Product Development, Manufacturing & Supply Agreement

EXHIBIT 10.13


================================================================================


PRODUCT DEVELOPMENT, MANUFACTURING
AND SUPPLY AGREEMENT


between


LAVIPHARM LABORATORIES INC.


and


ENDO PHARMACEUTICALS INC.


dated as of October 29, 1999


================================================================================


The confidential portions of this exhibit have been filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request in accordance with Rule 406 of the Securities Act of 1933.


REDACTED PORTIONS OF THIS EXHIBIT ARE MARKED BY AN ***.


TABLE OF CONTENTS


Page
-----


ARTICLE I
---------


DEFINITIONS 1
-----------


SECTION 1.01. General. ............................................................................................. 1
---------------------


ARTICLE II
----------


PRODUCT DEVELOPMENT 5
-------------------


SECTION 2.01. Product Development................................................................................... 5


SECTION 2.02. Steering Committee.................................................................................... 6


SECTION 2.03. Initial Products. .................................................................................... 6


SECTION 2.04. Project Committee..................................................................................... 6


SECTION 2.05. Product Development Plan.............................................................................. 6


SECTION 2.06. Target Specifications. ............................................................................... 6


SECTION 2.07. Product Specifications. .............................................................................. 7


SECTION 2.08. Best Reasonable Efforts. ............................................................................. 7


SECTION 2.09. Clinical Development and Regulatory Filings. ......................................................... 7


SECTION 2.10. Lavipharm Participation in Regulatory Process. ....................................................... 7


SECTION 2.11. Commercialization by Endo............................................................................. 7


SECTION 2.12. Development Exclusivity............................................................................... 8


SECTION 2.13. Exception to Exclusivity.............................................................................. 8


SECTION 2.14. Right to Exploit Intellectual Property................................................................ 8


ARTICLE III
-----------


OWNERSHIP AND LICENSE GRANT 9
---------------------------


SECTION 3.01. License Grant to Endo. ............................................................................... 9


SECTION 3.02. License Grant to Lavipharm............................................................................ 9


i


Page
----

SECTION 3.03. Ownership of Intellectual Property.................................................................... 9


SECTION 3.04. Joint Ownership....................................................................................... 9


SECTION 3.05. License of Joint Intellectual Property to Lavipharm................................................... 9


SECTION 3.06. License of Joint Intellectual Property to Endo........................................................ 9


ARTICLE IV
----------


PROSECUTION AND ENFORCEMENT 10
---------------------------


SECTION 4.01. Maintenance of Intellectual Property.................................................................. 10


SECTION 4.02. Joint Intellectual Property. ......................................................................... 10


SECTION 4.03. Prosecution of Joint Intellectual Property. .......................................................... 10


SECTION 4.04. Designated Party to Control........................................................................... 10


SECTION 4.05. Invoicing. ........................................................................................... 11


SECTION 4.06. Cooperation. ......................................................................................... 11


SECTION 4.07. Designated Party Abandonment.......................................................................... 11


SECTION 4.08. Updates on Developments............................................................................... 11


SECTION 4.09. Reports............................................................................................... 11


SECTION 4.10. Infringement of Joint Intellectual Property........................................................... 11


SECTION 4.11. Enforcement Within Respective Fields. ................................................................ 12


SECTION 4.12. Recoveries............................................................................................ 12


SECTION 4.13. Infringement of Other Intellectual Property. ......................................................... 12


ARTICLE V
---------


GRANT OF DISTRIBUTION AND SALE RIGHTS 13
-------------------------------------


SECTION 5.01. Exclusive Distribution Grant.......................................................................... 13


SECTION 5.02. Exclusive Manufacturing Right......................................................................... 13


ii


Page
----


ARTICLE VI 13
----------


MANUFACTURING AND PACKAGING OF PRODUCTS 13
---------------------------------------


SECTION 6.01. Site of Manufacture................................................................................... 13


SECTION 6.02. Supply Sources........................................................................................ 13


SECTION 6.03. Manufacturing Specifications. ........................................................................ 14


SECTION 6.04. Packaging Specifications and Promotional Materials.................................................... 14


SECTION 6.05. Manufacturing Efforts................................................................................. 14


ARTICLE VII
-----------


PRODUCT PURCHASE PLAN AND ORDERS 14
--------------------------------


SECTION 7.01. Initial Purchase Plan................................................................................. 14


SECTION 7.02. Revised and Definitive Purchase Plans. ............................................................... 14


SECTION 7.03. Updated Purchase Plan................................................................................. 15


SECTION 7.04. Purchase Requirements................................................................................. 15


ARTICLE VIII
------------


DELIVERY OF PRODUCT 16
-------------------


SECTION 8.01. Delivery of Product................................................................................... 16


SECTION 8.02. Defective or Non-conforming Product................................................................... 16


SECTION 8.03. Endo Responsibility................................................................................... 16


ARTICLE IX
----------


DEVELOPMENT FEES AND MILESTONE PAYMENTS 16
---------------------------------------


SECTION 9.01. Initial Payment. ..................................................................................... 16


SECTION 9.02. Milestone Payments.................................................................................... 17


SECTION 9.03. Development Fee Payment and Invoices.................................................................. 17


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Page
----

ARTICLE X
---------


TRANSFER PRICE, ROYALTIES AND PAYMENT TERMS 17
-------------------------------------------


SECTION 10.01. Price of Product..................................................................................... 17


SECTION 10.02. Payment of Transfer Price............................................................................ 18


SECTION 10.03. Royalties............................................................................................ 18


SECTION 10.04. Reporting. .......................................................................................... 18


SECTION 10.05. Lavipharm Taxes...................................................................................... 18


SECTION 10.06. Endo Taxes. ......................................................................................... 18


SECTION 10.07. Payment Currency..................................................................................... 18


SECTION 10.08 Right of Audit........................................................................................ 18


ARTICLE XI
----------


INFORMATION 19
-----------


SECTION 11.01. Safety and Health Information........................................................................ 19


SECTION 11.02. Periodic Exchange of Information..................................................................... 19


SECTION 11.03. Product Incidents.................................................................................... 19


ARTICLE XII
-----------


REPRESENTATIONS AND WARRANTIES 19
------------------------------


SECTION 12.01. Representations and Warranties of Lavipharm.......................................................... 19


SECTION 12.02. Representations and Warranties of Endo............................................................... 20


SECTION 12.03. DISCLAIMER........................................................................................... 21


ARTICLE XIII
------------


INDEMNIFICATION 21
---------------


SECTION 13.01. Lavipharm's Indemnity................................................................................ 21


SECTION 13.02. Endo Indemnity....................................................................................... 21


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----

SECTION 13.03. Indemnification Procedures. ......................................................................... 21


SECTION 13.04. Limitations on Lavipharm's Indemnity................................................................. 22


SECTION 13.05. Endo Exclusive Remedy. .............................................................................. 22


SECTION 13.06. Limitations on Endo's Indemnity. .................................................................... 23


SECTION 13.07. Special Damages. .................................................................................... 23


ARTICLE XIV
-----------


FORCE MAJEURE 23
-------------


SECTION 14.01. Notification of Force Majeure. ...................................................................... 23


SECTION 14.02. Effect of Force Majeure. ............................................................................ 23


SECTION 14.03. Cessation of Force Majeure. ......................................................................... 24


ARTICLE XV
----------


CONFIDENTIALITY 23
---------------


SECTION 15.01. Treatment of Confidential Information. .............................................................. 24


SECTION 15.02. Release from Restrictions. .......................................................................... 24


SECTION 15.03. Public Announcements and Publications................................................................ 25


ARTICLE XVI
-----------


TERM AND TERMINATION 25
--------------------


SECTION 16.01. Development Exclusivity Term......................................................................... 25


SECTION 16.02. Renewal of Development Exclusivity Term. ............................................................ 25


SECTION 16.03. License Term......................................................................................... 25


SECTION 16.04. Termination of Development Plan. .................................................................... 25


SECTION 16.05. Term of Agreement.................................................................................... 26


SECTION 16.06. Termination.......................................................................................... 26


SECTION 16.07. Survival............................................................................................. 27


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----


ARTICLE XVII
------------


MISCELLANEOUS 26
-------------


SECTION 17.01. Assignment........................................................................................... 27


SECTION 17.02. Successors and Assigns............................................................................... 27


SECTION 17.03. Notices. ............................................................................................ 27


SECTION 17.04. Waiver............................................................................................... 28


SECTION 17.05. Failure to Pay. ..................................................................................... 29


SECTION 17.06. Amendment............................................................................................ 29


SECTION 17.07. Entire Agreement. ................................................................................... 29


SECTION 17.08. Governing Law and Mediation.......................................................................... 29


SECTION 17.09. Counterparts......................................................................................... 29


SECTION 17.10. Headings............................................................................................. 29


SECTION 17.11. No Joint Venture/Agency. ............................................................................ 29


SECTION 17.12. Severability. ....................................................................................... 30


SECTION 17.13. Expenses. ........................................................................................... 30


SECTION 17.14. No Implicit Rights. ................................................................................. 30


SECTION 17.15. Non-Solicitation..................................................................................... 30


SECTION 17.16. Further Assurances................................................................................... 31


vi


PRODUCT DEVELOPMENT, MANUFACTURING
AND SUPPLY AGREEMENT


THIS PRODUCT DEVELOPMENT, MANUFACTURING AND SUPPLY AGREEMENT (this "Agreement") is made and entered into this 29th day of October 1999 (the --------- "Effective Date"), by and between Lavipharm Laboratories Inc. ("Lavipharm"), a -------------- --------- New Jersey corporation, and Endo Pharmaceuticals Inc. ("Endo"), a Delaware
---- corporation (each, a "Party", and collectively, the "Parties").
----- -------


W I T N E S S E T H:
- - - - - - - - - -


WHEREAS, Lavipharm is the owner or licensee of certain Intellectual Property (as defined below) related to the field of transdermal and intra-oral drug delivery, and Endo is the owner or licensee of certain Intellectual Property related to Pain Management (as defined below);


WHEREAS, Lavipharm is engaged in the business of developing and manufacturing transdermal and intra-oral drug delivery systems;


WHEREAS, Endo is engaged in the business of developing, marketing and distributing pharmaceuticals related to Pain Management (as defined below); and


WHEREAS, pursuant to the terms of this Agreement, Lavipharm and Endo desire to cooperate in the development and commercialization of drug delivery systems related to Pain Management utilizing transdermal patches and intra-oral film or wafer-like dosage forms.


NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:


ARTICLE I
DEFINITIONS
-----------


SECTION 1.01. General. As used herein, the following terms shall
------- have the following meanings:


"Affiliate" shall mean any Person that, directly or indirectly,
--------- through one or more intermediaries, Controls, is Controlled by, or is under common Control with another Person.


"Agreement" shall have the meaning set forth in the Preamble.
---------


"Agreement Term" shall have the meaning set forth in Section 16.05.
--------------


"ANDA" shall mean an Abbreviated New Drug Application with the United
---- States Food and Drug Administration.


"Batch" shall mean, for each Final Product, the number of Final
----- Product units that comprise a single production run, as specified by the applicable Product Specification.


"Clinical Development" shall mean, without limitation, post-IND
-------------------- toxicology studies, absorption, distribution, metabolism and excretion studies to support phase I, II and III clinical trials, the preparation and filing of all applicable IND, ANDA, NDA and equivalent foreign regulatory documents, and obtaining all necessary regulatory, reimbursement and pricing approvals in applicable countries.


"Confidential Information" shall mean all proprietary information and
------------------------ materials (whether or not patentable), disclosed by one Party to the other Party, irrespective of the manner in which a Party disclosed such information, in furtherance of this Agreement, including, but not limited to, substances, formulations, techniques, methodology, equipment, data, reports, correspondence, know-how, manufacturing documentation and sources of supply, as well as the existence of this Agreement.


"Control" (including the terms "Controlled by" and "under common
------- ------------- ------------ Control with"), with respect to the relationship between or among two or more ------------ Persons, shall mean the possession, directly or indirectly, or as trustee or executor, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, as trustee or executor, by contract or otherwise, including, without limitation, the ownership, directly or indirectly, of securities having the power to elect a majority of the board of directors or similar body governing the affairs of such Person.


"Definitive Product Purchase Plan" shall have the meaning specified in
-------------------------------- Section 7.02.


"Deliverables" shall mean all reports, results, Products and all other
------------ work product or deliverables of any type, in each case to be delivered by Lavipharm to Endo pursuant to this Agreement.


"Designated Party" shall have the meaning specified in Section 4.03.
----------------


"Development Exc ...