SUPPLY AGREEMENT

Supply Agreement

AGREEMENTS / CONTRACTS

CLAUSES

REPLIDYNE INC | DAIICHI SUNTORY PHARMA CO., LTD. | NIPPON SODA CO., LTD.

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Title: SUPPLY AGREEMENT
Governing Law: New York Date: 4/5/2006
Industry: Biotechnology and Drugs Sector: Healthcare

SUPPLY AGREEMENT, Parties: replidyne inc , daiichi suntory pharma co. ltd. , nippon soda co. ltd.

[ *** ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Exchange Act Of 1933, as amended.

Exhibit 10.15

SUPPLY AGREEMENT

AMONG

REPLIDYNE, INC.

DAIICHI SUNTORY PHARMA CO., LTD.

AND

NIPPON SODA CO., LTD.

DATED: DECEMBER 20TH, 2004

TABLE OF CONTENTS


Article	Title	Page
1	Definitions		2
2	Validation of Nihongi Facility		2
3	Manufacture and Supply of Drug Substance		5
4	Forecasts, Purchase Orders and Deliveries		10
5	Purchase Price and Payment		15
6	Drug Substance Quality		21
7	Regulatory Matters		24
8	Transfer of Manufacturing		28
9	Proprietary Rights		31
10	Secrecy		31
11	Duration and Termination		32
12	Effect of Termination		34
13	Hold Harmless and Insurance		38
14	Representations, Warranties and Covenants		39
15	Force Majeure		40
16	Non-Waiver		40
17	Modification		41
18	Miscellaneous		41
19	Applicable Law		43
20	Dispute Resolution		43
21	Notice		44
22	Publicity		44
23	Language		45
24	Execution in Counterparts		45

TABLE OF ATTACHMENTS


Number		Title
1		Definitions
2.3		Timeline
3.3		Delay Compensation
4.1		Batch Sizes
4.2(a)		Initial Clinical Forecast
5.1		Purchase Prices
6.1		Drug Substance Specifications
7.9		Sensitive Manufacturing Information
8.2		Manufacturing Patents
11.1		Patents


		SUPPLY AGREEMENT		PAGE i

SUPPLY AGREEMENT

THIS SUPPLY AGREEMENT ( “ Agreement ” ) is made as of December 20th, 2004 ( “ Effective Date ” ) among:

(1)		REPLIDYNE, INC. , a corporation organized and existing under the laws of the State of Delaware, U.S.A., having its principal business office at 1450 Infinite Drive, Louisville, Colorado 80027, U.S.A. ( “ Replidyne ” );

(2)		DAIICHI SUNTORY PHARMA CO., LTD. , a corporation organized and existing under the laws of Japan and having its registered office at 7-2, Kojimachi 5-chome, Chiyoda-ku, Tokyo 102-8530, Japan ( “ DSP ” ); and

(3)		NIPPON SODA CO., LTD. , a corporation organized and existing under the laws of Japan, having its registered office at 2-1, Ohtemachi 2-Chome, Chiyoda-ku, Tokyo 100-8165, Japan ( “ Nisso ” ).

DSP and Nisso are sometimes referred to collectively herein as the “ Supplier ” , and shall be jointly and severally liable for the obligations of “Supplier” hereunder as provided in Section 18.5 (Independent Contractor) hereof. Replidyne, DSP and Nisso are sometimes referred to collectively herein as the “ Parties ” or individually as a “ Party ” .

WITNESSETH:

WHEREAS , Replidyne and DSP have entered into the license agreement on March 15, 2004 pursuant to which Replidyne has been granted certain licenses in the Territory (as defined herein) under the patents and the know-how ( “ License Agreement ” ); and

WHEREAS , Replidyne, DSP and Nisso have entered into the Letter of Intent for Key Business Terms Faropenem Daloxate Supply Agreement on the same date ( “ Supply LOI ” ) which require the execution and delivery of this Agreement by the Parties; and

WHEREAS , Replidyne, DSP and Nisso entered into a letter agreement on November 15, 2004 (“ Letter Agreement ”) wherein Replidyne provided Nisso with an instruction to commence validation activities for Nisso’s Nihongi Facility to manufacture certain quantities of Drug Substance (hereinafter defined) and procurement of raw materials relating to such Drug Substance and Nisso agreed to commence such validation activities; and

WHEREAS , Replidyne desires to purchase from DSP pre-clinical, clinical and commercial quantities of the Drug Substance, and the Supplier desires to supply such Drug Substance to Replidyne in accordance with the terms and conditions of this Agreement.

NOW, THEREFORE, for and in consideration of the premises and the provisions contained herein, the Parties, intending to be legally bound, agree as follows:


		SUPPLY AGREEMENT		PAGE 1

ARTICLE 1: DEFINITIONS

Certain defined terms as used in this Agreement shall have the meanings respectively specified in Attachment 1 hereto.

ARTICLE 2: PREPARATION OF NIHONGI FACILITY

2.1		General . Nisso shall perform all necessary engineering work, equipment acquisition and commissioning, training, qualification and validation activities and other work required for the Nihongi Facility to manufacture and supply the Drug Substance meeting the Specifications in accordance with the then-current Drug Master File for the Drug Substance and all Regulations and Regulatory Approvals.

2.2		Engineering Activities . Nisso shall undertake and subsequently complete all necessary engineering activities, equipment acquisition and commissioning, training and other activities required for the Nihongi Facility to manufacture and supply the Drug Substance meeting the Specifications in accordance with the then-current Drug Master File for the Drug Substance (excluding qualification and validation activities as provided in Section 2.3 ). Subject to Section 12.5(c) (Engineering Costs) hereof, all costs related to such activities shall be for the sole account of Nisso. It is acknowledged by the Parties that Nisso have already commenced such activities in accordance with the Letter Agreement.

2.3		Validation Activities . Nisso shall undertake and complete all necessary qualification and validation activities for the Nihongi Facility to manufacture and supply commercial quantities of the Drug Substance meeting the Specifications in accordance with the then-current Drug Master File for the Drug Substance and all Regulations and Regulatory Approvals. Such activities shall be undertaken in accordance with the timeline and plan set forth in Attachment 2.3 hereto ( “ Timeline ” ). Subject to Section 2.4 (Purchase of Validation Lots of Drug Substance) hereof, all costs related to such activities shall be for the sole account of Nisso. It is acknowledged by the Parties that Nisso have already commenced a part of such activities in accordance with the Letter Agreement.

2.4		Purchase of Validation Batches of Drug Substance . Replidyne shall purchase and take delivery of Drug Substance manufactured at Nihongi Facility during the validation activities specified in Section 2.3 (Validation Activities) as follows:


		SUPPLY AGREEMENT		PAGE 2


(c)	Purchase Price :	JP¥ [ * ] /kg (JP¥ [ * ] /kg in the potency basis), priced on the basis of Ex Works Nihongi (to be increased by mutual agreement to reflect delivery FCA Narita pursuant to Section 4.7 (Delivery, Title and Risk of Loss) ).

(d)	Delivery :	In accordance with the Timeline (shipment from Nihongi Facility by [ * ]** ) and Section 4.7 (Delivery, Title and Risk of Loss) .

(e)	Payment Terms :	As set out in Section 5.3 (Payment) , provided that [ * ] percent ( [ * ] %) of the purchase price of JP¥ [ * ] which is calculated based on the estimated total quantity (JP¥ [ * ] x [ * ] Kg) shall be paid by Replidyne in advance within five (5) days after Replidyne places its purchase orders for the relevant delivery to DSP. Within thirty (30) days after receipt of each of 1st, 2nd and 3rd Batches, Replidyne shall pay DSP the purchase price corresponding to [ * ] percent ( [ * ]** %) of the quantity of each Validation Batch actually delivered. Further, within thirty (30) days after receipt of the 4th Batch, Replidyne shall pay DSP the balance of the total purchase price which shall be calculated as follows:

		Payment for the 4th Validation Batch = [JP¥ [ * ]** x Total quantity (potency) actually delivered for 4 batches (1st through 4th Validation Batch) ] — [(Initial payment described above (a)) + (Total amount paid for the 1st, 2nd and 3rd Validation Batches described above (b))].

(f)	Condition :	Only Drug Substance meeting the Specifications manufactured under a protocol approved by Replidyne. (For clarity, Replidyne shall not be required to purchase Drug Substance that results from experimental, pilot, scale-up or other batches that do not meet the Specifications.)

Upon the execution of this Agreement, Replidyne shall deliver Supplier the purchase order of the Validation Batch containing the above (a) to (f).

Nisso shall provide to Replidyne (i) written notice of its release of the relevant Validation Batch, (ii) a certificate of analysis for such Validation Batch, (iii) the results of all relevant testing data for such Validation Batch, and (iv) samples of such Validation Batch for Replidyne’s independent testing, which shall be reasonably satisfactory to Replidyne and Replidyne shall pay Nisso the reasonable shipping cost of such samples separately. Within thirty (30) days after the date of Replidyne’s actual receipt of Nisso’s notice, certificate, information and samples provided pursuant to this Section 2.4 , Replidyne shall review


		SUPPLY AGREEMENT		PAGE 3

such documents and, if desired, independently test such samples. Replidyne, by written notice to Nisso, shall either accept such Validation Batch or reject such Validation Batch with written reasonable reasons for such rejection. Nisso at its cost shall create and retain all necessary and customary batch samples and records. Other than the Validation Batches, Replidyne shall not be obligated to purchase quantities of Drug Substance manufactured pursuant to Section 2.3 (Validation Activities) hereof.

2.5		Replidyne Review . Nisso shall provide Replidyne with the opportunity to review and approve all plans and protocols for Validation Batches prior to commencing any such batch, such approval not to be unreasonably withheld or delayed, *provided that* Replidyne may withhold such approval if such plans or protocols fail to meet industry, FDA or ICH standards or cGMP or if Nisso’s equipment or process will not reasonably deliver the Drug Substance that would meet the warranties specified in Section 6.5 (Warranties) hereof.

2.6		Inspections . Prior to use of the Nihongi Facility for the production of Drug Substance, and in addition to the provisions of Sections 7.3 (Inspections) and 7.6 (Access to Facilities) , such facility shall have passed inspection and audit by Replidyne and all relevant Regulatory Authorities, including without limitation the FDA, for compliance with cGMPs, USP GMPs, ICH Guidelines or other guidelines issued by such Regulatory Authorities in the Territory or ICH. At the request of Replidyne or any relevant such Regulatory Authorities, Nisso shall correct any deficiency at the Nihongi Facility which would reasonably cause the production of the Drug Substance not to be in compliance with such requirements. If there is any difference in the opinion of Replidyne and Nisso with respect to the correction of the deficiencies identified in any inspection or audit of such facilities by Replidyne and Replidyne and Nisso are not able to agree upon a plan for correction of such deficiencies within thirty (30) days after inspection and audit by Replidyne, Replidyne and Nisso shall, without undue delay, reach an agreement on a Third Party expert who shall finally decide the issue regarding the correction of such deficiencies. The award issued by such Third Party expert shall be final and binding upon Replidyne and Nisso. Replidyne and Nisso shall share the cost of the Third Party expert equally. If Nisso agrees to make a correction or is obliged to make a correction of the deficiency in accordance with the award issued by the Third Party expert, Nisso shall bear all costs relating to such correction.

2.7		Launch Go Date . When Replidyne decides in its sole discretion to Launch the Drug Product and place its first firm purchase order for scaled up production of Drug Substance for commercial use in such Launch, Replidyne shall so notify the Supplier in writing. The date of such notice to Supplier shall be referred to herein as the “ Launch Go Date ” . (For clarity, Replidyne may, at its option prior to the Launch Go Date, delay its decision to commercially sell a Drug Product, or determine to not commercially sell a Drug Product, or make a limited launch of a Drug Product, without liability to Supplier other than pursuant to Section 3.3 (Compensation to Nisso for Delay in Launch) or Section 12.5(c) (Engineering Costs) or Section 12.5(d) (Other Pre-Approved Reimbursable Costs) hereof.) Nisso shall use its commercially reasonable efforts to have the capability to


		SUPPLY AGREEMENT		PAGE 4

		commercially produce the Drug Substance at the Nihongi Facility in accordance with the Timeline.

2.8		Registration . Replidyne shall have the right to specify the Nihongi Facility as the site for production of the Drug Substance in all NDAs and Regulatory Approvals related to the Drug Products. Nisso shall register the Nihongi Facility with all relevant Regulatory Authorities, including, without limitation, with the FDA by (i) filing a FDA Form 2656 for the Nihongi Facility, and (ii) completing a foreign site listing with the registration of a U.S. agent for the Nihongi Facility.

2.9		Available Capacity . From and after the Launch Go Date during the Term, Nisso shall at all times maintain an annual manufacturing capacity for Drug Substance of not less than [ * ]** tons in potency base at the Nihongi Facility.

2.10		Stability Studies . Nisso shall undertake stability studies in accordance with a timeline and plan that shall be mutually agreed in writing between Replidyne and Nisso. Nisso shall provide Replidyne with the opportunity to review and approve all plans and protocols related to such stability studies, such approval shall not be unreasonably withheld or delayed, *provided that* Replidyne may withhold such approval if such plans or protocols fail to meet cGMPs, Regulations or other guidelines issued by Regulatory Authorities or ICH.

ARTICLE 3: MANUFACTURE AND SUPPLY OF DRUG SUBSTANCE

3.1

Supply of the Drug Substance. Subject to the provisions of this Agreement, during the Term, the Supplier shall exclusively supply Replidyne with all the Drug Substance which Replidyne, Replidyne’s Affiliates and its sublicensees, as authorized and directed in writing by Replidyne from time to time (hereinafter collectively called “ Replidyne’s Designees ” ), require for their pre-clinical, clinical and commercial use in the Territory, and Replidyne shall exclusively purchase all of Replidyne’s and Replidyne’s Designees’ pre-clinical, clinical and commercial requirements of the Drug Substance in the Territory from DSP, which in turn shall obtain such supply from Nisso; provided, however, that such obligation of Replidyne shall cease to apply, and Replidyne may in its sole discretion manufacture or purchase any quantities of the Drug Substance from Third Parties, as provided in Section 3.2 (Minimum Purchase Quantities) hereof and Article 8 (Transfer of Manufacturing) hereof. Supplier hereby undertakes to supply such quantities of the Drug Substance as may be ordered by Replidyne, on the terms and conditions provided herein. Subject to Supplier’s prior written consent (such consent not to be unreasonably withheld), upon written request to Supplier by Replidyne, Nisso shall deliver the Drug Substance directly to Replidyne’s Designees. During the Term, all quantities of Drug Substance manufactured or supplied by Supplier and their Affiliates for use or sale in the Territory shall be exclusively for Replidyne. In the event that Supplier or their Affiliates manufacture or supply, or agree to manufacture or supply, any product which is, or is to be used for, a pharmaceutical formulation of faropenem daloxate to any Third Party on terms which are in any respect more favorable than the terms of this Agreement, then Supplier


		SUPPLY AGREEMENT		PAGE 5

		shall disclose such terms to Replidyne, and the Parties shall meet and negotiate in good faith commercially reasonable changes to this Agreement.

3.2		Minimum Purchase Quantities .

	(a)		First Three Years . Within ninety (90) days after the Launch Go Date, Replidyne and Nisso shall negotiate in good faith and mutually agree in writing upon appropriate minimum purchase quantities of the Drug Substance for the three (3) year period (the “ Three Year Period ” ) which commences on date of the first shipment of Drug Substance from Nisso for use in such Launch. The Parties agree that a minimum purchase quantity of [ * ] metric tons of the Drug Substance during the Three Year Period is a reasonable requirement based on Nisso’s investment and costs associated with the production of the Drug Substance. Accordingly, the minimum purchase quantity for the Three Year Period shall be [ * ] metric tons of the Drug Substance unless Replidyne determines that it is necessary to have a lower minimum based on results of the Phase III clinical studies, market conditions, reasonable sales projections and other relevant information relating to the commercialization of the Drug Products. In such event, Replidyne and Nisso shall negotiate in good faith in an effort to agree in writing on a lower minimum purchase quantity of the Drug Substance for the Three Year Period. If Replidyne and Nisso cannot agree on a lower minimum within such ninety (90) day period and Replidyne does not agree to the [ * ] metric ton minimum within ten (10) days thereafter, then (i) Nisso shall have the right to terminate this Agreement and receive reimbursement from Replidyne pursuant to Section 12.5(c) (Engineering Costs) hereof, and (ii) Replidyne shall have the right to require Nisso to transfer the Manufacturing Technology of the Drug Substance to Replidyne or its designee (the “ Manufacturing Designee** ”) pursuant to the terms and conditions stipulated in Sections 8.2 , 8.3 , 8.4 and 8.5 hereof.

	(b)		Next Five Years . Within ninety (90) days prior to the end of the Three Year Period, Replidyne and Nisso shall negotiate in good faith and agree in writing upon appropriate minimum purchase quantities of the Drug Substance for the five (5) year period commencing on the date following the last day of the Three Year Period and ending on the fifth (5th) anniversary date thereof (the “ Five Year Period ” ). The Parties agree that a minimum purchase quantity of [ * ] metric tons per year of the Drug Substance during the Five Year Period is a reasonable requirement based on Nisso’s investment and costs associated with the production of the Drug Substance. Accordingly, the minimum purchase quantity for the Five Year Period shall be [ * ] metric tons per year of the Drug Substance during the Five Year Period unless Replidyne determines that it is necessary to have a lower minimum based on market conditions, reasonable sales projections and other relevant information relating to the commercialization of the Drug Products. In such event, Replidyne and Nisso shall negotiate in good faith in an effort to agree in writing on a lower minimum purchase quantity of the Drug Substance for the Five Year Period. If Replidyne and Nisso cannot agree on a lower minimum within such ninety-day


		SUPPLY AGREEMENT		PAGE 6

			period and Replidyne does not agree to the [ * ]** metric ton per year minimum within ten (10) days thereafter, then (i) Nisso shall have the right to terminate this Agreement, and (ii) Replidyne shall have the right to require Nisso to transfer the Manufacturing Technology of the Drug Substance to Replidyne or its Manufacturing Designee pursuant to the terms and conditions stipulated in Sections 8.2 , 8.3 , 8.4 and 8.5 hereof.

	(c)		Remainder of the Term . For each year during the Term after the Five Year Period (the “ Remaining Term ” ), Replidyne and Nisso shall negotiate in good faith and agree in writing upon an appropriate minimum purchase quantity of the Drug Substance on an annual basis (each such year shall be a “ Remaining Term Year ” ). Within ninety (90) days prior to the end of the Five Year Period or the then-current Remaining Term Year, as applicable, Replidyne and Nisso shall meet or communicate for the purpose of establishing the minimum purchase quantity for the next Remaining Term Year. The Parties agree that a minimum purchase quantity of [ * ] metric tons per year of the Drug Substance for each Remaining Term Year is a reasonable requirement based on Nisso’s investment and costs associated with the production of the Drug Substance. Accordingly, the minimum purchase quantity for each such Remaining Term Year shall be [ * ] metric tons of the Drug Substance unless Replidyne determines that it is necessary to have a lower minimum based on market conditions, reasonable sales projections and other relevant information relating to the commercialization of the Drug Products. In such event, Replidyne and Nisso shall negotiate in good faith in an effort to agree in writing on a lower minimum purchase quantity of the Drug Substance for the next Remaining Term Year. If Replidyne and Nisso cannot agree on a lower minimum within such ninety (90) day period and Replidyne does not agree to the [ * ]** metric ton per year minimum within ten (10) days thereafter, then (i) Nisso shall have the right to terminate this Agreement, and (ii) Replidyne shall have the right to require Nisso to transfer the Manufacturing Technology of the Drug Substance to Replidyne or its Manufacturing Designee pursuant to the terms and conditions stipulated in Sections 8.2 , 8.3 , 8.4 and 8.5 hereof.

	(d)		Effect of Non-Exclusive Rights . If for any reason the rights of Replidyne pursuant to the License Agreement become non-exclusive rather than exclusive, including without limitation pursuant to Section 8.3 of the License Agreement, then the minimum purchase quantities obligations of Replidyne pursuant to this Section 3.2 shall cease to apply.

	(e)		Credit to Replidyne . For purposes of Replidyne’s performance of its minimum purchase obligations hereunder, in case, without Replidyne’s failure, although Replidyne is unable to receive all quantities of the Drug Substance from Supplier which Replidyne ordered in good faith pursuant to Section 4.3 (Purchase Orders) hereof, it shall be deemed that Replidyne has satisfied its corresponding minimum purchase obligation hereunder to the extent that the quantities not received by


		SUPPLY AGREEMENT		PAGE 7

			Replidyne would have caused Replidyne to meet or exceed the applicable minimum purchase quantities.

	(f)		Termination of Purchase in the event of Transfer of Manufacturing . In the event of the transfer of the manufacturing of the Drug Substance pursuant to Section 8.1 (Termination of Exclusive Purchase) , Replidyne’s obligation to complete the purchase of such minimum purchase quantities shall terminate, *provided, however,* that if the cause for such transfer of manufacturing is due to Section 8.1 (a) (Prices Not Competitive) , then Replidyne’s obligation shall not terminate for the Three Year Period.

	(g)		Security of Supply . If Replidyne has reasonably determined that for security of supply against the risk stipulated in Section 8.1(c) (Failure to Supply Requirements) and 8.1(d) (Force Majeure) it would be necessary or advisable to have alternative sources of the Drug Substance, and Replidyne has consulted with Supplier regarding the basis for such determination, and Supplier has not provided adequate assurances that are satisfactory to Replidyne related to Replidyne’s concerns, then Nisso shall disclose all Manufacturing Technology (excluding, however, the Sensitive Manufacturing Information (defined below)) to Replidyne and/or a Third Party designated by Replidyne for Replidyne’s use in the production of the Drug Substance and the Drug Product only. DSP and Nisso shall assist Replidyne and/or such Third Party designated by Replidyne as reasonably necessary to manufacture the Drug Substance; provided that such assistance shall be at Replidyne’s expense.

	(h)		Remedies . The compensation provisions of Section 5.8 (Compensation to Supplier) and Section 12.5(b) (Minimum Purchase Obligations) shall be Supplier’s sole remedy for Replidyne’s failure to purchase the minimum purchase quantities of Drug Substance pursuant to this Section 3.2. For clarity, the provisions of this Section 3.2, Section 5.8 and Section 12.5(b) shall only apply from and after the Launch Go Date.

	(i)		Low Dose Drug Product. It is expressly understood that the provisions of the minimum purchase quantities stipulated in this Section 3.2 shall not be applied in case Replidyne makes only a limited launch (and not the Launch) of the Drug Product in the Territory.

3.3

Compensation to Nisso for Delay . If the Launch Go Date has not occurred by January 1, 2007, then Replidyne shall compensate Nisso for a percentage of actual, documented and reasonable maintenance and depreciation costs incurred by Nisso relating to the Nihongi Facility (Nisso’s estimate of such costs are specified in Attachment 3.3 hereto) (the “ Delay Compensation ”) for the period (the “ Delay Compensation Period ” ) beginning on July 1, 2007 and ending on the date on which this Agreement terminates or Replidyne has both (i) provided its Launch Go Date notice to Supplier pursuant to Section 2.7 (Launch Go Date) hereof and (ii) made payment for delivery of the first firm purchase order for scaled up


		SUPPLY AGREEMENT		PAGE 8

production of Drug Substance for commercial use in Launch contemplated by the Launch Go Date, as follows:


Portion of Delay Compensation Period		Percentage of Delay Compensation Payable
[ * ]**		[ * ] percent ( [ * ] %)
( [ * ] to [ * ] )
[ * ]**		[ * ] percent ( [ * ] %)
( [ * ] to [ * ] )
Remainder of Delay Compensation Period		[ * ] percent ( [ * ] %)
(From and after [ * ]** )

provided, that the Delay Compensation for any twelve month period (before the above percentages are applied) shall not exceed JP¥ [ *** ] . For clarity, it is expressly understood that in case the Launch Go Date occurs between January 1, 2007 and June 30, 2007, the Delay Compensation hereof shall not be applied. If Replidyne disagrees with the amount of the Delay Compensation as calculated by Nisso, Replidyne and Nisso shall negotiate in good faith to resolve any differences. If both Parties cannot reach an agreement on the Delay Compensation after thirty (30) days, Replidyne and Nisso shall select a Third Party accounting firm mutually agreed by both Parties to finally decide any differences in the calculation of the Delay Compensation. The award issued by such Third Party accounting firm shall be final and binding upon both Parties. Replidyne and Nisso shall share equally the cost of the Third Party accounting firm. No other fees or compensation shall be payable to Nisso related to such delay pursuant to this Agreement. Notwithstanding the foregoing , no Delay Compensation shall be payable (i) if Nisso is not in material compliance with its obligations under this Agreement, or (ii) Nisso or the Nihongi Facility is not on schedule to manufacture and supply the Drug Substance in accordance with the provisions of this Agreement and the Timeline and Nisso has not satisfied all material qualification, validation and registration matters in the Territory, or (iii) for time periods after the expiration or termination of this Agreement. The payment of the Delay Compensation shall be made to the bank account designated by Nisso within thirty (30) days following (i) the end of each calendar year during the Delay Compensation Period, and (ii) the end of the Delay Compensation for the partial calendar year in which the Delay Compensation Period ends.

3.4		Coordinators . During the Term, Replidyne, DSP and Nisso shall each appoint one or more authorized representatives ( “ Coordinators ” ) for the exchange of all communications, other than formal notices hereunder, related to the supply of the Drug Substance. Each Party shall provide notice to the other Parties as to the name and title of the individuals so appointed. Each Party may replace its Coordinators at any time for any reason by providing written notice to the other Parties. The Coordinators shall meet at least once in each calendar year to review each Party’s past and future performance hereunder.

3.5		Drug Products Plans . Replidyne’s plans and schedule for arrangements to manufacture the Drug Substance into Drug Products shall be provided to Supplier on or before the Launch Go Date. Replidyne reserves the right to modify such plans, schedule and


		SUPPLY AGREEMENT		PAGE 9

		arrangements from time to time in its sole discretion, *provided that* Replidyne shall inform Supplier of material changes to such plans and schedule related to this Agreement.

3.6		Observance of Applicable Laws . The Parties shall exercise and perform their respective rights and obligations under this Agreement in accordance with all applicable laws, including, without limitation, all Applicable Laws and Regulations of Japan, the U.S. and Canada and each country in which Drug Substance manufacturing is being conducted or that pertain to the performance by the Supplier of their obligations in connection with the manufacturing of the Drug Substance. The Parties shall assist each other in complying with all Applicable Laws and Regulations.

3.7		Protective Measures . Each Party acknowledges that the Drug Substance is a Class 3 product that presents significant risks for employee injury and environmental contamination, and accordingly each Party undertakes and agrees at its cost to take all necessary and advisable precautions to ensure, and each Party shall be solely liable for, (i) the health and safety of its employees and all other persons under its direction or control having contact with the Drug Substance, and (ii) the protection of the environment related to Drug Substance in its possession.

3.8		Facilities . Nisso shall manufacture (i) pre-clinical and clinical quantities of the Drug Substance at the Takaoka Facility or the Nihongi Facility, as mutually agreed, and (ii) commercial quantities of the Drug Substance only at the Nihongi Facility.

3.9		No Cross-Contamination . Nisso shall use the Nihongi Facility only for the manufacture of (i) faropenem drug substance ( i.e. faropenem sodium and faropenem daloxate), and (ii) drug substance for other anti-biotic pharmaceuticals in the penem class. Nisso shall not produce any other drugs or products at the Nihongi Facility, except with the prior written consent of Replidyne, not to be unreasonably withheld.

ARTICLE 4: FORECASTS, PURCHASE ORDERS AND DELIVERIES

4.1		Batch Sizes . The permissible batch sizes for the purposes of forecasts and Purchase Orders pursuant to this Article 4 are as specified in Attachment 4.1 hereto.

4.2		Forecasts . Replidyne shall provide DSP with the following forecasts for the purchase of quantities of the Drug Substance pursuant to this Agreement (which DSP will promptly transfer such forecasts to Nisso), which shall constitute non-binding estimates of expected orders for the Drug Substance so that Nisso may make plans for the manufacturing of the Drug Substance. At the request of Nisso or DSP, the Parties shall review and discuss forecasts provided by Replidyne to assist the Nisso in efficiently scheduling the manufacture of the Drug Substance to meet the requirements of Replidyne pursuant to this Agreement.

(a)

Clinical Forecasts . Replidyne’s initial plan for the purchase of quantities of the Drug Substance to manufacture Drug Product for clinical use on a quarterly basis during the twelve (12) month period following the Effective Date is attached as


		SUPPLY AGREEMENT		PAGE 10

			Attachment 4.2(a) hereto. Such forecast shall be reviewed and updated by Replidyne at least every six (6) months.

	(b)		Planning Forecasts for Commercial Quantities . Twelve (12) months prior to the first anticipated commercial shipment of the Drug Substance, and on or before the first day of each calendar quarter thereafter, Replidyne shall provide the Supplier with a written rolling five (5) year forecast, beginning on such first day of such calendar quarter, on a calendar quarterly basis (each a “ Planning Forecast ” , which shall include the items specified in Section 4.3(i) and (ii) hereof, but need not include other items) of its expected orders of the Drug Substance for the commercial sale of Drug Products.

	(c)		Purchase Forecasts for Commercial Quantities . Twelve (12) months prior to the first anticipated commercial shipment of the Drug Substance, and on or before the first day of each calendar quarter thereafter, Replidyne shall provide the Supplier with a written rolling twelve (12) month forecast, beginning on such first day of such calendar quarter, on a monthly basis (each a “ Purchase Forecast ” , which shall include the items specified in Section 4.3(i) and (ii) hereof, but need not include other items) of its expected orders of the Drug Substance for the commercial sale of the Drug Products.

4.3

Purchase Orders . Replidyne may submit purchase orders to DSP (which DSP will promptly transfer such purchase order to Nisso) ( “ Purchase Orders ” ) during the Term for Drug Substance, with delivery dates in accordance with the lead times specified in Section 4.4 (Lead Times) . Purchase Orders shall, at a minimum, include: (i) identification of the specific Drug Substance ordered; (ii) quantity; (iii) delivery date; (iv) shipping instructions and shipping address; and (v) the Purchase Price of the Drug Substance ordered. Any Purchase Order placed by Replidyne shall be subject to acceptance by Nisso; provided, however, that all Purchase Orders issued in accordance with this Agreement for quantities up to [ *** ] percent ( [ *** ] %) of the quantities of the Drug Substance set forth in the first three (3) months of the most recent Purchase Forecast shall be automatically confirmed and accepted by Nisso and shall be supplied by the Supplier. The Supplier shall not be obligated, but shall use commercially reasonable efforts, to ship more than such quantities if ordered by Replidyne. It is expressly understood that, after using commercially reasonable efforts, if the Supplier fails to supply such excess quantities of the Drug Substance ordered by Replidyne, such failure shall not be deemed as a breach of this Supply Agreement, and Section 8.1 (Termination of Exclusive Purchase) hereof shall not apply, unless Nisso had accepted Replidyne’s Purchase Order(s) for the excess quantities not supplied. Replidyne shall have the obligation to purchase at least [ *** ] percent ( [ *** ] %) of the quantities of the Drug Substance set forth in the first three (3) months of the most recent Purchase Forecast. The terms and conditions of this Agreement shall govern and supersede any additional or contrary terms set forth in any Purchase Order of Replidyne or any acceptance, confirmation, invoice or other document of the Supplier or Replidyne unless duly signed by an officer of Replidyne, an officer of DSP and an officer of Nisso and expressly stating and identifying which specific additional or contrary terms shall supersede the terms and conditions of this Agreement. Notwithstanding the foregoing,


		SUPPLY AGREEMENT		PAGE 11

		Replidyne shall make the Purchase Order prior to the Launch Go Date no more than once every three (3) months.

4.4		Lead Times . Supplier acknowledges and agrees that time is of the essence in making deliveries of Drug Substance. The normal lead time for delivery of Drug Substance under any Purchase Order shall be [ * ] months. Replidyne shall specify a delivery date in each Purchase Order, which shall not be a date that is less than [ * ] months following the date of such Purchase Order, *provided that:*

	(a)		Waivers by Nisso . This limitation shall be waived if Nisso confirms such Purchase Order, even if such delivery date is less than [ * ]** months following the date of such Purchase Order.

	(b)		First Purchase Order . The lead time for Replidyne’s first Purchase Order for commercial quantities of Drug Substance (whether such Purchase Order is issued before or at the Launch Go Date) shall be [ * ]** months, provided that Replidyne and Nisso shall in good faith negotiate and agree shorter lead time for the first Purchase Order subject to Replidyne’s cooperation with Nisso to guarantee payment for the advance purchase of raw materials pursuant to Section 12.5(d) (Other Pre-Approved Reimbursable Costs) hereof.

	(c)		Launch Go Date Purchase Order . Subject to Section 4.4(b) (First Purchase Order) hereof, the lead time for Replidyne’s Purchase Order submitted with Replidyne’s notice to Supplier of the Launch Go Date pursuant to Section 2.7 (Launch Go Date) hereof shall have a lead time equal to the sum of (i) [ * ] months, plus (ii) the time period, not to exceed an additional [ * ] months, during which Replidyne and Nisso reach agreement upon minimum purchase quantities of the Drug Substance for the Three Year Period pursuant to Section 3.2(a) (First Three Years) hereof.

Nisso (i)shall confirm any Purchase Order with a delivery date that is more than [ *** ] months (or other time periods specified above) following the date of such Purchase Order subject to the provisions in Section 4.3 above, and (ii) may, but shall not be obligated to, confirm any Purchase Order with a delivery date that is less than [ *** ] months following the date of such Purchase Order. Nisso shall timely deliver the specified quantities of the Drug Substance by the date that is specified in Replidyne’s Purchase Order. If Nisso is unable, at any time, to supply Replidyne on a timely basis with the quantity of Drug Substance ordered by Replidyne in accordance with Section 4.3 for any reason, including the occurrence of a force majeure event under Article 15 (FORCE MAJEURE), the Supplier shall immediately notify Replidyne of such inability to supply and the estimated extent of such inability (including delay time and the quantity of Drug Substance involved).

4.5

Modification of Purchase Orders . No Purchase Order shall be modified or canceled except upon the mutual written agreement of Replidyne and the Supplier, except as provided in this Section 4.5 . Mutually agreed change orders shall be subject to all


		SUPPLY AGREEMENT		PAGE 12

provisions of this Agreement, whether or not the changed Purchase Order so states. Notwithstanding the foregoing , any Purchase Order may be canceled by Replidyne as to any quantity of Drug Substance which is not delivered by or on the delivery date specified by Replidyne in the relevant Purchase Order (as modified if applicable). Replidyne shall have the right to modify all forecasts provided pursuant to Section 4.2 (Forecasts) hereof but shall not have the right to modify or cancel the Purchase Order, if for any reason DSP decides to alter the exclusive license granted to Replidyne under the License Agreement to become a non-exclusive license, including without limitation pursuant to Section 8.3 of the License Agreement, provided, however, that DSP shall postpone such alteration of the exclusive license to a non-exclusive license until the Drug Substance of such Purchase Order is used up for the manufacturing of the Drug Product and such Drug Product has been sold by Replidyne in the ordinary course of its business, but such postpone period shall not exceed twelve (12) months.

4.6		Release Documentation . All Drug Substance shall meet the Specifications and shall be subjected to a quality control inspection and final release by Nisso. Nisso, at its cost, shall complete the manufacture, inspect and complete all necessary testing and other functions for each batch of the Drug Substance to demonstrate conformance to the warranties provided in Section 6.5 (Warranties) hereof prior to the release of the Drug Substance for shipment, all in accordance with Nisso’s quality control standards and in compliance with cGMPs. Nisso shall provide to Replidyne prompt written notice of such release, and shall include a packing list and documents in each shipment of the Drug Substance providing the following information and such other information as may be reasonably requested by Replidyne from time to time ( “ Release Documentation ” ): (i) Purchase Order number; (ii) Drug Substance code; (iii) quantity; (iv) Nisso lot number; (v) a certificate of analysis for each batch of the Drug Substance (which shall contain, at a minimum, analytical tests and results, date of manufacture, date of re-control (or shelf-life of the batch), batch size (total amount produced), a release statement, and a certification that the analytical tests are performed in accordance with the United States Pharmacopoeia); (vi) a certificate of compliance for each batch of the Drug Substance (confirming that the Drug Substance was manufactured in accordance with cGMPs); (vii) the results of all relevant testing data for each batch of the Drug Substance; and (viii) if required by Replidyne, samples of each batch of the Drug Substance (which shall be included in the quantities ordered by Replidyne under the relevant Purchase Order) for Replidyne’s independent testing pursuant to Section 4.8 (Inspection, Shortages and Defects) hereof (the reasonable shipping costs of such samples shall be for the account of Replidyne), which shall be reasonably satisfactory to Replidyne. Nisso shall also mail (i) copies of such packing list and documents to the shipping destination and to Replidyne, and (ii) such samples to Replidyne, for each shipment at the time of shipment. Nisso shall also notify Replidyne of rejected batches of the Drug Substance with the reasons for such rejection, and upon Replidyne’s request shall provide copies of Nisso’s internal documents related to deviation investigations.

4.7		Delivery, Title and Risk of Loss . All Drug Substance shall be shipped by the Supplier FCA (“Free Carrier”) , INCOTERMS 2000, Narita airport ( “ Shipping Point ” ) after its


		SUPPLY AGREEMENT		PAGE 13

release by Nisso at the time notified by Replidyne to the Supplier. The Parties acknowledge and agree that the sale of Drug Substance to Replidyne under this Agreement is an export sale which should not be subject to Japanese Consumption Tax; in the event that any Japanese tax authority asserts such a tax liability against Replidyne, Supplier shall cooperate with Replidyne, including without limitation providing any necessary documentation and properly reforming this Agreement, to confirm that the sales of Drug Substance hereunder are export sales from Japan. All Drug Substance shall be properly stored by Nisso in accordance with the Specifications, cGMPs and Replidyne’s reasonable instructions. Physical delivery of the Drug Substance and the Release Documentation to Replidyne may be made directly by Nisso.

4.8

Inspection, Shortages and Defects .

	(a)		Inspection . As between the Parties, Replidyne and its representatives shall have the right, but not the obligation, to inspect the Drug Substance and, if desired, independently test the samples (using such testing methods as Replidyne may determine) sent to Replidyne pursuant to Section 4.6 (Release Documentation) hereof, *provided, however, that* Replidyne acknowledges that Replidyne is subject to the inspection requirements, as applicable, for the Drug Substance in accordance with cGMPs, USP GMPs, ICH Guidelines or other guidelines issued by such Regulatory Authorities in the Territory or ICH, including, but not limited to, the inspection of the Release Documentation. Replidyne shall provide notice to Supplier if it discovers any shortage in quantity or Defect in quality pursuant to this Section 4.8 .

	(b)		Shortages . After the receipt of each shipment of the Drug Substance, Replidyne or its authorized representatives shall carry out a quantity count of such shipment. Replidyne shall notify Supplier in writing of any obvious shortage in quantity of any shipment of Drug Substance within its possession within forty (40) days after receipt by Replidyne and/or Replidyne’s Designees. A shipment of the Drug Substance is to be considered to have fulfilled the quantity specified in the Purchase Orders if Replidyne or its representatives does not notify the Supplier about any objections within such time periods.

	(c)		Defects . Upon notification to Supplier, Replidyne shall have the right to reject any lot in whole or in part that contains Drug Substance which is damaged or has a Defect ( “ Defective Product ” ) which should reasonably be discovered in the inspection stipulated in Section 4.8 (a) (Inspection) and quantity count of the shipment stipulated in Section 4.8 (b) (Shortages) above, *provided, however, that* such notification shall be provided to the Supplier within forty (40) days following the receipt of the Drug Substance by Replidyne and/or Replidyne’s Designees, and *provided, further, that* such notification shall be provided to the Supplier within one hundred eighty (180) days following the receipt of the Defective Product with respect to latent Defect which Replidyne cannot reasonably discover through the inspection stipulated in Section 4.8(a) (Inspection) above. For purposes of this


		SUPPLY AGREEMENT		PAGE 14

			Section 4.8 (but not for purposes of any other provision of this Agreement, including without limitation Sections 6.5 (Warranties) and 13.2 (Hold Harmless by Supplier) hereof), a shipment of the Drug Substance is to be considered to have fulfilled the Specifications, and Replidyne shall not request a replacement or credit for such shipment, if Replidyne or its representatives does not notify the Supplier about any Defects within such time periods. Replidyne shall provide Supplier with information as to the reason for the rejection of the Defective Product, including a description of the test procedure and results, if any, on which the rejection is based.

	(d)		Disposal or Return . Supplier shall instruct Replidyne as to the disposal or return of Defective Product. If Supplier instructs Replidyne to dispose of Defective Product, Supplier shall be responsible for such disposal costs. If Supplier instructs Replidyne to return Defective Product, Supplier shall be responsible for such return shipping charges.

	(e)		Replacement or Credit . At Replidyne’s option, Supplier shall either (i) immediately replace shortages of the Drug Substance or Defective Product, without additional cost to Replidyne, permit Replidyne to issue a debit memorandum to Supplier for the Purchase Price for shortages of the Drug Substance or Defective Product, and re-invoice Replidyne for the Drug Substance shipped to replace such shortages or Defective Product at the time of shipment of the replacement Drug Substance; or (ii) credit Replidyne for the Purchase Price for such shortages or Defective Product after receipt of Replidyne’s debit memorandum related to such shortage of the Drug Substance or Defective Product.

	(f)		Exceptions . The provisions of this Section 4.8 shall not apply to any Drug Substance which has a Defect due solely to (i) storage, handling, formulation, labeling or shipping by Replidyne, its Affiliate, sublicensees or customers, or (ii) Defects first discovered after the expiry of its shelf life.

	(g)		Disputes . In the event of a dispute regarding whether any Drug Substance has a Defect which Supplier and Replidyne are unable to resolve, a sample of such Drug Substance shall be submitted by Replidyne to an independent laboratory reasonably acceptable to Nisso and Replidyne for testing and the test results obtained by such laboratory shall be final and controlling. The fees and expenses of such laboratory testing and all additional shipping and transportation costs incurred as a result of the dispute shall be borne entirely by the party against whom such laboratory’s findings are made.

ARTICLE 5: PURCHASE PRICE AND PAYMENT

5.1

Purchase Prices.

(a)

General . As full compensation for the purchase by Replidyne of the Drug Substance and all other obligations to be performed by Supplier hereunder (other than as provided in Sections 3.3 (Compensation to Nisso for Delay) , 5.8


		SUPPLY AGREEMENT		PAGE 15

			(Compensation to Supplier) and 12.5 (Compensation to Nisso) hereof), Replidyne shall pay DSP the prices specified in Attachment 5.1 hereto (the “ Purchase Prices ” ) for quantities of the Drug Substance actually delivered by Nisso pursuant to Section 4.7 (Delivery, Title and Risk of Loss) hereof, subject to adjustment pursuant to this Article 5. No other fees shall apply.

	(b)		Reconciliation . The Purchase Price to be paid by Replidyne for the Drug Substance is based solely upon quantities of the Drug Substance purchased during any given calendar year. Based on the Purchase Forecast of Replidyne for the relevant year, an estimated Purchase Price for each Purchase Order in such year shall be calculated by the Parties. Within thirty (30) days following the end of each calendar year, the Supplier shall submit to Replidyne a reconciliation of the total amount that should have been paid by Replidyne for all quantities of the Drug Substance purchased during such calendar year in accordance with the actual Purchase Price against the total amounts actually billed by Supplier and paid for by Replidyne for such quantities based on the estimated Purchase Price for such calendar year. Replidyne shall within a period of thirty (30) calendar days after receipt of any reconciliation prepared by the Supplier by written notice either issue its confirmation of the amount identified therein as an overpayment or underpayment or state that it disagrees therewith with reasons set out therein. If no such written objection is delivered to Supplier by the end of such thirty (30) day period, then the overpayment or underpayment amount identified in such reconciliation shall be deemed to be accepted and approved by Replidyne and shall be final and binding on the Parties. If a written objection is delivered to the Supplier within such thirty (30) day period, then the matter shall be resolved in accordance with Article 20 (Dispute Resolution) hereof. If such reconciliation, as accepted or as so finally determined, shows that Replidyne has overpaid for such purchases, then the Supplier shall within ten (10) calendar days of the reconciliation being finally determined (the “ Final Reconciliation ” ), at Replidyne’s election, either refund such overpayment or credit such overpayment against future purchases of the Drug Substance. If such reconciliation shows that Replidyne has underpaid for such purchases, then Replidyne shall remit the balance so determined to be due to the Supplier within ten (10) calendar days of the Final Reconciliation.

5.2

Adjustment of Purchase Prices . If Nisso reasonably decides that an adjustment of the Purchase Price is commercially necessary due to an increase in the aggregate direct manufacturing costs of Nisso (including labor costs and costs of materials, but excluding indirect administrative and other allocated or fixed costs) for the Drug Substance, which can be documented by Nisso (after taking into account items of cost decreases), the Parties shall negotiate with each other in good faith a reasonable mechanism for increasing the Purchase Prices that would apply during the following calendar year taking into account net increases and decreases in the aggregate in such direct manufacturing costs experienced by Nisso or a general inflationary factor equal to the increase or decrease in the wholesale price index ( “ WPI ” ) as published by the Bank of Japan, in both cases from the Effective Date (or, if a previous adjustment to the Purchase Prices has been made


		SUPPLY AGREEMENT		PAGE 16

		pursuant to this Section 5.2 , from the date of such adjustment); *provided, however, that* in no event will the cumulative increase in the Purchase Prices during the Term exceed [ * ] percent ( [ * ] %) of the prices specified in Attachment 5.1 hereto. Any claims of increased direct manufacturing costs of Nisso for an increase in the Purchase Prices pursuant to this Section 5.2 shall (i) be accompanied by a detailed statement with reasonable supporting documentation from Nisso, evidencing the changes in all direct manufacturing cost items from the direct manufacturing costs as of the Effective Date (or, if a previous adjustment to the Purchase Prices has been made pursuant to this Section 5.2 , from the date of such adjustment), and (ii) be subject to audit by independent auditors pursuant to Section 5.5 (Audits) hereof. Nisso warrants that it shall provide to an independent certified public accountant or attorney nominated by Nisso and approved by Replidyne under confidentiality the details of the actual cost for each direct manufacturing cost item of the Drug Substance within thirty (30) days after the Effective Date, which shall be verified by such independent certified public accountant or attorney and then made available to independent auditors appointed by Replidyne in connection with audits undertaken pursuant to Section 5.5 (Audits) hereof to verify changes in Purchase Prices pursuant to this Section 5.2.

5.3		Payment . Amounts payable pursuant to this Article 5 shall be paid by Replidyne to DSP within forty five (45) days of receipt of the Supplier’s invoice (which shall not be issued by the Supplier prior to the release and delivery of the relevant Drug Substance) by wire transfer in immediately available funds to the following bank account of DSP:


		Sumitomo Mitsui Banking Co.
		Tokyo-Chuo Branch
		2-7-9 Nihonbashi, Chuo-ku, Tokyo, 103-0027 Japan
		SWIFT : SMBCJPJT
		Account Number: 246171

		If any amount payable to DSP under this Agreement is not paid when due and payable, DSP shall notify Replidyne of such non-payment, stipulating that payment must be made within seven (7) days from the date of notice. If Replidyne fails to make payment by the end of such notice period, then Replidyne shall pay to DSP interest on such amount at the rate that is three percent (3%) per annum above the rate 30 day U.S. Dollar LIBOR rate, as published in The Financial Times effective on the date such payment is due, such rate not to exceed the maximum interest rate permitted by Applicable Laws, from the date when due and payable until paid in full. Such interest rate shall change to a new thirty (30) day U.S. Dollar LIBOR date period (as applicable), shall be compounded monthly and shall be due and payable by Replidyne to DSP at the end of each calendar month that the amount remains unpaid until the date when such amount and all interest is paid in full.

5.4		Taxes . Replidyne shall be responsible for and shall pay all taxes, duties, import, deposits, sales taxes and value added taxes that are: (i) associated with the payment of any amounts by Replidyne to DSP pursuant to this Agreement, or (ii) based on the sale or use of the Drug Substance following delivery of the Drug Substance to Replidyne; *provided,*


		SUPPLY AGREEMENT		PAGE 17

however, that Replidyne shall not be responsible for (A) taxes imposed on the Supplier by the country of manufacture of the Drug Substance or (B) taxes imposed on the Supplier’s income. Supplier shall be responsible for and shall pay all taxes, duties, import deposits, sales tax or value added taxes prior to delivery of the Drug Substance to Replidyne. If Applicable Laws require that taxes be withheld on any payment made under this Agreement, the paying Party shall be entitled to (i) deduct those taxes from the payment, (ii) pay the taxes to the proper taxing authority, and (iii) send evidence of the obligation together with proof of payment to the other Party hereto.

5.5

Audits .

(a)

By Replidyne . Nisso shall permit an independent auditor appointed by Replidyne subject to the reasonable approval of Nisso, and who shall enter into a confidentiality agreement in favor of Nisso, during the Term and for a period of two (2) years after the Term to examine and audit the books and records of Nisso related to Section 3.3 (Compensation to Nisso for Delay), Section 5.1 (Purchase Prices), Section 5.2 (Adjustment of Purchase Prices), Section 5.4 (Taxes), Section 5.9 (Cost Reduction Opportunities) or Section 12.5 (Compensation to Nisso), for the preceding three (3) year period, at a mutually convenient time within normal business hours to the extent necessary to determine the accuracy of any calculations for payments due to Nisso hereunder. The costs of such examination and audit shall be borne by Replidyne; provided, however, that if any such examination and audit discloses an overpayment by Replidyne of five percent (5%) or more for any relevant time period due to Nisso’s fault and/or negligence, Nisso shall reimburse Replidyne for the reasonable costs of such examination and audit. The amount of any such overpayments shall be reimbursed to Replidyne.

(b)

By Nisso . Effective upon the occurrence of any of the circumstances specified in Section 8.1 (Termination of Exclusive Purchase) , Replidyne shall permit an independent auditor appointed by Nisso subject to the reasonable approval of Replidyne, and who shall enter into a confidentiality agreement with Replidyne, for a period commencing from the date on which Replidyne or Manufacturing Designee begins the manufacturing of the Drug Substance and ending two (2) years after such manufacturing ceases, to examine and audit the books and records of Replidyne related to Section 8.3 (Royalty), for the preceding three (3) year period, at a mutually convenient time within normal business hours to the extent necessary to determine the accuracy of any calculations for payments due from Replidyne under such Section 8.3. The costs of such examination and audit shall be borne by Nisso; provided, however, that if any such examination and audit discloses an underpayment by Replidyne of five percent (5%) or more for any relevant time period due to Replidyne’s fault and/or negligence, Replidyne shall reimburse Nisso for the reasonable costs of such examination and audit. The amount of any such underpayments shall be reimbursed to Nisso.


		SUPPLY AGREEMENT		PAGE 18

5.6

Third Party Royalties . Except as provided in the License Agreement, the Purchase Prices are inclusive of all royalty payment obligations to Third Parties, which shall be for the sole account of and paid by DSP, including without limitation royalties due to Tanabe Seiyaku for U.S. Patent No. 5,260,438 and all counterparts thereto in Japan and the Territory.

5.7

Exchange Rate Risk . The Purchase Prices specified in Attachment 5.1 shall be adjusted for currency fluctuation based on this Section 5.7 . For any month in which the Suppler issues an invoice to Replidyne under Section 5.3 (Payment) hereof, the Supplier shall include in such invoice the calculation of the average of the closing Yen/U.S. Dollar exchange rate as published in The Financial Times for the tenth (10 ^th ) and the last business day of each month for the immediately preceding six (6) months from the invoice date ( “ Averaged 6 Month Rate ” ).

	(a)		If the Average 6 Month Rate is greater than the exchange rate benchmark of [ * ] ¥/US$ ( “ Benchmark ” ) by more than [ * ] percent ( [ * ]** %), the Purchase Price shall be revised as follows:

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Number of Batches :

Four (4) batches as further specified in the protocol approved by Nisso and Replidyne (each a “ Validation Batch ” ).

Size of Batches :

[ *** ] kg ( [ *** ] kg in the potency basis) for the first batch and [ *** ] kg ( [ *** ] kg in the potency basis) for the second, third and fourth batches. Estimated total quantity is [ *** ] Kg ( [ *** ] Kg in the potency basis).

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