ACCEPTED

05-17-00412-CV
FIFTH COURT OF APPEALS
DALLAS, TEXAS
6/7/2017 12:55:00 PM
LISA MATZ
CLERK

No. 05-17-00412-CV
FILED IN
5th COURT OF APPEALS
DALLAS, TEXAS
IN THE COURT OF APPEALS FOR THE
6/7/2017 12:55:00 PM
FIFTH DISTRICT OF TEXAS AT DALLAS LISA MATZ
Clerk
SIGNATURE PHARMACEUTICALS, L.L.C.,
SIGNATURE R&D HOLDINGS, L.L.C.,
AMERICAN GENERICS, INC., and
MCCORMICK HOLDINGS, L.L.C.,
Appellants,
v.
RANBAXY, INC.
(f/k/a RANBAXY PHARMACEUTICALS, INC.),
RANBAXY LABORATORIES, LTD.,
VENKATACHALAM KRISHNAN, and
ARUN SAWHNEY,
Appellees.

On Appeal from the District Court of Collin County

Cause No. 296-03032-2014

APPELLEE RANBAXY, INC.’S BRIEF

Clyde M. Siebman
Texas State Bar No. 18341600
Siebman, Burg, Phillips & Smith LLP
300 N. Travis Street
Sherman, Texas 75090
Telephone No: 903-870-0070
Fax No: 903-870-0066
clydesiebman@siebman.com

ORAL ARGUMENT REQUESTED

 TABLE OF CONTENTS
INDEX OF AUTHORITIES .................................................................................... iii
STATEMENT REGARDING ORAL ARGUMENT ................................................ 1

ISSUES PRESENTED.............................................................................................. 1

STATEMENT OF FACTS ........................................................................................ 1

SUMMARY OF THE ARGUMENT ........................................................................ 6
ARGUMENT ............................................................................................................ 9

I. This Court Lacks Jurisdiction To Hear The Appeal From The Order
Granting A Declaratory Judgment In Part. ..................................................... 9

II. Section 12.8 Requires Arbitration To Be Complete Within Sixty

Days. ............................................................................................................... 9
A. Signature’s Proposed Interpretation of the Sixty-Day
Provision Would Render It Meaningless. ........................................... 10

B. Signature Has Admitted That Arbitration Must Be Finished

Within Sixty Days Under the Contract............................................... 14

III. The District Court Had Authority To Interpret Section 12.8 Under
The Declaratory Judgment Act. .................................................................... 16

A. The Arbitrators Issued No Final Jurisdictional Award But

Instead Invited Judicial Interpretation of Section 12.8. ..................... 17

B. The Parties Did Not Agree to Submit the Meaning of the

Sixty-Day Limit to Arbitration ........................................................... 20

C. Even If the Arbitrators Issued a Final Award on Jurisdiction,

Their Interpretation of Section 12.8 Exceeded Their
Authority. ............................................................................................ 23

IV. Signature’s Complaints Should Be Dismissed Because The Parties

Submitted Their Dispute to Arbitration and The Arbitration Was
Complete Once Sixty Days Expired. ............................................................ 27

PRAYER ................................................................................................................. 29

i
CERTIFICATE OF WORD COUNT

CERTIFICATE OF SERVICE

ii
 INDEX OF AUTHORITIES

Cases
Accenture LLP v. Spreng,
647 F.3d 72 (2d Cir. 2011) ........................................................................... 12, 20

Beaird Indus., Inc. v. Local 2297, Int’l Union,

404 F.3d 942 (5th Cir. 2005) ...............................................................................24

Bonham State Bank v. Beadle,

907 S.W.2d 465 (Tex. 1995) ...............................................................................17

Burch v. Tex. Health Presbyterian Hosp. Dallas,

No. 05-16-00003-CV, slip op., 2016 WL 6835720
(Tex. App.—Dallas, Nov. 3, 2016, no pet.) ........................................................15
Collins v. Tex Mall, L.P.,
297 S.W.3d 409 (Tex. App.—Fort Worth 2009, no pet.) ............................. 12, 20
Fid. & Deposit Co. of Md. v. State Dep’t of Admin. Servs.,
830 A.2d 1224 (Del. Ch. 2003)...........................................................................12
First Options of Chi., Inc. v. Kaplan,
514 U.S. 938 (1995) ............................................................................................27

Glass Design, Inc. v. Owens-Brockway Glass Container, Inc.,

No. W-12-CV-132, 2013 WL 12091106 (W.D. Tex. Jan. 7, 2013) ....................15
Hernandez v. Frazier,
Cv. No. SA:11-CV-0009-DAE, 2014 WL 1390887
(W.D. Tex. Apr. 9, 2014) .....................................................................................15

Holy Cross Church of God in Christ v. Wolf,

44 S.W.3d 562 (Tex. 2001) .................................................................................15
Hous. Lighting & Power Co.
v. Int’l Bhd. of Elec. Workers, Local Union No. 66,
71 F.3d 179 (5th Cir. 1995) .................................................................................24
Ill. Tool Works, Inc. v. Harris,
194 S.W.3d 529 (Tex. App.—Houston [14th Dist.] 2006, no pet.) ....................13

iii
Irrigation Constr. Co. v. Motheral Contractors, Inc.,
599 S.W.2d 336 (Tex. Civ. App.—Corpus Christi 1980, no writ.) .....................15

Karaha Bodas Co.

v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara,
364 F.3d 274 (5th Cir. 2004) ...............................................................................26
Lummus Glob. Amazonas S.A. v. Aguaytia Energy del Peru S.R. Ltda.,
256 F. Supp. 2d 594, 639 (S.D. Tex. 2002) ........................................................12
PoolRe Ins. Corp. v. Organizational Strategies, Inc.,
783 F.3d 256 (5th Cir. 2015) ...............................................................................24
Procom Energy, L.L.A. v. Roach,
16 S.W.3d 377 (Tex. App.—Tyler 2000, pet. denied) ........................................15
Publicis Commc’n v. True N. Commc’ns, Inc.,
206 F.3d 725 (7th Cir. 2000) .................................................................. 12, 20, 28
Schneider v. Kingdom of Thailand,
688 F.3d 68 (2d Cir. 2012) ..................................................................................21

Smith v. Transp. Workers Union of Am., Local 556,

374 F.3d 372 (5th Cir. 2004) ........................................................................ 24, 25

Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp.,

559 U.S. 662 (2010) ............................................................................................24
Transp. Ins. Co. v. WH Cleaners, Inc.,
372 S.W.3d 223 (Tex. App.—Dallas 2012, no pet.) .................................... 16, 17

Wheeler v. White,
314 S.W.3d 225
(Tex. App.—Houston [14th Dist.] 2010, pet. denied) ........................................15

Yusuf Ahmed Alghanim & Sons, W.L.L. v. Toys “R” Us, Inc.,
126 F.3d 15 (2d Cir. 1997) ..................................................................................26

Statutes
9 U.S.C. § 9 .........................................................................................................24

9 U.S.C. § 10 .................................................................................... 24, 25, 26, 27

iv
Tex. Civ. Prac. & Rem. Code § 37.004(a) ..........................................................16

v
 STATEMENT REGARDING ORAL ARGUMENT
This case involves complex legal and procedural issues. Oral argument would

advance this Court’s decisional process by providing a more complete opportunity

to clarify these issues. Ranbaxy, Inc. respectfully requests oral argument.

ISSUES PRESENTED1
1. Subject to Ranbaxy’s jurisdictional challenge, whether a contract with an

arbitration provision specifying that the arbitrators “shall hold a hearing and make

an award within sixty (60) days” requires arbitration to be complete within 60 days.

2. Subject to Ranbaxy’s jurisdictional challenge, whether it is proper to grant

a declaratory judgment as to the meaning of a contractual provision governing

arbitral procedure when the arbitrators have suspended arbitration pending judicial

determination of the provision’s meaning.

3. Subject to Ranbaxy’s jurisdictional challenge, whether dismissing a

complaint founded on a contract with an arbitration clause is appropriate when that

arbitration is complete and entitles plaintiffs to no recovery.

STATEMENT OF FACTS 2
In 2002, the predecessors-in-interest to Ranbaxy, Inc. (“Ranbaxy”) and

Signature Pharmaceuticals, LLC (“Signature”) entered into a joint venture

1
Ranbaxy disputes Signature’s presentation of the issues.
2
Ranbaxy disputes Signature’s presentation of the facts in its entirety.
1
agreement (“JVA”) to market Riomet™, a drug for treating Type 2 diabetes. Given

the speculative nature of the venture, the JVA contractually narrows the types of

remedies available, limits the types of damages either party can seek, and restricts

the nature of claims either party can raise. See C.R. 1065, JVA § 3.8.1 (no liability

for failure of product development efforts); C.R. 1066-67, JVA § 3.10 (no liability

for failure of marketing efforts); C.R. 1077-78, JVA § 8.5(ii) (no right to recover

indirect or consequential damages); C.R. 1083, JVA § 11.5 (limiting liability). Most

importantly for present purposes, the agreement provides that “any disputes” will be

submitted to arbitration, and that the arbitrators “shall hold a hearing and make an

award within sixty (60) days of the filing for arbitration.” C.R. 1085, JVA § 12.8.

In August 2014, Signature attempted to bypass that arbitration provision and

brought claims against Ranbaxy in the court below. C.R. 15-34. Ranbaxy applied

to compel arbitration in accordance with the terms of the JVA. C.R. 79. Signature

opposed the application, in part because “the arbitration provision requires that all

arbitrations be resolved within 60 days.” C.R. 322. Because it would require swift

resolution of the claims, Signature argued, the arbitration provision was

unconscionable. C.R. 327. In December 2014, the District Court rejected that

argument and granted Ranbaxy’s application to compel arbitration. C.R. 852. The

District Court also stayed the court proceedings “until such arbitration has been had

in in accordance with the terms of the agreement to arbitrate.” Id.

2
 Nearly two years later, on October 25, 2016, Signature finally filed an

arbitration demand with the American Arbitration Association (“AAA”). C.R. 1385.

But instead of seeking swift resolution of its claims, as the arbitration provision

requires, Signature spent its time arguing that the 60-day time limit would be

satisfied if the arbitrators were to issue an interim award within the time window.

C.R. 1457-58. Signature filed a “Request for Interim Measures” that asked the

arbitrators to resolve a discovery dispute by ordering Ranbaxy to provide certain

“Requested Information.” C.R. 1422-23. Ranbaxy responded to the arbitration

demand, raising a number of defenses, including a statute-of-limitations defense.

C.R. 1478-81. Ranbaxy also emphasized that the arbitration agreement required the

arbitration to be complete within 60 days, notwithstanding Signature’s attempt to

circumvent that provision by requesting a so-called interim award. C.R. 1481-82.

Signature requested that the arbitrators deny the statute of limitations defense,

and on December 15, 2016, the arbitrators held a hearing on that request. C.R. 1503.

On December 19, 2016, the arbitrators issued what they termed a “Partial Final

Award.” With respect to the statute of limitations defense, the decision provided that

“[t]he arbitrators have discretion to enforce” a time limit on Signature’s right to

pursue claims under the JVA “if it is appropriate in the circumstances to do so.” C.R.

1505. It preserved all other “claims and defenses in the arbitration . . . for further

3
proceedings.” Id. Along the way, in the “Reasons for Decision” portion of the

ruling, the arbitrators wrote:

Section 12.8 of the [JVA] does not require that a final award be made
by any specified deadline, only that an award be made. Rule R-47(b)
includes partial awards within the category of “awards.” This Partial
Final Award is an award made, following a hearing, in accordance with
the requirements of that Section and Rule.

Id.at 1504-05. The 60-day window for completing arbitration under the contract

triggered by the arbitration demand expired on December 24, 2016. The arbitrators

subsequently proposed an arbitration schedule. Ranbaxy agreed to that schedule but

noted that it explicitly reserved its rights under Section 12.8 of the JVA. C.R. 1519.

On January 30, 2017, the arbitrators issued an order stating that they “require

that the issue of arbitral jurisdiction after the 60th day following the filing of the

arbitration be resolved prior to proceeding with the merits.”3 C.R. 1517. The

arbitrators suspended proceedings in the arbitration “so that either party can proceed

in the appropriate court with jurisdiction to determine the applicability of Section

12.8 of the JVA to these proceedings or any other pre-Award issues which are

appropriate for judicial intervention.” Id. In the alternative, the parties could seek

a “further final and binding award on jurisdiction” from the arbitrators that would

3
The arbitrators attached a version of the “Partial Final Award” dated December
16, 2016 to their January 30 order. C.R. 1520-30. The parties had previously
received the December 19, 2016 version of the “Partial Final Award,” not the
December 16 version. The arbitrators did not explain this discrepancy.

4
“constitute a final and binding ruling on jurisdiction pursuant to AAA Rule R-7.”

Id. 4

On February 1, 2017, Ranbaxy informed the arbitrators that it would seek a

judicial determination about the meaning of Section 12.8 in accordance with the

arbitrators’ order. C.R. 1532. That same date, Signature wrote a letter to the

arbitrators noting that it believed the “Partial Final Award” award was already a

“final award” with respect to the arbitrators’ “jurisdiction pursuant to the 60-day

provision” of Section 12.8. C.R. 2045. Signature nonetheless requested a final

award confirming that the arbitrators had issued the Partial Final Award pursuant to

Rule R-7 and that the Partial Final Award constituted their rejection of any

jurisdictional objection. C.R. 2046.

The arbitrators responded to Signature’s request by issuing an order on

February 8, 2017, which stated: “The Arbitrators confirm that the Partial Final

Award . . . was their award on jurisdiction with respect to the 60 day requirement of

Section 12.8 of the JVA. The Parties have not agreed to seek a further ruling on the

subject from the Panel.” C.R. 2050. The February 8 order also requested that the

parties keep the panel apprised of all “court proceedings and rulings.” Id.

4
AAA Rule R-7(a) provides that “[t]he arbitrator shall have the power to rule on
his or her own jurisdiction, including any objections with respect to the existence,
scope, or validity of the arbitration agreement or to the arbitrability of any claim or
counterclaim.” C.R. 2064.

5
 Accepting the arbitrators’ invitation, on February 7, 2017, Ranbaxy sought a

declaratory judgment on the meaning of Section 12.8 in the District Court below

(where Signature had originally filed suit). Ranbaxy also sought a limited

suspension of the litigation stay for the purpose of hearing the declaratory judgment

motion. In response, Signature moved to confirm the Partial Final Award and sought

a limited suspension of the stay for that purpose. The District Court granted the

motions to lift the stay, denied the motion to confirm the Partial Final Award, and

declared that “[t]he Parties’ Arbitration Agreement contractually limits the duration

of the arbitration to sixty (60) days of the filing for arbitration” and that “[s]ixty (60)

days have elapsed from the date of the arbitration being filed.” C.R. 2312-13. The

District Court also denied “Ranbaxy’s request for a declaration that ‘Plaintiff take-

nothing.’” C.R. 2313.

SUMMARY OF THE ARGUMENT

Section 12.8 requires all disputes to go to arbitration, and it requires arbitration

to resolve those disputes within 60 days. It was included in the contract so that

resolving any disputes would be quick, efficient, and cheap. Signature should not

be allowed to escape its plain meaning both because there is no other sensible way

to read the provision and because Signature already admitted that is exactly what the

provision means.

6
 Signature argues that Section 12.8 requires only an interim award within 60

days. But Signature’s reading would completely eviscerate the time limit. The only

plausible reading of Section 12.8 is that an award should in fact resolve the disputes

within 60 days of filing. If instead any ruling on any issue satisfies the 60-day limit,

there would be no time limit to the arbitration, and the 60-day limit would be

meaningless. Signature’s preferred interpretation necessarily implies that in every

case, the limit could be easily circumvented. Ranbaxy did not agree to such an open-

ended arbitration.

In fact, Signature itself already recognized what the provision must mean

when it represented to the District Court that any arbitration would need to be

complete within 60 days. At the time, Signature was trying to avoid its agreement

to arbitrate entirely. Now, under Texas law, Signature remains bound by its own

statements about what the agreement means.

Absent a plausible reason for skewing the meaning of Section 12.8 and

confronted with its own admission, Signature spends most of its time arguing that

the District Court should not have reached the question at all. But the arbitrators’

orders clearly show that they understood that the statement they made about the

meaning of Section 12.8 was not final. The arbitrators specifically suspended

arbitration so that the parties could present this very controversy in court for a full

and final judicial resolution.

7
 The arbitrators no doubt hesitated to resolve the question because they lacked

authority to pronounce the meaning of the 60-day limit. Although arbitrators are

empowered by Rule R-7 to decide certain issues about the validity of the arbitration

agreement or whether particular types of claims are arbitrable, Rule R-7 does not

permit arbitrators to decide whether the arbitral procedure was proper or depart from

the plain terms of the contract. And while Signature argues Ranbaxy agreed to be

bound by the arbitrators’ pronouncement about Section 12.8, Ranbaxy in fact

explicitly reserved all rights under that provision. C.R. 1519, App. Tab 5, att. 1.

This case arises on a motion for declaratory judgment invited by the arbitrators

themselves, and no final confirmable award exists. Nonetheless, even if the

standards for vacating an award under the Federal Arbitration Act did apply, the

arbitrators exceeded their powers. Arbitrators are not permitted to act contrary to

the express terms of a contract. Nor does an agreement to arbitrate arbitrability

immunize the arbitration from all review. Instead, courts remain obligated to decide

whether the arbitrators were acting within their authority pursuant to the Federal

Arbitration Act or whether they exceeded the scope of the agreement to arbitrate.

Because the 60-day limit has passed and the arbitration is now complete, the

case may be definitively resolved on remand. Signature brought claims against

Ranbaxy, submitted those claims to arbitration, and received the arbitration’s final

8
outcome. This Court should instruct the District Court to dismiss the complaints

against Ranbaxy with prejudice.

ARGUMENT

I. This Court Lacks Jurisdiction To Hear The Appeal From The Order
Granting A Declaratory Judgment In Part.
Ranbaxy has previously asserted a threshold argument that this Court lacks

jurisdiction to hear the appeal from the non-final declaratory judgment. When a trial

court grants declaratory relief but does not resolve the litigation, interlocutory

appeals are not permitted. See Appellee Ranbaxy, Inc.’s Responsive Jurisdictional

Letter Br. 2-3. The following arguments on the merits are presented as an alternative

to, and are not intended to waive, Ranbaxy’s jurisdictional arguments.

II. Section 12.8 Requires Arbitration To Be Complete Within Sixty Days.

Section 12.8 provides that “any disputes . . . shall be resolved exclusively

through arbitration” and that the arbitrators “shall hold a hearing and make an award

within sixty (60) days of the filing for arbitration.” C.R. 1085. This provision has a

clear meaning: Disputes must go to arbitration, and the arbitration must resolve

those disputes within 60 days. Providing for expedited arbitration is also consistent

with the intent of the parties more generally throughout the contract to limit their

potential liability to each other. See C.R. 1065, JVA § 3.8.1; C.R. 1066-67, JVA

§ 3.10; C.R. 1077-78, JVA § 8.5(ii); C.R. 1083, JVA § 11.5. The parties entered the

JVA with the understanding that the venture was no guarantee. Including the

9
arbitration provision meant resolving any disputes that might arise would be quick,

efficient, and—most of all—cheap.

Signature wants to escape that plain meaning. But it should not be permitted

do so for two principal reasons. First, Signature offers no plausible alternative

explanation for the meaning of the 60-day limit. Signature’s arguments amount to

no more than a request for this Court to read the 60-day limit out of the contract

entirely. Second, Signature already took the contrary position on the meaning of

Section 12.8 when trying to convince the District Court not to compel arbitration.

Having admitted that the provision requires arbitration within 60 days, Signature is

bound by that admission.

A. Signature’s Proposed Interpretation of the Sixty-Day Provision

Would Render It Meaningless.
Signature’s main argument why Section 12.8 should not mean what it says is

that the parties intended to allow the arbitrators to issue an interim award, rather than

an award that resolved the dispute, within the 60-day window. Under that reading,

Section 12.8 would be satisfied so long as the arbitrators make any interim award,

no matter how miniscule, within the relevant time limit. Thereafter, the arbitration

could drag on for months, or even years. Such a reading defeats the whole purpose

of having a time limit.

This commonsense conclusion is bolstered by the fact that each of Signature’s

arguments to the contrary is entirely unpersuasive. Signature first argues (at 35-36)

10
that by adopting the AAA rules, the parties intended to incorporate a definition of

“award” that includes interim awards. As an initial matter, that the parties chose to

use AAA procedures to resolve disputes in arbitration does not mean that they

wanted the AAA rules to be used to define the terms of their contract. Moreover,

Signature merely points to various places where the rules use the term “award,” often

variously modified by the words “final” and “interim.” Even if, in certain contexts,

an award may mean an interim award (especially when modified by the word

“interim”), that does not explain why the parties would have gone to the trouble of

specifying that they wanted the arbitrators to make an award within 60 days if any

interim award would satisfy the time limit and the arbitration could continue

indefinitely.

Signature next makes much (at 37) of the fact that the parties used an

indefinite article before the word “award.” In a similar vein, Signature argues that

the parties could have made the meaning of the provision more obvious by saying

that “the final award on all issues” shall be made within 60 days. But Signature’s

new ideas about other ways the parties could have phrased the provision to provide

the 60-day limit on arbitration do not create ambiguity where none exists.

Not surprisingly, the only sensible reading of Section 12.8 is that an award

should actually resolve the disputes within 60 days of filing. That is consistent with

the ordinary understanding of the term “award” as the final resolution on the merits

11
of the claims submitted to arbitration. “As a general rule, a final and definite

arbitration award must both resolve all the issues submitted to arbitration, and

determine each issue fully so that no further litigation is necessary to finalize the

obligations of the parties under the award.” See Lummus Glob. Amazonas S.A. v.

Aguaytia Energy del Peru S.R. Ltda., 256 F. Supp. 2d 594, 639 (S.D. Tex. 2002)

(internal quotation marks omitted).

Even if an interim award could satisfy the 60-day limit, however, the

arbitrators’ decision is not in fact an interim award. In order to be an actual award,

a partial award must resolve an issue that would be “the proper subject of a separate

lawsuit independent of the underlying lawsuit.” Collins v. Tex Mall, L.P., 297 S.W.3d

409, 418 (Tex. App.—Fort Worth 2009, no pet.). In other words, an interim award

is only an “award” if it “finally and definitely dispose[s] of” at least one independent

claim “on the merits.” See Accenture LLP v. Spreng, 647 F.3d 72, 77 (2d Cir. 2011)

(internal quotation marks omitted). In contrast, decisions on “procedural matters”

and other rulings that are just “an early step in moving toward the end result” are not

“awards” and cannot be confirmed. Publicis Commc’n v. True N. Commc’ns, Inc.,

206 F.3d 725, 729-30 (7th Cir. 2000); see Fid. & Deposit Co. of Md. v. State Dep’t

of Admin. Servs., 830 A.2d 1224, 1231 (Del. Ch. 2003) (“the term ‘award’” as used

in the arbitration context “logically contemplate[s] ‘final’ and not interlocutory or

procedural orders”).

12
 The arbitrators’ decision does not resolve any claim. Instead, the arbitrators

simply decided that they had discretion, if circumstances warranted, to impose a time

limit on Signature’s claim. A decision that they “have discretion to enforce” a time

limit “if it is appropriate in the circumstances to do so,” C.R. 1505, finally and

definitely resolves absolutely nothing. Apparently, what Signature really means is

that any pronouncement by the arbitrators, as long as it is called an award, satisfies

the 60-day limit. That reading of Section 12.8 is absurd. Courts “construe [a]

contract so as not to render any of the language superfluous” and “will not construe

a contract to achieve an absurd result.” Ill. Tool Works, Inc. v. Harris, 194 S.W.3d

529, 533 (Tex. App.—Houston [14th Dist.] 2006, no pet.).

Finally, Signature resorts (at 40-42) to a series of arguments why it would not

be feasible to complete arbitration within 60 days. But these arguments only explain

why Signature could not have had arbitration exactly the way it wanted within 60

days. Far from making it “impossible for the Tribunal to discharge its duties,” the

60-day limit simply required the proceedings would have had to be expedited—as

the contract intended. Signature is doing no more than repeating its arguments

(rejected in 2014) about why it thinks requiring a 60-day arbitration would be

unconscionable.

Signature’s interpretation of Section 12.8—that the parties included a 60-day

limit for essentially no reason because the limit could in every case be handily

13
circumvented—is inconsistent with the plain meaning of the contract and the parties’

evident intent. Ranbaxy never agreed to arbitrate longer than 60 days. This Court

should reject Signature’s interpretation and conclude that whatever relief Signature

obtained within the 60-day time period was all the relief to which it was entitled.

B. Signature Has Admitted That Arbitration Must Be Finished Within

Sixty Days Under the Contract.
Section 12.8 means just what it says: Arbitration must be complete within 60

days. The obviousness of that reading is no doubt why Signature itself represented

to the District Court that any arbitration would need to be complete within 60 days.

When it made that representation, Signature was trying to evade its agreement to

arbitrate entirely and proceed in court instead. Today, just as two and a half years

ago, Signature’s litigation preferences do not nullify its contractual commitments.

Instead, Signature remains bound by its own agreement—and by its own statements

about what that agreement means.

When Ranbaxy applied to enforce the arbitration agreement in 2014,

Signature opposed the application. In so doing, Signature stated unequivocally that

“the arbitration provision requires that all arbitrations be resolved within 60 days.”

C.R. 322. Signature argued that, by requiring swift resolution of any claims, the

arbitration provision was unconscionable. C.R. 327. Signature never attempted to

amend, revise, or retract those clear statements. That Signature may have had

14
strategic reasons for making the admission at the time is irrelevant. Signature cannot

now unring the bell.

Under Texas law, “clear and unequivocal” assertions made in court pleadings

are judicial admissions that bind the party that made them. See Holy Cross Church

of God in Christ v. Wolf, 44 S.W.3d 562, 568 (Tex. 2001); Burch v. Tex. Health

Presbyterian Hosp. Dallas, No. 05-16-00003-CV, slip op. at 5, 2016 WL 6835720,

at *3 (Tex. App.—Dallas, Nov. 3, 2016, no pet.) (mem. op.) (“An admission of

status” as a licensee “in an unretracted pleading may be considered a judicial

admission that is legally binding on the party making it.”); Procom Energy, L.L.A. v.

Roach, 16 S.W.3d 377, 382 (Tex. App.—Tyler 2000, pet. denied) (same with respect

to being a fiduciary). As a rule, a party’s statements regarding its rights and

obligations under a contract are judicial admissions. See, e.g., Wheeler v. White, 314

S.W.3d 225, 229 (Tex. App.—Houston [14th Dist.] 2010, pet. denied) (party may

judicially admit contract’s enforceability); Hernandez v. Frazier, Cv. No. SA:11-

CV-0009-DAE, 2014 WL 1390887, at *6 (W.D. Tex. Apr. 9, 2014) (party’s “judicial

admissions establish” content of “agreement to submit quarterly accountings at the

end of each quarter”); Glass Design, Inc. v. Owens-Brockway Glass Container, Inc.,

No. W-12-CV-132, 2013 WL 12091106, at *3 (W.D. Tex. Jan. 7, 2013) (judicial

admission established that arbitration clause was part of contract); Irrigation Constr.

Co. v. Motheral Contractors, Inc., 599 S.W.2d 336, 341 (Tex. Civ. App.—Corpus

15
Christi 1980, no writ.) (statement that “$6,136.76 . . . was owed to Plaintiff pursuant

to their contract” was “a judicial admission that [defendant] owed plaintiff

$6,136.76”). Signature’s statements thus established the meaning of its contractual

commitment.

Requiring a party to be bound by admissions about the meaning of a contract

makes sense. A contract memorializes an agreement between parties. When a party

tells Texas courts exactly what it agreed to, there is no external reason (absent

challenge by the other party) why the law might require a different meaning.

Signature has changed its mind about what it believes the contract means because

although it previously thought the clear meaning of the provision was favorable to

its litigation position, it now thinks that a twisted reading of the provision would be

more favorable. But Signature’s self-serving change of heart in no way changes the

contract’s terms.

III. The District Court Had Authority To Interpret Section 12.8 Under The
Declaratory Judgment Act.
Under Texas’ Declaratory Judgment Act, “either party may seek declaratory

relief if there is a question regarding rights, status, or other legal relations arising

under a written contract.” Transp. Ins. Co. v. WH Cleaners, Inc., 372 S.W.3d 223,

231 (Tex. App.—Dallas 2012, no pet.); see Tex. Civ. Prac. & Rem. Code § 37.004(a).

The courts will have subject matter jurisdiction where “a justiciable controversy”

exists, Transp. Ins. Co., 372 S.W.3d at 227, that “will be resolved by the declaration

16
sought,” Bonham State Bank v. Beadle, 907 S.W.2d 465, 467 (Tex. 1995). “A

justiciable controversy is one in which a real and substantial controversy exists

involving a genuine conflict of tangible interest and not merely a theoretical

dispute.” Transp. Ins. Co., 372 S.W.3d at 227. That standard is easily satisfied here.

A genuine conflict exists between Signature and Ranbaxy about their legal relations

under their contract. The necessity of resolving the issue is particularly clear in light

of the fact that the arbitrators suspended arbitration so that the parties could present

this specific contractual controversy for a full and final judicial resolution. C.R.

1517.

A. The Arbitrators Issued No Final Jurisdictional Award But Instead

Invited Judicial Interpretation of Section 12.8.
Signature spends most of its brief arguing why this court should defer to the

arbitrators’ decision about what Section 12.8 means. Setting aside for the moment

whether a final decision by the arbitrators deserves deference, the bigger problem

with Signature’s argument is that the arbitrators did not make any final decision

about the meaning of the 60-day limit at all. In fact, the arbitrators’ pronouncement

on the issue clearly demonstrated that it was not final—and indicated that a court

was the proper forum to actually resolve the question.

It is worth stepping through the arbitrators’ orders on this point in some detail.

They issued three relevant orders: one on December 19, 2016; one on January 30,

17
2017; and one on February 8, 2017. 5 The December 19th order was largely a ruling

on a different procedural matter that contained a paragraph stating that “Section 12.8

of the [JVA] does not require that a final award be made by any specified deadline,

only that an award be made” and that the “Partial Final Award is an award made,

following a hearing, in accordance with the requirements of that Section and Rule

[47].” C.R. 1505. That paragraph appeared in the section of the order labeled

“Reasons for Decision” (not in the section labeled “Award”).

The January 30th order stated that the arbitrators “require that the issue of

arbitral jurisdiction after the 60th day following the filing of the arbitration be

resolved prior to proceeding with the merits.” C.R. 1517. The arbitrators suspended

proceedings in the arbitration “so that either party can proceed in the appropriate

court with jurisdiction to determine the applicability of Section 12.8 of the JVA to

these proceedings or any other pre-Award issues which are appropriate for judicial

intervention.” Id. Or the parties could seek a “further final and binding award on

jurisdiction” from the arbitrators that would “constitute a final and binding ruling

on jurisdiction pursuant to AAA Rule R-7.” Id. The order necessarily means (1) that

the arbitrators’ “Partial Final Award” did not resolve “the issue of arbitral jurisdiction

5
The latter two were issued after the arbitrators’ authority over the dispute had
ended but clarify the meaning of the original order and demonstrate why the
arbitrators saw judicial intervention as necessary.

18
after the 60th day following the filing of the arbitration”; (2) that “the applicability

of Section 12.8 . . . to [the] proceedings” is a “pre-Award issue[]” that is “appropriate

for judicial intervention”; and (3) that the arbitrators had not yet made any “final and

binding” award pursuant to Rule R-7(a) on any issue of arbitral jurisdiction.

The February 8th order was a response to Signature’s request that the

arbitrators clarify that its statements about Section 12.8 in the December 19 order

qualified as an award that was both final and issued pursuant to Rule R-7. See C.R.

2045-46. The February 8th order did no more than “confirm” that the arbitrators had

made a non-final, non-binding “award” in the Partial Final Award of December 19:

“The Arbitrators confirm that the Partial Final Award . . . was their award on

jurisdiction with respect to the 60 day requirement of Section 12.8 of the JVA.” C.R.

2050. The order went on to note that “[t]he Parties have not agreed to seek a further

ruling on the subject from the Panel.” C.R. 2050. The order conspicuously did not

say that the Partial Final Award was a final award or that it was issued pursuant to

Rule R-7. Instead, it clarified that the panel would make no “further ruling” on the

matter unless the parties agreed but instead would wait for judicial resolution of the

question.

The upshot is that the arbitrators never resolved the meaning of Section 12.8

with finality by the terms of their own orders. In further support of the arbitrators’

own understanding that their decision about Section 12.8’s meaning was not final,

19
that ruling could not qualify as a confirmable interim “award.” See Accenture LLP,

647 F.3d at 77; Publicis Commc’n, 206 F.3d at 729. The only thing that makes it

look like an award is the label applied to the ruling by the arbitrators in the February

8th order. But that label does not change the underlying substance. See Collins, 297

S.W.3d at 419 (“It is the content of the award, not its nomenclature, that determines

its finality.”).

B. The Parties Did Not Agree to Submit the Meaning of the Sixty-Day
Limit to Arbitration
The arbitrators’ interpretation of the 60-day limit would not deserve deference

even if it were final. Because the parties did not agree to submit that issue to

arbitration, the arbitrators had no authority to decide it. Signature argues (at 19-22)

that AAA Rule R-7 means broadly that the arbitrators had jurisdiction to decide

questions of arbitrability, including whether to enforce contractual procedural limits

to arbitration. Although Rule R-7 does give the arbitrators authority over some issues

of arbitrability (such as whether certain claims are susceptible to arbitration), Rule

R-7 does not apply to other issues of arbitrability, including questions about arbitral

procedure. Second, Signature claims (at 22-23) that Ranbaxy agreed that the

arbitrators should be the ones to decide the issue with finality. But Ranbaxy

explicitly refused to waive its right to judicial review. Ranbaxy was under no

obligation to forfeit its rights, so Signature’s disapproval of Ranbaxy’s reservation

of them is entirely misplaced.

20
 Signature uses “arbitrability” as an umbrella term to try to sweep in all

jurisdictional issues without carefully assessing whether there was any agreement to

submit a particular issue to arbitration. Signature argues that, because the parties

incorporated the AAA Rules, and because Rule R-7 empowers the arbitrators to

decide issues of arbitrability, the parties wanted to submit all issues of arbitrability

to arbitration. But the argument is flawed. Rule R-7 does not say that the arbitrators

may decide all issues of arbitrability. Instead, it lists some specific issues that the

arbitrators may decide. The procedure agreed to by the parties is not among them.

Rule R-7(a) provides that “[t]he arbitrator shall have the power to rule on his

or her own jurisdiction, including any objections with respect to the existence, scope,

or validity of the arbitration agreement or to the arbitrability of any claim or

counterclaim.” C.R. 2064. “[A]rbitrability is a term of art covering disputes about

whether the parties are bound by a given arbitration clause i.e., formation as well as

disagreements about whether an arbitration clause in a concededly binding contract

applies to a particular type of controversy i.e., scope.” Schneider v. Kingdom of

Thailand, 688 F.3d 68, 71 (2d Cir. 2012) (internal quotation marks and original

alteration marks omitted). Whether the 60-day limit requires arbitration to be

complete within 60 days has nothing to do with whether there is a valid arbitration

agreement or whether a particular type of claim is arbitrable. It is about the proper

arbitral procedure.

21
 It makes sense that Rule R-7 would not cover fundamental issues about the

agreement of the parties regarding arbitral procedure. Arbitration derives its

legitimacy from the parties’ agreement. It is therefore particularly important to

ensure that the procedures chosen by the parties for the arbitration are enforced. For

example, if the parties agree to arbitrate provided each party selects one arbitrator, a

panel composed of arbitrators selected by one party alone would be invalid. That

would hold true even if the panel pronounced its own composition valid.

Signature also argues that Ranbaxy asked the arbitrators to arbitrate the

meaning of the 60-day limit. On the contrary, Ranbaxy simply asked the arbitrators

to follow the plain language of the parties’ agreement by completing the arbitration

within 60 days. But nothing now precludes Ranbaxy from challenging the

arbitrators’ failure to follow the 60-day limit. That is precisely why Ranbaxy

explicitly reserved its rights under Section 12.8.

Signature argues (at 45) “the Tribunal was asking for judicial assistance in

forcing Ranbaxy to comply with the Partial Final Award.” Not so. The arbitrators

would not continue the arbitration unless Ranbaxy agreed to forfeit its right to

judicial review of the arbitrators’ jurisdiction. Ranbaxy was understandably

unwilling to do so. Ranbaxy stood ready to make its arguments about why the

arbitration procedure violated the parties’ agreement after the arbitration had been

completed pursuant to the arbitrators’ erroneous interpretation of the 60-day limit.

22
But the arbitrators were only willing to continue the arbitration if Ranbaxy would

agree to be bound by their ruling on the 60-day limit—more evidence that the ruling

was not already binding. Because the arbitrators specifically sought judicial

resolution, it would be both futile and perverse to “sen[d] the case back to the”

arbitrators at this point. See Appellants’ Br. 46.

Signature also suggests (at 44) the arbitrators were chiding Ranbaxy for not

“accept[ing]” the December 19 order. But Ranbaxy was under no obligation to give

up its right to judicial review about the arbitral procedure as a prerequisite to

proceeding with the arbitration. The arbitrators—not Ranbaxy—were the ones who

decided that arbitration would be suspended so that the District Court could first

make the necessary judicial determination about the meaning of the 60-day limit.

C. Even If the Arbitrators Issued a Final Award on Jurisdiction, Their

Interpretation of Section 12.8 Exceeded Their Authority.
Ranbaxy sought a declaratory judgment because the arbitrators had requested

judicial resolution of the meaning of the 60-day limit. Signature’s claim that this

request was a request to vacate the award is incorrect. Quite simply, there was no

final award, so there is no award to vacate. But even assuming the decision qualifies

as an award, the arbitrators exceeded their powers under the relevant standard.

23
 Under 9 U.S.C. § 10(a), an award may be vacated on a number of grounds,

including “where the arbitrators exceeded their powers.” § 10(a)(4).6 This means

that if the arbitrators exceed their authority, the award is not valid. “[T]he central or

primary purpose of the FAA is to ensure that private agreements to arbitrate are

enforced according to their terms.” Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp.,

559 U.S. 662, 682 (2010) (internal quotation marks omitted). The arbitration

agreement must be consensual, “because an arbitrator derives his or her powers from

the parties’ agreement to forgo the legal process and submit their disputes to private

dispute resolution.” Id. As a result, where “the language of the agreement is clear

and unequivocal, an arbitrator is not free to change its meaning.” Hous. Lighting &

Power Co. v. Int’l Bhd. of Elec. Workers, Local Union No. 66, 71 F.3d 179, 184 (5th

Cir. 1995). “‘It is well-established that courts may set aside awards when the

arbitrator exceeds his contractual mandate by acting contrary to express contractual

provisions.’” PoolRe Ins. Corp. v. Organizational Strategies, Inc., 783 F.3d 256,

262 (5th Cir. 2015) (quoting Beaird Indus., Inc. v. Local 2297, Int’l Union, 404 F.3d

942, 946 (5th Cir. 2005)).

For example, the arbitration agreement in Smith v. Transp. Workers Union of

Am., Local 556, 374 F.3d 372, 374 (5th Cir. 2004), like the agreement here, contained

6
These same standards may be used to deny a motion to confirm, see 9 U.S.C.
§ 9, so the above arguments apply with equal force to denial of Signature’s motion.

24
a limitation on the arbitrators’ authority to act after a certain time. The agreement in

Smith stated that an award could only be “modified” by the arbitrators within “three

business days” of its issuance. Id. at 375. Nevertheless, “[m]ore than a month after

the initial award” was issued, the arbitrators modified the award to grant costs to the

prevailing party. Id. at 374. The arbitrators declared that such modification was, in

their view, consistent with the agreement. Id. The Fifth Circuit noted that “the policy

that favors resolving doubts in favor of arbitration cannot serve to stretch a

contractual clause beyond the scope intended by the parties” and does not allow the

arbitrators “to disregard or modify the plain and unambiguous provisions of the

agreement.” Id. at 375. The Fifth Circuit affirmed the district court’s decision to

vacate, concluding that the final award was “beyond the reach of the arbitrators’

power” in violation of 9 U.S.C. § 10(a)(4). Id.

As a side matter, Signature argues (at 4) that the arbitration was an

international arbitration. It goes so far as to say (at 16) that Ranbaxy has failed to

meet its burden of proof by failing to address the New York Convention. What

Signature does not mention is that the standard is the same either way, so Signature’s

arguments are all beside the point. Even if Signature is correct that the proceedings

were international in character, the arbitration occurred in New York. Under

governing law, “a court in the country under whose law the arbitration was

conducted” may “apply domestic arbitral law … to a motion to set aside or vacate

25
that arbitral award.” Yusuf Ahmed Alghanim & Sons, W.L.L. v. Toys “R” Us, Inc.,

126 F.3d 15, 21 (2d Cir. 1997); see Karaha Bodas Co. v. Perusahaan Pertambangan

Minyak Dan Gas Bumi Negara, 364 F.3d 274, 288 (5th Cir. 2004) (country where

arbitration performed “may apply [its] own domestic law in evaluating a request to

annul or set aside an arbitral award”). 7 That is because “the power and authority of

the local courts of the rendering state remain of paramount importance.” Yusuf

Ahmed Alghanim & Sons, 126 F.3d at 22. In other words, regardless of whether the

arbitration was domestic or international, the fact that it took place in the United

States means that the Federal Arbitration Act, specifically 9 U.S.C. § 10, still applies

to whether the award can be vacated. In fact, all Signature’s argument means is that

grounds for vacating an award in the New York Convention may supplement the

available grounds under § 10.

It is also unclear why Signature thinks the result should be different under the

New York Convention’s standards. Article V(1)(d) provides for non-recognition of

an award where “the arbitral procedure was not in accordance with the agreement of

the parties.” 8 Appellants’ App. Tab 4, p. 10. The parties agreed to a particular

7
Signature cites (at 5) a contrary rule out of the Eleventh Circuit but does not
explain why the Eleventh Circuit’s rule should apply, rather than the Second
Circuit’s (the federal law of the jurisdiction where the arbitration occurred) or the
Fifth Circuit’s (the federal law of this jurisdiction).
8
Signature omits (at 30) any mention of arbitral procedure in its description of
the grounds for vacating an award under the Convention.

26
arbitral procedure—that arbitration would be complete within 60 days. Because that

procedure was not followed, the award could be vacated even under the Convention.

Signature also relies (at 26) on First Options of Chi., Inc. v. Kaplan, 514 U.S.

938 (1995), to argue that submitting questions of arbitrability to the arbitrators means

that they may determine their own jurisdiction. This principle only goes so far. First

Options says that when “the parties agree to submit the arbitrability question itself

to arbitration . . . the court’s standard for reviewing the arbitrator’s decision about

that matter should not differ from the standard courts apply when they review any

other matter that parties have agreed to arbitrate.” Id. at 943 (emphasis added). That

is to say, a court may still set the decision aside “in certain narrow circumstances”—

specifically, those enumerated in 9 U.S.C. § 10 (including § 10(a)(4), discussed

above). An agreement to arbitrate arbitrability is not carte blanche to the arbitrators

to exceed their powers.

IV. Signature’s Complaints Should Be Dismissed Because The Parties

Submitted Their Dispute to Arbitration and The Arbitration Was
Complete Once Sixty Days Expired.
Under the agreement, the arbitration was complete 60 days after the arbitration

demand was filed. As a result, any further action by the arbitrators would be ultra

vires. There is therefore no justification for returning the case to arbitration. Instead,

the case should be fully and finally resolved on remand, as Signature has received

27
only the relief it obtained during the 60-day time period. Signature is entitled to

nothing more.

Signature moved below to confirm the arbitrators’ decision. Of course,

Signature’s main reason for doing so was to convince the court to accept the

arbitrators’ interpretation of Section 12.8. The District Court’s denial of the motion

was correct for all the reasons already discussed. Both the arbitrators’ statement

about Section 12.8 and their ruling on the statute-of-limitations defense are, at most,

limited procedural rulings that do not qualify as a confirmable award. See Publicis

Commc’n, 206 F.3d at 729 (decisions on “procedural matters” and other rulings that

are “an early step in moving toward the end result” are not “awards” and cannot be

confirmed, unlike a comprehensive decision as to one or more substantive claims).

Even if the arbitrators’ narrow decision about their discretion to enforce a time

limit against Signature were somehow entitled to confirmation, however, that ruling,

standing alone, does not entitle Signature to any further relief. The arbitration is

over, and Signature has failed to secure an enforceable award entitling it to any relief

against Ranbaxy. Instead of seeking a true award within the time allotted, Signature

chose to waste the arbitration period on efforts to convince the arbitrators why they

could circumvent Section 12.8’s 60-day time limit. Signature was free then to make

that strategic choice, but it must now live with the consequences.

28
 The disposition of the case should be straightforward. Signature brought

claims against Ranbaxy, submitted those claims to arbitration as required by the JVA

and the District Court’s 2014 order, and has received the arbitration’s final

outcome—the limited procedural ruling it requested. Because Signature is entitled

to no additional bites at the apple, this Court should instruct the District Court on

remand to dismiss the complaints against Ranbaxy with prejudice.

PRAYER
For the reasons set forth above, this Court should affirm the District Court’s

denial of Signature’s motion to confirm. This Court should also find that it lacks

jurisdiction to hear Signature’s appeal from the non-final declaratory judgment or,

in the alternative, affirm the District Court’s declaratory judgment on the meaning

of Section 12.8 and remand for further proceedings consistent with that meaning.

Respectfully submitted,

SIEBMAN, BURG, PHILLIPS &

SMITH, LLP
/s/ Clyde M. Siebman
Clyde M. Siebman, Esq.
Texas State Bar No. 18341600
SIEBMAN, BURG, PHILLIPS &
SMITH, LLP
300 North Travis Street
Sherman, Texas 75090
Telephone No: 903-870-0070
Fax No: 903-870-0066
clydesiebman@siebman.com

29
 Stephanie R. Barnes, Esq.
Texas State Bar No. 24045696
4949 Hedgcoxe Road, Suite 230
Plano, Texas 75024
Telephone No: 214-387-9100
Fax No: 214-387-9125
stephaniebarnes@siebman.com

- and -

Jay P. Lefkowitz, P.C.

KIRKLAND & ELLIS LLP
601 Lexington Avenue
New York, New York 10022
Telephone No: 212-446-4800
Fax No: 212-446-4900
lefkowitz@kirkland.com
Of Counsel
Attorneys for Ranbaxy, Inc.

30
 CERTIFICATE OF WORD COUNT
Pursuant to Rule 9.4(i)(2), I certify that the textual portion of the foregoing

brief (exclusive of the tables of contents and authorities, statements regarding oral

argument and the issues, and certificates of service and compliance) contains 7981

words as determined by the word counting feature of Microsoft Word 2016.

/s/ Clyde M. Siebman

Clyde M. Siebman, Esq.
 CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of Appellee Ranbaxy, Inc.’s Brief

has been served in accordance with the Texas Rules of Appellate Procedure on all

the counsel of record listed below by electronic service, on this the 7th day of June,

2017.

S. Shawn Stephens Jeffrey M. Telep

Sara McBrearty KING & SPALDING LLP
KING & SPALDING LLP 1700 Pennsylvania Avenue, NW
Texas State Bar No. 19160060 Suite 200
1100 Louisiana Street, Suite 4000 Washington, DC 20006
Houston, Texas 77002 Telephone: (202) 626-2390
Telephone: (713) 751-3200 Fax Number: (202) 626-3737
Facsimile: (713) 751-3290 jtelep@kslaw.com
sstephens@kslaw.com
smcbrearty@kslaw.com

Brian A. White
KING & SPALDING LLP
1180 Peachtree Street NE
Atlanta, Georgia 30309
Telephone: (404) 572-4600
Facsimile: (404) 572-5100
bwhite@kslaw.com
Of Counsel

ATTORNEYS FOR APPELLANTS

/s/ Clyde M. Siebman

Clyde M. Siebman
 APPENDIX
TO APPELLEE’S BRIEF

TAB DOCUMENT DESCRIPTION

Amended and Restated Joint Venture and Operating Agreement
1 (“JVA”) (C.R. 1053 – C.R. 1112) (Arbitration Agreement at Section
12.8 on C.R. 1085)

Plaintiffs’ Response to Defendants’ Application to Compel Arbitration

2 and Stay Proceedings (without exhibits) (C.R. 307 – C.R. 332)

Trial Court’s December 19, 2014 Order Granting Ranbaxy’s

3 Application to Compel Arbitration and Stay Proceedings (C.R. 852)

Arbitrators’ December 19, 2016 “Partial Final Award” (C.R. 1501 –

4 C.R. 1511)

5 Arbitrators’ January 30, 2017 Order (C.R. 1515 – C.R. 1530)

6 Ranbaxy’s February 1, 2017 email to Arbitrators (C.R. 1532)

Signature’s February 1, 2017 letter to Arbitrators (C.R. 2045 – C.R.

7 2046)

8 Arbitrators’ February 8, 2017 Order (C.R. 2050)

9 Trial Court’s March 14, 2017 Memorandum (C.R. 2283 – C.R. 2284)

10 Trial Court’s April 3, 2017 Order (C.R. 2312 – C.R. 2313)

Texas Uniform Declaratory Judgments Act - Tex. Civ. Prac. & Rem.
11 Code § 37.001 et seq.
APPENDIX TAB 1
 EXECUTION COPY

AMENDED AND RESTATED JOINT VENTURE AND

OPERATING AGREEMENT

This AMENDED AND RESTATED JOINT VENTURE AND OPERATING

AGREEMENT ("Agreement") is entered into as of this 19th day of. June, 2002 by and between
Ranbaxy Pharmaceuticals Inc., a Delaware corporation, having its executive office located at 600
College Road East, Princeton, New Jersey 08550 ("Ranbaxy"), and Signature Pharmaceuticals, Inc.,
a New York corporation, having its executive office located at P .O. Box 866248, Plano, Texas,
75086 ("SPI") (Ranbaxy and SPl are hereinafter referred to collectively as the "Members").

WITNESSETH

WHEREAS, each ofRanbaxy and SPI formed a limited liability company under the
Limited Liability Company Act of the State of Delaware (the "LLC'') pursuant to the Certificate of
Formation attached as Exhibit A hereto; and

WHEREAS, each ofRanbaxy and SPI contributed and made available, and continued
to contribute and make available, certain assets to the LLC in exchange for all of the membership
interest in the LLC; and

WHEREAS, each of Ranbaxy and SPI executed a certain Joint Venture and
Operating Agreement dated August 1, 2000 (the "Original Operating Agreement") to, among other
things, organize, capitalize and provide for the management and governance of the LLC for the
purpose of engaging in the development, receipt of regulatory approval, manufacture and marketing
of the Products (as therein defined); and

WHEREAS, Ranbaxy and SPI are parties to a certain Asset Purchase Agreement
dated of even date herewith providing, among other things, for Ranbaxy's purchase of substantially
all of the assets of SPI and American Generics, Inc. (the "Asset Purchase Agreement"); and

WHEREAS, upon completion of the transaction contemplated pursuant to the Asset

Purchase Agreement, SPI's manufacturing facility will be transferred and conveyed to Ranbaxy, and
SPI will no longer have the facility or capacity to conduct the manufacturing operations previously
contemplated to be performed and conducted by SPI pursuant to the Original Operating Agreement;
and

WHEREAS, the parties desire to amend and restate in its entirety the Original
Operating Agreement pursuant to this Agreement in order to give affect to the transactions
contemplated pursuant to the Asset Purchase Agreement and Ranbaxy's manufacture of the Products
(as hereinafter detined),A, /
522909·1 )/' ~

1053
 NOW, THEREFORE, in consideration of the premises, the respective covenants,
representations and warranties contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I
DEFINITIONS

For purposes of this Agreement the following terms shall have the following
meanings:

"AB Rated Liquid Oral Product" shall mean a metformin based product which has
been approved by the FDA with an approved application that contains adequate scientific evidence
establishing through in vitro and/or in vivo studies the bioequivalence of the metformin based
product to the Company's Liquid Oral Product.

"Accountants" shall mean the firm of independent certified public accountants

designated by the Board from time to time to serve as the accountants for the LLC.

"Act" shall mean the Delaware Limited Liability Company Act as set forth in § 18-
101 et seq., as amended.

"Affiliate" shall mean any Person directly or indirectly controlling, controlled by,
or under common control with, the referenced Person. For purposes of the above, the term "control"
(including "controlling" and "controlled") shall mean the possession, direct or indirect, of the power
to direct or to cause the direction of the management and policies of a Person, whether through the
ownership of voting interests, by contract, or otherwise.

"Agency" shall mean any governmental regulatory authority responsible for granting
approvals for the sale of the Products.

"Agreement" shall mean this Amended and Restated Joint Venture and Operating
Agreement.

"ANDA" shall mean a "Abbreviated New-Drug Application" as defined in

the United States Food, Drug and Cosmetic Act, as amended, and Applicable FDA rules and
regulations.

"Bankruptcy" shall be deemed to have occurred as to a Member when (i) such

Member shall have commenced a voluntary case under the federal bankruptcy laws, as now
constituted or hereafter amended or replaced, or under any other applicable federal or any state
bankruptcy or insolvency law, or (ii) a decree or order for relief under any of such laws shall hav~ iJ .
been entered by any court having jurisdiction in respect of such Member, or a receiver, liquidato/Y

522909-1 2 ~

1054
assignee, custodian, trustee or similar official shall have been appointed for such Person or any
substantial part of such Member's property, or the winding-up or liquidation of such Person's affairs
shall have been ordered, and in connection with the foregoing provisions of this clause (ii) either
such Member shall have applied for or consented to such decree, order or appointment or such
decree, order or appointment, shall have continued unstayed and in effect for a period of 90 days
(whether or not consecutive), or (iii) such Member shall have made an assignment for the benefit of
creditors.

"Board" shall mean the LLC Board of Directors.

"Capital Account" shall have the meaning provided in Section 5.6.

"Code" shall mean the Internal Revenue Code of 1986, as it may be amended
or replaced from time to time.

"Competitive Liquid Oral Product" means either an AB Rated Liquid Oral Product
or a Non-AB Rated Liquid Oral Product.

"Defaulting Member" shall have the meaning provided in Section 8.5.

"Effective Date" shall mean August I, 2000.

"Event of Default" shall have the meaning provided in Section 8.5.

"Events of Dissolution" shall have the meaning provided in Section 8.1.

"Excess Cash Flow" shall mean the gross cash proceeds received by the LLC from
operations, revenues, other dispositions, financings and refinancings or any other source (including
a capital contribution) plus any reduction in Reserves previously established, less all cash used to
pay LLC expenses, including, without limitation, Post-Commercialization Development Expenses,
Post-Commercialization Patent Expenses, Manufacturing Expenses, Marketing and Sales Expenses,
debt payments, capital acquisitions and improvements, replacements, distributions and
contingencies, all as determined by the Board.

"FDA" shall mean United States Food and Drug Administration.

"Interest" shall have the meaning set forth in Section 3.1 hereof.

"Joint Venture Business" shall have the meaning set forth in Section 2.4 hereof.

"Know-How" shall mean all the Technical Information relating to the Products
owned or controlled by either SPI or Ranbaxy as of the Effective Date or during the term of this
Agreement.~
522909-1
3

1055
 "Launch" shall mean the date of the first commercial shipment of the first Product
developed by the LLC, by the LLC or by Ranbaxy or its Affiliates on behalf of the LLC, to third
party customers after receipt of FDA approval for such Product.

"LLC" shaH mean the limited liability company formed pursuant to the Certificate
of Formation and governed by this Agreement.

"LLC Interest" or "Percentage Interest" shall refer to a Members percentage of

ownership interest in the LLC as set forth in Section 3.1.

"Liquid Oral Products" shall mean all orally administered liquid Metformin base,
Metformin HCI, and other salts and improved chemical entities of Metformin, either administered
alone or in combination with other drugs, including any and all approved indications, including but
not limited to, as described in the Specifications, which shaJl be developed, certified and
commercialized in accordance with the terms of this Agreement.

"Liquidating Trustee" shall have the meaning provided in Section 8.2.

''Manufacturing Expenses" shall mean costs of raw materials, quality-control tests,

supplies, production materials, labor and benefits expense, shipping expense and other costs directly
identifiable to the manufacture and supply of a Product, and a portion of relevant overhead expense,
determined in accordance with U.S. generally accepted accounting principles applied on a consistent
basis.

"Marketing and Sales Expenses'' shall have the meaning provided in Section 3.1 0.

''Member" shall mean a person who owns an LLC Interest in the LLC.

"Membership Rights" shall mean all of the rights of a Member in the LLC
including the Member's: (i) LLC Interest(s); (ii) right to inspect the LLC's books and records; and
(iii) right to participate in the management of and vote on matters coming before the Members.

"NDA" shall mean a "New Drug Application," as defined in the United States Food,
Drug and Cosmetic Act, as amended, and applicable FDA rules and regulations.

"Non-AB Rated Liquid Oral Product" shall mean a metformin based product that
does not have an application approved by the FDA with adequate scientific evidence establishing
through in vitro and/or in vivo stjfies the bioequiva]ence of the metformin based product to the
Company's Liquid Ora] Product.JY

~/
522909-1 4

1056
 "Original Operating Agreement" shall mean the Joint Venture and Operating
Agreement dated August 1, 2000 by and between Ranbaxy and SPI which is amended and restated
in its entirety by this Amended and Restated Joint Venture and Operating Agreement.

"Permitted Transferee" shall mean a corporation, 51% or more of the capital and
voting stock of which is owned, directly or indirectly, by a Member.

"Person" shall mean any person, firm, corporation, partnership, limited liability
company, association, company, trust, estate, custodian, nominee or other individual or entity.

"Pre-Commercialization Development Expenses" shall mean (i) the direct

expenses incurred by Ranbaxy in the processing and preparation of exhibit and validation batches
of the first Liquid Oral Product to be subject to Agency approval, as shall be determined in
accordance with U.S. generally accepted accounting principles, and shall include the following
documented and reasonable direct costs and expenses: salaries, benefits, supplies, excipients, raw
materials, packaging and shipping; and (ii) the expenses incurred by Ranbaxy, or its designee, in the
development, submission for and receipt of regulatory approval relating to any of the Products,
including, without limitation, those relating to the conduct and oversight of clinical testing,
bioavailability and bioequivalence studies, the preparation, submission and prosecution of applicable
ANDA and NDA submissions, as appropriate, which expenses are incurred prior to the Launch of
the first Product developed by the LLC.

"Post-Commercialization Development Expenses" shall mean the expenses

(whether incurred by the LLC or by a Member on its behalf), in the development, submission for and
receipt of regulatory approval relating to any of the Products, including, without limitation, those
relating to the conduct and oversight of clinical testing, bioavailability and bioequivalence studies,
the preparation, submission and prosecution of applicable ANDA and NDA submissions, as
appropriate, which expenses are incurred on or after the date of the Launch of the first Product
developed by the LLC.

"Pre-Commercialization Patent Expenses" shall mean the costs and expenses

incurred by a Member, or its designee, in the filing, prosecution and maintenance of any patents
relating to the Products or any related Know-How or Technical Information, in any jurisdiction
where such patents may be filed, from time to time, on behalf of the LLC, which expenses are
incurred on or prior to the Launch of the first Product developed by the LLC.

"Post-Commercialization Patent Expenses" shall mean the costs and expenses

incurred by a Member, or its designee, in the filing, prosecution and maintenance of any patents
relating to the Products or any related Know-How or Technical Information, in any jurisdiction
where such patents may be filed, from time to time, on behalf of the LLC, which expenses are
incurred on or after the date of the Launch of the first Product developed by the LLC.

"Products" shall mean collectively, the Solid Products and the Liquid Oral Products.~

522909-1
5 ~

1057
 "Regulations" shall mean the fmal or temporary regulations promulgated by
the United States Department of the Treasury under the Code and as then in effect.

"Reserves" shaJI have the meaning provided in Section 6.3.

"Solid Products" shall mean all drug delivery forms ofMetformin base, Metformin
HCI and other salts and improved chemical entities of Metformin (including, without limitation,
solids in all dosages either in normal or sustained release) either administered alone or in
combination with other drugs, including any and all approved indications, as described in the
Specifications, which shaH be developed, certified and commercialized in accordance.with the terms
of this Agreement, but expressly excluding Liquid Oral Products.

"Specifications" shall have the meaning set forth in Exhibit B attached

hereto.

"Tax Matters Partner" shall mean the "tax matters partner" as defined in
Section 6231(a)(7) of the Code.

"Technical Information" shall mean all techniques and data and other know-how
and techniCal information relating to the development of tbe Products existing at the Effective Date
and during the tem1 of this Agreement, including inventions (including patentable inventions),
practices, methods, concepts, know-how, trade secrets, documents, computer data, source rode
apparatus, clinical and regulatory strategies, test data, analytical and quality control data,
manufacturing, patent data or descriptions, development information, drawings, specifications,
designs, plans, proposals and technical data and manuals and a11 other proprietary information
relating to the Products.

"Trademarks" shall mean any and all trademarks relating to the Products
to be owned by the LLC as same may be registered with the U.S. Patent and Trademark Office from
time to time.

"Transfer" shall mean any sale> assignment, hypotheca6on, mortgage, pledge,

encumbrance or other transfer or disposition.

ARTICLE II
FORMATION

2.1 Formation. The Members join together pursuant to this Agreement as a

"limited liability company" as of the Effective Date. The Certificate of Formation as filed in
accordance with the Act is attached as Exhibit A. The LLC shall conduct business as a limited
liability company pursuant to the tenns of this Agreement and the provisions of all applicable Ia~

522909-1
6

1058
 2.2 Name. The name of the LLC shall be "Ranbaxy Signature LLC" but the
business and operations of the LLC may be conducted under any other or additional name designated
by the Board; provided, however, that the LLC shall not use (i) the name "Signature" (or any other
name owned by SPI) or any derivation thereof without the prior written consent of SPI or (ii) the
name "Ranbaxy " (or any other name owned by Ranbaxy) or any derivation thereof without the prior
written consent of Ranbaxy. The LLC shall execute and file any assumed or fictitious name
certificate required to be filed by the laws of any jurisdiction in which the LLC conducts or transacts
its business.

2.3 Office. The LLC shall maintain its principal office at c/o Ranbaxy
Pharmaceuticals Inc., 600 College Road East, Princeton, New Jersey 08540, or at such other location
as may be selected from time to time by the Board. The LLC may maintain such other offices at such
other places as the Board deems advisable.

2.4 Purpose. Except as otherwise provided herein, the LLC shall engage in the
business of (i) developing and seeking and obtaining regulatory approval for the Products (ii)
contracting with Ranbaxy for the manufacture of the Liquid Oral Products, (iii) contracting with
Ranbaxy or such other third party designated by the LLC for the manufacture of the Solid Products,
(iv) Ranbaxy's marketing and sale of the Products on behalf of the LLC, and (iv) such other or
additional business or products as the Board may, from time to time, determine pursuant to Article
IV hereof (the "Joint Venture Business"); provided, however, that the Company shall not engage in
any act or activity requiring the consent or approval of any state official, department, board or agency
or other body without such consent or approval first being obtained.

2.5 Title of Property. All properties and assets, real or personal, tangible or
intangible, owned by the LLC or acquired by the LLC through purchase, contribution by a member
or otherwise shall be held and recorded in the name of the LLC. All such properties and assets shall
be deemed to be owned by the LLC as an entity, and no member individually shall have any
ownership of such property or assets. The LLC shall have the right to form, and to hold interest,
directly or indirectly, in one or more corporations, partnerships or other persons for the purpose of
owning any property or assets of the LLC or operating all or any part of the Joint Venture Business.

2.6 Term. The term of the LLC shall commence on the Effective Date and shall
continue until the winding up and liquidation of the LLC in accordance with Article VIII.

2. 7 Registered Agent. The name of the LLC's registered agent in the State of
Delaware shall be Corporation Service Company and the registered office of the LLC shall be at
1013 Centre Road, Wilmington, Delaware 19805.

2.8 Other Activities. Except as otherwise expressly provided herein, each

Member may engage or participate, or possess any interest, in any other business enterprise, venture
or activity of any nature or description, independently or with others, including without limitation, 1J
the continuation of each Member's business activities as of the Effective Date, and may receive and V
522909-1 7 ~

1059
 enjoy income therefrom; provided, however, that neither Member nor its Affiliates shall directly or
indirectly, develop, manufacture or sell the Products except through the LLC or as provided in this
Agreement during the term of this Agreement. Neither Member shall be required to account to the
LLC or the other Member with respect to any such income, nor shall the LLC or any Member, by
virtue of this Agreement, have any rights or interest in or to such independent enterprise, venture or
activity or the income derived therefrom.

2.9 Transactions with Affdiates and Others. Ex,cept as expressly provided in

this Agreement, the LLC may engage in transactions with any Member or any Affiliate or Affiliates
thereof: acting in or for its own account and nothing shall be deemed to restrict in any way the
freedom of a Member to sell to or to buy from the LLC, or to or from others who may be in
competition with the LLC or another Member, and nothing in this Agreement shall be deemed to
restrict in any way the freedom of a Member to conduct any business or activity whatsoever.

2.10 Scope of Member Authority. Except as otherwise expressly and specifically

provided in this Agreement, neither of the Members shall have any authority to act for, or to assume
any obligations or responsibilities on behalf ot: the LLC or of the other Member.

2.11 Liability to Third Parties. Except as expressly provided in the Act, the
Members shall not be personally liable for any liabilities, or for the payment of any debts and
obligations, of the LLC.

ARTICLE III
LLC INTERESTS, CAPITAL CONTRIBUTIONS AND DISTRIBUTIONS

3.1 LLC Inte.rests. The interest (an "Interest" or "Interests") of each Member in
the profits, losses, capital, distributions and any other items of the LLC shall be in accordance with
their relative Percentage Interests in the LLC, unless it is expressly provided otherwise in this
Agreement or the Members mutually agree in writing. "Percentage Interest" means, with respect to
any Member, the Percentage Interest set forth in Section 3.2 hereof as such Percentage Interest may
be adjusted pursuant to Section 3.4 or Section 7 .1.1 hereo£ If any Interest in the LLC is transferred
in accordance with the provisions of this Agreement, the transferee of such Interest shall succeed to
the Percentage Interest of the transferor to the extent it relates to the transferred Interest.

3.2 Initial Percentage Interests; Adjustment of Interests. The initial

Percentage Interests of each of the Members shaH be as follows: SPI - 32.5%; and Ranbaxy -
67.5%. Each Member's Percentage Interest shall be adjusted accor·dingly in the event of (i) an
additional capital contribution pursuant to Section 3.4 hereof or (ii) the purchase or sale of all or a
pmtion of a Member's Interest pursuant to Section 7 .1.1 hereof. Each Interest shall be personal
property tor all purposes.

3.3 Initial Capital Contributions. At the Effective Date, the Members (i)
received their respective LLC Interest and (ii) provided tor or made the capital contribution specified

~~ 8 ~

,----··-
..
1060
 • Each of SPI and Ranbaxy:

1. Each of Ranbaxy and SPI conveyed, and hereby confirm such

conveyance, to the LLC all right, title and interest in and to the
Products and granted, and hereby confirm the grant, to the LLC of an
irrevocable, fully paid, nonexclusive license to the related Know-How
. and Technical Information.

2. Each of Ranbaxy and SPI conveyed, and hereby confirm such

conveyance, to the LLC, all right, title and interest to the existing
formulations for the Products as more particularly described on
Exhibit C hereto.

3. Each ofRanbaxy and SPI agree to oversee and consult with each other
in the development of the Products, :including, without limitation, lab
scale formulation and all testing and studies required, including bio-
availability and bio-equivalence studies, and the preparation,
submission and prosecution ofANDAs or NDAs, as appropriate, for
the Products (in all contemplated dosage strengths) to obtain FDA
approval and equivalent non-U.S. Agency approval to commercialize
the Products.

• Ranbaxy:

l. Ranbaxy agreed, and hereby confirms its agreement, either itself or

through its designee, (at its expense up to the date of Launch of the
first Product developed by the LLC) to make available the personnel,
facilities and equipment in such amounts as are commercially
reasonable for the development of the Solid Products and, in
conjunction with the contributions and assistance provided by SPI
pursuant to this Section 3.3, the development and further
improvement of the Liquid Oral Products.

2. Ranbaxy agreed, and hereby confirms its agreement, (at its expense
up to the date of Launch of the first Product developed by the LLC)
to make available the personnel, facilities and equipment in such
amounts as are commercially reasonable to prepare and submit in the
name of the LLC the regulatory filings required in order to obtain
FDA approval and non-U.S. Agency approval to commercialize the
Solid Products and, in conjunction with the contributions and
assistance to be provi~~ by SPI pursuant to this Section 3.3, the
Liquid Oral Products!/' ~
522909-1
9

1061
 3. Ranbaxy shall make an initial cash capital contribution in the amount
of$33,750.

• SPI:

1. SPI agreed, and hereby confirms its agreement, to make available the
personnel in such amounts as are commercially reasonable for the
development of the Liquid Oral Products.

2. SPI agreed, and hereby confirms its agreement, to make available the
personnel in such amounts as Ranbaxy shall request for the
development and manufacture of exhibit and validation batches in
such amounts and variations as Ranbaxy shall request, as shall be
necessary in order to obtain FDA approval and non-U.S. Agency
approval to commercialize the first Liquid Oral Products.

3. SPI shall make an initial cash capital contribution in the amount of

$16,250.

3.4 Additional Capital Contributions (a) If, in the opinion of the Board,
additional sums of money are required to finance the business and affairs, including capital
expansion, of the LLC, (i) the LLC may borrow from commercial lending institutions, from
Members or from any source or combination of sources, such sums as may be required by th.e LLC
and/or (ii) the Members may jointly commit themselves and pursuant to such commitment shall
contribute to the capital of the LLC such additional sums as may be required by the LLC in
proportion to the Members then existing Percentage Interests. It is the intent of the Partners that
additional financing for the LLC be structured so as to minimize the changes in the relative Interests
of the Members and that, therefore, debt financing or additional capital contributions on a
proportionate basis should be preferable to the contribution of additional equity by one Member. To
the extent that this may require the LLC to borrow money from the Members or Attiliates of the
Members, such borrowing should be on terms and conditions, including, without limitation, yield
and security, no less favorable to the LLC than could be obtained by the LLC from independent third
party lenders.

(b) In the event additional capital is contributed by a Member or the

Members other than in proportion to the respective Percentage Interests of the Members at the time
of such contribution, the Percentage Interest of each Member shall be adjusted as follows effective
as of the date such capital is contributed to the LLC:

I = C/F+P ~ L
522909-1 lOTC/F+y~

1062
.
 where:

I = Percentage Interest of a Member following additional capital contribution.

C =additional capital contributed by Member.

F = Fair Market Value of the LLC as of the close of business on the day immediately
preceding the date the additional capital is contributed to the LLC as determined by the
Board.

P = Percentage Interest of a Member immediately prior to additional capital contribution

(expressed as a decimal).

TC = total additional capital contributed by all Members at time of such Member's

contribution.

For purposes hereof"Fair Market Value" shall mean the fair value of the Interests in
the LLC as agreed to by Ranbaxy and SPI or, in the event they cannot agree upon such fair
value within thirty (30) days following the LLC's determination that additional capital is to
be contributed to the LLC, such fair market value shall equal the "Appraisal Value". The
Appraisal Value shall be determined as follows: within fifteen (15) days following the thirty
(30) day period provided above, Ranbaxy and SPI shall select a separate appraiser who shall
be a member or an associate of an independent investment banking firm, a public accounting
firm, an appraisal firm or another person experienced in valuing the securities of entities in
businesses similar to the LLC's. The LLC shall promptly furnish to the appraiser such
information concerning its financial condition, earnings, capitalization and business
prospects as such appraisers may reasonably request. The appraiser shall be directed to
independently determine the value of the Interests in the LLC that are being purchased as of
the date of purchase. The fees and expenses of each appraiser shall be borne by the party
selecting such appraiser. In the event the two appraisers, after a thirty (30) day period from
the appointment of the later appointed appraiser, are unable to agree on the appraisal of the
Fair Market Value of the LLC, the appraisers shall (i) submit to the LLC in writing their
respective appraisals, and (ii) appoint a third appraiser, who shall be experienced and
qualified as provided above. The third appraiser shall be instructed to complete an appraisal
in the same manner as the first two appraisals and within thirty (30) days of the date ofhis
appointment, choose which of the first two appraisals is more accurate. Upon such a choice
by the third appraiser, such chosen appraisal shall govern and be deemed the Fair Market
Value of the LLC.

3.5 Distributions. Unless the Members otherwise mutually agree in writing,

distributions, other than upon dissolution, from the profits and surplus of the LLC shall be made to
each Member at the discretion of the Board in accordance with each Member's Percentage Interest
in the LLC, subject to the adjustments provided in Section 3.3 and this Section 3.5 and to reserveh
522909-1 11 /~.

1063
limitations provided in Section 6.3. Notwithstanding anything to the contrary contained herein,
Ranbaxy's Post-Commercialization Development Expenses, Ranbaxy's Marketing and Sales
Expenses, Ranbaxy's Manufacturing Expenses and Ranbaxy's Post Commercialization Patent
Expenses shall be satisfied in full by the LLC prior to any distributions to the Members of profits or
Excess Cash Flow. Neither Member shall be entitled to any distribution from the profits and surplus
of the LLC, except as may be authorized by the Board.

3.5.1. The LLC shall calculate profits and Excess Cash Flow for purposes
of distribution to Members on an individual Product basis. Selling, general and administration
expenses and overhead expenses shall be allocated to each of the Products in accordance with U.S.
generally accepted accounting principles applied on a consistent basis. The profits and Excess Cash
Flow relating to a particular Product shall be distributed, subject to Board Authorization, to the
Members in accordance with the following allocations:

(a) For profits and Excess Cash Flow generated by the LLC relating to
any Oral Liquid Products and where

(i) such profits and Excess Cash Flow were generated prior to the first
commercial sale of any Competitive Oral Liquid Product in the United States, Ranbaxy and SPI shall
receive 62.5% and 37.5%, respectively, of such distributions, or

(ii) such profi ts and Excess Cash Flow were generated after the first
commercial sale of any Competitive Oral Liquid Product in the United States, Ranbaxy and SPI shall
receive 67.5% and 32.5%, respectively, of such distributions.

(b) For profits and Excess Cash Flow generated by the LLC relating to
any Solid Products, Ranbaxy and SPI shall receive 67.5% and 32.5%, respectively, of such
distributions.

3.6 Additional Contributions and Withdrawals. No Member shall be required

to make any contribution to the capital of the LLC other than as provided in this Article III. All
capital contributions shall be applied in furtherance of the Joint Venture Business of the LLC. No
Member shall have the right to withdraw from the LLC or to demand a return of all or any part of
its capital contribution during the tenn of the LLC. No interest shall accrue for the benefit of, or be
paid to any Member on, capital contributions.

3.7 Payment of Fees and Expenses. Except as approved by the Board or as

expressly provided in this Article III relating to a Member's Post-Commercialization Development
Expenses, Ranbaxy's Marketing and Sales Expenses, Ranbaxy's Manufacturing Expenses and
Ranbaxy's Post-Commercialization Patent Expenses which are to be charged to and satisfied by the

expenses attributable to the LLCY

LLC as provided herein, no Member shall be reimbursed for its overhead or general or administrative
-1\(

522909-1 12

--·-·- ..

1064
 3.8 Product Development Efforts. Subject to the oversight and control of the
Board as provided in Article IV hereof, each of SPI and Ranbaxy will exercise continuing
commercially reasonable efforts in the performance of development efforts relating to the Products,
including the review and oversight of clinical testing, bio-availability and bio-equivalence studies,
and the preparation, submission and prosecution of the ANDA or NDA, as appropriate, for the
Products (in all contemplated dosage strengths) to obtain FDA approval and non-U.S. Agency
approval to commercialize the Products within the timeframes as may, from time to time, be
established by the Board ofDirectors. SPI and Ranbaxy will cooperate in such joint development
efforts.

3.8.1 Records and Reports. Each of the Members understand and agree
that neither Member warrants or commits that any Products will be successfully developed for sale,
and neither Member shall have any liability or responsibility to the other or to third parties for any
such failure of the development efforts hereunder, except to the extent such failure results from such
Member's intentional misconduct, gross negligence or willful breach of its duties or obligations as
provided herein. Ranbaxy will provide written reports to the Board and SPI on a quarterly basis
stating in detail all efforts made in connection with its development efforts and all significant
progress achieved and difficulties encountered in the development efforts since the date of the last
such report.

3.8.2 Development Expenses. Each Member will keep complete, true

and accurate records of all Pre-Commercialization Development Expenses and Post-
Commercialization Development Expenses incurred by such Member in the perfonuance of its
development efforts relating to the Products. Each of the Members acknowledge and agree that
Ranbaxy shall fund and be responsible for the Pre-Commercialization Development Expenses.

Each of the Members further acknowledges and agrees that the Post-
Commercialization Development Expenses shall be incurred directly by the LLC and shall be for its
account. In the event the LLC shall have insufficient capital or surplus to fund the Post-
Commercialization Development Expenses, Ranbaxy may, but shall be under no obligation to, fund
such Post-Commercialization Development Expenses which shall be for the account of, shall be
charged to and shall be satisfied by the LLC. Ranbaxy shall remit to the LLC a detailed analysis of
Post-Commercialization Development Expenses as incurred on a monthly basis commencing with
the t1rst month following the Launch of the first Product. The LLC shall remit to Ranbaxy the Post-
Commercialization Development Expenses for the preceding month within thirty (30) days of receipt
of Ranbaxy's description of such expenses relating to such month. Each of the Members
acknowledges and agrees that the satisfaction ofRanbaxy's Post-Commercialization Development
Expenses shall constitute a priority distribution from the LLC to Ranbaxy and shall be made prior
to any distribution of the profits or Excess Cash Flow from the LLC to its Members, in such
capacity. SPJ's representatives shaJI have the right to inspect, copy and audit Ranbaxy's records
relating solely to the Post-Commercialization Development Expenses at any time during reasonable
business hours upon reasonable prior notice to Ranbaxy. Any such audit shall be at the expense of
SPI, unless the audit resuJts in a downward adjustment to such Post-Commercializat~·on
Development Expenses by an amount in excess of five percent (5%), in which case such audit 7
522909-1 13 ttx

1065
 expenses shall be satisfied by Ranbaxy. All such Post-Commercialization Development Expenses
shall be charged by Ranbaxy to the LLC and shall be considered in the determination of the net
profits of the LLC for purposes of distribution of Excess Cash Flow.

3.9 Manufacturing Efforts. Notwithstanding the development efforts to be

provided by the Members for the benefit of the LLC, each of the Members acknowledge and agree
that the determinations relating to the manufacturing, marketing and sale of the Products shall be
made by the Board of Directors of the LLC. The Members further acknowledge and agree that the
LLC shall contract with Ranbaxy individually for the manufacture of Agency approved Liquid Oral
Products and may contract with Ranbaxy individually for the manufacture of Agency approved Solid
Products. Specifically, each Member hereby acknowledges and agrees that, at the conclusion of
development efforts resulting in a Product which has received Agency approval and for which the
Board of Directors determines that the LLC should undertake the manufacture of such Product,
Ranbaxy shall manufacture the LLC's requirements for the Liquid Oral Products. The form of
manufacture and supply agreement between Ranbaxy and the LLC shall be substantially identical to
the form attached hereto as Exhibit D. The form Manufacture and Supply Agreement provides,
among other things for the transfer price relating to the Products and for the manufacture of the
Products in accordance with the approved ANDA or NDA, as appropriate, the specifications provided
therein and the requirements of applicable law and FDA regulations.

The LLC shall determine the appropriate third party(ies) to manufacture and
supply its requirements for Solid Products. Each of the Members acknowledge and agree that the
LLC may select Ranbaxy and/or its Affiliates to satisfY all or any portion of its requirements for the
Solid Products. In the event the LLC shall retain Ranbaxy to satisfY the manufacture and supply of
any or all of the Solid Products, Ranbaxy and the LLC shall execute a form of manufacturing and
supply agreement substantially identical to the form attached hereto as Exhibit D, providing, among
other things, for the LLC's satisfaction ofRanbaxy's Manufacturing Expenses relating to the Products
and for the manufacture of the Products in accordance with the approved ANDA or NDA, as
appropriate, the specifications provided therein and the requirements of applicable law and FDA
regulations.

Each of the Members acknowledge and agree that the LLC shall satisfY
Ranbaxy's Manufacturing Expenses (as defined in Article I hereof) in an amount equal to the product
of(i) such Manufacturing Expenses, multiplied by (ii) 1.07.

3.10. Marketing and Sales Efforts. Each of the Members acknowledges

and agrees that the LLC hereby grants to Ranbaxy and its Affiliates exclusive marketing, promotion,
distribution and sales rights to the Products on a worldwide basis.

At the conclusion of development efforts resulting in a Product which has

received Agency approval and for which the Board of Directors determines the LLC should undertake
the marketing and sale of such Product, Ranbaxy shall, at the expense of the LLC, provide s~c: d/
personnel, facilities and equipment in such amounts as are commercially reasonable for the marketin~ ""Y

522909-1 14 ~

1066
distribution and sale of the Products on a scale and within the time frames as may, from time to time,
be established by the Board of Directors (the "Marketing and Sales Efforts").

SPI understands and agrees that Ranbaxy does not warrant or commit that the
Products will be successfully marketed, and Ranbaxy shall have no liability or responsibility to SPI,
the LLC or any third parties for any such failure in the Marketing and Sales Efforts, except to the
extent such failure results from intentional misconduct, gross negligence or willful breach of its duties
or obligations set forth herein. Ranbaxy will provide written reports to the Board and SPI on a
quarterly basis stating in detail all efforts made and in progress, and all significant progress achieved
and difficulty encountered in the performance of the Marketing and Sales Efforts since the date of the
last such report.

Ranbaxy shall keep complete, true and accurate records of all expenses
incurred by Ranbaxy in the Marketing and Sales Efforts relating to the Products, which shall include,
without limitation, advertising, marketing, sales promotion, salaries, commissions and a portion of
relevant overhead expenses, determined in accordance with U.S. generally accepted accounting
principles and Ranbaxy's historical accounting practices (the "Marketing and Sales Expenses").
Ranbaxy shall provide to the Board a detailed analysis of the Marketing and Sales Expenses relating
to each Product on a monthly basis. The LLC shall remit to Ranbaxy the Marketing and Sales
Expenses for the preceding month within thirty (30) days of receipt of the description of such
expenses from Ranbaxy for such month. SPI shall have the right to inspect, copy and audit such of
Ranbaxy's records relating solely to the Marketing and Sales Expenses at any time during reasonable
business hours upon reasonable prior notice to Ranbaxy. Any such audit shall be at the expense of
SPI, unless the audit results in a downward adjustment to such expenses by an amount in excess of
five percent (5%), in which case Ranbaxy shall satisfY such audit expenses.

3.11. NDA and ANDA Approvals. The parties agree that any
governmental approvals issued in connection with any Products developed pursuant to this
Agreement, whether an NDA, ANDA or otherwise, shall be issued in the name of, and title shall be
held in, the LLC.

3.12 Adverse Events Reporting. Each party shall promptly notifY the
other of any fact, circumstance, condition or knowledge dealing with any of the Products, Technical
Information or the Know-How of which the party becomes aware bearing upon the safety or efficacy
of such Products. Each party shall immediately notifY the other of any inspection or audit relating
to any Product by any governmental or regulatory authority. Each ofRanbaxy andSPI agrees to
cooperate with each other during any inspection, investigation or other inquiry by any governmental
authority or entity, including providing information and/or documentation as may be requested by
such governmental entity. In the event of any disagreement concerning the content or form of any
response to such governmental entity, Ranbaxy shall be responsible for deciding the appropriate
form and content of any response.

3.13 Filing of Patents. Ranbaxy will be responsible for the filing,

maintenance and prosecution in such jurisdictions as the Board shall determine and such other/f. _,
522909-l 15 ./~

1067
countries as the Board shall select, of patents on the Know-How, Technical Information or other
patentable technology owned or acquired by the LLC (the "Patents").

3.13.1 Termination of Patent. Each Member shall promptly give

notice to the other of the initiation of any interference, opposition, reissue, reexamination or
revocation proceeding and the grant, lapse, revocation, surrender, invalidation or abandonment of
any Patent Rights relevant to this Agreement. If at any time, either party wishes to discontinue the
prosecution of any Patent(s) relating to the Know-How or Technical Information, such party shall
promptly give notice of such intention to the other Member and to the Board. No such prosecution
shall be discontinued unless a decision to discontinue such patent is reached by the Board.

3.13.2. Patent Expenses. Ranbaxy shall provide funding for the Pre-
Commercialization Patent Expense. Post-Commercialization Patent Expenses incurred by Ranbaxy
shall be at the expense of the LLC and shall be reimbursed to Ranbaxy prior to any distributions as
provided in Section 3.5. Ranbaxy will provide to the Board a detailed analysis of all expenses
incurred by Ranbaxy relating to the filing, maintenance and prosecution of any Patents. SPI's
representatives shall have the right to inspect, copy and audit such records at any time during
reasonable business hours upon reasonable prior notice to Ranbaxy. Any such audit shall be at the
expense of SPI, unless the audit results in a downward adjustment to such expenses by an amount
in excess of five percent (5%).

3.14. Third Party Efforts. Each of the Members acknowledges and agrees that
Ranbaxy may enter into agreements or arrangements with other Persons in the exercise of its efforts
to develop, submit and obtain regulatory approval for and market the Products.

ARTICLE IV
MANAGEMENT AND OPERATIONS

4.1 General Powers. The business and affairs of the LLC shall be managed by
or under the direction of the LLC Board (the "Board").

4.2 Number; Qualification; Authority; Term of Office; Removal; Vacancies.

The Board shall consist of six (6) Directors, four (4) of whom shall be designated by Ranbaxy (each,
a "Ranbaxy Director") and two (2) of whom shall be designated by SPI (each, a "SPI Director"). The
initial Board shall consist ofDr. V. Ravi Chandran and Mr. V. Ramakrishnan (each a "SPI Director")
and Dipak Chattaraj, Omesh Sethi, Sandeep Parekh and John P. Reilly (each a "Ranbaxy Director").
Each Ranbaxy Director and each SPI Director shall have full power and authority to represent, bind
and commit Ranbaxy and SPI, respectively, and to take all actions required to be taken by such
Member under this Agreement. No Director shall have the power to bind the LLC, except by virtue
of his authority as an officer of the LLC. Each Director shall hold office until his successor is
designated or until his earlier resignation, removal or death. Each Member may at any time remove
a Director designated by it, with or without cause, such removal to be effective upon notice to the
other Member. Any vacancy on the Board created by resignation, removal or death of a Direc or
shall be filled by a successor Director by the Member which designated the vacating director.
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 4.3 Quorum and Manner of Acting. The presence of all six (6) Directors shall
constitute a quorum for the transaction of business. Unless a greater number is required by
applicable law or by any provision of this Agreement, the vote of a majority of the Directors present
at a meeting at which a quorum is present shall be the act of the Board.

4.4 Meetings. The Board shall meet at such regularly scheduled intervals as may
be determined by the Directors, but in no event less frequently than once each calendar quarter at the
offices of the LLC or at such other place as may be agreed upon by the Directors. If the Directors
do not agree otherwise, each quarterly meeting shall be held on the second Tuesday of each calendar
quarter beginning at I 0:00 a.m. (EST) at the offices of the LLC. The Board shall (i) formulate for
comment and adoption by the Members, annual business plans and budgets (each such and all
business plan and budgets consented to by the Members being referred to as an "Annual Business
Plan and Budget"), (ii) consult with Members regarding the progress of the LLC in achieving its
goals, (iii) review with Members plans for furthering those goals in the ensuing calendar quarter and
thereafter, and (iv) advise the Members in respect of such matters that the Members may from time
to time determine.

Meetings of the Board may be held at any time upon not less than ten (1 0) days prior
written notice, with respect to meetings at which Members are expected to attend in person at a
single location, and upon five ( 5) business days prior written or telecopy notice, with respect to
meetings to be conducted by conference telephone or similar means of communication, in each case
given by the President or any Member. Any Director may waive written notice of the meeting, in
writing, before, at or after the meeting. The attendance of a Member at a meeting of the Board shall
constitute a waiver of notice of such meeting, except where the Member attends the meeting for the
express purpose of objecting to the transaction of any business because the meeting is not lawfully
called or convened.

4.5 Action Without A Meeting. Any action required or permitted to be taken

at a meeting of the Board may be taken without a meeting if all of the Directors consent thereto in
writing, and the writing or writings are filed with the minutes of the proceedings of the Board.

4.6 Telephonic Meetings. Members of the Board may participate in a meeting

of the Board by means of a conference telephone or similar communication equipment by means of
which all persons participating in the meeting can hear each other simultaneously and such
participation in a meeting shall constitute presence in person at such meeting.

4. 7 Principal Officers. The Board shall have the authority to appoint a President
and may also appoint such other principal officers, including a treasurer and a secretary, as the Board
in its discretion determines. The principal officers of the LLC shall be appointed annually by the
Board and shall hold such office until his successor shall have been du1y appointed, or until his
earlier resignation, removal or death. Any officer may be removed with or without cause, at any
time, by resolution adopted by the Boar~ ~
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 4.8 President. If appointed by the Board, the President shall be the Chief
Executive Officer of the LLC and shal1 exercise the powers and perform the duties usual to the Chief
Executive Officer and, subject to the control of the Board, shall have general management and
control of the affairs and business of the LLC. The President shall at all times be subject to and
serve at the will of the Board and shall comply with all policies and practices established by the
Board. The actions of the President, within the scope of his authority herein provided, shall
constitute the actions of and bind the LLC.

4.9 Treasurer and Secretary. If appointed by the Board, the treasurer shall be
the principal financial officer of the partnership and may be the President. If appointed by the Board,
the secretary shall attend all meetings of the Board and record all votes in the JPinutes of the
proceedings in a book to be kept for that purpose, and shall perform such other duties as are usual
to the office of secretary and as sha11 be assigned from time to time by the Board not inconsistent
with this Agreement.

4.10 Powers of the Board. The Board and, if appointed, the President shall have
the following powers on behalf of, and in the name of and for the account of the LLC, except to the
extent otherwise specifically provided herein, including, without limitation, Section 4.11 hereof:

(a) To open, maintain and close bank accounts and draw checks or other orders
for the payment of money thereon;

(b) appoint, if it so chooses, an independent auditor to review Post-

Commercialization Development Expenses, Marketing and Sales Expenses, Manufacturing Expenses
and Patent Expenses;

(c) hiring of legal counsel, consultants or accountants on behalf of the LLC;

(d) To enter into, make and perform any contracts, agreements or undertakings
it may deem necessary, advisable or desirable, in furtherance of the purposes of the LLC as
aforestated; and

(e) To act on behalf of the LLC in all other matters.

4.11 Unanimous Consent of Members. In limitation of the powers of the Board

and, if appointed, the President as provided for in Sections 4.1, 4.7 and 4.10 hereof, the fo11owing
actions shall require the unanimous consent of each of the Members:

(a) Require any Member to mak.e any capital contribution or investment in the
LLC;

(b) Any merger of the LLC with or into, or other consolidation of the LLC with,
any Person, or any sale, transfer, lease or other disposition of all or substantially all of the LL~

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assets or any purchase, lease or other acquisition by the LLC of all or any substantial part of the
assets of another person or entity;

(c) Any amendment or modification to, or recision of a11 or any portion of this
Agreement or the Certificate of Formation of the LLC, or any other act or action resulting in any
change in the status of the Company as a Delaware Limited Liability Company;

(d) Except to the extent permitted by Article VIII hereof, the dissolution or
liquidation of the LLC;

(e) The adoption of any business plan or budget of the LLC, including annual
business plans and budgets or material modifications to same;

(f) The incurrence of any Post-Commercialization Development Expenses to be

funded by any Member for the account of the LLC; and

(g) The admission of any Person as a Member of the LLC.

ARTICLEV
ACCOUNTING AND TAX MATTERS

5.1 Fiscal Year. The fiscal year of the LLC shall be the calendar year.

5.2 Accounting Method. The books and records of the LLC shall be maintained
on the method of accounting chosen by the Board and otherwise in accordance with generally
accepted accounting principles consistently appbed and shall show all items of income and expense.
The Board shall maintain at the LLC's principal office fu]] and accurate books and records of the
LLC's business.

5.3 Access to Information. All such reports provided by the Board shall be at
the expense of the LLC. Each Member and his respective attorneys, accountants and other advisors,
shall have the right at al1 times during usual business hours and upon reasonable notice, to examine,
review, audit, and make copies ofthe books and records of the LLC. Each Member sha11 maintain
all information relating to the LLC contained in such reports, books and records in strict confidence.
Each Member making such examination, review, audit or copying shaH bear all of the expenses
incurred by such Member and the LLC in any such examination, review, audit and copy'ing.

5.4 Reports and Audits. (a) The books of accounts shall be closed promptly at
the end of each fiscal year. Within ninety (90)) days thereaft.er, a written report shall be delivered
to each Member which written report shall include a statement of profits and losses and changes in
financial position for the year then ended, a balance sheet as of the close of the year and each
Member's Percentage Interest as of the end of such year, a11 prepared in accordance with generally
accepted accounting•principals in the United States and, if so determined by the Board, audited~by
the LLC's independent accountants accompanied by such accountant's report thereon. The repo
522909-1 19 .tx

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shall also contain such additional statements with respect to the status of the LLC's operations and
transactions by the LLC as are material to the LLC and as are considered necessary by the Board.

(b) The LLC shall prepare and deliver to each Member, within forty-five (45))
days after the end of each fiscal quarter, unaudited financial statements of the LLC and an estimate
of such Member's taxable income for such quarter.

5.5 Preparation of Tax Returns. The Board, or the President if so appointed,

shall cause federal, state, local and foreign income tax returns of the LLC to be prepared. As
promptly as practicable after the end of each fiscal year, the Board, or if appointed, the President,
shall cause to be prepared and delivered to each Member a statement of such Member's share of the
LLC's taxable income or loss for the preceding fiscal year and any other information necessary in
preparing a Member's federal, state, local and foreign income tax return with respect to the LLC.

5.6 Capital Accounts and Allocations. (a) A separate capital account (a

"Capital Account") shall be maintained on the LLC's books for each Member. In the event any
Interest is transferred in accordance with the terms of this Agreement, the transferee shall succeed
to the Capital Account of the transferor to the extent it relates to the transferred Interest.

The Capital Account of a Member shall be increased by:

(i) the fair market value of assets and services contributed to the LLC
(determined as of the date of contribution) by such Member;

(ii) the amount of money contributed to the LLC by such Member;

(iii) such Member's share of net income (or items thereof) allocated to its Capital
Account pursuant to this Agreement;

(iv) LLC liabilities assumed by such Member or which are secured by any LLC
property distributed to such Member; and

(v) any other amounts required by Treasury Regulation Section 1.704-l(b).

The Capital Account of a Member shall be decreased by:

(i) the amount of money and the fair market value of any LLC property
distributed by the LLC (determined as of the date of distribution) to such Member pursuant to the
provisions of this Agreement;

(ii) such Member's share of net losses (or items thereof) allocated to its Capital
Account pursuant to this Agreement; and

(iii) any other amounts required by Treasury Regulation Section 1. 704-1 (b)p:( _,
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 (b) As of the end of each :fiscal year of the LLC, the net income or net loss of the
LLC (computed in accordance with generally accepted accounting principles) shall be allocated to
the Member's in accordance with their relative Percentage Interest and such Member's Capital
Account shall be appropriately adjusted to reflect each Member's allocations of net income and net
losses and such other adjustments as shall be required by Section 704(b) of the Code and the
regulations promulgated thereunder.

5.7 Tax Status. The Members intend that the LLC shall be treated as a
"partnership" for federal, state, local and foreign income tax purposes and agree to take all
reasonable actions, including the amendment of this Agreement and the execution of other
documents as may be reasonably required to qualify for and receive such treatment as a "partnership"
for such income tax purposes.

5.8 Tax Matters Member. Ranbaxy shall be the "tax matters partner" of the
LLC as such term is de:fined in Section 623l(a)(7) of the Code. The Tax Matters Partner shall cause
all federal, state and local tax returns of the LLC to be prepared for each taxable period for which
such returns are required to be filed and shall cause such returns to be timely filed. The Tax Matters
Partner shall provide copies of all such rerums to all Members at a reasonable time prior to the :filing
of such returns.

5.9 Bank Accounts. All funds of the LLC shall be deposited in an account or
accounts opened in the LLC's name and invested at the Board's discretion. The Board shall
detem1ine the institution or institutions at which the accounts will be opened and maintained, the
types of accounts and the Persons who will have authority with respect to the accounts and the funds
therein.

ARTICLE VI
DISTRIDUTIONS

6.1 Withdrawals. A Member may not make any withdrawal of capital from the
LLC except with the prior written consent of each other Men1ber.

6.2 Distributions of Excess Cash Flow. As soon as practicable after the close
of each calendar quarter, and subject to the priority distributions to Members provided herein to
satisfy Post-Commercialization Development Expenses, Manufacturing Expenses, Marketing and
Sales Expenses and Post-Commercializatiot:t Patent Expenses, the Board shall cause the LLC to
distribute the Excess Cash Flow of the LLC to the Members in accordance with the sections 3.3, 3.4,
3.5, 3.5.1 and 6.3.

6.3 Reserves. Notwithstanding anything to the contrary contained in Section 6.2,

the Board may defer the distribution of the Excess Cash Flow and use such Excess Cash Flow to
establish reserves (the "Reserves") for the payment of LLC expenses, debt payments, capital

/<
improvements, replacements, distributions, contingencies, working capital and all other purp~sesl(/
S229Q9.1 21

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all as determined by the Board. Notwithstanding the foregoing, the Board shall meet on the second
Tuesday of each November during the term of this Agreement to determine the amount of Excess
Cash Flow from the LLC's current year's operations to retain in a previously taxed income account
as an accumulation of earnings (the "Retained Earning Reserve"); provided, however, that in no
event shall the amount of the Retained Earnings Reserve for such year (a) be less than ten percent
(10%) of such year's Excess Cash Flow, or (b) exceed fifteen percent (15%) of such year's Excess
Cash Flow, unless otherwise unanimously agree<l by the board

ARTICLE VII
TRANSFERS OF LLC INTERESTS

7.1 Transfers ofLLC Interests. Except as expressly permitted by the terms of

this Agreement, no Member may Transfer all or any part of its LLC Interest unless and until such
Transfer has been approved in writing by all of the Members. Any purported Transfer made in
violation of this Section 7.1 shall be void ab initio and without effect. Any Member who purports
to Transfer all or any part of its LLC Interest in violation of this Section 7.1 shall be deemed to be
a "Defaulting Member." Notwithstanding the foregoing, each Member may Transfer all, but not less
than all, of its LLC Interest to a Permitted Transferee; provided, however, that in each case such
Transferee shall agree in writing with all persons then parties to this Agreement to hold such LLC
Interests subject to a1I of the provisions of this Agreement and upon execution of such writing
become a Member for all purposes of this Agreement.

7 .1.1 Right of First Refusal; Certain Transfers. Should any Member

desire to transfer any of its LLC Interest, in whole or in part (the "Selling Member"), it shall first
offer all of its LLC Interest for sale to the other Member and provide the other Member with written
notice of its intention to sell its LLC Interest, which written notice shall contain relevant information
pertaining to any potential third-party purchaser including the identity of such person, terms of any
offer, and such other infonnation as the other Member may request. The other Member, within
ninety (90) days after receipt of such notice, shall have the right and option to purchase (in the time
frame hereinafter provided) all, but not less than all, of the Selling Member's Interest at the purchase
price and on the terms to be negotiated in good faith by the parties. The exercise of the option to
purchase the LLC Interest hereunder shall be made by the delivery of a written notice to the Selling
Member within the ninety (90) day period after receipt of the Selling Member's offer to sell. The
closing of the purchase of the LLC Interest by the other Member shall take place within 60 days of
the date of such Member's exercise of the option to purchase as provided herein. Upon receipt of
the purchase price for the LLC Interest to sold by the Selling Member in cash or other consideration
mutually agreed to by the parties, the Selling Member shall transfer the LLC Interests to the
purchaser and execute such appropriate instruments and agreements as may be reasonably necessary
to affect such transfer. In the event the other Member does not exercise its option to purchase the
Selling Member's Interest, or the parties are unable to reach agreement on the terms of the sale
within the time period provided above, the Selling Member may sell its Interest on terms no less
favorable than those offered to the other Member during the three-month period then commencing,
provided such third-party agrees to be bound by the terms of this Agreement. lf during such three
month period the terms of the proposed sale change in any material respect to be less favorable t~ /
522909-1 . 22 / ~

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•
the Selling Member than those offered to the other Member, or if within such three-month period,
such Selling Member has not transferred all of the LLC Interest subject to the offer under this
section, the Selling Member must re-offer its LLC Interests to the other Member in accordance with
the time and manner as provided herein before again seeking to Transfer such LLC Interest.

Any transfer of LLC Interest made pursuant to this Section 7.1.1 shall be permitted
under the terms of this Agreement only if the transferee shall agree in writing to be bound by the
terms of this Agreement.

7.1.2 Membership Rights. Except as provided in Section 7.1.1, no

Member may Transfer his Membership Rights nor shall there be admitted to the LLC a new Member
unless such Transfer or admission is approved by the all of the Members.

7.2 Withdrawals. No Member may resign, dissolve or otherwise withdraw from

the LLC unless and until such resignation, dissolution or withdrawal has been approved in writing
by the other Member. Any other provision of this Agreement to the contrary notwithstanding, if a
Member resigns, dissolves or otherwise withdraws from the LLC without such approval, such
Member shall thereafter be deemed to be a "Defaulting Member." A Member's dissolution,
Bankruptcy or the termination of a Member's Rights in the LLC (by withdrawal or otherwise) shall,
subject to the provisions of Article VIII, not dissolve the LLC, and such Member's legal
representative shall have all the rights of the withdrawing Member's LLC Interest for the purpose of
settling the Member's estate and effecting any other transactions permitted by this Article VII. Any
Member who voluntarily or involuntarily withdraws shall not be entitled to receive in liquidation,
pursuant to § 18-604 of the Act, the fair value of the Member's LLC Interest as of the date the
Member ceased to be a Member of the LLC; however, subject to the provisions of Section 8.6, such
withdrawing Member shall be entitled to receive such distributions as are made from time to time
to all Members.

7.3 Other Conditions of Transfers. In addition to the satisfaction of the

conditions set forth in Section 7.I, no Member may Transfer all or any portion of any LLC Interest
unless the following conditions ("Conditions ofTransfer") are satisfied:

7 .3.1. The Transfer will not require registration of the LLC Interests under
any federal or state securities laws;

7 .3.2. The transferee delivers to the LLC a written instrument agreeing to be

bound by the terms of this Agreement;

7.3.3. The Transfer will not result in the termination ofthe LLC pursuant to
Code Section 708;

7.3.4. The Transfer ~~l~o~ result in the LLC being subject to the
Investment Company Act of 1940, as amende')t l:
522909-l 23~

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 7.3.5. The transferor or the transferee delivers the following infonnation to
the LLC: (i) the transferee's taxpayer identification number; and (ii) the transferee's initial tax basis
in the transferred interest; and

7.3.6. The Transfer of an LLC Interest pursuant to this Section 7.3 shall not
result in the Transfer of any of the Member's other Membership Rights, if any, and, unless the
Transfer ofMembership Rights is approved in accordance with Section 7.1 or is effective from one
Member (or his legal representative) to another Member, in accordance with Section 7.1.1, the
transferee of an LLC Interest shall have no right to: (i) become a Member; or (ii) exercise or enjoy
any Membership Rights.

ARTICLE VIII
DISSOLUTION

8.1 Events of Dissolution. The LLC shall continue until dissolved upon the
earliest to occur of the following events (the "Events of Dissolution"):

(i) January 1, 2030; or

(ii) the written consent of all Members to terminate and dissolve the LLC;
or

(iii) the death, retirement, resignation, expulsion, Bankruptcy, or

dissolution of a Member or the occurrence of any event which terminates the continued Membership
of a Member in the LLC unless the business of the LLC is continued by the remaining Member
holding a majority of LLC Interests within ninety (90) days following the occurrence of any such
event; or

(iv) the entry of a decree ofjudicial dissolution und.er §18-802 of the Act.

8.2 Liquidating Distributions. (a) Upon an Event of Dissolution, a Person

designated by the Board (the "Liquidating Trustee''), shall take full account of the assets and
liabilities of the LLC a') of the date of such Event of Dissolution and shall proceed with reasonable
promptness to liquidate the LLC's assets and terminate its business. The cash proceeds from such
liquidation, together with any other net assets of the LLC, shall be applied first to the payment of all
debts, obligations and other liabilities of the LLC, including all items relating to such liquidation and
all reserves that the Liquidating Trustee determines, in its discretion, to be appropriate. Amounts
remaining after such payments have been made, shaH be distributed to the Members as follows:

(i) first, to the payment of all debts owed to Members, including, without
limitation, all unreimbursed Development Expenses, Man~.fa~ng and Sales Expenses and Patent
Expenses in proportion to the amounts then owed to theh y

522909·.1 24 ~

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 (ii) second, to each Member in proportion to the amount of its unreturned capital,
until the amount of such unreturned capital equals zero; and

(iii) third, to each of the Members in accordance with each Member's Percentage
Interest, provided that any distribution in·kind shall be considered for the purpose of such
distribution to have been a distribution of such assets by the LLC at fair market value thereof and
a distribution of such proceeds to the Member receiving such assets.

(b) The liquidation of the assets and the discharge of liabilities shall occur in an
orderly manner so as to enable the Members to reasonably maximize the proceeds therefrom. In the
event of such liquidation, each Member shall promptly pay to the LLC any amounts owed to the
LLC, whether or not then due and payable.

8.3 Final Accounting. If the LLC is liquidated, each Member shall be furnished
with a statement certified by the independent public accountants of the LLC, which shall set forth
the assets and liabilities of the LLC and the Interest of each of the Members as of the date of the
complete liquidation, taking into account distributions and payments as provided in Section 8.2
hereof, the allocation of all gain or loss realized by the LLC on the liquidation of property and assets
of the LLC, the allocation of any tax attributes, and any other matter not inconsistent with this
Agreement deemed appropriate by such accountants.

8.4 Filing of Certificate of Cancellation. If the LLC is dissolved, the Members

shall promptly have filed certificate of cancellation with the Secretary of State of Delaware. If there
are no remaining Members, the articles shall be filed by the last Person to be a Member; if there are
no remaining Members and no Person who last was a Member, the articles shall be filed by the legal
or personal representative ofthe Person who last was a Member.

8.5 Default. If a Member fails to perform any of its obligations under this
Agreement or violates any of the terms of this Agreement (an "Event of Default"), the other Member
shall have the right (in addition to all of its other rights and remedies under this Agreement, at law
or in equity) to give such Member written notice of such default at any time prior to the curing of
such default. Unless such Member cures such default within thirty (30) days after receipt of such
notice, then the Member shall be a "Defaulting Member" hereunder. Notwithstanding the foregoing
of this Section 8.5, in the event that a Member violates the terms of this Agreement and such
violation constitutes gross negligence or willful misconduct, then such Member shall immediately
be deemed to be a "Defaulting Member" and shall not be entitled to receive notice of such default
or an opportunity to cure such default. If a Member is a Defaulting Member as that term is defmed
in this Section 8.5 or elsewhere in this Agreement, the other Member may do one or more of the
following, at the same or different times, in addition to all of their other rights and remedies:

(i) bring any proceeding in the nature of specific performance, injunction or

other equitable remedy, it being acknowledged by each of the Members that damages at law may be
an inadequate remedy for an Event of Default under this Agreement, and the Defaulting Member
may be compelled to cure such default; ~/
522909·1 . / ~ 25

1077
 (ii) bring any action at Jaw by or on behalf of the Members or the LLC,
individually or collectively, as may be permitted in order to recover damages, and the Defaulting
Member shall be liable for all damages suffered by the LLC (other than indirect or consequential)
and the other Members as a result of such default;

(iii) require~ by written notice from such other Member to the LLC, that any
amount otherwise payable from the LLC to the Defaulting Member shall be paid to the other
Member or the Board in an amount equal to the amount (including damages) owing from the
Defaulting Member to the other Member, or to the LLC; and

(iv) remove the Defaulting.Member as a Member of the LLC; which removal

sha11 constitute a withdrawal under Section 7.2.

8.6 Costs and Expenses under Certain Circumstances. ln the event of a

dissolution ofterrnination of the LLC resulting from a breach by any Member of the provisions of
this Agreement, the breaching Member shall indemnify and hold harmless the other Member from
and against any and all costs and out-of-pocket expenses (including reasonable attorneys' fees)
reasonably incurred by the other Member as a result of such dissolution.

ARTICLE IX
CONFIDENTIALITY

9.1 Confidentiality. The Members recognize that, in connection with the

operations of the LLC and their transactions in connection therewith, the Members and certain of
their respective Affiliates may furnish and disclose to each other and certain of their respective
Affiliates confidential and proprietary technical, commercial and other information ("Information"),
including, without limitation, information relating to the LLC's and each Member's (and certain of
its Affiliates') organization, personnel, business activities, policies, tinances, costs, marketing plans,
projected revenues, technology, rights, obligations, liabilities and strategies.

(b) [nformation so furnished or disclosed by the LLC, either Member or their

respective Affiliates is to be considered confidential, and for five (5) years after the termination of
this Agreement, each Member, to the extent it comes into possession oflnformation of the LLC or
the other Member, shall not use or exploit such Information for its own benefit of its Affiliates or
in connection with its business relationships with customers of such Member or its Affiliates (other
than customer relationships through the LLC) and shall take all reasonable care to insure that such
Information shall not be disclosed to any third party, including imposing reasonable contidentiality
requirements with respect to such Information on its or its Affiliates, employees, agents, counsel,
accountants or other representatives, except insofar as such Information is allocated to such Member
upon termination of the LLC or insofar as (i) such disclosure may be specifically authorized in
writing from time to time by the LLC or the Member or its Affiliate furnishing such Information, (ii)
such fnformation is necessarily disclosed by its commercial use in the operations of the LL~h~: .:?( /
pursuant to any right or license granted by the LLC, (iii) the receiving Member can demonstrate
522909-I 26
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v-

1078
 such Information was previously made public by the furnishing Member, (iv) the receiving Member
can demonstrate that such Information was previously disclosed by the furnishing Member without
restriction to a third party, (v) the receiving Member can demonstrate that such Information is in the
public domain otherwise than as a consequence of a breach of its obligations hereunder, (vi) such
Information is known by the LLC or the receiving Member or Affiliate without proprietary
restrictions at the time of receipt of such Information or (vii) such disclosure is required under
compulsion of law, including subpoena, civil investigative demands, oral questions -or
interrogatories, or other compulsory process; provided that the LLC or the other Member, as the case
may be, shall be given notice of service of such demand or process and a reasonable opportunity to
defend against such demand or process.

9.2 No Furnishing of Competitive Information. Notwithstanding the

foregoing, the Members shall refrain from furnishing and disclosing to each other or to any of their
respective Affiliates any Information with respect to business activities of either Member (or any of
their respective Affiliates) that are unrelated to the LLC.

ARTICLE X
REPRESENTATIONS AND WARRANTIES

10.1 SPI and Ranbaxy Representations and Warranties. Each Member

hereby represents and warrants to the other Member as follows:

(a) Such Party (i) is a corporation duly organized, validly existing, and
in good standing under the laws of its jurisdiction of incorporation with its principal place of
business as indicated in Section 12.1 of this Agreement; (ii) is duly qualified as a corporation and
in good standing under the Jaws of each jurisdiction where its ownership or lease of property or the
conduct of its business requires such qualification, where the failure to be so qualified would have
a material adverse effect on the financial condition of such Party or the ability of such Party to
perform its obligations hereunder; (iii) has the requisite corporate power and authority and the legal
right to conduct its business as now conducted and hereafter contemplated to be conducted; (iv) has
all necessary licenses, pennits, consents, or approvals from or by, and has made all necessary notices
to all governmental authorities having jurisdiction, to the extent required for such ownership and
operation; and (v) is in compliance with its certification of incorporation and bylaws.

(b) The execution, delivery and perfonnance of this Agreement by such

Member and all instruments and documents to be delivered by such Member hereunder: (i) are
within the corporate power of such Member; (ii) have been duly authorized by all necessary or
proper corporate action; (iii) are not in contravention of any provision of the certificate of
incorporation or bylaws of such Member; (iv) wiJI not violate any law or regulation or any order or
decree of any court of governmental instrumentality; (v) will not violate the terms of any indenture,
mortgage, deed of trust, lease, agreement, or other instrument to which such Member is a party or
by which such Member or any of its property is bound, which violation would have a materi~l
adverse effect on the financial condition of such Member or on the ability of such Member to .
522909-1 . 27 ttx

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 perform its obligations hereunder; and (vi) do not require any filing or registration with or the
consent or approval of, any governmental body, agency, authority or any other person, which has not
been made or obtained previously.

(c) This Agreement has been duly executed and delivered by such
Member and constitutes a legal, valid and binding obligation of such Member, enforceable against
such Member in accordance with its terms, except as such enforceability may be limited .by
applicable insolvency and other laws affecting creditors' rights generally or by the availability of
equitable remedies.

(d) Such Member follows reasonable commercial practices common in

the industry to protect its proprietary and confidential information, including requiring its employees,
consultants and agents to be bound in writing by obligations of confidentiality and non-disclosure
and requiring its employees, consultants and agents to assign to it any and all inventions and
discoveries discovered by such employees, consultants and/or agents made within the scope of, and
during their employment, and only disclosing proprietary and confidential information to the Third
Parties pursuant to written confidentiality and non-disclosure agreements.

10.2 SPI & Ranbaxy Representations and Warranties. SPI and Ranbaxy
hereby represents and warrants the following to each other:

(a) Such Party is the sole owner of or has conveyed to the LLC, the entire
right, title and interest in and to their respective Products, Technical Information and the Know-
How, and no other person (including any govermnent) has any license, claim or other right or interest
in or to the Products, Technical Information and the Know-How including any related patents, and
the Products, Technical Information and the Know-How may be conveyed to, and utilized by, the
LLC without payment of any royalty, fee or incurring any other obligation to any other Person
(including any government).

(b) The making, using, selling or offering for sale of any Products,
Technical Information and the Know-How will not infiinge, misappropriate or otherwise conflict
with any intellectual property or other rights of any third party, and the Products may be
commercialized hereunder without payment of any royalty, fee or incurring any other obligation to
any other Person.

(c) Such Party is not aware of any infringement of the Products,

Technical Information and the Know-How. or any misappropriation of the Products, Technical
Intonnation and the Know-How by any third party.

(d) All of the research and development work performed in connection

with any of the Products, Technical Information and the Know-How by such Party prior to the date
of this Agreement was performed solely by through its employees and not with any third parties, and
was performed in accordance with applicable law and in compliance with all applicable regul~

522909-1 28 ~

r.----·- ·- 1080
 requirements, and all such rights have been properly assigned to such Party, including any and all
rights of any employees or consultants.

(e) There are no judicial, arbitral, regulatory or administrative

proceedings or investigations, claims, actions or suits relating to the Products, Technical
Information and the Know-How pending against such Party or its affiliates in any court or by or
before any governmental body or agency including, products liability or compliance with applicable
regulatory laws and, to the best of such Party's knowledge, no such judicial, arbitral, regulatory or
administrative proceedings or investigations, acts or suits have been threatened against such Party
or its affiliates.

ARTICLE XI
INDEMNIFICATION

11.1 Liability for Actions or Inactions. (a) Except as provided in this Article XI,
neither Member, nor its directors, officers, employees or agents, nor any Director ofthe LLC shall
be liable, responsible or accountable in damages or otherwise, to the other Member or the LLC for
any loss, liability, damage or expense arising from any act or omission by any of such persons, unless
such act or omission constituted fraudulent or willful misconduct, was performed or omitted in bad
faith, constituted gross negligence or willfully breached in any material respect a duty or obligation
assumed or required to be performed by this Agreement. This Article XI shall not apply to the acts
or omissions of either Member with respect to any provision of this Agreement or any other
agreement between the LLC and such Member or any of its Affiliates.

(b) The officers of the LLC shall not be liable, in damages or otherwise, to the
LLC or either Member for any act or failure to act on behalf of the LLC, which act was within the
scope of the authority conferred on such officer by this Agreement or the Board, unless such act or
omission constituted fraudulent or willful misconduct, was performed or omitted in bad faith or
constituted gross negligence.

11.2 Indemnification. (a) The LLC shall indemnify and hold harmless its officers
and the Members, their respective Affiliates and their respective Directors, directors, officers
employees and agents (each, an "Indemnified Party") from and against any and all losses, costs or
expenses (including reasonable attorney's fees and expenses) incurred by any of them by reason of
any acts, omissions or alleged acts or omissions in connection with or in any way relating to the Joint
Venture Business, not in contravention of the standard set forth in Section 11.1 (a) or Section 11.1 (b)
hereof, as the case may be, where such loss or expense is incurred as a result of any actual or
threatened civil, criminal, administrative or investigative suit, action, proceeding or claim; provided,
however, that if the Indemnified Party is ultimately found by any court of competent jurisdiction or
by any arbitrator to have acted or omitted to act in a manner which is in contravention of the standard
set forth in Section 11.1 (a) of Section 11.1 (b) hereof, as the case may be, the Indemnified Party shall
repay all amounts paid or reimbursed by the LLC under this Article XI. The LLC shall not beA' ~
522909-l 29 ~v

1081
I
 required to indemnify any Indemnified Party for any amount paid or payable by such Indemnified
Party in the settlement of any suit, action, proceeding, investigation or claim agreed to without the
written consent of the LLC. Promptly after receipt by the Indemnified Party of notice of its
involvements in any suit, action, proceeding or investigation, the Indemnified Party shall, if a claim
in respect thereof is to be made against the LLC under this Section 11.2(a), notify the LLC in writing
of such involvement No failure by the Indemnified Party so to notify the LLC shall relieve the LLC
from the obligation to indemnify the Indemnified Party, unless the LLC shall have been materially
prejudiced by such failure. To the extent it wishes, the LLC shall be entitled to assume the defense
of any action which is the subject of this Section 11.2{a), with counsel reasonably satisfactory to the
· Indemnified Party; provided, however, that the Indemnified Party may retain its own counsel at the
expense of the LLC if representation of both the Indemnified Party and the LLC would, in the
reasonable judgment of such Indemnified Party, be inappropriate due to actual or potential differing
interests between them.

(b) As between the Members, no Member shall be liable or bear responsibility

for more than such Member's proportionate share (based on its Percentage Interest at the time such
liability or obligation is incurred) of each and all of the liabilities and obligations of the LLC. In the
event that either Member shall be required to pay, discharge or otherwise bear responsibility for any
amount of any liability or obligation of the LLC (including for such purpose any amount due from
the LLC under Section I 0.2(a) hereof) in excess of such Member's proportionate share thereof (other
than a liability or obligation arising under circumstances that, as to such Member, were in
contravention of the standard set forth in Section 11.1 (a) or Section 11.1 (b) hereof, as the case may
be), the other Member hereby agrees to indemnify, hold harmless and reimburse such Member
against and for such other Member's proportionate share.

(c) Each Member shall indemnify, defend and hold harmless the LLC and the
other Member from and against any and all demands, claims, actions or causes of action,
assessments, losses, damages, liabilities, costs and expenses (including, without limitation, interest,
penalties and reasonable attorney's fees, disbursements and expenses) arising out of or resulting from
any breach of the representations contained herein or any unauthorized action taken or commitment
or obligation incurred by it.

(d) The agreements contained in this Section 11.2 shall survive the withdrawal
of any Member from the LLC and any termination or dissolution of the LLC; provided, however, in
no event shall any Member be liable for any liability or obligation incurred following such
withdrawal, termination or dissolution.

11.3 Insurance. The LLC may, to the full extent permitted by law, purchase and
maintain insurance against any liability that may be asserted against any person entitled to indemnity
pursuant to Section 11.2 hereof.

11.4 WARRANTY DISCLAIMER. EXCEPT AS OTHERWISE EXPRESSLY

PROVIDED IN THIS AGREEMENT, NEITHER MEMBER MAKES ANY WARRANTY WITH
RESPECT TO ANY TECHNOLOGY, GOODS, SERVICES, RIGHTS OR OTHER SUBJ~~~ ~
522909-1 30 ~.)

1082
I
MATTER OF THIS AGREEMENT AND HEREBY DISCLAIMS WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-
INFRINGEMENT WITH RESPECT TO ANY AND ALL OF THE FOREGOING.

11.5 LIMITED LIABILITY. NOTWITHSTANDING ANYTHING ELSE IN

THIS AGREEMENT OR OTHERWISE, NEITHER SPI NOR RANBAXY SHALL BE LIABLE
WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY
CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE
THEORY FOR (I) ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE
DAMAGES OR LOSS PROFITS OR (II) COST OF PROCUREMENT OF SUBSTITUTE GOODS,
TECHNOLOGY OR SERVICES.

ARTICLE XII
GENERAL

12.1 Notices. Any notices required or permitted to be given hereunder shall be

delivered in person or by DHL, Federal Express( or other courier service requiring signature upon
receipt) or sent by mail, postage prepaid, or facsimile (confirmed by a telephone conversation with
the recipient) to the address set forth below. The parties may change the address at which notice is
to be given by giving notice to the other party as herein provided. All notices shall be deemed
effective upon receipt by the party to whom it is addressed.

Ifto SPI: Signature Pharmaceuticals , Inc.

P.O. Box 866248
Plano, Texas
Attn: V. Ravi Chandran, Ph.D.
Telephone: (214) 418-6591
Facsimile: (970) 236-4876

lfto Ranbaxy: Ranbaxy Pharmaceuticals Inc.

600 College Road East
Princeton, New Jersey 08540
Attn: President
Telephone: (609) 720-9200
Facsimile: (609) 720-1155

With a copy to: St. John & Wayne, LLC

Two Penn Plaza East
Newark, New Jersey 07105
Attn: John P. Reilly, Esq.
Telephone: 973-491-3~~~ ~
Facsimile: 973-491-35,~

522909-1 31 ~

1083
 12.2 Waiver. No consent or waiver, express or implied, by any Member to or of
any breach or default by any other Member in the performance by any other Member of its
obligations hereunder shall be deemed or construed to be a consent to or waiver of any other breach
or default in the performance by such other Member of the same or any other obligation of such
Member hereunder. Failure on the part of a Member to complain of any act or failure to act of any
other Member or. to declare such other Member in default, irrespective of how long such failure
continues, shall not constitute a waiver by such Member of its rights hereunder.

12.3 Severability. If any term or provision of this Agreement or the application

thereof to any person or circumstances shall be invalid or unenforceable to any extent, the remainder
of this Agreement and the application of such provisions to other persons or circumstances shall not
be affected thereby and shall be enforced to the greatest extent permitted by law.

12.4 Binding Agreement. Subject to the restrictions on Transfers set forth herein,
this Agreement shall inure to the benefit of and be binding upon the Members and their respective
heirs, executors, legal representatives, successors and assigns. None of the provisions of this
Agreement are intended to be, nor shall the provisions be construed to be, for the benefit of any third
party. Whenever, in this Agreement, a reference to any party or Member is made, such reference
shall be deemed to inc1ude a reference to the permitted heirs, executors, legal representatives,
successors and assigns of such party or Member.

12.5 Additional Remedies. The rights and remedies of any Member hereunder
shall not be mutually exclusive, i.e., the exercise of one or more of the provisions hereof shall not
preclude the exercise of any other provisions hereof The respective rights and obligations hereunder
shal1 be enforceable by specific performance, injunction or other equitable remedy, but nothing
herein contained is intended to, nor shall it, limit or affect any other rights in equity or any rights at
law or by statute or otherwise of any party aggrieved as against the other for breach or threatened
breach of any provision hereof, it being the intention of this Section 12.5 to make clear the agreement
of the Members that the respective rights and obligations of the Members hereunder shall be
enforceable in equity as well as at 1aw or otherwise.

12.6 Assignment. Without the prior written consent of the other Member hereto,
no party may sell, assign, transfer, mortgage, hypothecate or otherwise dispose of or encumber or
pennit or suffer any encumbrance of any right, interest or obligation hereunder, and any purported
sale, assignment, transfer, mortgage, hypothecation or other disposal or encumbrance of any right,
interest or obligation hereunder without such consent shall be void and without effect.

Notwithstanding anything to the contrary contained herein, this Agreement shall

survive a change of control of either of the Members, including, without limitation, the sale of all
or substantially all of the assets or stock of a Member or the merger or consolidation of a Member
with any Pers~

522909-1 32

r·-- 1084
 12.7 No Third Party Beneficiaries. Nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights or remedies under or by reason of this
Agreement, except as expressly set forth herein.

12.8 Arbitration. In the event of any disputes that are not resolved by the Board
or the Members shall be resolved exclusively through arbitration and settled by a panel of three (3)
arbitrators in New York, New York(one ofwhom shall be selected by SPI, one ofwhom shall be
selected by Ranbaxy and the third of whom shall be selected by the arbitrators selected by SPI and
Ranbaxy) who shall hold a hearing and make an award within sixty (60) days of the filing for
arbitration. The arbitrators shall be selected and the proceedings and award conducted in accordance
with the rules of the American Arbitration Association then pertaining. The arbitrators, in addition
to any award that they shall make, shall have the discretion to award the prevailing party the costs
of the proceedings together with reasonable attorney's fees. Any award made hereunder may be
docketed in a court of competent jurisdiction. In the event there are any issues which are not
arbitrable as a matter oflaw, and as a condition precedent to a court making a determination on any
non-arbitrable issues, any issues which may be arbitrated shall first be determined by arbitration
pursuant to this Section 12.8.

12.9 Further Actions. Each of the Members hereby agrees to execute and deliver
hereafter such further instruments and do such further acts and things as may be required or
appropriate to carry out the intent and purpose of this Agreement and which are not inconsistent with
the terms hereof.

12.10 Use of Certain Terms. The definitions in Article I apply equally to both the
singular and the plural; any pronoun used in this Agreement shall include the corresponding
masculine, feminine and neuter; the words "include" and "including" shall be deemed to be followed
by the phrase "without limitation"; and the terms "hereof" and "herein" shall refer to the particular
agreement or document in which such term appears.

12.11 Counterparts. This Agreement may be executed in one or more counterparts

with each such counterpart deemed to be an original hereof and all of such counterparts deemed to
be one and the same Agreement.

12.12 Entire Agreement. This Amended and Restated Joint Venture and Operating
Agreement and the Manufacturing and Supply Agreement attached as Exhibit D contain the entire
agreement between the parties hereto with respect to the LLC. Such Agreements supersede all prior
written and oral statements, including, without limitation, the Original Operating Agreement, which
is hereby terminated, and any prior representation, statement, condition or warranty. No variations,
modifications, or changes herein nor any waiver of any provision hereof shall be binding unless set
forth in a document duly executed by or on behalf of each of the Members.

12.13 Governing Law. This Agreement shall be governed by and construed in

accordance with the laws of the State ofDelaware (other than its rules as to conflicts oflaw to~

522909-1 33 ~

1085
extent that such rules would result in the application of the laws of some other jurisdiction). To the
extent the provisions of this Agreement are inconsistent with the Delaware Limited Liability
Company Act, the provisions of this Agreement shall apply.

IN WITNESS WHEREOF, the parties hereto executed this Agreement

effective as of the date written above.~ .

Members:

SIGNATURE PHARMACEUTICALS, INC.

Name: ~Ravi Chandran, Ph.D.

Title:

RANBAXY PHARMACEUTICALS INC.

J.;? ~ ltu:V?~
Name: Dipak Chattaraj ~
Title: President
1V-

522909-l 34

1086
 Exhibit A

Form of Certificate ofFormation

STATE OF DELAWARE

CERTIFICATE OF FORMATION

OF

RANBAXYSIGNATURELLC

This Certificate of Formation ofRanbaxy Signature LLC (the "Company") is being executed
by the undersigned, an authorized natural person, for the purpose of forming a limited liability
company pursuant to the Delaware Limited Liability Company Act, being Chapter 18, Title 6 of the
Delaware Code, as amended. The undersigned hereby certifies that:

FIRST: The name of the limited liability company is Ranbaxy Signature LLC

SECOND: The address of its registered office in the State of Delaware is 1013 Centre Road
in the City ofWilmington, County ofNew Castle. The name of its Registered Agent at such address
is the Corporation Service Company.

IN WITNESS 'tiE/OF, the undersigned has executed this Certificate of Formation on the
18"' day ofJuly 2000'/V

Is/ Marina Solo, Esq.

MARINA SOLO, ESQ.
Authorized Person
St. John & Wayne, L.L.C.
Two Penn Plaza East, 1Oth Floor
Newark, New Jersey 07105-2249 0
V
t!'v

522909-1
35

1087
 ExhibitB

Specifications for Metformin Llguid

# Test Parameter Requirement

1 Description Clear liquid, colorless to slight color, with

characteristic taste, and cherry flavor.
2 Identification (by IR) The metformin peak in the sample
chromatogram must correspond to that of
the standard solution.
3 Deliverable volume (this is based The deliverable volume of not less that 960
on the largest bottle contemplated - ml. or as stated in the label.
960 ml. or 32 fluid ounces.)
Deliverable range or variation is 960 mi. to
See comment on sizes below 989 mi.
4 Clarity of the solution No precipitate or particulate matter should
be seen.
5 Microbial limits:
l. Total aerobic m icrobial count I) Not more than I 000 cfu/ml.
2 . Total combine yeast and molds 2) Not more than 1000 cfu/ml.
3. E. coli 3) Absent
4. Salmonella 4) Absent
5. S. aureus 5) Absent
6. P. aero ginosa 6) Absent
Stability batches of Metfonnin will also b e tested for
anti-microbial effectiveness.
6 Related substances To be determined

7 Spillage test To meet requirement

8 Assay of Metformin 450.0 mg. to 550.0 mg. per 5 ml. of liquid

{90 to 110% oflabel claim)
9 Storage In tight containers, at a temperature not
exceeding 25 degrees C.

The above enumerated specifications describe to product as it exists today. During the
development stage additional tests and parameters will be developed. Other tests may included as
a pre-requisite by the regulatory agencies.

Sizes - Based on dosing schedules bottle sizes will be determined. Currently bottle s~~ are
expected to be in the range of 120 ml to 960 ml or 4 fluid ounces to 32 fluid ounces/v ~

522909- 1 36

1088
 Exhibit C

Existing Product Formulations

The FORMULATION:

Formulations containing Metformin Liquid and other .Liquids containing Metformin and I or
other Hypoglycemic agent for the control of glucose in patients with type II diabetes (adult onset
non-insulin dependent diabetes mellitus or NIDDM)

Other active pharmaceutical ingredients could include one of the following:

1) First and second generation sulfonylureas such as but not limited to - acetohexamide,
chlorpropamide, tolazamide, tolbutamide, glimepiride, glipizide, glyburide, etc.
2) Thiazolidinediones such as but not limited to - troglitazone, pioglitazone, rosiglitazorie, etc.
3) Meglitinides such as repaglinide.
4) Alpha glucosidase inhibitors acarbose and miglitol.
5) Other biguanidine compounds.
6) And in combination with insulin.

The above formulations will be free from sugar, alcohol, dyes which will be part to the marketing
strategy in promoting to the physicians and patients.

The formulation is intended to be administered to patients just pri~~

after a meal ONCE or TWICE a day as prescribed by the physician~
X meal, or immediately

522909-1
37

1089
 Exhibit D

Form of Manufacturing and Supply Agreement

MANUFACTURING AND SUPPLY AGREEMENT

THIS MANUFACTURING AND SUPPLY AGREEMENT (the "Agreement"),

dated as of _ _ _ _, 200_, is by and between RANBAXY SIGNATURE LLC, a Delaware

limited liability company, having offices at c/o Ranbaxy Pharmaceuticals Inc., 600 College Road

East, Princeton, New Jersey 08540 ("LLC"), and RANBAXY PHARMACEUTICAL INC., a

Delaware corporation, having offices at 600 College Road East, Princeton, New Jersey ("RPI").

WITNESSETH

WHEREAS, RPI and Signature Pharmaceuticals, Inc., a New York corporation, have

entered into an Amended and Restated Joint Venture and Operating Agreement dated March _ ,

2002 (the "Joint Venture Agreement") providing, among other things, for the formation and

governance of the LLC; and

WHEREAS, subject to the terms and conditions set forth in this Agreement, LLC

wishes to have RPI manufacture for LLC the products described on Schedule 1 hereto (the "Liquid

Oral Products") and RPI is agreeable to manufacturing and supplying the Products as provided

herein; and

WHEREAS, the parties desire to provide for the manufacture of all such Liquid Oral

Products by RPI at RPI'S manufacturing facility located at 34 West Fulton Street, Gloversville, New

York 12078 or such other facility as RPI shall determine (the "Facility") subject to the terms and

conditions set forth h e r e i P '

522909-1
38

1090
 NOW, THEREFORE, the parties agree as follows:

1. DEFINITIONS. For purposes hereof the following terms shall have the

meanings set forth:

"Affiliate" shall mean any corporation, firm, partnership or other entity or individual

(hereinafter collectively referred to as a "person") which directly or indirectly controls or is

controlled by or is under common control with a party to this Agreement. "Control" means

ownership, directly or through one or more Affiliates, of more than fifty percent (50%) of the shares

of stock entitled to vote for the election of directors, in the case of a corporation, or more than fifty

percent (50%) of the equity interest in the case of any other type oflegal entity, status as a general

partner in any partnership, or any other arrangement whereby a party controls or has the right to

control the Board of Directors or equivalent governing body of a corporation or other entity.

"Commencement Date" shall mean the date of this Agreement.

"Confidential Information" means all tangible embodiments of technology and all

information (including but not limited to information about any element of technology) which is

disclosed by one party to the other hereunder except to the extent that such information (i) as of the

date of disclosure is demonstrably known to the party receiving such disclosure or its Affiliates, as

shown by written documentation, other than by virtue of a prior confidential disclosure to such party

or its Affiliates; (ii) as of the date of disclosure is in, or subsequently enters, the public domain,

through no fault or omission of the party receiving such disclosure; or (iii) as of the date of

disclosure or thereafter is obtained from a third party free of any obligation of confidentiality to the

disclosing party.

"FDA" shall mean the United States Food and Drug Administration.~
522909-1 39 ~

1091
 "GMPs' shal1 mean current Good Manufacturing Practices, as defined in 21 CFR

Section 210 et seq., as amended and in effect from time to time.

"Label", ''Labeled" or Labeling" shall mean all labels and other written, printed or

graphic matter upon (i) any Liquid Oral Products or .any container or wrapper utilized with any

Liquid Oral Product, or (ii) any written material accompanying any Liquid Oral Product, including,

without limitation, package inserts.

"Liquid Oral Products" or "Product" shall mean any pharmaceutical product described

on Schedule I hereto, as same may be amended in a writing between the parties, from time to time,

which shall be manufactured by RPI in accordance with the terms of this Agreement.

"LLC" shall mean Ranbaxy Signature LLC, a Delaware limited liability company

formed pursuant to the filing of a Certificate of Formation with the Delaware Secretary of State and

governed by the Joint Venture Agreement.

"Losses" shall mean any liabilities, damages, costs or expenses, including reasonable

attorney's fees, incurred by either party which arise from any claim, lawsuit or other action by a third

party.

"Manufacturing Expenses" shall be determined in accordance with U.S. generally

accepted accounting principles applied on a consistent basis and RPI's historical practices and shall

include the following documented and reasonable direct costs and expenses incurred by RPI in the

manufacture and supply of a particular Liquid Oral Product: salaries, benefits, supplies, raw

materials, production materials, packaging, shipping and other costs directly identifiable to the

manufacture and supply of a Liquid Oral Product and a portion of relevant overhead expense, all as

more particularly described on Schedule 3 h e r *

522909-1 40 't

1092
 "Manufacturing Records'' sha11 mean all Specifications, fonnulations, processes and

controls, including all supporting and historical data, product samples, technology transfer,

laboratory data, development documentation equipment and other historical validation data and all

related regulatory and compliance documents and information and such further information and

documentation as RPI shall reasonably request to enable it to manufacture and supply Liquid Oral

Products in accordance with the tenns and conditions set forth herein.

"Packaging" shall mean all primary containers, including bottles, vials, cartons,

shipping cases or any other like matter used in packaging or accompanying the Liquid Oral Products.

"Person" shall mean an individual, corporation, partnership or other entity.

"Raw Materials" shall mean all bulk pharmaceutical ingredients, coatings, creams, and

other related items necessary or required for the manufacture and supply by RPI of each of the Liquid

Oral Products in accordance herewith.

"Specifications" shall mean the terms and conditions applicable to each of the Liquid

Oral Products as set forth in Schedule 2 hereto, including (as applicable), statements of

pharmaceutical manufacturing, labeling, filling, packaging, storage and quality control procedures,

and labeling and packaging instructions., as the same may be supplemented from time to time.

Any tenn not specifically defined in this Agreement shall have the meaning ascribed to such

term in the Joint Venture Agreement.

2. MANUFACTURE AND SUPPLY.

2.1 Supply Obligations. (a) RPI shall manufacture, package, test and supply to

LLC aU ofLLC's requirements for each Liquid Oral Product, in accordance with the Specifications

and the terms hereof. Each ofRPI and LLC aclmowledge and agree tha~ su~ect to the terms he<~
522909-J 41

1093
RPI shall be the sole supplier of the Liquid Oral Products and shall be precluded from manufacturing

or supplying any of the Liquid Oral Products to any third party other than LLC in the absence of the

written approval ofthe Board ofDirectors ofLLC.

(b) Except as otherwise provided herein, LLC shall purchase solely from RPI all

of its requirements of the Liquid Oral Products subject to purchase orders issued by LLC in

accordance with Section 3.1 hereof.

(c) RPI shall provide (at its expense up to the date of Launch of the first Liquid

Oral Product developed by LLC) to LLC such amounts of the Liquid Oral Products as LLC shall

request for the purpose of developing the Liquid Oral Products and in order to obtain FDA approval

and non-U.S. Agency approval to commercialize the Liquid Oral Products.

(d) In the event RPI shall (i) fail to have its manufacturing facility completed and

validated for production of the Liquid Oral Products upon receipt of Agency approval of the first of

such Liquid Oral Products, and/or (ii) be unable to satisfY the production requirements of the LLC

for the Liquid Oral Products, then, in addition to such other rights as LLC may have pursuant to the

Joint Venture Agreement, LLC may contract with third parties for the manufacture and supply of any

such Liquid Oral Product.

2.2 Forecasts; Excess Orders; Capacity (a) Simultaneous with the execution

of this Agreement, LLC shall deliver to RPI a non-binding forecast of estimated production

requirements of each of the Liquid Oral Products for the twelve month period commencing on the

Commencement Date. LLC shall prepare and deliver to RPI similar non-binding forecasts for each

of the ensuing twelve month periods during the term of this Agreement not later than 30 days prior

thereto. LLC shall be under no obligation to issue purchase orders for any of the Liquid Or»-

522909-I 42 ~

1094
Products, subject to compliance with its obligations under the terms of the Joint Venture Agreement.

(b) Not later than 30 days prior to each calendar quarter during the term hereof,

LLC shall provide RPI with a written rolling forecast of the quantities of each Liquid Oral Product

that LLC expects to order for delivery during the next succeeding four (4) calendar quarters. Such

forecast shall be binding only with respect to the first quarter thereof, and shall be non-binding for

the balance. Each forecast shall indicate the amounts of each Liquid Oral Product expected for

delivery in the relevant quarter. The first such forecast for each Liquid Oral Product shall be

provided on or before the Commencement Date. In the event that LLC shall, in any calendar quarter,

submit purchase orders for a Liquid Oral Product in excess of one hundred thirty (130%) percent of

the forecast for such Product in such quarter (such amount in excess of 130% of forecasted amounts,

the "Excess Orders"), RPI shall use commercially reasonable efforts to fill such Excess Orders as

promptly as practicable, but shall not be in breach hereof if notwithstanding such efforts, it shall be

unable to fill such Excess Orders.

2.3 Supply of Records and Raw Materials. To the extent not otherwise in the

possession or control ofRPI, LLC shall make the Manufacturing Records available to RPI, promptly

after execution hereof. RPI shall supply all raw materials necessary for the manufacture and supply

of the Liquid Oral Products in accordance herewith. RPI's provision of Raw Materials shall be

consistent with the types and amounts of Liquid Oral Products specified in the quarterly rolling

forecasts provided pursuant to Section 2.2 hereof. All such raw materials shall be stored by RPI at

the Facility in compliance with applicable law and the Specifications.

2.4 Facility and Records Maintenance; Audit. RPI shall, at all times, maintain

and operate the Facility, and implement such quality control procedures, so as to be able to perfo~

522909-1 43 ~

1095
its obligations hereunder in compliance with all applicable law, including without limitation GMP.

Each party shall promptly notifY the other upon receipt by it of any adverse notice from any

governmental agency relating to the Liquid Oral Products, employees, environmental conditions or

the operation of the Facility. RPI shall maintain true and complete books and records (including,

without limitation, all Manufacturing Records) of all data relating to the manufacture, supply and

sale of Liquid Oral Products. RPI shall permit quality assurance representatives of LLC and

representatives of the FDA to inspect the Facility and all books and records ofRPI relating to the

production of the Liquid Oral Products (including, without limitation, all Manufacturing Records)

at all times upon three days' prior written notice (except in the case of emergency), during normal

business hours and on a confidential basis; provided, however, that such inspections shall be limited

to twice annually in the absence of a breach of this Agreement by RPI (except in the case of

emergency).

2.5 Labeling and Packaging.

(a) Labeling. Each Liquid Oral Product and all Labeling, advertising and

promotional material used in connection therewith, shall be solely in the name of Ranbaxy

Pharmaceuticals Inc., or its designee and conform to the Specifications. LLC shall be responsible

for ensuring the accuracy of all information contained on all Labels and Labeling for Liquid Oral

Products and for the compliance of all such Labels and Labeling with applicable law. Should LLC

desire or be required to make any change in ·any such Label or Labeling. LLC shall be responsible

for the updating of all artwork and text associated with such change and providing such changes to

RPI. RPI shall make all necessary arrangements for such changed Labels or Labeling to be printed

and shall provide to LLC proofs for LLC's review. LLC shall promptly either provide RPI ~
522909-1 44
u

1096
 necessary corrections thereto or notifY RPI of its approval of such proofs. LLC shall reimburse RPI

for the cost of preparing the proofs of such new Labels or Labeling, as well as an other costs

associated with such new Labels or Labeling.

(b) Packaging. RPI shaiJ supply Packaging and Labels for the Liquid

Oral Products under this Agreement and such Packaging and Labels shall be solely in the name of

Ranbaxy Pharmaceuticals Inc., or its designee and in accordance with the Specifications.

3. PURCHASING; DELIVERY; PAYMENT TERMS.

3.1 Purchase Orders. From time to time, and subject to the other provisions of

the Joint Venture Agreement and this Agreement, LLC may place orders for Liquid Oral Products

and identifY the requested delivery dates for each such order. Each order placed pursuant to this

Section 3.1 which is not modified or canceled by LLC within ten {10) working days ofthe requested

delivery date thereof shaH constitute a firm obligation to purchase the ordered quantities of Liquid

Oral Products. Firm orders may be modified or canceled by LLC upon written notice to RPl;

provided. however, that LLC shall pay RPI, within ten (10) days after invoice therefor, any actual

out-of-pocket costs incurred by RPI as a result of such modification or cancellation to the extent they

would not otherwise be recovered by RPI hereunder. The terms and conditions of this Agreement

shall be controlling over any conflicting terms and conditions used by LLC in ordering Liquid Oral

Products or by RPI in accepting or confirming orders and any term or condition of such purchase

order, acceptance or other document which ·Shall conflict with or be in addition to the terms and

conditions of this Agreement is hereby expressly rejected.

3.2 Delivery. RPI shall use its best efforts to ensure that Liquid Oral Products

ordered by LLC in accordance with this Agreement are shipped in accordance with fi/
th~ delivery dates
522909-1 ~ 45

r -· 1097
 specified in LLC's purchase orders, and RPI shall notifY LLC promptly of any anticipated delay. All

Liquid Oral Products shall be delivered, in the size, packaging and quantities specified in LLC's

purchase orders, freight and shipping prepaid to LLC's or its designee's location, as specified in the

purchase order. RPI shall arrange tor shipping and transporting Liquid Oral Products from the

Facility to the location designated by LLC and shall be responsible for the payment of shipping,

insurance and related costs for delivery (which amounts shall be included in the Manufacturing

Expenses). Title and risk of loss shall pass to LLC upon delivery to LLC's premises or the premises

of its designee, as specified in the purchase order. RPl shall give LLC reasonable prior written

notice of the date on which Liquid Oral Products subject to each purchase order shall first become

available for delivery. RPI shall include in each shipment of Liquid Oral Products hereunder a

certificate of analysis which shall certifY that the Liquid Oral Products contained in such shipment

comply with the provisions of Section 4.1 hereof.

3.3 Acceptance and Rejection. LLC shall give written notice to RPI of any

claims that Liquid Oral Products manufactured by RPI do not comply with the requirements of

Section 4.1 hereof promptly upon its becoming aware of such noncompliance. Any notice by LLC

pursuant to this Section 3.3 that any Liquid Oral Products shall not comply with the terms and

conditions hereof shall be accompanied by a true and correct copy of the results of any tests

conducted by LLC thereon. The parties shall cooperate in good faith to resolve any disputes arising

therefrom and in the event that the parties shall be unable to resolve such dispute within thirty (30)

days from the date ofLLC's notice pursuant to this Section 3.3, the parties shall submit such dispute

to a mutually agreed upon independent laboratory. The determination by such laboratory shall be

final and binding and the costs therefor shall be borne by the nonprevailing party. LLC shal~

~I ~ ~

r 1098
 dispose of any Liquid Oral Product claimed by it not to comply with the tenns and conditions hereof

until resolution of any dispute with respect thereto. RPI shall promptly replace any Liquid Oral

Product which does not comply with the tenns and conditions thereof; at its sole cost and expense,

by delivery thereofto LLC's facility.

3.4 Product Recall. (a) In the event of any recall or seizure of any Liquid Oral

Product arising out of, relating to, or occurring as a result of, any act or omission byRPI, RPI shall

replace the amount of Liquid Oral Product recalled or seized, plus reimburse LLC for all

transportation costs, if any, taxes, insurance, handling, out-of-pocket costs and reasonable attorney's

fees incurred by LLC in respect of such recalled or seized Liquid Oral Product.

(b) In the event of any recall or seizure of any Product arising out of, relating to

or occurring as a result of any act or omission of LLC, LLC shall reimburse to RPI for the

Manufacturing Expenses of such recalled Liquid Oral Products, shall be solely responsible for any

transportation costs, import duties, if any, taxes, insurance, handling and other costs incurred by LLC

in respect of such recalled or seized product, and shall promptly reimburse RPI for all third party

costs and expenses incurred by RPI in connection with such recalL

(c) For purposes of this Section 3.4, "recall" shall mean (i) any action by RPI,

LLC or any Affiliate of either to recover title to or possession of any Product sold or shipped and/or

(ii) any decision by LLC not to sell or ship Product to third parties which would have been subject

to recall if it had been sold or shipped, in each case taken in the good faith belief that such action was

appropriate under the circumstances. For purposes of this Section 3.4, "seizure" shall mean any

action by any government agency to detain or destroy Product.

(d) Each party shall keep the other fully informed of any notification or o~
522909-1
47 J;v

1099
I
infonnation, whether received directly or indirectly, which might affect the marketability, safety or

effectiveness of any Product., or which might result in liability issues or otherwise necessitate action

on the party of either party, or which might result in recall or seizure of any Product.

(e) Prior to any reimbursement pursuant to this Section 3.4, the party claiming

reimbursement shall provide the other with reasonably acceptable documentation of all reimbursable

costs and expenses.

4. QUALITY ASSURANCE; TESTING.

4.1 Product Compliance. RPI shall produce all Liquid Oral Products in

accordance with the Specifications therefor and GMP. All Liquid Oral Products shall be stored,

Labeled and Packaged in accordance with the Specifications and requirements of the Food, Drug and

Cosmetic Act ("FD&C Act") and the rules and regulations of the FDA promulgated thereunder. Each

Product shall, at the time of shipment, not be adulterated or misbranded within the meaning of the

FD&CAct.

4.2 Product Testing. RPI shall conduct, or cause to be conducted all physical

parameters, in processing testing with respect to each batch of Liquid Oral Products to be supplied

pursuant hereto prior to delivery thereof to LLC. RPI shall retain a sample of each batch teste-d for

at least the shelf life of such batch plus one year, or such longer period as may be required by GMPs.

4.3 Insurance. During the tenn of this Agreement, each party shall obtain and

maintain, at its sole expense, product liability insurance with a minimum limit of liability of

$5,000,000 per occurrence and in the aggregate naming the LLC as additional insured. Evidence of

coverage, in the fonn of certificates of insurance, shall be provided promptly upon execution of this

Agreement and as reasonably requested thereafter. Such certificates shall endeavor to provide~

522909-l 48 ~

1100
written notice to the additional named insured to fifteen (15) days prior to any material change,

cancellation or non-renewal of the policy. All policies should have a "Best" Rating of no less than

"AX".

4.4 Indemnification

Each of RPI and Signature Pharmaceuticals, Inc. acknowledge and confirm their

respective indemnity obligation contained in the Joint Venture Agreement. Any claim for indemnity

pursuant to this Agreement shall be governed by the terms of Article XI of the Joint Venture

Agreement.

5. PRICE AND PAYMENT TERMS.

5.1 Recovery of Manufacturing Expenses. The LLC shall satisfy RPI's

Manufacturing Expenses for each shipment of the Products in an amount equal to the product of (i)

the Manufacturing Expenses for such product shipment, multiplied by (ii) 1.07 ("Base Price").

5.2 Payment. TI1e Manufacturing Expenses for each Product delivered by RPI

to the LLC pursuant hereto, shall be paid within sixty (60) days after the end of each month in which

such Product is delivered.

5.3 Adjustment to Base Price. The Base Price shall be adjusted annually, upon

mutual agreement of the parties, based on the then current gross margins for the sale of the Liquid

Oral Products and any change in the Manufacturing Expenses from the previous fiscal year. In the

Agrx:
event the parties cannot agree upon an adjustment to the Base Price, RPI and LLC shall continue to

perform as provided by tbe terms of this

522909-1
49

1101
 6. REPRESENTATIONS; WARRANTIES.

6.1 By RPI. RPI hereby represents and warrants to LLC as follows:

(a) RPI is a corporation duly organized and validly existing under the laws of the

State of Delaware;

(b) RPI has the requisite authority to execute and·deliver this Agreement and to

perform its obl.igations hereunder;

(c) Any Liquid Oral Products delivered by RPI to LLC shall, at time of shipment

have been formulated, manufactured, Labeled, Packaged and stored by SPI in conformity with GMPs

and the Specifications and shall not be adultered or otherwise violative of the FD&C Act;

(d) The execution and performance ofRPI's obligations hereunder are not and

will not be in violation of or in conflict with any material obligation it may have to any third party;

(e) RPl is not debarred and RPI is not and will not use in any capacity the

services of any person debarred under Subsection 306(a) or (b) of the Generic Drug Enforcement Act

of 1992;

(f) RPI will maintain throughout the term of this Agreement, all permits,

licenses, registrations and other forms of governmental authorizations and approvals ("Permits'')

required to be obtained and maintained by RPI in order for RPI to execute and deliver this

Agreement and to perform its obligations hereunder in accordance with all applicable law and shall

otherwise perform its obligations hereunder in a manner which complies in all material respects with

applicable law; and

(g) All Raw Materials shall comply and be in conformity with GMPs and the

Specifications and shall not be adulterated, misbranded or otherwise violative of the Federal Foo~/

522909-1 50 ~

r -- 1102
Drug and Cosmetic Act, as amended or other applicable laws; and

(h) To the best ofRPI's knowledge and belief, there are no investigations, adverse

third party allegations or actions, or claims against RPI, including any pending or threatened action

against RPJ, in any court or by or before any governmental body or agency, with respect to the Liquid

Oral Products, the Facility or its obligations set forth herein which may materially adversely affect

RPI's ability to perform its obligations under this Agreement.

6.2 By LLC. LLC represents and warrants to RPI as follows:

(a) LLC is a limited liability company duly organized and in good standing under

the laws of the State of Delaware;

(b) LLC has the requisite corporate authority to execute and deliver this

Agreement and to perform its obligations hereunder;

(c) The execution and performance ofLLC's obligations hereunder are not and

wi11 not be in violation of or in conflict with any material obligations it may have to any third party;

(d) LLC is not debarred and LLC has not and will not use in any capacity the

setvices of any person debarred under Subsections 306(a) or (b) of the Generic Drug Enforcement

Act of 1992;

(e) LLC has and will maintain throughout the tenn of this Agreement, all Permits,

in order for LLC to execute and deliver this Agreement and perform its obligations hereunder in

accordance with all applicable law and shall otherwise perform its obligations hereunder in a manner

which complies, in all material respects, with all applicable pennits; and

(f) To the best of LLC's knowledge and belief, there are no investigations,

adverse third party allegations or actions, or claims against LLC, including any pending or threaten~/

522909-1 51 ~

1103
 action against LLC in any court or by or before any govermnental body or agency, with respect to

the Liquid Oral Products or its obligations set forth herein which may adversely affect LLC's ability

to perform its obligations under this Agreement;

7. TERM AND TERMINATION.

7.1 Term. This Agreement shall commence on the Commencement Date and

continue until terminated in accordance with the provisions of Section 7.2.

7.2 Termination

(i) Termination by Consent. This Agreement may be terminated by

mutual consent ofRPI and LLC

(ii) Termination for Breach by RPI. JfRPI breaches or defaults in the

performance for observance of any of its material obligations under
this Agreement and, such breach or default is not cured within forty-
five (45) days after receipt by RPI of a written notice from LLC
specifying the breach or default, then LLC shall have the right to
terminate this Agreement with immediate effect by giving written
notice to RP 1. Upon such termination, LLC shall be permitted to
manufacture for itself and/or contract \\-ith any of its Members or
other third party(ies) for the manufacture and supply of any and all
the Liquid Oral Products. RPI agrees to immediately provide any and
all manufacturing records and other technical information required to
permit LLC, its Members and any such third party to manufacture and
supply the Liquid Oral Products and provide such other technical
assistance and support as may be reasonably requested by LLC from
time to time. RPI shall be responsible for any Excess Manufacturing
Expenses as defined and provided in Section 3.3 of the Joint Venture
Agreement.

7.2 Post-Termination. Termination of this Agreement shall not affect any

payment obligations or other liabilities which have accrued as of the date of such termination.

8. CONFIDENTIALITY. Each of the parties acknowledge and agree to be

bound by the tenns of the confidentiality provisions contained in Article IX of the Joint Ven~/

522909-1 52 ~

~-- - -··-···

1104
Agreement.

9. BREACH AND DISPUTE RESOLUTION. Each of the parties

acknowledge and agree to be bound by the terms ofthe dispute resolution provisions contained in

Section )2.8 ofthe Joint Venture Agreement.

10. INDEPENDENT CONTRACTOR. This Agreement shall not (i) to

create or imply a general partnership between the parties, (ii) to make either party tl;J.e agent of the

other for any purpose, (iii) to alter, amend, supersede or vitiate any other arrangements between the

parties with respect to any subject matters not covered hereunder, (iv) to give either party the right

to bind the other, or (v) to create any duties or obligations between the parties except as expressly

set forth herein.

11. MISCELLANEOUS.

1 I .1 Assignment. Neither party shall, without the prior written consent of the

other party having been obtained, assign or transfer this Agreement to any person; provided,

however, that each party may assign or transfer this Agreement to any Affiliate or to any successor

by merger of such party or its pharmaceutical business, or upon a sale of all or substantially all of,

such party's assets, or the assets of its pharmaceutical business, including the Liquid Oral Products,

without the prior written consent of the other party hereto. This Agreement shall be binding upon

and shall inure to the benefit of the parties and their successors and pennitted assigns.

11.2 Compliance with Laws. RPI will satisfy its manufacturing and supply

obligations under this Agreement in accordance with all applicable laws, ordinances, rules,

regulations, orders, licenses and other requirements or hereafter in effect.

11.3 Force 1\fajeure. Neither party to this Agreement shall be liable for fa~

522909-1 53 ~

1105
or delay in the performance of any of its obligations hereunder (with the exception of payment

obligations), if such failure or delay is due to causes beyond its reasonable control, including,

without limitation, acts of God, earthquakes, fires, strikes, acts of war, or intervention (other than

as a result of acts or omissions of such party) of any govemmenta1 authority, whether affecting such

party or any of its Affiliates.

11 .4 Governing Law. This contract shall be governed by, and construed in

accordance with, the laws of the State ofNew Jersey, applicable to contracts entered into and to be

performed wholly within said State.

11.5 Notice. All notices required to be given hereunder shall be in writing and

shall be given by personal delivery, via facsimile transmission, by a nationally recognized overnight

carrier or by registered or certified mail, postage prepaid with return receipt requested. Notices shal1

be addressed to the parties as follows:

Ifto LLC or RPI: c/o RANBAXY PHARMACEUTICALS INC..

600 College Road East
Princeton, New Jersey 08540
Attn: President
Tel no: (609) 720-9200
Fax no.: (609) 720-1 155

With a copy to: St. John & Wayne, L.L.C.

2 Penn Plaza East
Newark, New Jersey 07105
Attn: John P. Reilly, Esq.
Tel no: (973) 491-3600
Fax no.: (973) 491-3555

Notices delivered personally shalt be deemed communicated as of actual receipt;

notices sent via facsimile transmission shall be deemed communicated as of receipt by the sender

of written confinnation of transmission thereof; notices sent via overnight courier shall bed~

522909· 1 54 ~

1106
received as of one business day following sending; and notices mailed shall be deemed

communicated as of three business days after proper mailing. A party may change his or its address

by written notice in accordance with this Section 11.5.

11.6 Amendments. Any amendment or modification of this Agreement shall only

be valid if made in writing and signed by or on behalf of the parties hereto.

11.7 Counterparts. This Agreement may be executed in counterparts, each of

which shall be deemed an original and all of which shall constitute a single document.

11.8 Entire Agreement. This Agreement (including the Schedules hereto)

represents the entire agreement of the parties with respect to the subject matter hereof; superseding

aJJ prior agreements and understandings, written or oral.

11.9 Benefit; Binding Effect. This Agreement shall be binding upon and shaH

inure to the benefit of the parties hereto and their respective successors and permitted assigns.

11.10 Survival. Notwithstanding anything to the contrary contained in this

Agreement, the provisions of Sections 4.1 , 4.4, 6 and 8 shaH survive any termination of this

Agreement.

11.11 Further Assurances. The parties hereto agree that they shall take all

appropriate actions, including, without limitation, the execution or filing of any documents or

instruments, which may be reasonably necessary or advisable to carry out the intent and accomplish

the purposes of any of the provisions hereof,

11.12 Severability. In the event that any provision of this Agreement shall be held

invalid or unenforceable for any reason by a court of competent jurisdiction, such provision or~

~
522909· 1
55

1107
 thereof shall be considered separate from the remaining provisions of this Agreement, which shall

remain in full force and effect. Such invalid or unenforceable provision shall be deemed revised to

effect, to the fullest extent permitted by law, the intent of the parties as ~et forth therei?
/

[SIGNATURE PAGE TO FOLLO~

522909-1
56

I 1108
 IN WITNESS WHEREOF, the parties hereto have caused this agreement to be

executed as of the effective date by their duly authorized representatives-};/

RANBAXY PHARMACEUTICALS INC.

By:____________~--------~-----
Name:
Title:

RANBAXY SIGNATURE LLC

By:____ _ __ _ _ _ __ __
Name:
Title:

522909-1
57

1109
 SCHEDULE 1

LIQUID ORAL PRODUCTS TO BE MANUFACTURED r

w

448176-1

1110
 SCHEDULE2

PRODUCT SPECIFICATIONS

[To be provided~

448176-1

1111
r
 SCHEDULE3

MANUFACTURING EXPENSES

[To beprovide~]
(To be attached)

448176-l

1112
APPENDIX TAB 2
 Filed: 12/10/201411:17:10 PM
Andrea S. Thompson
District Clerk
Collin County, Texas
By Helene Walkoviak Deputy
Envelope ID: 3449584
CAUSE NO. 296-03032-2014

SIGNATURE PHARMACEUTICALS, L.L.C., } IN THE DISTRICT COURT

SIGNATURE R&D HOLDINGS, L.L.C.; }
AMERICAN GENERICS, INC. AND } 296TH JUDICIAL DISTRICT
MCCORMICK HOLDINGS, L.L.C., }
} COLLIN COUNTY, TEXAS
Plaintiffs, }
}
vs. }
}
RANBAXY, INC. F/K/A RANBAXY }
PHARMACEUTICALS, INC.; }
RANBAXY LAB ORATORIES, LTD.; }
VENKATACHALAM KRISHNAN AND }
ARUN SAWHNEY, }
}
Defendants. }
________________________________ }

PLAINTIFFS' RESPONSE TO
DEFENDANTS RANBAXY, INC. AND VENKATCHALAM KRISHNAN'S
APPLICATION TO COMPEL ARBITRATION
AND STAY PROCEEDINGS

TO THE HONORABLE JUDGE OF SAID COURT:

Signature Pharmaceuticals, L.L.C., Signature R&D Holdings, L.L.C.,

American Generics, Inc. and McCormick Holdings, L.L.C., Plaintiffs, make this

response to Defendants Ranbaxy, Inc. and Venkatchalam Krishnan's Application

to Compel Arbitration and Stay Proceedings and would respectfully show as

follows:

PLAINTIFFS' RESPONSE TO
DEFENDANTS' APPLICATION
TO COMPEL ARBITRATION AND STAY PROCEEDINGS PAGE 1

307
 SUMMARY

The Court should DENY Movant's motion to compel arbitration

because there is no enforceable agreement between the parties to
arbitrate. First, the arbitration provision, advanced by Movants,
is contained in a partnership operating agreement, which is a
subordinate document in a larger transaction, comprised of other
master contracts which do not contain any provision to arbitrate.
The present dispute pertains to the master transaction and not
the operating agreement. This lesser document containing the
arbitration provision therefore cannot be made to override the
terms of other contracts. The lesser document containing the
arbitration provision is limited in scope to disputes strictly among
the partners of the Ranbaxy Signature, L.L.C. partnership
regarding partnership business; Second, such arbitration
provision should not be enforced as it was procured by fraud and
contains terms which are unconscionable.

PLAINTIFFS' RESPONSE TO DEFENDANTS'

APPLICATION TO COMPEL ARBITRATION AND STAY PROCEEDINGS PAGE 2

308
 I.
FIRST OBJECTION AND SPECIAL EXCEPTION
TO DEFENDANT'S MOTION TO COMPEL ARBITRATION

RESPONDENTS OBJECT TO MOVANTS FILING A SINGLE MOTION

MADE APPLICABLE TO TWO SEPARATE CASES

1. Defendants have filed a motion contained in a single pleading made

applicable to two separate cases, mainly this case and case No. 296-03030-

2014, and scheduled it as a single hearing. The pleading containing the

motion improperly bears two captions and two case numbers on the front

cover, and interchangeably presents arguments and factual allegations

pertaining to two completely separate and independent cases. Defendants'

motion simultaneously refers to both cases and makes allegations which are

not made distinct and clear as to which case they apply. This approach is

confusing and somewhat misleading to the Court and to the Plaintiffs as

respondents to the motion.

2. Respondents object and take special exception to this pleading as not

conforming with proper procedure and pleading requirements and ask the

Court to require Movants to amend their pleading into two distinct and

PLAINTIFFS' RESPONSE TO DEFENDANTS'

APPLICATION TO COMPEL ARBITRATION AND STAY PROCEEDINGS PAGE 3

309
 separate motions, filed in the respective case, to which Respondents can

properly respond without confusion.

3. To further this request, Respondents ask the Court to continue the present

hearing date until such time as Movants re-plead their motion to conform

with the above objection.

II.
SECOND OBJECTION TO DEFENDANTS’ MOTION TO COMPEL
ARBITRATION

RESPONDENTS ALSO OBJECT TO PORTIONS OF MOVANT’S

MOTION THAT REFER TO FACTS AND THEORIES CONTAINED IN
PLAINTIFF’S FIRST AMENDED PETITION, WHICH HAS NOW BEEN
SUPERCEDED

4. Plaintiffs’ First Amended Petition in this case, has been superceded by

Plaintiffs’ Second Amended Petition. Plaintiffs’ First Amended Petition,

referred to by Movants, is no longer a live pleading and is a nullity in all

respects.

PLAINTIFFS’ RESPONSE TO DEFENDANTS’

APPLICATION TO COM PEL ARBITRATION AND STAY PROCEEDINGS PAGE 4

310
5. References therefore to numerous facts and legal theories contained in the

superceded pleadings are therefore inappropriate, inaccurate and misleading

to the court.

6. Movants arguments and references to Plaintiffs’ allegations should only be

considered in the context of what is plead in Plaintiffs’ Second Amended

Petition or the then current pleading of record.

III.
INTRODUCTION AND BACKGROUND FACTS

7. Dr. V. Ravi Chandran, is a scientist and inventor residing on Collin County,

Texas. Dr. Chandran is also an officer and representative of the Plaintiff

group of companies: Signature Pharmaceuticals, L.L.C., (the survivor of a

merger with Signature Pharmaceuticals, Inc.), Signature R&D Holdings,

L.L.C., American Generics, Inc. and McCormick Holdings, L.L.C.

PLAINTIFFS’ RESPONSE TO DEFENDANTS’

APPLICATION TO COM PEL ARBITRATION AND STAY PROCEEDINGS PAGE 5

311
8. Dr. Chandran personally, and related companies, hold in excess of 25

patents filed and/or approved worldwide, which are related to more than

9000 new drug molecules and their formulations for human and animal use

to diagnose and treat various diseases.

9. Among various formulations and chemically modified derivatives of

numerous drugs invented by Dr. Chandran are the liquid and solid dosage

forms of Metformin and its salts, conjugates and esters etc. These solid and

liquid formulations and the chemically modified derivatives of metformin

base, metformin salts, conjugates and esters are useful in the treatment of

Type II diabetes.

10. In 1999, Dr. Chandran, as a representative of Signature Pharmaceuticals,

Inc., Signature R&D Holdings, L.L.C., American Generics, Inc. and

McCormick Holdings, LLC., entered into discussions with Ranbaxy, a

global pharmaceuticals manufacturer, for the development of the Metformin

group of formulations and chemically modified Metformin brand drugs.

PLAINTIFFS’ RESPONSE TO DEFENDANTS’

APPLICATION TO COM PEL ARBITRATION AND STAY PROCEEDINGS PAGE 6

312
11. Based on various representations made by Ranbaxy executives to Dr.

Chandran (including representatives of Ranbaxy Laboratories, Ltd. India

and representatives ofRanbaxy Pharmaceuticals, Inc. in the U.S.) about

their desire and intention to develop, license and market a number of

Metformin formulations and chemically modified Metformin brand drugs

invented by Dr. Chandran, he agreed on behalf of the above referenced

group of companies, to enter into a series of related contracts forming one

comprehensive transaction to sell the Metformin derived drugs and related

assets.

12. This comprehensive transaction included execution of the following

contracts:

(a) An Asset Purchase Agreement, between American Generics, Inc., as

seller, to Ranbaxy Pharmaceuticals, Inc., as buyer (signed April 1,
2000); [Attached hereto as Exhibit 1]

(b) An Asset Purchase Agreement, between Signature Pharmaceuticals,

Inc., as seller, to Ranbaxy Pharmaceuticals, Inc., as buyer, which
included various assets and the sale of the Metformin liquid
manufacturing factory in Gloversville, New York (signed July 19,
2002); [Attached hereto as Exhibit 2]

PLAINTIFFS' RESPONSE TO DEFENDANTS'

APPLICATION TO COMPEL ARBITRATION AND STAY PROCEEDINGS PAGE 7

313
 (i) An Agreement for the Sale and Purchase ofReal Estate,
between McCormick Holdings, L.L.C., as seller, and Ranbaxy
Pharmaceuticals, Inc., as buyer, for the sale of the real estate
related to the Gloversville factory (signed July 19, 2002) and
attached as Exhibit A to the Signature Pharmaceuticals, Inc.
Asset Purchase Agreement; [Attached hereto as Exhibit 3]

(ii) The Amended and Restated Joint Venture and Operating

Agreement, being the company operating agreement between
Signature Pharmaceuticals, Inc. and Ranbaxy Pharmaceuticals,
Inc. for the formation and operation of Ranbaxy Signature,
L.L.C. (signed June 19, 2002) and attached as Exhibit F to the
Signature Pharmaceuticals, Inc. Asset Purchase Agreement:
[Attached hereto as Exhibit 4]

(iii) A Promisory Note, from Ranbaxy Pharmaceuticals, Inc. to

Signature Pharmaceuticals, Inc., (signed July 19, 2002) and
attached as Exhibit B to the Signature Pharmaceuticals, Inc.
Asset Purchase Agreement;

(iv) A Consulting Agreement, from Dr. Chanran to Ranbaxy

Pharmaceuticals, Inc., (signed July 19, 2002) and attached as
Exhibit G to the Signature Pharmaceuticals, Inc. Asset
Purchase Agreement.

13. The two asset sale agreements, along with the four subordinate agreements

attached to the Signature Pharmaceuticals, Inc. Asset Purchase Agreement1,

formed the transaction in which the group of companies represented by Dr.

Chandran essentially sold the Metformin drugs, which included everything

In addition to the four subordinate agreements supporting the Signature

Pharmaceuticals, Inc. Asset Purchase Agreement, there were additional subordinate agreements.

PLAINTIFFS' RESPONSE TO DEFENDANTS'

APPLICATION TO COMPEL ARBITRATION AND STAY PROCEEDINGS PAGE 8

314
 from drug patents, licenses and intellectual property, to the state of the art

manufacturing facility and other related assets, owned by the various

Plaintiff companies.

14. Among these various contracts, the controlling agreement was contained in

the Signature Pharmaceuticals, Inc. Asset Purchase Agreement, between

Signature Pharmaceuticals, Inc., as seller, to Ranbaxy Pharmaceuticals, Inc.,

as buyer, (signed July 19, 2002). [See Exhibit 2]

15. To induce the Plaintiff group of companies, Ranbaxy executives represented

to Dr. Chandran that Ranbaxy was a successful and well reputed global

manufacturer of generic drugs and would be well suited to expand and

market the Metformin group of formulations and chemically modified

Metformin brand drugs developed by Dr. Chandran and the Plaintiff group

of companies. Ranbaxy promised it would further develop several of the

Metformin formulations by applying for regulatory approvals and licensing

in both the United States and overseas, and then manufacture and market the

liquid oral and solid dosage forms of Metformin and the chemically

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 modified derivatives of Metformin worldwide.

16. However in 2014, Dr. Chandran saw articles in the news that the U.S.

government had brought criminal charges against Ranbaxy and levied

historical financial fines against it.

17. At this time, Dr. Chandran realized that the Ranbaxy Defendants had

engaged in fraud to induce the Plaintiff group of companies to sell the

Metformin formulations and chemically modified Metformin brand drugs

and related assets. Dr. Chandran discovered that Ranbaxy never intended to

honor its promises to lawfully and ethically develop and market the

Metformin formulations, but instead had always intended to illegally

manufacture and sell these drugs without obtaining proper and valid U.S.

FDA approval.

18. Dr. Chandran learned that Ranbaxy, through its various companies and

manufacturing facilities, had routinely engaged in a pattern of criminal and

fraudulent conduct, possibly since 1994, associated with the licensing and

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 the manufacture of several drugs, including the Metformin drug line and

that the U.S. federal government along with numerous states had brought

lawsuits and criminal cases against several Ranbaxy companies. These

criminal cases resulted in sanctions against Ranbaxy, and bans on many

drugs currently licensed and sold by Ranbaxy, including the Metformin line

of drugs, and on the future licensing and manufacture of such drugs.

19. Plaintiffs have brought common law fraud, statutory fraud and civil

conspiracy causes of action as a result of being wrongfully induced through

fraud by Ranbaxy to enter into the comprehensive transaction to sell the

Metformin drug line and related assets.

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 IV.
ARGUMENT AND AUTHORITIES

INTRODUCTION

20. Movants must prove that ( 1) there is a valid agreement to arbitrate between

the parties; and (2) that the dispute in question falls within the scope of that

arbitration agreement." See, JP Morgan Chase & Co. v. Conegie ex rel.

Lee, 492 F.3d 596, 598 (5th Cir. 2007).

21. In their motion to compel arbitration, Movants have alleged that this case is

governed by the arbitration clause contained in the Amended and Restated

Joint Venture and Operating Agreement, signed June 19, 2002, which is

essentially the company operating agreement for Ranbaxy Signature, L.L.C.

[See Exhibit 4.]

THERE IS NO AGREEMENT TO ARBITRATE: THE CONTROLLING

CONTRACT IN THE MASTER TRANSACTION DOES NOT REQUIRE
ARBITRATION

22. As described above, Plaintiffs have brought claims against the Defendants

based largely on fraud in the inducement of the master transaction to sell the

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 Metformin line of drugs and associated assets. Thus the dispute pertains as

a whole to the master transaction to sell the Metformin drugs and assets.

23. This master transaction was comprised of two master contracts and various

subordinate contracts and documents, with the controlling primary

agreement being the Asset Purchase Agreement between Signature

Pharmaceuticals, Inc. and Ranbaxy Pharmaceuticals, Inc. [See Exhibit 2.]

24. It is important to note, that the Asset Purchase Agreement and all the

various other subordinate contracts, do not contain an arbitration clause and

instead call for litigation in the courts.

25. Only the Ranbaxy Signature, L.L.C. operating agreement contains an

arbitration clause.

26. Movants' reliance on the arbitration provision contained in the operating

agreement is incorrect and inappropriate. This operating agreement,

misleadingly entitled as a ')oint venture agreement," strictly pertains to the

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 formation and operation of the Ranbaxy Signature partnership and is

entirely between Signature Pharmaceuticals, Inc. and Ranbaxy

Pharmaceuticals, Inc., as partners in the new company to being formed.

Plaintiffs Signature R&D Holdings, L.L.C., American Generics, Inc. and

McCormick Holdings, L.L.C. are not parties to this operating agreement and

have nothing to do with the operation of this partnership.

27. More importantly this operating agreement is actually a subordinate

agreement, listed as a "closing item" to be provided by the parties as a

condition to the execution of the Asset Purchase Agreement referenced

above. For example, in Section 4.2 the Asset Purchase Agreement states:

Section 4.2. Seller's Particular Closing Deliveries. At the Closing,

in addition to any other documents specifically required to be
delivered pursuant to this Agreement, the Seller shall:

( o) execute and deliver to Buyer the Amended and Restated

Joint Venture and Operating Agreement serving to amend
the Joint Venture and Operating Agreement dated as of
August 1, 2000 between Buyer and SPI, in the form
attached as Exhibit F hereto, Seller acknowledging and
agreeing that the execution of the Amended and Restated
Joint Venture and Operating Agreement by Buyer and SPI
is a condition precedent of Buyer's and SPI's obligations

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 under this Agreement;

See Exhibit 4, Page 8 of the Asset Purchase Agreement.

28. Plaintiffs have alleged fraud in the inducement of the entire transaction.

Therefore the "dispute" between the parties does not arise from the

Amended and Restated Joint Venture and Operating Agreement of Ranbaxy

Signature, L.L.C., but relates to a global transaction governed by the master

Asset Purchase Agreement, along with several other subordinate

agreements, none of which call for arbitration.

29. The parties have therefore not entered into an arbitration agreement, as the

master contract does not require arbitration.

THIS DISPUTE DOES NOT FALL WITHIN THE SCOPE OF THE

ARBITRATION AGREEMENT CONTAINED IN THE L.L.C. OPERATING
AGREEMENT

30. Only the Ranbaxy Signature, L.L.C. operating agreement contains an

arbitration clause. As argued above, the present dispute should be governed

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 by the main agreement between the parties, being the Asset Purchase

Agreement. Therefore, as explained above, there is no agreement to

arbitrate and the second question as to whether the dispute is within the

scope of an agreement to arbitrate is inapplicable.

31. For the sake of argument, even if the arbitration provision contained in the

L.L.C. operating agreement were to apply, it is clearly limited in scope and

purpose. This company agreement arbitration clause is clearly intended to

be by and between the partners of the L.L.C. and regarding management

disputes internal to that company. For example the arbitration provision

refers to disputes that cannot be resolved by the “board members” of the

L.L.C. This clearly shows it was not meant to apply to the parties to the

main transaction but only the board members and partners of the L.L.C.

32. This is also consistent with the fact that the arbitration provision requires

that all arbitrations be resolved within 60 days. While internal management

disputes of the L.L.C. could be resolved within two months, serious

complex commercial disputes between the parties pertaining to the entire

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 comprehensive transaction absolutely cannot.

THE ARBITRATION PROVISION IN THE L.L.C. OPERATING

AGREEMENT WAS OBTAINED BY FRAUD

33. As discussed above, disputes between the parties pertaining the main

transaction are governed by the Asset Purchase Agreement, which does not

contain an arbitration agreement. Should the Court wish to further consider

the arbitration provision contained in the L.L.C. operating agreement,

Respondents assert the following additional defense.

34. A written arbitration agreement or provision is unenforceable, even if it falls

within the scope of the Texas Arbitration Statute, if grounds exist at law or

in equity for the revocation of the agreement or if the court finds that the

agreement or provision was unconscionable at the time it was made. Tex.

Civ. Prac. & Rem. Code §§ 171.001(b), 171.022.

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35. In determining whether an arbitration agreement is enforceable, the court

will adjudicate any claim that the inclusion of the arbitration clause in the

contract was the product of fraud or coercion. Prima Paint Corp. v. Flood

& Conklin, 388 U.S. 395, 403-404, 87 S. Ct. 1801, 18 L. Ed. 2d 1270

(1967); In re Morgan Stanley & Co., 293 S.W.3d 182, 185-190 (Tex. 2009)

(court, not arbitrator, determines whether party had capacity to enter into

contract).

36. For example, a finding of invalidity was upheld in one case, because of

evidence that the party seeking arbitration, who had drafted the contract,

had fraudulently obtained the inclusion of the arbitration provision by false

assurances that the contract had been approved by the other party's attorney.

Gulf Interstate Engineering v. Pecos Pipeline, 680 S.W.2d 879, 881-882

(Tex. App.-Houston [1st Dist.] 1984, writ dism'd).

37. In the present case, Plaintiffs allege that the arbitration provision was

obtained by Ranbaxy, which drafted all of the agreements, by fraud.

PLAINTIFFS’ RESPONSE TO DEFENDANTS’

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38. In their respective affidavits, V. Ravi Chandran and Ramakrishnan

Venkatasubrahmanyan both testify that John Reilly, the attorney for

Ranbaxy during all phases of the negotiations, falsely represented to them

that the arbitration clause in the original and the Amended and Restated

Joint Venture Operating Agreement ofRanbaxy Signature, L.L.C., was

essentially required by law in company operating agreements and cannot be

negotiated. He also made the representation that arbitration would be

financially economical and much quicker than court litigation.

See Exhibit B, Page 7, Affidavit of V. Ravi Chandran.

See Exhibit C, Pages 4- 5, Affidavit of Ramakrishnan

Venkatasubrahmanyan.

39. These representations were false, material, and relied upon by the decision

makers for the Plaintiff group of companies, in agreeing to the inclusion of

the arbitration clause. See Exhibit B, Page 8, Affidavit of V. Ravi

Chandran. See Exhibit C, Page 6, Affidavit ofRamakrishnan

Venkatasubrahmanyan.

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40. Arbitration clauses are not required by law. Nor is arbitrating with the AAA

in New York a requirement or an economical alternative to court litigation.

In fact, the published filing fee to initiate an arbitration case for a claim as

described in plaintiffs' petition is in New York is $41,500. The estimated

administrative fee plus the arbitrators' fees for a 5 day trial is estimated at

$107,500. Such a high filing fee would create a significant burden and

disincentive to Plaintiffs.

See Exhibit B, Pages 10 -11, Affidavit of V. Ravi Chandran.

41. These representations falsely induced Plaintiffs into agreeing to the

inclusion of the arbitration provision in the L.L.C. company operating

agreement. The court should therefore refuse to enforce the provision as it

was procured by fraud and should be held as invalid.

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THE ARBITRATION PROVISION IN THE L.L.C. OPERATING
AGREEMENT IS UNCONSCIONABLE AS WRITTEN

42. The arbitration clause contained in the Amended and Restated Joint Venture

Operating Agreement ofRanbaxy Signature, L.L.C., is also unconscionable.

43. The provision requires that any arbitration be completed within 60 days.

This term is unconscionable, as it would prevent, as a practical matter,

Plaintiffs ability to succeed with any kind of meaningful arbitration case.

Any prospective dispute between the parties would require significant

discovery and preparation. For example, Ranbaxy sells the Metformin

drugs either alone or in combination with other drugs as solid, and liquid

oral dosages in many countries through several of its affiliates. Thus

significant discovery would need to be completed to obtain the needed

proof as to Ranbaxy's operations concerning the sale ofMetformin

products, either alone or in combination with other drugs.

See Exhibit B, Pages 8 -9, Affidavit of V. Ravi Chandran.

PLAINTIFFS' RESPONSE TO DEFENDANTS'

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AUTHORITIES RELATED TO ADJUDICATION OF MOTIONS TO
COMPEL ARBITRATION

44. The court may summarily decide whether to compel arbitration on the basis

of documentary evidence such as affidavits, pleadings, discovery, and

stipulations. But an evidentiary hearing should be conducted when disputes

as to material facts are controverted by an opposing affidavit or other

admissible evidence. Jack B. Anglin Co., Inc. v. Tipps, 842 S.W.2d 266,

269 (Tex. 1992) (undisputed evidence established applicability of FAA);

Tex. La Fiesta Auto Sales, LLC v. Belk, 349 S.W.3d 872, 882-883 (Tex.

App.-Houston [14th Dist.] 2011, no pet.) (evidentiary hearing did not

prejudice party opposing arbitration).

45. The party seeking to compel arbitration must establish the existence of an

enforceable arbitration agreement, and show that the claims raised fall

within the scope of that agreement. J .M. Davidson, Inc. v. Webster, 128

S.W.3d 223, 227 (Tex. 2003) (despite strong presumption favoring

arbitration, presumption arises only after party seeking to compel arbitration

proves that valid arbitration agreement exists).

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46. Disputes regarding interpretation of the arbitration agreement are

determined according to ordinary contract principles. Leander Cut Stone

Co. v. Brazos Masonry, 987 S.W.2d 638, 640 (Tex. App.-Waco 1999, no

pet.).

V.
PLAINTIFFS’ RESPONSE
RELIES ON THE FOLLOWING PROOF

47. Plaintiffs response herein relies on the following proof attached hereto:

Exhibit A: Affidavit of V. Vasantha Lakshmi (custodian of records)

Exbhibit B: Affidavit of V. Ravi Chandran

Exhibit C: Affidavit of Ramakrishnan Venkatasubrahmanyan

Exhibit 1: Asset Purchase Agreement, between American Generics, Inc.,

as seller, to Ranbaxy Pharmaceuticals, Inc., as buyer (signed
April 1, 2000)

Exhibit 2: Asset Purchase Agreement, between Signature

Pharmaceuticals, Inc., as seller, to Ranbaxy Pharmaceuticals,
Inc., as buyer, (signed July 19, 2002)

Exhibit 3: Agreement for the Sale and Purchase of Real Estate, between
McCormick Holdings, L.L.C., as seller, and Ranbaxy

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329
 Pharmaceuticals, Inc., as buyer, for the sale of the real estate
related to the Gloversville factory (signed July 19, 2002) being
Exhibit A to the Signature Pharmaceuticals, Inc. Asset
Purchase Agreement.

Exhibit 4: Amended and Restated Joint Venture and Operating

Agreement, the company operating agreement between
Signature Pharmaceuticals, Inc. and Ranbaxy Pharmaceuticals,
Inc. for the formation and operation of Ranbaxy Signature,
L.L.C., (signed June 19, 2002), being Exhibit F to the
Signature Pharmaceuticals, Inc. Asset Purchase Agreement.

VI.
IN THE ALTERNATIVE,
MOTION TO ORDER DISCOVERY PRIOR TO ADJUDICATION OF
DEFENDANTS MOTION TO COMPEL ARBITRATION

48. A trial court has the discretion to order pre-arbitration discovery if it lacks

sufficient information regarding the scope of an arbitration provision or

other issue of arbitratability, such as a defense to arbitration. In re Houston

Pipe Line Co., 311 S.W.3d 449, 451 (Tex. 2009) (orig. proceeding).

49. Respondents therefore request that the Court order pre-arbitration discovery

should the Court determine that it lacks sufficient information regarding the

defenses to arbitration argued above by Respondents.

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 VII.
PRAYER

50. WHEREFORE, PREMISES CONSIDERED, Respondents pray that

upon completion of a hearing the Court DENY Defendants' application to

compel arbitration and to stay these proceedings.

Respectfully submitted,

LAW OFFICES OF JULIUS S. STAEV

2101 Cedar Springs Rd., Ste. 1050
Dallas, Texas 75201
Tel: (214) 347-0569
Fax: (214) 279-5674
jstaev@staevlaw.com

/s/ Julius S. Staev

Julius S. Staev
Texas Bar No. 00792855

ATTORNEY FOR PLAINTIFFS

SIGNATURE PHARMACEUTICALS, L.L.C.
SIGNATURE R&D HOLDINGS, L.L.C.
AMERICAN GENERICS, INC.
MCCORMICK HOLDINGS, L.L.C.

PLAINTIFFS' RESPONSE TO DEFENDANTS'

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 CERTIFICATE OF SERVICE

I CERTIFY that in compliance with the provisions of rules 21 and 2la of

the Texas Rules of Civil Procedure, on December 10, 2014, I served a true and
correct copy of the foregoing Plaintiffs' Response to Defendants' Application to
Compel Arbitration and Stay Proceedings on the following named person(s).
This service was made by sending the same as indicated below.

Via Email Through EFS System

clvdesiebman@siebman.com

Clyde M. Siebman, Esq.

SIEBMAN, BURG, PHILLIPS &
SMITH, LLP
300 North Travis Street
Sherman, Texas75090

/s/ Julius S. Staev

Julius S. Staev

PLAINTIFFS' RESPONSE TO DEFENDANTS'

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APPENDIX TAB 3
 Filed: 12/17/2014 11:29:14 AM
Andrea S. Thompson
District Clerk
Collin County, Texas
By Deborah Hill Deputy
Envelope ID: 3516195
CAUSE NO. 296-03032-2014

SIGNATURE PHARMACEUTICALS, § IN THE DISTRICT COURT

§
L.L.C., SIGNATURE R&D HOLDINGS,
§
L.L.C.; AMERICAN GENERICS, INC.
AND MCCORMICK HOLDINGS, §
L.L.C., §
§
Plaintiffs, §
§
vs. § 296TH JUDICIAL DISTRICT
§
RANBAXY, INC. F/K/A RANBAXY §
PHARMACEUTICALS, INC.; §
RANBAXY LABORATORIES, LTD.; §
VENKATACHALAM KRISHNAN AND §
ARUN SAWHNEY, §
§
Defendants. § COLLIN COUNTY, TEXAS

ORDER ON RANBAXY, INC. AND

VENKATCHALAM KRISHNAN'S APPLICATION TO COMPEL
ARBITRATION AND STAY PROCEEDINGS

After considering Ranbaxy, Inc. and Venkatchalam Krishnan's Application

to Compel Arbitration and Stay Proceedings, the response, and arguments of

counsel, and after a hearing on the application, the Court GRANTS the

Application To Compel Arbitration and Stay Proceedings.

Accordingly, the Court hereby STAYS these proceedings until such

arbitration has been had in accordance with the terms of the agreement to arbitrate.
·
S1gne d on _December
____ 19 _ _,2014.

~~ -Cl
852
APPENDIX TAB 4
 AMERICAN ARBITRATION ASSOCIATION

SIGNATURE PHARMACEUTICALS, LLC,

Claimant, Case No. 01-16-0004-6534
-against-
RANBAXY PHARMACEUTICALS, INC.,
Respondent.

PARTIAL FINAL A WARD

WE, THE UNDERSIGNED ARBITRATORS, having been appointed in accordance with

the dispute resolution provisions of an Amended and Restated Joint Venture and Operating
Agreement dated June 19, 2002 (Exhibit C-1 ), (the "Agreement"), between Ranbaxy
Pharmaceuticals, Inc. and Signature Pharmaceuticals, Inc. and having been duly sworn, and
having duly heard the submissions and evidence of the Parties, and given all Parties the
opportunity to be heard, do hereby FIND and AWARD, as follows:

I. THE PARTIES AND THE AGREEMENT

1. Claimant Signature Pharmaceuticals, LLC ("Signature") is a Delaware limited

liability company and states that it is the surviving company of a merger with Signature
Pharmaceuticals, Inc., a New York corporation that is a party to the Agreement. Its address is
PO Box 835090, Richardson, TX 75083-5090.

2. Respondent Ranbaxy Pharmaceuticals, Inc. is a Delaware corporation. Its address

is 600 College Rd. E, Ste. 2100, Princeton, NJ 08540.

3. In 2000, Ranbaxy and Signature Pharmaceuticals, Inc. formed Ranbaxy

Signature, LLC (the "LLC"), a Delaware limited liability company. The Agreement defines
ownership and operating rights relating to the LLC. The parties to the Agreement are the
Members ofthe LLC.

II. DISPUTE RESOLUTION AND GOVERNING LAW

4. Section 12.8 of the Agreement states:

"Arbitration. In the event of any disputes that are not resolved by

the Board or the Members shall be resolved exclusively through

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 arbitration and settled by a panel of three (3) arbitrators in New
York, New York (one of whom shall be selected by SPI, one of
whom shall be selected by Ranbaxy and the third of whom shall be
selected by the arbitrators selected by SPI and Ranbaxy) who shall
hold a hearing and make an award within sixty (60) days of the
filing for arbitration. The arbitrators shall be selected and the
proceedings and award conducted in accordance with the rules of
the American Arbitration Association then pertaining. The
arbitrators, in addition to any award that they shall make, shall
have the discretion to award the prevailing party the costs of the
proceedings together with reasonable attorney's fees. Any award
made hereunder may be docketed in a court of competent
jurisdiction. In the event there are any issues which are not
arbitrable as a matter of law, and as a condition precedent to a
court making a determination on any non-arbitrable issues, any
issues which may be arbitrated shall first be determined by
arbitration pursuant to this Section 12.8."

5. Section 12.13 of the Agreement provides:

"Governing Law. This Agreement shall be governed by and

construed in accordance with the laws of the State of Delaware
(other than its rules as to conflicts of law to the extent that such
rules would result in the application of the laws of some other
jurisdiction). To the extent the provisions of this Agreement are
inconsistent with the Delaware Limited Liability Company Act,
the provisions of this Agreement shall apply."

III. RELEVANT PROCEDURAL HISTORY

6. Signature filed its Demand for Arbitration and commenced this arbitration on
October 25, 2016. Signature is represented by:

Jeffrey M. Telep, Esq.

King & Spalding LLP
1700 Pennsylvania Avenue, NW, Suite 200
Washington, DC 20006-4707

and

Brian A. White, Esq.

Sara S. Bums, Esq
King & Spalding LLP
1180 Peachtree Street, NE
Atlanta, GA 30309-3521

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 and

Sara McBrearty, Esq.

King & Spalding LLP
1100 Louisiana St., Suite 4000
Houston, TX 77002

7. Ranbaxy filed an Answering Statement on November 21, 2016. It included a

section arguing that "Signature's Claims Are Barred by the Statute of Limitations." Ranbaxy is
represented by:

Jay P. Lefkowitz, P.C.

Eric F. Leon, P.C.
Kirkland & Ellis LLP
601 Lexington Ave.
New York, NY 10022

8. The Panel of arbitrators, constituted on November 29, 2016 after having been
selected in accordance with the Agreement, is composed of:

Han. E. Leo Milonas, Chairperson

Pillsbury Winthrop Shaw Pittman LLP
1540 Broadway
New York, NY 10036-4039

James H. Carter, Esq.

Wilmer, Cutler, Pickering Hale and Dorr LLP
7 World Trade Center
250 Greenwich Street
New York, NY 10007

Hon. William B. Chandler, III

Wilson Sonsini Goodrich & Rosati
Eight West Laurel St.
Georgetown, DE 19947-1424

9. The parties have agreed that the American Arbitration Association's Commercial
Arbitration Rules (the "AAA's Commercial Rules") are applicable in this arbitration.

10. On December 5, 2016 Signature filed Claimant's Request for an Award Denying
Respondent's Statute of Limitations Defense (the "Request"). Following telephone conferences
among counsel for the parties and the arbitrators on December 5 and 6, 2016, the parties
submitted additional papers supporting and opposing the Request in accordance with Arbitrators'
Order No.1 ofDecember 7, 2016.

11. An oral hearing was held on the Request in New York, NY on December 15,
2016. This Partial Final Award constitutes an award addressing the Request.

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IV. THE REQUEST AND THE PARTIES' CONTENTIONS

12. In the Request, Signature contends (at 14) that "there is no time limit on
Signature's right to pursue its claims arising out of or relating to" the Agreement and that
"Ranbaxy's statute oflimitations defense fails as a matter of law." Signature seeks an award
containing a declaration to that effect, and Signature maintains that an award upon this matter
made on or prior to December 26, 2016 would constitute "an award within sixty (60) days ofthe
filing for arbitration" pursuant to Section 12.8 of the Agreement.

13. Signature contends that neither the Agreement, the Rules, the Federal Arbitration
Act, 9 U.S.C. section 1 et seq., nor any other provision of law authorizes arbitrators to enforce
any statute of limitations restricting Signature's right to pursue any claim it asserts in this
arbitration. Signature therefore seeks an award striking or dismissing this defense.

14. Ranbaxy opposes the Request and contends that the panel has discretion to apply
or not apply a statute of limitations pursuant to New York's Civil Practice Law and Rules,
Sections 7502(c) and 202, and Sections R-4(c) and R-47(a) of the AAA's Commercial Rules and
that the panel should apply Delaware's three-year statute of limitations. Ranbaxy also maintains
that Section 12.8 of the Agreement requires the panel to render a final award in this case not later
than December 26, 2016.

V. REASONS FOR DECISION

15. Section R-4(c), part of a Rule titled "Filing Requirements," states:

"It is the responsibility of the filing party to ensure that any

conditions precedent to the filing of a case are met prior to filing
for an arbitration, as well as any time requirements associated with
the filing. Any dispute regarding whether a condition precedent
has been met may be raised to the arbitrator for determination."

16. Section R-47(a), part of a Rule titled "Scope of Award," provides:

"The arbitrator may grant any remedy or relief that the arbitrator
deems just and equitable and within the scope of the agreement of
the parties, including, but not limited to, specific performance of a
contract."

17. Section R-8, titled "Interpretation and Application of Rules," states in part:

"The arbitrator shall interpret and apply these rules insofar as they
relate to the arbitrator's powers and duties."

18. The AAA's Commercial Rules authorize arbitrators to decide whether there are
any "time requirements associated with" the filing of any claim in this arbitration and to
determine whether it would be "just and equitable" to grant any remedy or relief on any claim
that Signature has asserted, which includes whether damages should be granted in view of the

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time that may have elapsed prior to assertion of a claim. The AAA' s Commercial Rules, which
are included by reference as part of the Agreement, grant arbitrators discretion to decide to apply
a state statute of limitations as a restriction on remedies, should the panel consider that
appropriate, just and equitable.

19. The Request therefore should be denied.

20. Section 12.8 of the Agreement specifies that the arbitrators "shall hold a hearing
and make an award" within 60 days of filing for arbitration. Section R-47(b) states:

"In addition to a final award, the arbitrator may make other

decisions, including interim, interlocutory, or partial rulings,
orders, and awards. In any interim, interlocutory, or partial award,
the arbitrator may assess and apportion the fees, expenses, and
compensation related to such award as the arbitrator determines is
appropriate."

21. Section 12.8 ofthe Agreement does not require that a final award be made by any
specified deadline, only that an award be made. Section R-47(b) includes partial awards within
the category of"awards." This Partial Final Award is an award made, following a hearing, in
accordance with the requirements of that Section and Rule.

VI. AWARD

WHEREFORE, for the reasons set forth above, we hereby DECLARE and AWARD as
follows :

22. Signature's Request for a declaration that there is no time limit on Signature's
right to pursue its claims arising out of or relating to the JV Agreement is denied. The arbitrators
have discretion to enforce such a time limit if it is appropriate in the circumstances to do so.

23. Except as set forth herein, all other claims and defenses in the arbitration are
preserved for further proceedings, and the arbitrators will retain jurisdiction to decide these at a
later stage in this proceeding.

24. This Partial Final Award may be executed in counterparts, each of which shall be
deemed an original, and all of which together shall constitute the Partial Final Award ofthis
panel.

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We hereby certify, for the purposes of Article I of the New York Convention of 1958, on the
Recognition and Enforcement ofForeign Arbitral Awards, that this Partial Final Award was
made in New York, N.Y., United States of America.

Dated: December ~016

James H. Car1cr. Arbitrator

William B. Chandler, II I, Arbitrator

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t\ctivdJS 1600965!!2v.2

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We hereby certify, for the purposes of Article I ofthe New York Convention of 1958, on the
Recognition and Enforcement of Foreign Arbitral Awards, that this Partial Final Award was
made in New York, N.Y., United States of America.

Dated: December jj, 20 16

E. Leo Milonas, Chairperson

-· ~ ;/c;;._ft__
Q~es H. Carter, Arbitrator

William B. Chandler, III, Arbitrator

-6-
ActiveUS 160096582v.2

1507
We hereby certify, for the purposes of Article I of the New York Convention of 1958, on the
Recognition and Enforcement of Foreign Arbitral Awards, that this Partial Final Award was
made in New York, N.Y., United States of America.

Dated: December_, 2016

E. Leo Milonas, Chairperson

James H. Carter, Arbitrator

tJ~;f.~g
William B. Chandler, III, Arbitrator

- 6-
ActivelJS 160096582v.2

1508
STATE OF NEW YORK )
) SS:
COUNTY OF NEW YORK )

I hereby certify that, for the purposes of Article I of the New York Convention or 1958 on the

Recognition and Enforcement of Foreign Arbitral Awards, this Pa11ial Final Award was made in

New York, N.Y., United States of America.

Dated: December { f'· 20 16

STATE OF NEW YORK )

) SS:
COUNTY OF NEW YORK )

On this lCr 1-h day of December, 2016. before me personally came and appeared E. Leo Mi Ionas.

to me known and known to me to be the individual described in and who executed the foregoing

instrument and he acknowledged to me that he executed the same.

"
.'/ ---:--
DcLew\Dc':- lC( 2.0tl.;. c=--;.1l-L-t-.J-tL-·1f.-. ;)~.._,, U- ;LA

Date / Notary Pitblic

SUSAN BUSANI
Notary Public, State of New York
No. 01 BU4983804
Qualified In Bronx County
Commission Expires July 8, 2019

- 7-
ActivcUS I 60096582v.2

1509
STATE OF NEW YORK )
) SS:
COUNTY OF NEW YORK )

I hereby certify that, for the purposes of Article 1 of the New York Convention of 195 8 on the

Recognition and Enforcement of Foreign Arbitral Awards, this Partial Final Award was made in

New York, N.Y., United States of America.

Dated: December 11, 2016

'0. . r-) .
.----···- ~ 1.4 / / \_ Cu ~-
~es H. Carter, Arbitrator

STATE OF NEW YORK )

) SS:
COUNTY OF NEW YORK )

VirA day of December, 2016, before me personally came and appeared James H. Carter,
On this ,;. . .,

to me known and known to me to be the individual described in and who executed the foregoing

instrument and he acknowledged to me that he executed the same.

---- ~

(
·/
(/'
b~
'.-::-
/;fy)&n~~l
- '-.
l
. I

Notary Public
"----··
SUSAN A DALESSANDRO
NOTARY PUBLIC, State of New York
No. 01 DA49548sa
Qualified in Richmond County
Commission Expires Aug. 21' 2017

- 8-
ActiveUS 160096582v.2

1510
STATE OF DELAWARE )
) SS:
COUNTY OF SUSSEX )

I hereby certify that, for the purposes of Article 1 of the New York Convention of 1958 on the

Recognition and Enforcement of Foreign Arbitral Awards, this Partial Final Award was made in

New York, N.Y., United States of America.

Dated: December '2016

~&~77C
William B. Chandler, III, Arbitratoi="""

STATE OF DELAWARE )
) SS:
COUNTY OF SUSSEX )

On this~day of December, 2016, before me personally came and appeared William B.

Chandler, III, to me known and known to me to be the individual described in and who executed

the foregoing instrument and he acknowledged to me that he executed the same.

Date

- 9-
ActivclJS 160096582v.2

1511
APPENDIX TAB 5
 AMERICAN ARBITRATION ASSOCIATION

SIGNATURE PHARMACEUTICALS, LLC,

Claimant, Case No. 0116 004 6534

-against-

RANBAXY PHARMACEUTJCALS, INC.,

Respondent.

ARBITRATORS' ORDER

1. Reference is made to the January 23,2017 email from Respondent's counsel (see

Attachment 1) and to the multiple emails and correspondence, the hearing minutes of

December 15, 2016 and the Arbitrators' "Partial Final Award" dated December 16, 2016 (see

Attachment 2) which address the timeliness of these proceedings under Section 12.8 of the

JV A. Specifically the Partial Final Award determined, in Paragraphs 20 and 21, as foUows:

"20. Section 12.8 of the Agreement specifies that the arbitrators "shall hold a
hearing and make an award" within 60 days of filing for arbitration. Rule R-47(b) states:

"In addition to a final award, the arbitrator may make other decisions,
including interim, interlocutory, or partial rulings, orders and awards. In
any interim, interlocutory, or partial rulings, orders, and awards. In any
interim, interlocutory, or partial award, the arbitrator may assess and
apportion the fees, expenses, and compensation related to such award as
the arbitrator determines is appropriate."

21. Section 12.8 of the Agreement does not require that a final award be made
by any specified deadline, only that an award be made. Rule R-47(b) includes partial
awards within the category of "awards;" This Partial Final Award is an award made,
following a hearing, in accordance with the requirements of that Section and Rule."

1515
 2. The Partial Final A ward was made prior to the 60th day following the filing of

the arbitration. In the January 20, 2017 scheduling conference call with counsel, after the 60th

day following filing of the arbitration had passed, Claimant's counsel stated that it was satisfied
\

that the Partial Final Award complied with the timeliness requirements of Section 12.8 of the

JVA, and it was prepared to proceed. Respondent's counsel asserted that it was not prepared to

take a position on Section 12.8 "at this time." The Arbitrators advised Respondent tbat it would

be manifestly unjust and unfair, for the parties to expend a significant amount of time and

resources, and for the Respondent to "sit on its rights" as perceived, and to await the outcome

of the arbitration. If it was satisfied with the result, it would do nothing. However, if it was not

satisfied, it would then go to court to challenge the proceedings under Section 12.8 of the

JVA. Therefore, Respondent's counsel was directed that the Respondent should decide and

advise the Arbitrators by January 23, 2017 whether it intended to proceed to court for a stay or

to continue with the arbitration process.

3. The January 23, 2017 email from Respondent's counsel specifically advised that

the Respondent would proceed with the arbitration "[w]ith the understanding that Ranbaxy

reserved all rights under Section 12.8 of the JVA, and that Ranbaxy' s continued participation in

these proceedings is performed subject to, and without waiver of, this reserva~on of rights,

Ranbaxy is amenable to the schedule proposed by the Panel (subject to confirming the

availability of one witness) and will not seek to enjoin the proceedings at this time."

2
1516
 4. The proposed "reservation" by Respondent of "all rights" under Sec. 12.8 of the

JVA is not acceptable to the Arbitrators, who require that the issue of arbitral jurisdiction after

the 60th day following the .filing of the arbitration be resolved prior to proceeding with the

merits of the case. The Arbitrators are therefore suspending the proceedings in this arbitration

until February 21, 2017 so that either party can proceed in the appropriate court with

jurisdiction to determine the applicability of Section 12.8 of the JVA to these proceedings or any

other pre-Award issues which are appropriate for judicial intervention. Alternatively, either

party may present the issue of jurisdiction under Sec. 12.8 of the JV A to the Panel for a further

final and binding award on jurisdiction, relying on prior submissions or supplementing them as

the party may choose, by February 21, 2017. The Arbitrators' decision shall constitute a final

and binding ruling on jurisdiction pursuant to AAA Rule R-7. The Panel will understand that

each party, by proceeding with the arbitration after February 21, 2017 without having taken

either of these steps, will have waived any further objection to jurisdiction under Sec. 12.8 of the

JVA.

Dated: New York, New York

January 30, 2017

1517
 Attachment 1
Email from I<irkland & Ellis to the Tribunal
dated January 23, 2017

1518
Busani, Susan G.

From: Huang, Kuan <luan,huang@kirkland.com>

Sent: Monday, January 23, 2017 7:42PM
To: Milona-s, E. Leo;james.carter@wilmerhale.com; wchandler@wsgr.com
Cc: Albertic@adr.org; Lefkowitz, Jay P.; Leon, Eric F.; Taylor, Nate; bwhite@kslaw.com; Telep,
Jeffrey; Burns, Sara; McBrearty, Sara
Subject: Signature Pharmaceuticals, LLC V. Ranbaxy Pharmaceuticals, Inc., Case No.
01-16-0004-6534

Dear Messrs. Carter, Chandler, and Milonas:

We write on behalf of Respondent Ranbaxy, Inc. (f/k/a Ranbaxy Pharmaceuticals, Inc., and referred to herein as
"RanbaxyN) in accordance with the Panel's request during the telephonic conference held on January 20, 2017. During
that conference, the Panel proposed that a final hearing in the above-captioned matter be held on April 3 -7, 2017, with
April12 and 13, 2017 serving as addltlonal"reserve" hearing dates, If necessary. With the understanding that Ranbaxy
reserves all rights under Section 12.8 of the JVA, and that Ranbaxy's continued participation In these proceedings is
performed subject to, and without waiver of, this reservation of rights, Ranbaxy is amenable to the schedule proposed
by the Panel (subject to confirming the availability of one witness) and will not seel( to enjoin the proceedings at this
time.

Respectfully submitted,

Kuan Huang

KIRKLAND & ELLIS LLP

601 Lexington Avenue, New York, NY 10022
T +1 2.12 446 4904
F +i 212 446 4900

k ua n. huang@ki rkla nd .com

The information contained In this communication is confidential, may b6 attorney-client privileged. may constitute inside informfltion. and is intended only
for the use of the addressee. !! is the property of Kirkland & Ellis LLP or Kirkland & Ellis lnternatiotlal LLP. Unauthotized use, disclosure or copying of
this communication or any part thereof is strictly prohibited and may be unlawful. If you have received this communication in error. please notify us
immediatefy by return email or by email to ~~m~l~r.@!s.irli@p~n, and destroy this communication and all copies thereof, includin9 all attachments.

1
1519
 Attachment 2
Partial Final Award dated December 16, 2016

1520
 AMERICAN ARBITRATION ASSOCIATION

SIGNATURE PHARMACEUTICALS, LLC,

Claimant, Case No. 01-16-0004-6534
-against-
RANBAXY PHARMACEUTICALS, INC.,
Respondent.

PARTIAL FINAL AWARD

WE, THE UNDERSIGNED ARBITRATORS, having been appointed in accordance with

the dispute resolution provisions of an Amended and Restated Joint Venture and Operating
Agreement dated June 19,2002 (Exhibit C-1), (the "Agreement"), between Ranbaxy
PharmaceutiCals, Inc. and Signature Pharmaceuticals, Inc. and having been ·duly sworn, and
having duly heard the submissions and evidence of the Parties and given a!J Parties the
opportunity to be head, do hereby FIND tmd A WARD, as follows:

I. THE PARTIES AND THE AGREEMENT

1. Claimant Signat1-rre Pharmaceuticals, LLC ("Signatm·e") is a Delaware limited

liability company and states that it is the surviving company of a merger with Signature
Pharmaceuticals, Inc., a New .York corporation that is a party to the Agreement. Its address is
PO Box 835090, Richardson, TX 75083-5090.

2. Respondent Ranbaxy Pharmaceuticals, Inc .. is a Delaware corporation. Its address

is 600 College Rd. E Ste. 2100, Princeton, NJ 08540.

3. In 2000 Ranbaxy and Signature Pharmaceuticals, Inc. formed Rm1baxy Signature,

LLC (the "LLC"), a Delaware limited liability company. The Agreement defines ownership and
operating rights relating to the LLC. The parties to the Agreement are the Members of the LLC.

II. DISPUTE RESOLUTION AND GOVERNING LAW

4. Section 12.8 of the Agreement states:

"Arbiti'ation. In the event of any disputes that are not resolved by

the Board or the Members shall be resolved exclusively tlwough
arbitration and settled by a panel of three (3) m·bitrators in New
York, New York (one of whom shall be selected by SPI, one of
whom shall be selected by Ranbaxy and the third of whom shall be

Active US 160096582v, 1
1521
 selected by the arbitrators selected by SPI and Ranbaxy) who shall.
hold a hearing and make an award within sixty (60) days of the
filing for arbitration, The arbitrators shall be selected and the
proceedings and award conducted in accordance with the rules of
the American Arbitration Associatioti then pertaining. The
arbitrators, in addition to any award that they shall make, shall
have the discretion to award the prevailing party the costs of the
proceedings together with reasonable attorney's fees, Any award
made hereunder may be docketed in a court of competent
jurisdiction. In the event there are any issues which are not
arbitrable as a matter of law, and as a condition precedent to a
court making a determination on any non-arbitrable isstws, any
issues which may be arbitrated shall first be determined by
arbitration pursuant to this Segtion 12.8,"

5. Section12.13 ofthe Agreement provides:

"Governing Law. This Agreement shall be governed by and

construed in accordance with the laws of the State of Delaware
(other than its rules as to conflicts of law to the extent that such
rules would result in the application of the laws of some other
jmiscliction). To the extent the provisions of this Agreement are
inconsistent with the Delaware Limited Liability Company Act,
the provisions of this Agreement shall 0.pply."

III. RELEVANT PROCEDURAL HISTORY

6. Signature filed its Demand for Arbitration and commenced this arbitration on
October 25, 2016. Signature is represented by:

Jeffrey M. Telep, Esq.

King & Spalding LLP
1700 Pennsylvania Avenue, NW, Suite 200
Washington, DC 20006-4707

and

Brian A. White, Esq.

Sara S. Burns, Esq
King & Spalding LLP
1180 Peachtree Street, NE
AtlantE\, GA 30309-3521

and

Sara McBrearty, Esq.

King & Spalding LLP

-2-
· ActiveUS 160096582v.l
1522
 1100 Louisiana St., Suite 4000 ·
Houston, TX 77002

7, Ranbaxy filed an Answering Statement on November 21, 2016. It included a

section aTguing that ~'Signature's Claims Are Barred by the Statute of Limitations." Rm1baxy is
represented by:

JayP. Lefkowitz, P.C.

Eric F. Leon:, P.C,
Kirklm1d & Ellis LLP
601 Lexington Ave,
New York, NY l 0022

8, The Panel of arbitrators, constituted on November 29, 2016 after having been
selected in accordance'with the Agreement, is composed of:

Hon. E. Leo Milonas, Chairperson

Pillsbury Winthrop Shaw Pittman LLP
1540 Broadway
New York, NY 10036~4039

James H. Carter, Esq.

Wilmer, Cutler, Pickering Hale and Dorr LLP
7 World Trade Center
250 Greenwich Street
New York, NY 10007

Hon. Willim11 B. Chandler, III

Wilson Sonsini Goodrich & Rosati
Eight West Laurel St.
Georgetown, DE 19947-1424

9. The parties have agreed that the American Arbitration Association's Commercial
Arbitration Rules (the "Rules") are applicable in this arbitration.

10. On December 5, 2016 Signature 5led Claimant's Reqtlest for an Award Denying
Respondent's Statute of Limitations Defense (the ''Request"). Following telephone conferences
among counsel for the parties and the arbitrators on December 5 and 6, 2016, the parties
submitted additional papers supporting and opposing the Request in accordance with Arbitrators'
Order No, 1 of December 7, 2016.

11. An oral hearing was held on the Request inN ew York, NY on December 15,
2016. This Partial Final Award constitutes an award addressing the Request.

IV. THE REQUEST AND THE PARTIES' CONTENTIONS

12. In the Request, Signature contends (at 14) that "there is no time limit on
Signature's right to pursue its claims arising out of or relating to" the Agreement and that

-3 ~
Active US 1600965 82v, 1
1523
"Ranbaxy' s statute of limitations defense fails as a matter oflaw." Signature seeks an award
containing a declaration to that effect, and Signature maintains that an award upon this matter
made on or prior to December 26, 2016 would constitute "an award within sixty (60) clays of the
filing for arbitration" pursuant to Section 12.8 of the Agreement.

13. ·Signature contends that neither the Agreement, the Rules, the Federal Arbitration
Act, 9 U.S.C. section 1 et seq., nor any other provision of law authorizes arbitrators to enf()rce ·
any statute of limitations restricting Signature's right to pursue any claim it asserts in this
arbitration. Signatm:e therefore seeks an award striking or dismissing this defense.

14. Ranbaxy opposes the Request and contends that the panel has discretion to apply
or not apply a statute oflimitations pursuant to New York's Civil Practice Law and Rules,
Sections 7502(c) and 202, a11d American Arbitration Association Rules R··4(c) and R-47(a) and
that the panel should apply Delaware's tlu·ee-year statute of limitations. Ranbaxy also maintains
that Section 12.8 of the Agreement requires the panel to render a final award in this case not later
than December 26, 2016.

V. REASONS FOR DECISION

15. Rule R-4( c), part of a Rtlle titled "Filing Requirements," states:

~~u is the responsibility of the filing party to ensure that any

conditions precedent to the filing of a case are met prior to filing
for an arbitration, as well as any time requirements associated with
the filing. Any dispute regarding whether a condition precedent
has been met may be raised to the ru·bitrator for determination."

16. Rule 47(a), part of a Rule titled "Scope of Award," provides:

"The arbitrator may grant any remedy or relief that the arbitrator
deems just and equitable and within the scope of the agreement of
the parties, including, but not limited to, specific performance of a
contract."

17. Rule 8, titled "Interpretation and Application of Ru.les," states in part:

"The arbitrator shall interpret and apply these rules insofar as they
relate to the arbitrator's powers a11d duties."

18. These rules authorize arbitrators to decide whether there are any ''time
requirements associated with" the filing of any claim in this arbitration and to determine whether
it would be "just and equitable" to grant any remedy or relief on any claim that Signature has
asserted, which includes ·whether drunages should be granted in view of the time that may have
elapsed prior to assei·tion of a claim. These rules, which are included by reference as part of the
Agreement, grant arbitrators discretion to decide to apply a state statute of limitations as a
restriction on remedies, should the panel consider that appropriate, just and equitable.

19. The Request therefore should be denied.

-4"
Active US 160096582v. I
1524
 20, Section 12.8 of the Agreement specifies that the arbitl·ators "shall hold a hearing
and mak·e an. award" within 60 dnys of filing for arbitration. Rule R~47(b) states:

'~In addition to a final award~ the arbitrator may mnke other

decision.'!, including interim, interlocutory, or partial rulings.
orders, and awards. In any interim, interlocutory, m· pm'tial awmd,
the arbitrator may assess and apportion the fees) expenses) and
compensation related to such awmd as the arbitrator determines is
appropriate."

21, Section 12.8 of the Agreement does notrequite that a :final award be made by a11y
specified deadlhie, only th-at an award be made. Rule R~47(b) includes partial awards 'Within the
category of"awarcl.o;;.') This Partial Final Award is an award made, following a hearing, in
accordance with the requirements of that Section and Rule.

VI. AWARD

WHEREFORE, for the reasons set forth above, we hereby declare and AWARD ao:;
fqllows:

22. Signature)s Request fat a declaration that there is no time limit on Signa.tm·e~s
right to pursue its claims arising out of or relating to .the JV Agreement is denied, The arbitrators
have discretion to enforce such a time limit if it is appropriate in the circun1stances to do so.

23. Except as set forth he1·eh1, all other claims and defenses in the arbitration are
ptesel'Ved for flll'thei' proceedings.

We hereby certify, for the purposes of Article I of the New York Convention of 1958. on the
Recognition and Enforcement of Foreign ArbitTal Awards, that this Partial Final Awal'd was
made in New Yark, N.Y.~ United Statefl of America.

Dated: December~ 2016

James I-I. Carter, Arbitrator

- .
William B. Chandler, III, ArbitJ.·ator

Active'US !60096582v.J
1525
I hereby certify that, for the purposes of Article 1 of the New York Convention of 1958 on the

Recognition and Enforcement ofForeign Arbitral Awards, this rinal Award was made in New

York, N.Y., United States of America.

Dated: December fC. 2016

;f!_JZ_~ ·
E. Leo Milonas, Chairperson

SlATE OF NEW YORK )

) SS:
COUNTY OF NEW YORK )

~
On lhis l(o day of December, 2016, before me personally came and appeared E. Leo Milonas,

lo me known and known to me to be the individual described in and who executed the foregoing

instrument and he ackt1owledged to me that he executed the same.

D.e..c r:..ro be,(' \ 0 1 1..0 \ (p

Date Notary ublic

SUSAN BUSANI
Notary Publlo, Stoto ol New York.
No. 01BU4983804
QuaUfled In Bronx County
Commltelon Expires July 8, 201.9.

-6~
AcllvcUS l60096S82v.l
1526
 ·· · 20. .S~otion 12,8 (')f the Agreement specifit}s thElt the arbitrator.~ "sh~U hold a'hearing
and n ake an award" w1thin' 60 da;ts of filing f01: arbitration, Rule .R~47(b) tates:
"In a~dltion to a finat ·nwaid, the arbltra or may muk other :
decision., in·cludi.ng inteJ•irri, hW')t·Jocutory,·or part!al n1_lings,
orde1·s, ood awards. Ill any interim, in~ ·loc\ltOL'Y, or par ial award,
tho al'bitra.tor may a'iscss and apportion t~e. fees, exp nses\ E11d ·
compenst~ti·on related 0 such award ·us the a.l'bitrat<;>r determines .is
appropriate." · ·

· :?,1. Section 12.8 ..ofthe Agree111~11t ·c,oes not ·equlre. lhut tl flnal ttw'ard l e made by any .
s·peci'fied dead fine; only that ~n award be made. Rule RA7(b) inch.1<ios partial awards .within the
category of '\~wards.'u This Partl.al Final Awal'd: is run.wf\.r~ made, following t\ hetwlng, ·;n
accordance wHh .tbo roq1.tiremei1t:S ofthat-Seotion 'and Rule.
I ' ' I • 0

VI. · AWAHD ·

WHEREFORE, for .the r~asw1.s s.et forth ·ubove, we h~J.· eby lecla1.'c und AWARD.as
follows : · · · .· : . .

·22. $ignt"~t1m~'s Request for a d~clarat'on ~hat there is no Lime limit on Si.gnatur~'·:1
right to pqrsu~ its clajm.s arising ~nit of or ·ela.#ng to the JV Agreement Ls denied. The arbitratol's
.. ~ave disoretlor td enforce.. s 1ch a time Hmlt if. it is appropriate in ·h cu·oumst'Emces to do so.
. 23, . ..xcept as set torth herein, all othet· Claims and c!efense:-: ih the arbitra tlo are
presm'V d or ~'ut;ther proceedirtgs.

We hereby certify, for the purposes o(Artlcle 1 ofthe N~w York ConveMion of 1958,011 the
R cognition ~rid Bnforcom·ent of PoreigJi A:rbitTt\1 Awn.Tds, .that this P al'tial Pinal Award was
made.in New York, N.Y.,.VnHed States· of America·, · · . · ·
.Dated: Decembet· _L&zo 16 .

....,..,_.._, ,...._~,_.,..-, ~... .. ..-...-- ~ ·· ·~., ....... ..:.... r.to--.__,. , _ •

_E..Leo 1:fi1onas, Chairpor~o.n

•' • I I •
:·.

William B. Cban_d_ler, Ill, Arbitrator

- 5 ~·
AoUvoUS I600%SB2v. I ..
1527 .
 ..
1 hereby cortlf'y that, for the purposes of Article 1 ofthc :'\ey, York Convention of 1958

on the Recognition Md Enforcement of~o~lgn Arbitral Awat'ds~ this Finn! Award was made in

New York, N.Y., United States of Ameftca

Dated: December '', 2016

Q1 os H. Carter, Arbltrnlor
•'

STATU OFNL1W YORK )

) SS:
COUNTY OF NEW YORK )

On this /I. h. day ofDecembct, 2016, before me personally oamo and appeared Jnmos H. Carter:
to me known tmd known to m6 to be the·individual described In und who oxccuwd the foregoing

instrument nnd he acknowledged to me that he exeeutod Ihe same.

:;[):~tt?~B€J?. I' 2d~ l

DfltC

MAIW ANN tl)A\3LIAY1'rll ·' ' .

NOTARY PUI:ILIQSloto or N~wy01 ' \•• • o ~'' ;:,,' •., J I

No. 01<.~M70!1341 ~. .... ~· ·" ...

:
.OuiiJJQud In N£1etau county
Certlllonto Rlod In Now York Coun~Y,
Oomml\.'1lon Elcplros Aug. 31, 20.JL'l.

-7-
1\ottvoUS 160096SB2v. I

1528
 20. Section 12.8 of the Agreement sp-ecifies that the arbitrators '~shall hold a beari~g
and make an award't within 60 days of filing for arbitration. Rule R..47(b) states: I
"In addition to a finui award, the arbitrator may make othCl'
decisions, including interim, interlocutory~ or pnrtinlr·ulings;
orders, nnd awnrds. In any interhn 1 interlocutory, or pnrtial a.ward,
the arbitrator may ussess and apportion the fees, expenses, and
compensation related to such uward as the arbitrator determines is
appropriate/'
21. Section 12.8 ofthe Agreement does not require thut a final aww:d be made by Jny
specified deadline, only that an award be madeT Rule R~47(b) includes parlial awards within the
category o.f"awards.1' This Partial E'ina.l Award ]san award made. ±'ollowlng a hearing, in I]
accordance with the requirements ofthe.t Section and Rule.

VI. AWARD
WHEREFORE, for the reasons set forth above, we hereby declnre and AWARD us
follows:
22. Signature~s Request for a deolnratlon that there is .no time limit on Signa.tut(j1 $
right to pm•sue its claims arising out of or reluting,to the JV Agreement is d~nied. The arbitra ors
have discretion to enforce such a time limit if it is appropriate in the circurnstanccs to do so.
23. Except as set forth herein, all other claims and defenses in the urbitratiou are
preserved for further ptoceedings.
We hereby certify~ for the purposes of Article I of the New York Convention of 1958, on the
Recognition and Enforcement of Foreign Arbitral Awards~ that this Partinl Final Awaxd was
made in New York, N.Y., United States of Amerlon,
Dated: Decemberl'2016

E. Leo Milonus~ Chairperson

.,

James H. Carter1 Arbitrator

Act!veUS l 60096582v.l
152~
 Xhereby certify that, for the purposes Qf Artide 1 oftlH~ New York Convention of19 :g

on .the Recognition and Enforcement ofFoteign Arbitra~ Award~, this Final Award was mnd1 in
·New York, N.Y. 1 United States of America. .

· Dated: Deaetnb~l' ((?, 2016 j

!d!4U1(d~
WilHam B. Cha.nd1er1 III, Arbitrator ·

STATE OF· DELAWARE )

) SS:
COUNTY OF SUSSEX )

On this 16 day of December, 2016, before me personally cnme and appeared Wiilinm B. I
Chandler~ III, to. me known and known to me to be the individual
. described in and who executed
I

the foregoing instrwneut and he acknowledged to me tltnt he exet!uted the srune.

1 1
Date '

Activ!'lUS J60096SBZv.l
153~
APPENDIX TAB 6
From: Leon, Eric F.
Sent: Wednesday, February 01, 2017 7:40PM
To: james.carter@wilmerhale.com; eleo.milonas@pillsburylaw.com; wchandler@wsgr.com
Cc: albertic@adr.org; bwhite@kslaw.com; jtelep@kslaw.com; smcbrearty@kslaw.com;
Huang, Kuan; Taylor, Nate; Lefkowitz, Jay P.; Serino, Joseph
Subject: Signature Plharmaceuticals, LLC V. Ranbaxy Pharmaceuticals, Inc. - Case
01-16-0004-6534

Dear Messrs. Carter, Chandler1 and Milonas:

We write on behalf of Respondent Ranbaxy, Inc. (f/k/a Ranbaxy Pharmaceuticals, Inc., and referred to herein as
"Ranbaxy') in response to the Panel's Order dated January 30, 2017. Ranbaxy understands that, under that Order, the
Panel has suspended the proceedings in this arbitration so that, by February 21, 2017, either party can proceed to seek a
judicial determination regarding the applicability of Section 12.8 of the JVA to these proceedings. As the Panel knows,
Ranbaxy believes that the 60-day time limit in Section 12.8 is a critical aspect ofthe parties' agreement to arbitrate,
which cannot be set aside absent an amendment mutually agreed upon by the parties. And as the Panel recognized,
because the applicability of Section 12.8 defines the scope of the Panel's jurisdiction in this arbitration, this is an issue
that should be resolved before the parties proceed further with this arbitration. Thus, in accordance with the Panel's
invitation as set forth in its Order, Ranbaxy is writing to inform the Panel that Ranbaxy intends to seek a judicial
determination as to the meaning of the 60-day time limit in Section 12.8 of the JVA and its applicability to this
arbitration proceeding. We appreciate the Panel1 s patience during this process and apologize for any inconvenience.

Respectfully submitted,

Eric F. Leon

KIRKLAND & ELLIS LLP

601 Lexington Avenue, New York, NY 10022
T +1 212 446 4731 M +1 917 763 4447
F +1 212 446 4900

eric. leo n@ kirkla nd.com

1
1532
APPENDIX TAB 7
KING & SPALDING King & Spalding LLP
1180 Peachtree Street N.E.
Atlanta, GA 30309-3521
Tel: + 1 404 572 4600
Fax: +1 404 572 5100
www.kslaw.com

Brian A. White
Partner
Direct Dial: +1 404 572 4739
Direct Fax: +1 404 572 5100
bwhite@kslaw.com

February 1, 2017

VIA EMAIL

Hon. E. Leo Milonas James H. Carter, Jr., Esq.

Pillsbury Winthrop Shaw Pittman LLP WilmerHale
1540 Broadway 7 World Trade Center
New York, NY 10036-4039 250 Greenwich Street
New York, New York 10007
Hon. William B. Chandler, III
Wilson Sonsini Goodrich & Rosati
Eight West Laurel Street
Georgetown, DE 19947-1424

Re: Signature Pharms. v. Ranbaxy Pharms., Case No. 01-16-0004-6534

Dear Members of the Tribunal,

Claimant, Signature Pharmaceuticals, Inc. ("Signature"), writes pursuant to the

Arbitrators' Order dated January 30, 2017 ("Order No. 2"). Signature's position is that the
Partial Final Award dated December 16, 2016 (the "Partial Final Award") is (1) "an award"
for purposes of Article 12.8 of the Joint Venture Agreement; (2) a final award for purposes of
the New York Convention and Chapter 2 of the FAA on issues related to the statute of
limitations that are the subject of the Partial Final Award; and (3) a final award for purposes
of the New York Convention rejecting Respondent Ranbaxy Pharmaceuticals, Inc.'s
('Ranbaxy") objection to jurisdiction pursuant to the 60-day provision found in Article 12.8
of the Joint Venture Agreement ("JVA") issued after two telephone hearings and one in-
person hearing. Moreover, if there were any doubt that the Tribunal has already ruled on and
rejected Ranbaxy's challenge to the Tribunal's jurisdiction, pursuant to Rule R-7(a) of the
AAA Rules, this Tribunal rather than any court would have to resolve that challenge in the
first instance. Signature fully reserves all of its rights with respect to these and any other
issues relating to this arbitration.

In particular, if Ranbaxy seeks recourse in a court against the Partial Final Award,
whether in the form of a challenge, an injunction action, or otherwise, Signature fully
reserves its rights inter alia to (1) assert, via a cross-motion to confirm the Partial Final
Award on jurisdiction or otherwise, that the Arbitral Tribunal has decided its own jurisdiction

2045
Page 477
Page 2

and that the court must defer to the Tribunal’s ruling; and (2) in the alternative, to move to
compel arbitration so that the Tribunal may resolve Ranbaxy’s objection to the Tribunal’s
jurisdiction in the first instance.

Signature notes, however, the Tribunal’s invitation to the parties to “present the issue
of jurisdiction under Sec. 12.8 of the JVA to the Panel for a further final and binding award
on jurisdiction, relying on prior submissions or supplementing them as the party may choose,
by February 21, 2017.” Without prejudice to Signature’s argument that the Tribunal has
already issued a final and binding award on jurisdiction (rendering the Tribunal functus
officio on that issue), Signature hereby requests that the Tribunal issue a further award
confirming its prior ruling to the effect that the Partial Final Award “is an award made,
following a hearing, in accordance with [Section 12.8 of the Joint Venture Agreement and
Rule R-47(b) of the AAA Rules]” ; that “[e]xcept as set forth [t]herein, all other claims and
defenses in the arbitration are preserved for further proceedings” and that the Tribunal has
rejected Ranbaxy’s objection to the Tribunal’s continuing jurisdiction pursuant to Rule R-7 of
the AAA Rules.

For purposes of this request, Signature relies on its prior written and oral submissions,
which it will supplement (pursuant to Paragraph 4 of Order No. 2) with a short letter brief
that it will submit on or before February 7, 2017.

Finally, Signature notes that in the correspondence attached to Order No. 2, Ranbaxy
suggested that it has considered seeking some form of injunction of further proceedings
before the Tribunal. In light of the passage of time since the issuance of the Partial Final
Award, the suspension of these proceedings pursuant to Order No. 2, and the fact that there
have been regular communications between the parties, no urgency would justify an ex parte
application by Ranbaxy. At the same time, Signature has no interest in protracted court
proceedings. Accordingly, by copy of this letter, we are advising Ranbaxy that Signature’s
counsel is available to meet and confer promptly concerning scheduling (or any other) issues.

Respectfully submitted,

King & Spalding

Brian A. White

Cc: All counsel of Record

2046
APPENDIX TAB 8
 AMERICAN ARBITRATION ASSOCIATION

SIGNATURE PHARMACEUTICALS, LLC,

Claimant, Case No. 01 16 004 6534

-against-

RANBAXY PHARMACEUTICALS, INC.,

Respondent.

ARBITRATORS' ORDER

The Arbitrators confirm that the Partial Final Award dated December 16, 2016 was their

award on jurisdiction with respect to the 60 day require ment of Section] 2.8 o f the JVA. The

P a rties have not agreed to seek a further ruling on the subject from the Panel. Respondent, in

response to the Arbitrators' Order dated Janua ry 30, 2017, s tates that it has commenced

proceedings" ... to de termine the applicability of Section 12.8 to these proceed ings .... " The

Arbitrators request that cow1sel keep the Panel updated on all court proceedings a nd rulings on

a timely basis.

Dated: New York, New York

Februa ry 8, 2017

For the Panel

2050
41!23 -7395-9234 v I
APPENDIX TAB 9
 3/15/2017 12:31 PM SCANNED Page 1

JOHN R. ROACH, JR.

Judge, 296th Judicial District Court
Collin County Courthouse
~cKinney, Texas75069

972-548-4409; Metro 972-424-1460 x. 4409

MEMORANDUM

To: All Counsel of Record

From: Judge John R. Roach, Jr.
Subject: 296-03030-2014- Chandran v. Ranbaxy
296-03032-2014- Signature Pharm. v. Ranbaxy
Date: March 14, 2017

On March 13, 2017 this Court considered the following Motions:

1. Plaintiffs Motion to Confirm Arbitration Award;

2. Defendant's Motion to Lift Stay;
3. Defendant's Motion for Declaratory Judgment.

Defendant's Motion to Lift Stay was brought to procedurally allow the parties to argue
the above-referenced Motions before the Court. Both sides filed Motions with the
Court seeking rulings/relief. In addition, both sides agree that the previously ordered
arbitration is at a standstill until this Court makes rulings on said Motions. The Court
FINDS the Motion to Lift Stay is AGREED to by the parties and, as a result, is GRANTED.

Plaintiffs Motion to Confirm Arbitration Award is DENIED. The DENIAL is based upon
the arguments of counsel, the briefs filed by both parties, all of the case law presented
and, more specifically, Smith v. Transport Workers of America, 374 F. 3d 372 (2004). The
Court FINDS the Parties' Arbitration Agreement contractually limits the duration ofthe
arbitration to "sixty (60) days of the filing for arbitration". The Court also FINDS that
sixty (60) days have elapsed from the date of the arbitration being filed.

Defendant's Motion for Declaratory Judgment seeking a declaration from this Court
that the 'arbitration is over and Plaintiff take-nothing' is DENIED.

Ruling by Memorandum 1
2283
As a result of the foregoing, the previous Stay issued by this Court is VACATED.

The Court ORDERS counsel to prepare an Order consistent to the rulings contained
herein and submit said Order to the Court for signature within 10 days.

0
JUDGE PRESIDING

Ruling by Memorandum 2
2284
APPENDIX TAB 10
 4/5/2017 12:08 PM SCANNED Page 1

CAUSE NOS. 296-03030-2014

296-03032-2014

)
V. RA VI CHANDRAN and SIGNATURE )
R&D HOLDINGS, L.L.C., )
)
Plaintiffs )
) IN THE DISTRICT COURT 296nt
v. ) DISTRICT COLLIN COUNTY, TEXAS
)
RANBAXY, INC. (f/k/a RANBAXY )
PHARMACEUTICALS, INC.) and )
RANBAXY LA BORA TORIES, LTO. )
)
Defendants. )
)
)
SIGNATURE PHARMACEUTICALS, L.L.C., )
SIGNATURE R&D HOLDINGS, L.L.C., )
AMERICAN GENERICS, INC., and )
MCCORMICK HOLDINGS, L.L.C. )
)
Plaintiffs )
)
v. )
)
RANBAXY, INC. (f/k/a RANBAXY )
PHARMACEUTICALS, INC.); RANBAXY )
LABORATORIES, LTO.; )
VENKA TACHALAM KRISHNAN; and )
ARUN SA WHNEY, )
)
Defendants. )
______________________________ )

ORDER
After considering Plaintiff Signature Pharmaceuticals, L.L.C.'s ("Signature") Motion to

Confirm Arbitration Award, Defendant Ranbaxy, Inc.'s ("Ranbaxy") Motion to Lift Stay, and

Ranbaxy's Motion for Declaratory Judgment, the responses thereto, arguments of counsel, and

after a hearing regarding the same, the Court GRANTS the Motion to Lift Stay, and DENIES the

Page 3

2312
Motion to Confirm Arbitration Award. On the Motion for Declaratory Judgment, the Court

FINDS and DECLARES that:

I) The Parties' Arbitration Agreement contractually limits the duration of the arbitration

to sixty (60) days of the filing for arbitration; and

2) Sixty (60) days have elapsed from the date of the arbitration being filed.

Ranbaxy's request for a declaration that "Plaintiff take-nothing" is DENIED.

As a result of the foregoing, the Court's December 19, 2014 Order to Stay is VACATED.

on~~, 2017
CJ~
Signed

•
JUDGE PRESIDING

Page4
2313
APPENDIX TAB 11
T. 2, Subt. C, Ch. 37, Refs & Annos, TX CIV PRAC & REM T. 2, Subt. C, Ch. 37,...

Vernon’s Texas Statutes and Codes Annotated

Civil Practice and Remedies Code
Title 2. Trial, Judgment, and Appeal
Subtitle C. Judgments
Chapter 37. Declaratory Judgments

V.T.C.A., Civil Practice & Remedies Code T. 2, Subt. C, Ch. 37, Refs & Annos
Currentness

Footnotes
*
Date of approval.

1
See the General Statutory Note.

V. T. C. A., Civil Practice & Remedies Code T. 2, Subt. C, Ch. 37, Refs & Annos, TX CIV PRAC & REM T. 2, Subt. C, Ch.
37, Refs & Annos
Current through Chapters effective immediately through Chapter 34 of the 2017 Regular Session of the 85th Legislature
End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works.

© 2017 Thomson Reuters. No claim to original U.S. Government Works. 1

§ 37.001. Definition, TX CIV PRAC & REM § 37.001

KeyCite Yellow Flag - Negative Treatment

Unconstitutional or PreemptedLimited on Preemption Grounds by Shanker v. United of Omaha Life Insurance Company, S.D.Tex., Jan. 03, 2017
Vernon’s Texas Statutes and Codes Annotated
Civil Practice and Remedies Code (Refs & Annos)
Title 2. Trial, Judgment, and Appeal
Subtitle C. Judgments
Chapter 37. Declaratory Judgments (Refs & Annos)

V.T.C.A., Civil Practice & Remedies Code § 37.001

§ 37.001. Definition

Currentness

In this chapter, “person” means an individual, partnership, joint-stock company, unincorporated association or society, or
municipal or other corporation of any character.

Credits

Acts 1985, 69th Leg., ch. 959, § 1, eff. Sept. 1, 1985.

V. T. C. A., Civil Practice & Remedies Code § 37.001, TX CIV PRAC & REM § 37.001
Current through Chapters effective immediately through Chapter 34 of the 2017 Regular Session of the 85th Legislature
End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works.

© 2017 Thomson Reuters. No claim to original U.S. Government Works. 2

§ 37.002. Short Title, Construction, Interpretation, TX CIV PRAC & REM § 37.002

KeyCite Yellow Flag - Negative Treatment

Unconstitutional or PreemptedLimited on Preemption Grounds by Shanker v. United of Omaha Life Insurance Company, S.D.Tex., Jan. 03, 2017
Vernon’s Texas Statutes and Codes Annotated
Civil Practice and Remedies Code (Refs & Annos)
Title 2. Trial, Judgment, and Appeal
Subtitle C. Judgments
Chapter 37. Declaratory Judgments (Refs & Annos)

V.T.C.A., Civil Practice & Remedies Code § 37.002

§ 37.002. Short Title, Construction, Interpretation

Currentness

(a) This chapter may be cited as the Uniform Declaratory Judgments Act.

(b) This chapter is remedial; its purpose is to settle and to afford relief from uncertainty and insecurity with respect to rights,
status, and other legal relations; and it is to be liberally construed and administered.

(c) This chapter shall be so interpreted and construed as to effectuate its general purpose to make uniform the law of those
states that enact it and to harmonize, as far as possible, with federal laws and regulations on the subject of declaratory
judgments and decrees.

Credits

Acts 1985, 69th Leg., ch. 959, § 1, eff. Sept. 1, 1985.

V. T. C. A., Civil Practice & Remedies Code § 37.002, TX CIV PRAC & REM § 37.002
Current through Chapters effective immediately through Chapter 34 of the 2017 Regular Session of the 85th Legislature
End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works.

© 2017 Thomson Reuters. No claim to original U.S. Government Works. 3

§ 37.003. Power of Courts to Render Judgment; Form and Effect, TX CIV PRAC & REM...

KeyCite Yellow Flag - Negative Treatment

Unconstitutional or PreemptedLimited on Preemption Grounds by Shanker v. United of Omaha Life Insurance Company, S.D.Tex., Jan. 03, 2017
Vernon’s Texas Statutes and Codes Annotated
Civil Practice and Remedies Code (Refs & Annos)
Title 2. Trial, Judgment, and Appeal
Subtitle C. Judgments
Chapter 37. Declaratory Judgments (Refs & Annos)

V.T.C.A., Civil Practice & Remedies Code § 37.003

§ 37.003. Power of Courts to Render Judgment; Form and Effect

Currentness

(a) A court of record within its jurisdiction has power to declare rights, status, and other legal relations whether or not further
relief is or could be claimed. An action or proceeding is not open to objection on the ground that a declaratory judgment or
decree is prayed for.

(b) The declaration may be either affirmative or negative in form and effect, and the declaration has the force and effect of a
final judgment or decree.

(c) The enumerations in Sections 37.004 and 37.005 do not limit or restrict the exercise of the general powers conferred in
this section in any proceeding in which declaratory relief is sought and a judgment or decree will terminate the controversy or
remove an uncertainty.

Credits

Acts 1985, 69th Leg., ch. 959, § 1, eff. Sept. 1, 1985.

V. T. C. A., Civil Practice & Remedies Code § 37.003, TX CIV PRAC & REM § 37.003
Current through Chapters effective immediately through Chapter 34 of the 2017 Regular Session of the 85th Legislature
End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works.

© 2017 Thomson Reuters. No claim to original U.S. Government Works. 4

§ 37.004. Subject Matter of Relief, TX CIV PRAC & REM § 37.004

KeyCite Yellow Flag - Negative Treatment

Unconstitutional or PreemptedLimited on Preemption Grounds by Shanker v. United of Omaha Life Insurance Company, S.D.Tex., Jan. 03, 2017
KeyCite Yellow Flag - Negative TreatmentProposed Legislation
Vernon’s Texas Statutes and Codes Annotated
Civil Practice and Remedies Code (Refs & Annos)
Title 2. Trial, Judgment, and Appeal
Subtitle C. Judgments
Chapter 37. Declaratory Judgments (Refs & Annos)

V.T.C.A., Civil Practice & Remedies Code § 37.004

§ 37.004. Subject Matter of Relief

Effective: June 15, 2007

Currentness

(a) A person interested under a deed, will, written contract, or other writings constituting a contract or whose rights, status, or
other legal relations are affected by a statute, municipal ordinance, contract, or franchise may have determined any question
of construction or validity arising under the instrument, statute, ordinance, contract, or franchise and obtain a declaration of
rights, status, or other legal relations thereunder.

(b) A contract may be construed either before or after there has been a breach.

(c) Notwithstanding Section 22.001, Property Code, a person described by Subsection (a) may obtain a determination under
this chapter when the sole issue concerning title to real property is the determination of the proper boundary line between
adjoining properties.

Credits

Acts 1985, 69th Leg., ch. 959, § 1, eff. Sept. 1, 1985. Amended by Acts 2007, 80th Leg., ch. 305, § 1, eff. June 15, 2007.

V. T. C. A., Civil Practice & Remedies Code § 37.004, TX CIV PRAC & REM § 37.004
Current through Chapters effective immediately through Chapter 34 of the 2017 Regular Session of the 85th Legislature
End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works.

© 2017 Thomson Reuters. No claim to original U.S. Government Works. 5

§ 37.005. Declarations Relating to Trust or Estate, TX CIV PRAC & REM § 37.005

Vernon’s Texas Statutes and Codes Annotated

Civil Practice and Remedies Code (Refs & Annos)
Title 2. Trial, Judgment, and Appeal
Subtitle C. Judgments
Chapter 37. Declaratory Judgments (Refs & Annos)

V.T.C.A., Civil Practice & Remedies Code § 37.005

§ 37.005. Declarations Relating to Trust or Estate

Currentness

A person interested as or through an executor or administrator, including an independent executor or administrator, a trustee,
guardian, other fiduciary, creditor, devisee, legatee, heir, next of kin, or cestui que trust in the administration of a trust or of
the estate of a decedent, an infant, mentally incapacitated person, or insolvent may have a declaration of rights or legal
relations in respect to the trust or estate:

(1) to ascertain any class of creditors, devisees, legatees, heirs, next of kin, or others;

(2) to direct the executors, administrators, or trustees to do or abstain from doing any particular act in their fiduciary
capacity;

(3) to determine any question arising in the administration of the trust or estate, including questions of construction of wills
and other writings; or

(4) to determine rights or legal relations of an independent executor or independent administrator regarding fiduciary fees
and the settling of accounts.

Credits

Acts 1985, 69th Leg., ch. 959, § 1, eff. Sept. 1, 1985. Amended by Acts 1987, 70th Leg., ch. 167, § 3.08(a), eff. Sept. 1,
1987; Acts 1999, 76th Leg., ch. 855, § 10, eff. Sept. 1, 1999.

V. T. C. A., Civil Practice & Remedies Code § 37.005, TX CIV PRAC & REM § 37.005
Current through Chapters effective immediately through Chapter 34 of the 2017 Regular Session of the 85th Legislature
End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works.

© 2017 Thomson Reuters. No claim to original U.S. Government Works. 6

§ 37.0055. Declarations Relating to Liability for Sales and..., TX CIV PRAC & REM...

Vernon’s Texas Statutes and Codes Annotated

Civil Practice and Remedies Code (Refs & Annos)
Title 2. Trial, Judgment, and Appeal
Subtitle C. Judgments
Chapter 37. Declaratory Judgments (Refs & Annos)

V.T.C.A., Civil Practice & Remedies Code § 37.0055

§ 37.0055. Declarations Relating to Liability for Sales and Use Taxes of Another State

Effective: September 1, 2007

Currentness

(a) In this section, “state” includes any political subdivision of that state.

(b) A district court has original jurisdiction of a proceeding seeking a declaratory judgment that involves:

(1) a party seeking declaratory relief that is a business that is:

(A) organized under the laws of this state or is otherwise owned by a resident of this state; or

(B) a retailer registered with the comptroller under Section 151.106, Tax Code; and

(2) a responding party that:

(A) is an official of another state; and

(B) asserts a claim that the party seeking declaratory relief is required to collect sales or use taxes for that state based on
conduct of the business that occurs in whole or in part within this state.

(c) A business described by Subsection (b)(1) is entitled to declaratory relief on the issue of whether the requirement of
another state that the business collect and remit sales or use taxes to that state constitutes an undue burden on interstate
commerce under Section 8, Article I, United States Constitution.

© 2017 Thomson Reuters. No claim to original U.S. Government Works. 7

§ 37.0055. Declarations Relating to Liability for Sales and..., TX CIV PRAC & REM...

(d) In determining whether to grant declaratory relief to a business under this section, a court shall consider:

(1) the factual circumstances of the business’s operations that give rise to the demand by the other state; and

(2) the decisions of other courts interpreting Section 8, Article I, United States Constitution.

Credits

Added by Acts 2007, 80th Leg., ch. 699, § 1, eff. Sept. 1, 2007.

V. T. C. A., Civil Practice & Remedies Code § 37.0055, TX CIV PRAC & REM § 37.0055
Current through Chapters effective immediately through Chapter 34 of the 2017 Regular Session of the 85th Legislature
End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works.

© 2017 Thomson Reuters. No claim to original U.S. Government Works. 8

§ 37.006. Parties, TX CIV PRAC & REM § 37.006

Vernon’s Texas Statutes and Codes Annotated

Civil Practice and Remedies Code (Refs & Annos)
Title 2. Trial, Judgment, and Appeal
Subtitle C. Judgments
Chapter 37. Declaratory Judgments (Refs & Annos)

V.T.C.A., Civil Practice & Remedies Code § 37.006

§ 37.006. Parties

Currentness

(a) When declaratory relief is sought, all persons who have or claim any interest that would be affected by the declaration
must be made parties. A declaration does not prejudice the rights of a person not a party to the proceeding.

(b) In any proceeding that involves the validity of a municipal ordinance or franchise, the municipality must be made a party
and is entitled to be heard, and if the statute, ordinance, or franchise is alleged to be unconstitutional, the attorney general of
the state must also be served with a copy of the proceeding and is entitled to be heard.

Credits

Acts 1985, 69th Leg., ch. 959, § 1, eff. Sept. 1, 1985.

V. T. C. A., Civil Practice & Remedies Code § 37.006, TX CIV PRAC & REM § 37.006
Current through Chapters effective immediately through Chapter 34 of the 2017 Regular Session of the 85th Legislature
End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works.

© 2017 Thomson Reuters. No claim to original U.S. Government Works. 9

§ 37.007. Jury Trial, TX CIV PRAC & REM § 37.007

Vernon’s Texas Statutes and Codes Annotated

Civil Practice and Remedies Code (Refs & Annos)
Title 2. Trial, Judgment, and Appeal
Subtitle C. Judgments
Chapter 37. Declaratory Judgments (Refs & Annos)

V.T.C.A., Civil Practice & Remedies Code § 37.007

§ 37.007. Jury Trial

Currentness

If a proceeding under this chapter involves the determination of an issue of fact, the issue may be tried and determined in the
same manner as issues of fact are tried and determined in other civil actions in the court in which the proceeding is pending.

Credits

Acts 1985, 69th Leg., ch. 959, § 1, eff. Sept. 1, 1985.

V. T. C. A., Civil Practice & Remedies Code § 37.007, TX CIV PRAC & REM § 37.007
Current through Chapters effective immediately through Chapter 34 of the 2017 Regular Session of the 85th Legislature
End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works.

© 2017 Thomson Reuters. No claim to original U.S. Government Works. 10

§ 37.008. Court Refusal to Render, TX CIV PRAC & REM § 37.008

Vernon’s Texas Statutes and Codes Annotated

Civil Practice and Remedies Code (Refs & Annos)
Title 2. Trial, Judgment, and Appeal
Subtitle C. Judgments
Chapter 37. Declaratory Judgments (Refs & Annos)

V.T.C.A., Civil Practice & Remedies Code § 37.008

§ 37.008. Court Refusal to Render

Currentness

The court may refuse to render or enter a declaratory judgment or decree if the judgment or decree would not terminate the
uncertainty or controversy giving rise to the proceeding.

Credits

Acts 1985, 69th Leg., ch. 959, § 1, eff. Sept. 1, 1985.

V. T. C. A., Civil Practice & Remedies Code § 37.008, TX CIV PRAC & REM § 37.008
Current through Chapters effective immediately through Chapter 34 of the 2017 Regular Session of the 85th Legislature
End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works.

© 2017 Thomson Reuters. No claim to original U.S. Government Works. 11

§ 37.009. Costs, TX CIV PRAC & REM § 37.009

Vernon’s Texas Statutes and Codes Annotated

Civil Practice and Remedies Code (Refs & Annos)
Title 2. Trial, Judgment, and Appeal
Subtitle C. Judgments
Chapter 37. Declaratory Judgments (Refs & Annos)

V.T.C.A., Civil Practice & Remedies Code § 37.009

§ 37.009. Costs

Currentness

In any proceeding under this chapter, the court may award costs and reasonable and necessary attorney’s fees as are equitable
and just.

Credits

Acts 1985, 69th Leg., ch. 959, § 1, eff. Sept. 1, 1985.

V. T. C. A., Civil Practice & Remedies Code § 37.009, TX CIV PRAC & REM § 37.009
Current through Chapters effective immediately through Chapter 34 of the 2017 Regular Session of the 85th Legislature
End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works.

© 2017 Thomson Reuters. No claim to original U.S. Government Works. 12

§ 37.010. Review, TX CIV PRAC & REM § 37.010

Vernon’s Texas Statutes and Codes Annotated

Civil Practice and Remedies Code (Refs & Annos)
Title 2. Trial, Judgment, and Appeal
Subtitle C. Judgments
Chapter 37. Declaratory Judgments (Refs & Annos)

V.T.C.A., Civil Practice & Remedies Code § 37.010

§ 37.010. Review

Currentness

All orders, judgments, and decrees under this chapter may be reviewed as other orders, judgments, and decrees.

Credits

Acts 1985, 69th Leg., ch. 959, § 1, eff. Sept. 1, 1985.

V. T. C. A., Civil Practice & Remedies Code § 37.010, TX CIV PRAC & REM § 37.010
Current through Chapters effective immediately through Chapter 34 of the 2017 Regular Session of the 85th Legislature
End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works.

© 2017 Thomson Reuters. No claim to original U.S. Government Works. 13

§ 37.011. Supplemental Relief, TX CIV PRAC & REM § 37.011

Vernon’s Texas Statutes and Codes Annotated

Civil Practice and Remedies Code (Refs & Annos)
Title 2. Trial, Judgment, and Appeal
Subtitle C. Judgments
Chapter 37. Declaratory Judgments (Refs & Annos)

V.T.C.A., Civil Practice & Remedies Code § 37.011

§ 37.011. Supplemental Relief

Currentness

Further relief based on a declaratory judgment or decree may be granted whenever necessary or proper. The application must
be by petition to a court having jurisdiction to grant the relief. If the application is deemed sufficient, the court shall, on
reasonable notice, require any adverse party whose rights have been adjudicated by the declaratory judgment or decree to
show cause why further relief should not be granted forthwith.

Credits

Acts 1985, 69th Leg., ch. 959, § 1, eff. Sept. 1, 1985.

V. T. C. A., Civil Practice & Remedies Code § 37.011, TX CIV PRAC & REM § 37.011
Current through Chapters effective immediately through Chapter 34 of the 2017 Regular Session of the 85th Legislature
End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works.

© 2017 Thomson Reuters. No claim to original U.S. Government Works. 14