean the United States of America and its territories and possessions, including without limitation, Puerto Rico.

“Withdrawal” shall mean a voluntary withdrawal of Product(s) from distribution or retail locations or from patients by the manufacturer or distributor not requested by the FDA or other Governmental Body.

“Unit” shall mean each soft gelatin capsule of Product(s) with specifications and characteristics set forth in Section 6.1.

“Valproic Acid EnteriCare™ Product” shall mean enteric release soft gelatin capsules containing the Active Ingredient in the dosage strengths and dosage forms for the Valproic Acid EnteriCare™ Product described in Appendix A attached hereto and made using Banner’s EnteriCare™ technology.

“Valproic Acid Versatrol™ Product” shall mean extended release soft gelatin capsules containing the Active Ingredient in the dosage strengths and dosage forms for the Valproic Acid Versatrol™ Product described in Appendix A attached hereto and made using Banner’s Versatrol™ technology.

1.2 Construction Principles. As used in this Agreement:

(a) references to Sections shall mean sections of this Agreement, unless otherwise expressly indicated;

(b) references to days, weeks, months, quarters, and years shall be references to calendar days, weeks, months, quarters, and years, unless otherwise stated in this Agreement, for example, in Section 3.3(a);

(c) all sums of money are in United States Dollars.

Article 2. Registration; Regulatory Matters; Product Development; Milestone Payments.

2.1 Regulatory Matters .

	(a)		Responsibility for Regulatory Submissions .
			(i) Banner shall be responsible for interacting with the FDA and shall diligently act to complete any requirements for obtaining Regulatory Approval of the Product(s). Banner may discharge its responsibility under this Section 2.1(a)(i) directly or through a third party. Banner shall consult

			with JDS prior to selection of any such third party, Banner shall be responsible to maintain all Regulatory Approvals or other FDA-filings or applications for Regulatory Approval as long as required for use in connection with either party’s activities under this Agreement.
			(ii) JDS shall be responsible, with Banner’s full cooperation, to prepare FDA approvable label copy, proposed samples of packaging and artwork for Products, and shall use reasonable commercial efforts to provide such label copy and artwork to Banner in sufficient time to prevent any delay in obtaining Regulatory Approval due to the label copy, proposed samples of packaging or artwork; provided however, that in the case of the Valproic Acid EnteriCare™ Product, such proposed label copy and artwork (but not samples of packaging) shall be provided by JDS to Banner no later than ***. All such JDS label copy and final packaging specifications shall be subject to Banner’s prior approval to the extent it contains information subject to Regulatory Approval.
			(iii) Upon request by Banner, JDS shall cooperate with Banner in, and shall provide Banner with, all other information with respect to JDS or its activities hereunder reasonably necessary for filing in connection with obtaining or maintaining the Regulatory Approval of the Product(s) and/or in responding to any questions or requests for additional information by the FDA.
	(b)		NDA Ownership . Banner owns the rights to and shall retain all Regulatory Approvals and all applications for Regulatory Approval (including, without limitation, any NDA and any other registration or FDA-filed dossier) for the Product(s).
	(c)		Costs and Expenses of Registration Activities and Maintaining Regulatory Approval . Banner shall be responsible for and timely make payment for the costs and expenses related to the maintenance, preparation and filing of NDA or other documents necessary to obtain and/or maintain the Regulatory Approval of the Product(s). JDS shall be responsible for and timely make payment of all costs and expenses related to the development and preparation of the label copy, samples of packaging and artwork for the Product(s).
	(d)		Extraordinary Regulatory Events. ***

***

***

     2.2 Milestone Payments to Banner . In consideration of Banner’s regulatory and development services related to the Product(s), JDS shall make milestone payments to Banner in immediately available funds payable to an account specified by Banner, which when paid shall be nonrefundable. Milestone payments payable by JDS to Banner are as follows:

(a) $1,900,000.00 (one million nine hundred thousand dollars) shall be due and payable immediately upon execution and delivery of this Agreement by both parties.

(b) $1,500,000.00 (one million five hundred thousand dollars) shall be due and payable ***.

(c) $500,000.00 (five hundred thousand dollars) shall be due and payable ***.

(d) $1,000,000.00 (one million dollars) shall be due and payable ***.

(e) Subject to *** $3,000,000.00 (three million dollars) ***

***

2.3		Product Developments.
		(a)  Dosage Strengths. From time to time during the Term, Banner and JDS may agree to develop dosage strengths of Products for the Agreement Indications in addition to the dosage strengths listed on Appendix A attached hereto. Upon agreement to develop such dosage strengths, (i) Banner and JDS shall negotiate in good faith and enter into a development agreement specifying, among other things, defined timelines and an established budget pursuant to which JDS shall reimburse Banner for all costs of developing such mutually agreed to additional dosage strengths, including without limitation, actual direct out of pocket costs, Banner’s internal research and development costs determined in an established project accounting system at standard hourly rates, and the costs to obtain Regulatory Approval to market the additional strengths in the Territory. Banner shall invoice JDS for such costs for developing the additional dosage strengths and JDS shall pay such invoices within thirty (30) days from the date of the invoice received, and (ii) Appendix A attached hereto shall be amended to include such additional dosage strengths so that the terms and conditions of this Agreement shall then be applicable to the additional dosage strengths so added. If in developing the additional dosage strengths, Banner develops, discovers or creates patentable Intellectual Property that provides a commercial advantage for Product(s) over the then existing technology used to make, use or sell Product(s), and the parties agree that it is commercially advantageous for Banner to implement such Intellectual Property to develop, make, use or sell the Product(s) in new dosage strengths, the parties shall negotiate in good faith appropriate fair compensation to Banner for the added commercial value of such new Banner Intellectual Property (e.g., by upfront milestone fees and/or additional royalties on sales of the new Product dosage strengths). The determination of such fair compensation to Banner will take into consideration, among other things, the amount of funds already expended and to be expended by JDS in developing the Product(s) in additional dosage strengths, the contribution of JDS to the development of the product concept, and the financial return likely to be earned from the proposed

		commercialization of the Product(s) in new dosage strengths. However, if the parties cannot agree to the appropriate fair compensation to Banner for the added commercial value of such new Intellectual Property for the new Product dosage strengths, Appendix A shall not be amended to include such new dosage strengths and such new dosage strengths shall not be included in the Product(s) covered by this Agreement.
		(b)  Additional Indications . ***
		(c)  Dosage Forms . If during the Term, Banner decides to develop additional dosage forms of Valproic Acid or its salts for the Agreement Indications (i.e., dosage forms other than soft gelatin capsules and enrobed tablets), then Banner shall notify JDS of its decision in writing and shall provide information as reasonably requested by JDS with respect to such development projects from time to time. ***

***

Article 3. Purchase/Supply of Product(s); Exclusivity; Non-Competition.

3.1 Banner’s Supply Commitments . Banner shall manufacture, imprint and supply Product(s) to JDS pursuant to JDS’s Purchase Orders (submitted by JDS pursuant to the terms and conditions of this Agreement) and in accordance with the Regulatory Approval, the Specifications and in compliance with Applicable Law.

3.2 JDS’s Commitment .

(a) Exclusive Purchases . JDS shall, during the Term, purchase exclusively from Banner all of JDS’s requirements of the Product(s) for distribution and sale in the Territory in accordance with the terms and conditions of this Agreement.

(b) Efforts . JDS shall use reasonable commercial efforts (i) to achieve the First Commercial Sale of each Product within *** after the Regulatory Approval for that Product provided that such Product is Commercially Available; and (ii) to thereafter legally maximize JDS’s sales volume of that Product throughout the Territory. Notwithstanding the foregoing, JDS shall have no obligation to achieve the First Commercial Sale of a Product on or before ***, unless an earlier launch date is agreed to in writing by the parties.

3.3		Exclusivity .
		(a)  Definition. As used in this Section 3.3, “year” means each period of twelve (12) full consecutive calendar months during the Term, with the first “year” beginning on the First Commercial Sale of each Product and ending at the end of the twelfth full calendar month after the First Commercial Sale of such Product.
		(b)  Minimum Royalty Payments. JDS shall have the exclusive right to sell the Products in the Territory, provided that JDS pays Banner at least the Minimum Royalty Payment each year for each Product.

			(i)  Product Contributions to Minimum Royalty Payment. The respective dollar contribution of each Product to the Minimum Royalty Payment shall be calculated as follows:
			***

			***
			(ii)  Carryover Contributions. If in any year the Royalty Payments actually paid by JDS to Banner exceed the Minimum Royalty Payment required for that year, the excess amount shall be credited in the immediately following year solely to the extent needed to allow JDS to achieve the Minimum Royalty Payment.
			(iii)  Minimum Royalty Payment Abatement . If for reasons directly attributable to Banner’s actions or failure to act, or to Force Majeure, JDS cannot fulfill JDS’s customer orders for Product(s) and, as a consequence, JDS’s Net Sales Revenue is reduced, and not merely delayed, then JDS may reduce the Minimum Royalty Payment due to Banner for the applicable year by an amount proportionate to the amount that JDS’s Net Sales Revenue was reduced in such year because of Banner’s actions or failure to act, or because of Force Majeure.

(c)  Termination of Exclusivity . Banner shall have the right, in its sole discretion, upon thirty (30) days prior written notice to JDS, to terminate JDS’s exclusive right to sell the Product(s) in the Territory, on a Product by Product basis, and thereafter shall have the right to offer coextensive rights to one or more third parties if both of the following conditions exist during the same year: ***

		*** Should Banner terminate JDS’s exclusive right to sell one or more Product(s) in the Territory under this Section 3.3(c) then the non-competition restrictions imposed on Banner under Section 3.4 shall also terminate with respect to such Product(s).
3.4		Non-Competition.
		(a) Subject to Section 3.3(c), with the exception of soft gelatin capsules containing as an active ingredient Valproic Acid, salts thereof or oligomers thereof that Banner supplies to third parties in the Territory as of the Commencement Date pursuant to written agreements as of the Commencement Date, which third parties and agreements are listed on Schedule 3.4 attached hereto (the “Exception”), Banner shall not, directly or indirectly, either itself or through a third party, supply for sale, market or otherwise commercialize in the Territory any Valproic Acid, salt thereof or oligomer thereof, in each case, in the form of a soft gelatin capsule, hard gelatin capsule or tablet product that possesses FDA marketing approval for any Agreement Indication. For the avoidance of doubt, the Exception shall be limited to the specific products that Banner is supplying in the Territory to the scheduled third parties, or their successors, pursuant to the scheduled written agreements as of the Commencement Date.
		(b) Other than the Products supplied by Banner under this Agreement, JDS shall not, directly or indirectly, either itself or through a third party, offer for sale, market or otherwise commercialize in the Territory any Valproic Acid, salt thereof or oligomer thereof, in each case, in the form of a soft gelatin capsule, hard gelatin capsule or tablet product that possesses FDA marketing approval for the Agreement Indications.
		(c) Banner shall be free to sell the Products and any other Valproic Acid product, including salts thereof and oligomers thereof in any dosage form, any dosage strength and for any indication, to one or more third parties for resale or distribution outside the Territory without restriction except as follows:
		***

     ***

Article 4. Terms of Purchase of Product(s) from Banner .

4.1		Pricing; Royalties .
		(a) The price as of the Commencement Date for Valproic Acid EnteriCare™ Products in Packaged Product form shall be:
		***
		(b) The price for Valproic Acid Versatrol™ Products in Packaged Product form shall be determined according to Banner’s standard cost systems in accordance with generally accepted accounting principles and shall be consistent with Banner’s determination of the Valproic Acid EnteriCare™ Product price in Packaged Product form charged by Banner to JDS. Banner shall provide JDS with summary documentation to support such price determination, including, without limitation, to the extent that the pricing of Valproic Acid

		Versatrol™ Product is greater than the pricing of Valproic Acid EnteriCare™ Product, the components and the costs associated with such components that caused such increase in pricing. The price for Valproic Acid Versatrol™ Product shall be fixed only after the formulation for the Valproic Acid Versatrol™ Product is finalized and scale up to full batch size is completed.
		(c) At JDS’s option, up to ***
		(d) Pricing provided under this Section 4.1 is based on a minimum production lot size of *** Units. Should JDS require smaller or larger size lots, pricing shall be negotiated in good faith and pricing adjusted accordingly.
		(e) In addition to the Product(s) price set forth above, JDS shall make Royalty Payments to Banner as follows:
		***

		***
		(f) JDS shall make Royalty Payments quarterly. Accrued but unpaid Royalty Payments shall be paid within thirty (30) days after the end of each quarter, in the same manner as invoice payments under Section 4.3. With each Royalty Payment, JDS shall provide to Banner a summary statement of Net Sales Revenue for the applicable quarter.
		(g) If there is a delay in achieving the First Commercial Sale of Valproic Acid EnteriCare™ Product so that it does not occur before *** and this delay is due to circumstances beyond JDS’s reasonable control including delay in obtaining Regulatory Approval not attributable to JDS and Force Majeure, then the Royalty Payment set forth in Section 4.1(e)(i) shall commence on the date of the First Commercial Sale of the Valproic Acid EnteriCare™ Product and shall end *** thereafter, and the beginning of each new Royalty Payment set forth in Sections 4.1(ii), (iii) and (iv) shall be extended and commence accordingly.
		(h) Upon request of JDS, the parties shall discuss in good faith terms and conditions under which JDS could buy out its obligation to make Royalty Payments under this Agreement, however, neither party is bound to agree to or accept any such term or condition.

4.2 Price Adjustments. Banner shall be entitled to increase the labor and overhead component of the price of the Product(s) annually at a percentage rate equal to the change in the United States Department of Labor’s Bureau of Labor Statistics’ Producer Price Index for Pharmaceutical Preparations from the previous year, provided however, that in the event Banner determines that an extraordinary labor condition exists that has caused or will cause Banner’s labor and overhead costs to increase at a rate exceeding the annual adjustment, Banner shall provide JDS with reasonably detailed documentation of the actual or projected increased labor and overhead costs and the parties shall negotiate in good faith appropriate price increases to compensate Banner for the extraordinary labor condition on a going forward basis. In addition, no more than once per calendar quarter, Banner shall decrease or increase the price of Products to reflect decreased or increased raw materials costs for new Purchase Orders if the aggregate decrease or increase in raw materials costs is at least five percent (5%) of the raw materials cost at the Commencement Date or at the date the last price decrease or increase due to raw materials costs was implemented, whichever is later. The benefits of decreases in raw material prices shall be shared by the parties equally so that price decreases implemented by Banner shall not exceed an amount greater that *** of the subject aggregate raw material price decrease. Banner shall provide JDS with sixty (60) days written notice of any price increase or decrease under this Section 4.2. If requested, Banner shall provide JDS with reasonable written evidence of raw material cost increases and decreases, and with the calculation of any extraordinary increase in labor and overhead costs.

4.3 Payment Terms . Banner shall invoice JDS upon each shipment of Product(s), and JDS shall pay such invoices within *** from the date of such invoice. Banner shall deliver to JDS correct and complete invoices at, or promptly after, the date Product(s) ship to JDS. Payment shall be in U.S. dollars and paid to an account designated by Banner in writing. All amounts payable by JDS to Banner under this Agreement shall, if delinquent, accrue interest at one (1%) percent per month from the date of the delinquency.

4.4		Purchase Forecasts .
		(a) JDS shall submit to Banner a forecast of the quantity of Product(s) that JDS anticipates ordering from Banner for the first twelve (12) months of the Term (the “Purchase Forecast”). JDS’s initial Purchase Forecast shall be due at a date agreed to by the parties which date shall be a reasonable period in advance of the anticipated date of the Regulatory Approval. JDS shall update this Purchase Forecast on or before the tenth (10 th ) day of every calendar month, thereby creating a 12-month rolling forecast. The first four (4) months of such forecast shall be a binding purchase commitment and the remaining eight (8) months shall be non-binding. Banner shall use commercially reasonable efforts, but is not obligated, to supply any monthly forecast that exceeds one hundred and twenty percent (120%) of the quantity previously forecast for that month.
		(b) At least six (6) months prior to the anticipated date of Regulatory Approval of a Product, Banner and JDS shall cooperate to determine the details of the first Purchase Forecast, including without limitation, the launch quantities of such Product, the Product mix (e.g., dosage strengths) and the desirable mix of Product quantities as physicians samples and as retail size containers. As promptly as practicable following the delivery to Banner of the first Purchase Forecast JDS shall provide Banner with binding firm orders (each a “Purchase Order”) for the first four (4) months of the Purchase Forecast. The Purchase Orders shall meet the requirements for Purchase Orders set forth in Section 4.5.
4.5		Purchase Orders .
		(a) Each month within two (2) weeks after submission of the Purchase Forecast for that month, JDS shall provide Banner with Purchase Orders for the fourth month (i.e., the month newly added to the binding purchase commitment under Section 4.4). The Purchase Order shall specify: the specific Product(s) being ordered, the proposed shipment date to JDS, the quantities of Product(s) ordered (which total monthly volume for the order period shall be no less than the applicable binding portion of the Purchase Forecast as provided in Section 4.4), and the requested place and manner of delivery, including any carrier designated for use by JDS. If JDS does not designate a carrier, then Banner shall select the carrier. In no event shall Banner be obligated to accept any Purchase Order for less than the minimum batch size of ***

		***. Banner shall be provided a minimum lead-time for delivery of *** on Purchase Orders. Within five (5) business days after receipt of a Purchase Order, Banner shall notify JDS of its acceptance of such Purchase Order as a binding order or shall indicate what portion of the amounts covered by the Purchase Order Banner is willing to accept as a binding order. Such confirmation shall also confirm the proposed shipment date or specify a reasonable alternate shipment date. Both parties shall make reasonable good faith efforts to adjust order requirements to reflect market conditions, except that change requests may not be made within *** from the scheduled ship date of the subject Product(s) without Banner’s written approval not to be unreasonably withheld.
		(b) Banner’s acceptance of any Purchase Order is limited to the terms and conditions stated in this Agreement. All terms and conditions proposed by JDS in any Purchase Order or otherwise which are different from or in addition to this Agreement are expressly rejected. No purported oral or verbal agreement or other understanding which attempts in any way to modify the conditions stated herein will be binding, unless both parties agree to the modification, in advance and in writing.
		(c) If Banner (i) is unable to fulfill JDS Purchase Orders for Product or (ii) becomes aware of any circumstances (including Force Majeure) that will cause Banner to become unable to fulfill JDS Purchase Orders, in each case, for any continuous sixty (60) day period, Banner shall give JDS prompt written notice, describing such circumstances together with a proposed course of action to remedy such failure, which may include supplying Product from a second source (including without limitation a Banner Affiliate) qualified to provide Product under the Regulatory Approval. In the event Banner cannot fulfill JDS Purchase Orders from a qualified second source, JDS may, in its discretion, cancel each affected Purchase Order and/or meet the shortfall from any alternate source or sources selected by JDS in its sole discretion. Any procurement by JDS from such alternative sources shall be limited to the extent of the material shortfall by Banner and such procurement shall cease as soon as Banner is able to resume normal supplies, subject to depletion of any inventory on hand that was purchased or is to be delivered pursuant to binding contractual commitments to purchase from the alternate source or sources. In meeting its requirements under this Section 4.5(c), JDS shall not enter into any long term supply commitments with any third party source. The Net Sales Revenue from the product that JDS purchases from a source other than Banner under the terms of this Agreement shall be included in Net Sales Revenue.
		(d) If Banner orders a specific raw material ingredient for a Product(s) and the raw material is delayed or fails to meet Banner’s acceptance criteria, through no act or omission by Banner, then for all purposes of this Agreement, Banner’s shipment timetable shall be extended by the period of such delay, or in the case of unacceptable material to allow Banner adequate time to obtain an acceptable

		replacement material, but if the delay exceeds sixty (60) days then the provisions of Section 4.5(c) shall apply.
4.6		Shipment .
		(a) With respect to Products: (i) Banner or it’s third party finish packager will ship each order of Product(s) Ex Works the packaging facility, (ii) Banner shall package the Product(s), or arrange to have the Product(s) packaged, for shipment in accordance with customary practices in the trade and shall arrange for shipment to the location designated by JDS, and (iii) freight and insurance shall be for the account of JDS, and JDS shall bear the risk of loss, delay or damage in transit from and after delivery by Banner or such third party finish packager to the carrier for shipment to JDS.
		(b) Any extra reasonable cost incurred by Banner on account of shipment changes requested by JDS shall be reimbursed by JDS.
		(c) Banner shall include the following with each shipment of the Product(s): (i) the Purchase Order number; (ii) the lot number; (iii) the quantity of the Product(s); and (i) a certificate of analysis as required by Section 6.2 hereof.

Article 5. Supply of Ingredients, Finishing, and Packaging .

5.1 Product Ingredients. Banner shall supply the Active Ingredient and all other raw materials as required for compounding, processing and imprinting the Product(s), and the components for bulk packaging and bulk labeling, if applicable. Banner’s receipt, processing, handling and storage of the Active Ingredient and all raw materials required hereunder shall be conducted in accordance with Applicable Law. In the manufacture of Product(s), Banner shall not use any materials that fail to meet the current standards for materials under Applicable Law, where such standards are established and are applicable.

5.2 Finish Packaging . Banner shall supply, or arrange for the supply of, all finish packaging components, including without limitation and if applicable, bottles, labels, outserts, caps, blister and corrugated materials. Banner may finish package Product itself or arrange for finish packaging by a third party. In the latter case, Banner hereby assumes the liabilities, responsibilities and obligations pertaining to arranging for finish packaging of Product(s). Banner shall, in its own discretion, select the third party finish packager after consultation with JDS regarding the selection. Banner shall cause the finished packaging of the Product(s) to be conducted in accordance with all Applicable Law. Banner shall not assume any obligation, responsibility or liability of JDS with respect to the content, development or supply of label copy, or artwork.

Article 6. Performance Standards.

6.1 Specifications and Characteristics . Banner shall manufacture and provide to JDS Product(s) in compliance with the Regulatory Approval, the Specifications and Applicable Law. The Product(s) shall have a minimum shelf life of at least *** with respect to finished Product(s) and at least *** with respect to physician samples, at the time of delivery to JDS (provided JDS takes delivery in accordance with requested date of delivery on the applicable Purchase Order). After Banner completes stability studies in accordance with Applicable Law which Banner undertakes to complete within a reasonable period of time after the Commencement Date, Product(s) shall have a minimum shelf life of at least *** at the time of delivery to JDS (provided JDS takes delivery in accordance with requested date of delivery on the applicable Purchase Order).

6.2 Certificate of Analysis . Concurrent with shipment, Banner shall deliver to JDS a certificate of analysis, in Banner’s customary form, for each lot of Product(s) sold to JDS, confirming that the Product(s) meets the Specifications.

6.3 Product(s) Acceptance .

(a) Within thirty (30) days of receipt of Product(s) by JDS, JDS or its designee shall conduct a visual inspection of Product(s). Should the visual inspection indicate a deviation from the Specifications, JDS shall promptly notify Banner in writing by facsimile. If after conducting its own investigation of the samples within fourteen (14) calendar days, Banner agrees that such samples do not conform to the Specifications, and unless Banner reasonably determines that the Nonconformity is directly attributable to JDS’s or its agents’ shipping, handling, distribution or storage of the nonconforming Products, Banner shall promptly provide JDS, free of any additional charge, with new deliveries of the same quantity of the Product(s) as the delivered shipment, or identifiable subset thereof, from which the sample was taken, or, in Banner’s discretion and at its cost, and if appropriate under Applicable Law, Banner may promptly reprocess the nonconforming Product(s) to meet the Specifications. In either event (unless Banner reasonably determines that the Nonconformity is directly attributable to JDS or its agents’ shipping, handling, distribution or storage of the nonconforming Products), JDS shall return, at Banner’s expense, the particular lot, portion, or shipment of the non-conforming Product(s) if requested to do so by Banner; provided that if Banner elects to destroy such nonconforming Product(s), Banner shall arrange for