Exhibit 10.34

***Text Omitted and Filed Separately with

the Securities and Exchange Commission.

Confidential Treatment Requested Under

17 C.F.R. Sections 200.80(b)(4) and 240.24b-2.

CONFIDENTIAL

Facility Construction and Commercial Supply Agreement

(the “Agreement”)

by and between

Lonza Biologics, Inc.

101 International Drive

Portsmouth, NH 03801

USA

- hereinafter “Lonza” -

and

Celladon Corporation

11988 El Camino Real, Suite 650

San Diego, CA 92130-3579

USA

- hereinafter “Customer” -

Effective as of October 31, 2014 (the “Effective Date”)

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Table of Contents

 

    Page   1 Definitions and Interpretation   1    2 Reservation Period and
Construction Trigger   10    3 Performance of Services   12    4 Project
Management / Steering Committee   16    5 Quality   17    6 Insurance   17    7
Forecasting, Ordering and Cancellation   19    8 Delivery and Acceptance   20   
9 Price and Payment   22    10 Intellectual Property   27    11 Warranties   29
   12 Indemnification and Liability   30    13 Confidentiality   32    14 Term
and Termination   34    15 Force Majeure   36    16 Miscellaneous   37   

 

Appendix A Project Plans

 

  •   Appendix A-1 Detailed Design

 

  •   Appendix A-2 Pre-Construction Activities

 

  •   Appendix A-3 Facility Construction

 

  •   Appendix A-4 Technology Transfer, Validation and Manufacturing

 

Appendix B Specifications Appendix C Estimated Construction Timeline Appendix D
Minimum Production Targets Appendix E Form of Escrow Agreement Appendix F Form
of Quality Agreement

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Appendix G Form of Common Stock Purchase Agreement Appendix H Customer
Background Intellectual Property

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Recitals

WHEREAS, Customer is engaged in the development and research of a viral
therapeutic Product and requires assistance in the development and manufacture
of such Product;

WHEREAS, Lonza and its Affiliates have expertise in the evaluation, development
and manufacture of biologics, including viral therapeutics;

WHEREAS, Customer and Lonza’s Affiliate, Lonza Houston, Inc., entered into that
certain Amended and Restated Manufacturing Services Agreement dated August 26,
2013 (“Clinical Agreement”) relating to the manufacture of Product for clinical
use; and

WHEREAS, Customer wishes to engage Lonza for Services relating to the
manufacture of the Product for further clinical use and for commercial use, as
more fully described herein; and

WHEREAS, Lonza, or its Affiliate, is prepared to perform such Services for
Customer on the terms and subject to the conditions set out herein.

NOW, THEREFORE, in consideration of the mutual promises contained herein, and
for other good and valuable consideration, the parties intending to be legally
bound, agree as follows:

 

1 Definitions and Interpretation

 

“Affiliate” means any company, partnership or other entity which directly or
indirectly Controls, is Controlled by or is under common Control with the
relevant Party. “Control” means the ownership of more than fifty percent (50%)
of the issued share capital or the legal power to direct or cause the direction
of the general management and policies of the relevant Party. “Agreement” means
this agreement incorporating all Appendices, as amended from time to time by
written agreement of the Parties. “Applicable Laws” means all relevant U.S. and
European Union federal, state and local laws, statutes, rules, and regulations
which are applicable to a Party’s activities hereunder, including, without
limitation, the applicable regulations and guidelines of any Governmental
Authority and all applicable cGMP together with amendments thereto. “Approval”
means the approval by the FDA or EMA to market and sell Product manufactured at
the Facility in the United States or the European Union, respectively.
“Background Intellectual Property” means any Intellectual Property either
(i) owned or controlled by a Party prior to the Effective Date or (ii) developed
or acquired by a Party independently from the performance of the

 

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Services hereunder during the Term of this Agreement. Customer’s Background
Intellectual Property existing as of the Effective Date to be provided to Lonza
under this Agreement is set forth in Appendix H. “Batch” means the Product
derived from a single run of the Manufacturing Process at a 2000 L working
volume. “Building” means the existing building located at […***…], Portsmouth,
NH or such other building as may be agreed by the Parties. “CapEx” or “CapEx
Amount” means the estimate of the capital cost expected to be incurred by Lonza
to construct the Facility, as updated by Lonza […***…], excluding the […***…]
and the […***…], which costs will be […***…]. “Capital Equipment” means those
certain pieces of equipment described in the Detailed Design or a Project Plan
used to produce the Product that are purchased by Customer or for which Customer
reimburses Lonza, including, without limitation, the related documentation
regarding the design, validation, operation, calibration and maintenance of such
equipment. “Certificate of Analysis” means a document prepared by Lonza listing
tests performed by Lonza or approved External Laboratories, the Specifications
and test results with respect to a Batch and such other information and
certifications as are required to be in such document pursuant to the Quality
Agreement. “cGMP” means those laws and regulations applicable in the U.S. and
Europe, relating to the manufacture of medicinal products for human use,
including, without limitation, current good manufacturing practices as specified
in the ICH guidelines, including without limitation, ICH Q7A “ICH Good
Manufacturing Practice Guide for Active Pharmaceutical Ingredients”, US Federal
Food Drug and Cosmetic Act at 21CFR (Chapters 210, 211, 600 and 610) and the
Guide to Good Manufacturing Practices for Medicinal Products as promulgated
under European Directive 91/356/EEC. For the avoidance of doubt, Lonza’s
operational quality standards are defined in internal cGMP policy documents.

 

***Confidential Treatment Requested

 

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“cGMP Batch” means a Batch that is required under the applicable Project Plan or
Purchase Order to be manufactured in accordance with cGMP. “Change” means any
change to the Services or pricing incorporated into a written amendment to the
Agreement in accordance with Clause 16.3 or effected in accordance with the
Quality Agreement. “Commencement Date” means the date of removal of the vial of
cells from frozen storage for the production of a Batch. “Conceptual Study”
means the study prepared by Lonza pursuant to a statement of work under the
Clinical Agreement executed April 24, 2014. “Confidential Information” means
Customer Information and/or Lonza Information, as the context requires.
“Construction Trigger” has the meaning set forth in Clause 2.6. “Customer
Information” means all information that is proprietary to Customer or an
Affiliate of Customer or that is maintained in confidence by Customer or any
Affiliate of Customer and that is disclosed by Customer or any Affiliate of
Customer to Lonza under or in connection with this Agreement, including, without
limitation, any and all Customer business plans, know-how and trade secrets, and
any materials supplied by Customer to Lonza in accordance with any Project Plan.
“Customer Materials” means any Raw Materials, components of Product, or other
materials of any nature provided by Customer. “Customer Withdrawal” means a good
faith determination by the Customer’s board of directors, as a result of
regulatory, safety and/or efficacy concerns regarding the Product, to cease and
refrain from development and promotion of the Product and not to seek marketing
approvals therefor, followed by a public announcement by Customer’s management
that Customer has decided to permanently cease and refrain from developing and
promoting the Product. “Dedicated Production Line” means a production line
consisting of all rooms used for Product manufacturing that are personnel
accessed from the supply or return corridor of the Facility that, during the
term of this Agreement, unless otherwise agreed, will

 

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be used only for Services provided under this Agreement. “Deliver” or “Delivery”
means availability of Product for pick up by the applicable carrier at the
Facility for shipment to Customer. “Delivery Date” means, with respect to any
cGMP Batch, the date of Delivery of such cGMP Batch. “Detailed Design” means the
detailed design for the Facility which Lonza has commissioned pursuant to a
Project Plan hereunder. “Downstream Materials” means chromatography resins and
media, anion exchange filter membranes, and UF membranes intended to refine or
purify the Product, as specified in the Master Batch Record. “Downstream
Material Handling Fees” means a fee payable on each order of Downstream
Materials equal to […***…] percent ([…***…]%) of the acquisition cost of such
Downstream Materials by Lonza that is charged to the Customer in addition to the
cost of such Downstream Materials. “EMA” means the European Medicines Agency, or
any successor agency thereto. “Engineering Batch” means a Batch that is intended
to demonstrate the transfer of the Manufacturing Process to the Dedicated
Production Line and the Facility. “Engineering Run Phase” means the period
following Facility OQ, during which Lonza will complete Engineering Runs, and
which period will end when […***…] ([…***…]) Engineering Batches have been
successfully manufactured according to Specifications at the Facility, unless
such period is deemed completed earlier in accordance with Clause 3.4. “Escrow
Account” means an account with Escrow Agent, intended to secure payment of
[…***…], and to facilitate […***…], in accordance with the Escrow Agreement.
“Escrow Agent” means […***…] or such other reputable U.S. financial institution
offering escrow services as may be mutually agreed by the Parties.

 

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“Escrow Agreement” means a three-party escrow agreement among Customer, Lonza
and Escrow Agent in substantially the form attached as Appendix E, which will
[…***…]. “External Laboratories” means any Third Party instructed by Lonza, with
Customer’s prior consent, which is to conduct activities required to complete
the Services. “Facility” means a commercial scale viral production facility to
be constructed by Lonza in the Building or such other Lonza facility as may be
agreed upon by the Parties. “Facility Mechanical Completion” means that all
equipment and mechanical systems necessary to produce up to […***…] Batches per
year at the Facility have been installed but have not been commissioned.
“Facility OQ” means all equipment and mechanical systems necessary to produce up
to […***…] Batches per year at the Facility have been commissioned and
operationally qualified. “FDA” means the United States Food and Drug
Administration, or any successor agency thereto. “First Approval” means the
first Approval of Product in the U.S. or Europe. “Governmental Authority” means
any Regulatory Authority and any national, multi-national, regional, state or
local regulatory agency, department, bureau, or other governmental entity in the
U.S. or European Union. “Intellectual Property” means (i) inventions (whether or
not patentable), patents, trade secrets, copyrights, trademarks, trade names and
domain names, rights in designs, rights in computer software, database rights,
rights in confidential information (including know-how) and any other
intellectual property rights, in each case whether registered or unregistered,
(ii) all applications (or rights to apply) for, and renewals or extensions of,
any of the rights described in the foregoing clause (i), and (iii) and all
rights and applications that are similar or equivalent to the rights and
application described in the foregoing clauses (i) and (ii), which exist now, or
which come to exist in the future, in any part of the world.

 

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“Lonza Information” means all information that is proprietary to Lonza or any
Affiliate of Lonza or that is maintained in confidence by Lonza or any Affiliate
of Lonza and that is disclosed by Lonza or any Affiliate of Lonza to Customer
under or in connection with this Agreement, including without limitation, any
and all Lonza business plans, know-how and trade secrets. “Lonza Responsibility”
means, in the case of any non-conformity of a Batch to the Product Warranty,
that such non-conformity: (a) is primarily attributable to Lonza’s breach of its
obligations hereunder or Lonza’s negligence or intentional misconduct; or
(b) results from a critical failure at the Facility or in the performance of the
Manufacturing Process or the equipment used to manufacture Product that, in each
case, is primarily attributable to Lonza’s breach of its obligations hereunder
or Lonza’s negligence or intentional misconduct. “Manufacturing Process” means
the production process for the manufacture of Product, as such process may be
improved or modified from time to time by agreement of the Parties in writing.
“Master Batch Record” means the document, proposed by Lonza and approved by
Customer, which defines the manufacturing methods, test methods and other
procedures, directions and controls associated with the manufacture and testing
of Product. “Maximum Capacity” means with respect to the Dedicated Production
Line, the maximum number of Batches that can be produced in any 12-month period
(assuming overlapping consecutive runs after process validation), which, unless
otherwise mutually agreed by the Parties in writing, shall be: (a)
[…***…] Batches during the period from completion of the last Process Validation
Batch until the earlier of (i) the […***…] anniversary of First Approval and
(ii) expiration of the […***…] Request Period (as defined in Clause 9.2); (b)
[…***…] Batches during the period from expiration of the […***…] Request Period
until the earlier of (i) the […***…] anniversary of First Approval and
(ii) expiration of the […***…] Request Period (as defined in Clause 9.2) (c)
[…***…] Batches during the period from expiration of the […***…] Request Period
until the […***…] anniversary of First Approval;

 

***Confidential Treatment Requested

 

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in each case, subject to: (x) pro rata adjustment for any 12-month period during
which the Batch production level increases or decreases as described in
Clause 3.3; and (y) reduction in the event of Customer’s exercise of its right
to decrease the Batch production level in accordance with Clause 3.3.6.
“Measurement Period” means a period of 12 calendar months beginning on the first
day of the calendar month following: (i) with respect to the initial Measurement
Period, Release of the final Validation Batch; and (ii) with respect to
subsequent Measurement Periods, (A) the end of the Target Fulfillment Period
with respect to the previous Measurement Period if the Minimum Production Target
was not met for such previous Measurement Period, otherwise, (B) the end of the
previous Measurement Period. “Measurement Period Notice” has the meaning given
in Clause 9.9.1. “Minimum Production Rate” has the meaning given in Appendix D.
“Minimum Production Target” has the meaning given in Appendix D. “Monthly
[…***…] Fee” has the meaning given in Clause 9.2. “Monthly […***…] Fee” has the
meaning given in Clause 9.2. “New Customer Intellectual Property” has the
meaning given in Clause 10.2. “New General Application Intellectual Property”
has the meaning given in Clause 10.3. “Operational Failure” means the suspension
by Lonza of production of Product for more than […***…] ([…***…]) days due to
the occurrence of a failure at the Facility or in the equipment used to the
manufacture Product (and which failure is not attributable to […***…]) at any
time following the Engineering Run Phase. Operational Failure would include,
without limitation, such a suspension by Lonza due to […***…]. “PAI” means
Pre-Approval Inspection as defined by the FDA or EMA. “Party” means each of
Lonza and Customer and, together, the “Parties”.

 

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“Persistent Supply Failure” means: (i) an Operational Failure exists and has
existed for a period of […***…] ([…***…]) consecutive calendar months; or (ii) a
Target Fulfillment Period is ongoing and has been ongoing for at least […***…]
([…***…]) calendar months. “Process Validation Batch” means a Batch that is
produced with the intent to show reproducibility of the Manufacturing Process
and is required to complete process validation studies. “Product” means
Customer’s proprietary AAV1/SERCA2a drug substance, an adenovirus-associated
virus based vector containing the expression cassette for SERCA2a product.
“Product Warranty” has the meaning provided in Clause 11.1.2. “Production Clean
Room” means a clean room intended for use in cell culture, production of viral
product, viral purification and/or non-viral purification. “Project Plan” means
the plan(s) describing the Services to be performed by Lonza under this
Agreement, including any update and amendment of such plans to which the Parties
may agree from time to time. The initial Project Plan(s) are attached hereto as
Appendix A. “Purchase Order” means a purchase order submitted by Customer in
accordance with Clause 7.2 (to the extent consistent with Forecasts delivered by
Customer pursuant to Clause 7.1) for one or more cGMP Batches. “Quality
Agreement” means the quality agreement to be mutually agreed by the Parties
before commencement of cGMP manufacturing and to be attached hereto as Appendix
F (which will be incorporated herein by reference), and that will set out the
responsibilities of the Parties in relation to quality as required for
compliance with cGMP. “Raw Materials” means all ingredients, reagents, solvents,
any other components of the Product as well as consumables and wearables,
required to perform the Manufacturing Process or Services set forth in the bill
of materials detailing the same (including Downstream Materials). “Raw Materials
Fee” means the procurement and handling fee of […***…] percent ([…***…]%) of the
acquisition cost of Raw Materials by Lonza that is charged to the Customer in
addition to the cost of such Raw Materials, except for Downstream Materials

 

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which will be subject to the Downstream Materials Handling Fee. “Regulatory
Authority” means the FDA, EMA and any other similar regulatory authorities as
may be agreed upon in writing by the Parties. “Release” means, with respect to
any cGMP Batch, the release of such cGMP Batch by Lonza Quality Assurance in
accordance with the Quality Agreement. “Reservation Period” means, collectively,
the Initial Reservation Period (as defined in Clause 2.1) and the extension
period(s) for which Customer pays the applicable extension fee pursuant to
Clauses 2.2, 2.3 and/or 2.4. “Services” means all or any part of the services to
be performed by Lonza under this Agreement (including, without limitation,
process and analytical method transfer, facility construction, process
validation, clinical and commercial manufacturing, as well as quality control
and quality assurance activities), particulars of which are set out in a Project
Plan and Purchase Orders, Master Batch Records or Quality Agreement, as
applicable. “Shared Resources” means any system, material, input, output,
service or resource within the Building or Facility or associated with the
Services, which is not exclusively dedicated to the Product or the Manufacturing
Process hereunder. By way of illustration, Shared Resources include but are not
limited to: quality control laboratories, manufacturing sciences laboratories,
office/administration space, electricity, WFI water, disposal, buffer
preparation, security, site IT, process controls, DeltaV systems,
shipping/receiving, storage, and raw material handling. “Specifications” means
the specifications of the Product to be mutually agreed by the Parties before
commencement of the production run for the first Engineering Batch and to be
attached hereto as Appendix B (which will be incorporated herein by reference),
which may be amended from time to time in accordance with this Agreement.
“Target Fulfillment Period” means with respect to any Measurement Period for
which the applicable Minimum Production Target has not been met, a period of

 

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consecutive calendar months following such Measurement Period, during which
Lonza will continue to manufacture Batches until it has successfully made and
Delivered additional Batches ([…***…]) that, together with Batches successfully
made and Delivered during such Measurement Period ([…***…]), achieve a Minimum
Production Rate that meets the Minimum Production Target for such Measurement
Period. Each Target Fulfillment Period will end on the last day of the calendar
month in which manufacturing and Delivery of such additional Batches is
completed. “Term” has the meaning given in Clause 14.1. “Third Party” means any
party other than Customer, Lonza and their respective Affiliates.

In this Agreement references to the Parties are to the Parties to this
Agreement, headings are used for convenience only and do not affect its
interpretation, references to a statutory provision include references to the
statutory provision as modified or re-enacted or both from time to time and to
any subordinate legislation made under the statutory provision, references to
the singular include the plural and vice versa, and references to the word
“including” are to be construed without limitation.

 

2 Reservation Period and Construction Trigger

 

2.1 Initial Reservation Period. On or before the third (3rd) business day after
the Effective Date, Customer shall pay Lonza a non-refundable reservation fee
for the period beginning on the Effective Date and ending on […***…] (the
“Initial Reservation Period”) of $1,000,000 (the “[…***…] Reservation Fee”). In
the event Customer fails to timely pay the 2014 Reservation Fee, this Agreement
will automatically terminate as of 11:59 pm on the fifth (5th) business day
following the Effective Date.

 

2.2 First Extension of Reservation Period. If Customer has not exercised the
Construction Trigger by […***…], Customer shall have the right, in its sole
discretion, to extend the Reservation Period by an additional […***…] ([…***…])
months to […***…] upon notice to Lonza by […***…] along with payment of a
non-refundable reservation extension fee of an additional $[…***…] (the “First
Extension Fee”).

 

2.3 Second Extension of Reservation Period. If Customer has not exercised the
Construction Trigger by […***…], Customer shall have the right, in its sole
discretion, to extend the Reservation Period by an additional […***…] ([…***…])
months to […***…] upon notice to Lonza by […***…] along with payment of a
non-refundable reservation extension fee of an additional $[…***…] (the “Second
Extension Fee”).

 

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2.4 Third Extension of Reservation Period. If Customer has not exercised the
Construction Trigger by […***…], Customer shall have the right, in its sole
discretion, to extend the Reservation Period by an additional […***…] ([…***…])
months to […***…] upon notice to Lonza given by […***…] along with payment of a
non-refundable reservation extension fee of an additional $[…***…] (the “Third
Extension Fee”).

 

2.5 Credit for Extension Fees. If Customer exercises the Construction Trigger in
accordance with Clause 2.6, Customer shall be entitled to a credit towards
future Milestone Payments and pre-construction activities set forth in Appendix
A-2 in an amount equal to the sum of the following: (a) if Customer paid the
First Extension Fee prior to exercise of the Construction Trigger, […***…]% of
the First Extension Fee ($[…***…]); (b) if Customer paid the Second Extension
Fee prior to exercise of the Construction Trigger, […***…]% of the Second
Extension Fee ($[…***…]); and (c) if Customer paid the Third Extension Fee prior
to exercise of the Construction Trigger, […***…]% of the Third Extension Fee
($[…***…]).

 

2.6 Construction Trigger. Customer shall have the right, exercisable by written
notice to Lonza delivered at any time during the Reservation Period, but not
prior to completion of the Detailed Design, to require Lonza to commence
construction of the Facility as described in Clause 3.2 (the “Construction
Trigger”). Within five (5) business days following Customer’s exercise of the
Construction Trigger:

 

  2.6.1 Lonza shall purchase directly from Customer a number of shares of
Customer’s common stock equal to the lesser of (i) that number of shares having
an aggregate purchase price equal to, as closely as possible without exceeding
based on the Per Share Purchase Price, $10,000,000 at the Per Share Purchase
Price and (ii) one share less than the lowest number of shares that would exceed
the lower of the Nasdaq Share Caps. The foregoing sale and purchase of
Customer’s shares of common stock shall be made pursuant to a Common Stock
Purchase Agreement in substantially the form attached hereto as Appendix G,
which shall be entered into by the Parties on or before the third (3rd) business
day following the date on which the Construction Trigger is exercised.

For purposes of this Clause 2.6.1:

 

  (a) “Nasdaq 20% Issuance Cap” means, if the Per Share Purchase Price is less
than the greater of book or market value of Customer’s common stock on the date
the Construction Trigger is exercised, the number of shares that would result in
the issuance of more than 19.99% of Customer’s outstanding common stock as of
immediately before the issuance (in each case, as calculated in accordance with
the rules and guidance of The NASDAQ Global Market).

 

  (b) “Nasdaq Change of Control Cap” means the number of shares that would
result in Lonza beneficially owning, immediately following the issuance of
Customer’s common stock contemplated by the initial paragraph of this
Clause 2.6.1, in excess of 19.99% of the outstanding common stock or voting
power of Customer (as calculated in accordance with the rules and guidance of
The NASDAQ Global Market).

 

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  (c) “Nasdaq Share Caps” means, collectively, the Nasdaq 20% Issuance Cap and
the Nasdaq Change of Control Cap.

 

  (d) “Per Share Purchase Price” means a price per share that is equal to the
average of the Volume Weighted Average Prices per share of Customer’s common
stock for the […***…] trading days immediately preceding the date on which
Customer exercises the Construction Trigger.

 

  (e) “Volume Weighted Average Price” means the volume weighted average sale
price of Customer’s common stock on The Nasdaq Global Market (without regard to
after-hours trading or any other trading outside of the regular trading hours)
as reported by Bloomberg Financial Markets or an equivalent, reliable reporting
service agreed upon in writing by the Parties.

 

  2.6.2 Lonza, Customer and the Escrow Agent shall execute and deliver the
Escrow Agreement; and

 

  2.6.3 subject to execution of the Escrow Agreement, Customer […***…] to the
[…***…] ($[…***…]); provided, that Customer may in any event delay deposit of
such additional […***…] dollars ($[…***…]) for up to […***…] ([…***…]) days
after the date on which the Construction Trigger is exercised.

 

  2.6.4 If Customer executes the Agreement and simultaneously exercises the
Construction Trigger, the reservation and extension fees described in this
Clause 2 shall not apply.

 

3 Performance of Services

 

3.1 Performance of Services Generally. Following exercise of the Construction
Trigger, and subject to completion of the transactions described in
Clauses 2.6.1 through 2.6.3, Lonza shall itself and through its Affiliates:

 

  3.1.1 use commercially reasonable efforts to perform the Services under each
Project Plan in accordance with the terms and conditions of this Agreement on
the estimated timelines as set forth in the applicable Project Plan; and

 

  3.1.2 use commercially reasonable efforts to manufacture cGMP Batches under
Purchase Orders in accordance with the terms and conditions of this Agreement on
the production schedules delivered by Lonza to Customer pursuant to this
Agreement.

Lonza shall be entitled to have one or more of its Affiliates perform any of
Lonza’s obligations contained in this Agreement. Lonza shall remain fully
responsible for its Affiliates’ performance of all obligations delegated to
Affiliates. Lonza shall retain appropriately qualified and trained personnel
with the requisite knowledge and experience to perform the Services in
accordance with this Agreement. Lonza may subcontract or delegate any of its
rights or obligations under this Agreement to perform the Services to Third
Party subcontractors with Customer’s prior written consent, which shall not be
unreasonably withheld or delayed; provided, that Lonza shall be responsible for
the acts or omissions of such Third Party subcontractors.

 

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Notwithstanding the foregoing, Lonza shall not be responsible for erroneous
results of analytical lab services performed by External Laboratories approved
by Customer.

 

3.2 Facility Construction and Technology Transfer.

 

  3.2.1 Within […***…] ([…***…]) days after the Construction Trigger (subject to
completion of the transactions described in Clause 2.6), Lonza will initiate
construction of the Facility within the Building.

 

  3.2.2 Lonza will use reasonable efforts to initiate pre-construction
activities as described in the applicable Project Plan prior to exercise of the
Construction Trigger to enable construction to be initiated on the schedule
described in Clause 3.2.1.

 

  3.2.3 Thereafter, Lonza will undertake the construction of the Facility
(including a Dedicated Production Line and Shared Resources), in accordance with
the Detailed Design and Lonza procedures and policies, and use commercially
reasonable efforts to complete such construction on the estimated timeline for
construction of the Facility attached hereto as Appendix C.

 

  3.2.4 The estimated […***…] is or will be described in the […***…] (such total
estimated […***…] is referred to herein as the “CapEx Amount” or “CapEx”). Lonza
shall provide […***…] for […***…], to the extent described in the […***…], and
Lonza (or its Affiliate, in Lonza’s sole discretion) shall […***…], including
the […***…] and […***…] in connection with the performance of the Services and
operation of the Dedicated Production Line. Any mutually-agreed changes to the
scope of the […***…] shall be […***…].

 

  3.2.5 Lonza shall transfer the Manufacturing Process to the Facility,
including implementing the technology transfer plan set forth in the applicable
Project Plan. Customer shall provide reasonable assistance and support to Lonza
in implementing such technology transfer as reasonably requested by Lonza.

 

  3.2.6 Any Capital Equipment required for the performance of the Services but
not included in the Detailed Design shall be acquired on terms to be agreed by
the Parties prior to commencement of the relevant Services.

 

3.3 Production Level

 

  3.3.1 Start-Up and Initial Staffing. Lonza shall perform the Facility
commissioning and start up to include the recruitment and training of qualified
personnel required to operate the Dedicated Production Line and perform the
Services at the Facility. Lonza shall initially recruit and train sufficient
staff at the Facility to perform the initial shake down runs and the process
validation/conformance lots through Release of the final Validation Batch.

 

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  3.3.2 Staffing Generally. Lonza shall staff the Facility consistent with the
staffing schedules provided to Customer following commencement of the first
Measurement Period.

 

  3.3.3 […***…]-Batch Production Level. Upon Release of the final Validation
Batch, Lonza shall have recruited and trained sufficient staff at the Facility
to supply up to […***…] Batches per year (assuming overlapping consecutive runs
after process validation).

 

  3.3.4 […***…]-Batch Production Level. Customer may request to increase the
production level of the Facility to be able to supply up to […***…] Batches per
year (assuming overlapping consecutive runs after process validation)
(“[…***…] Batch Request”). Lonza agrees to be up to the […***…] Batch/year
production level within […***…] months following the date of Customer’s
[…***…] Batch Request.

 

  3.3.5 […***…]-Batch Production Level. Customer may request to increase the
production level of the Facility to be able to supply up to […***…] Batches per
year (assuming overlapping consecutive runs after process validation) (“[…***…]
Batch Request”). Lonza agrees to be up to the […***…] Batch/year production
level within […***…] months following the date of Customer’s […***…] Batch
Request.

 

  3.3.6 Decreasing Production Level. Customer may request to decrease the
production level (and associated monthly suite fee) from […***…] Batches/year to
[…***…] Batches/year or from […***…] Batches/year to […***…] Batch/year by
giving Lonza […***…] months’ notice; provided that […***…].

 

  3.3.7 Other Production Level Changes. In the event Customer desires to change
the production level otherwise than according to the above provisions, both
parties agree to negotiate timings and monthly suite fees in good faith,
provided that the timing of achieving production rates (ramp up or down) and
monthly suite fees will be based on the foregoing provisions and Clause.

 

  3.3.8 Dedicated Production Line; Other Clean Rooms. During the Term, Lonza
will not use the Dedicated Production Line except to provide Services hereunder.
Lonza may, at its own expense, build-out and operate additional Production Clean
Rooms within the Building for use in providing services to customers other than
Customer, provided that Lonza shall at all times ensure that any such build-out
does not impair Lonza’s ability to comply with its obligations hereunder. If at
any time during the Term, Lonza desires to expand the Building or production
areas within the Building beyond what is otherwise agreed with Customer under
this Agreement, Lonza shall give prompt notice thereof to Customer, and the
parties shall discuss in good faith regarding Customer becoming an exclusive or
non-exclusive customer with respect to production areas to be included in such
expansion.

 

3.4

Engineering Batches. Following completion of Facility construction,
commissioning and startup, Lonza shall manufacture Engineering Batches until it
has completed […***…] ([…***…]) successful Engineering Batches, in compliance
with cGMP and

 

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  Specifications, unless the parties mutually agree that a lesser number of
successful Engineering Batches has sufficiently demonstrated that the
Manufacturing Process has been successfully transferred to the Facility and can
be operated therein in compliance with cGMP. Customer shall have the right to
make whatever further use of the non-cGMP Engineering Batches as it shall
determine, provided that such use is not for human use and does not violate any
Applicable Laws. Lonza makes no warranty that Engineering Batches will meet cGMP
or the Specifications. If Lonza determines that an Engineering Batch does meet
cGMP and the Specifications, it will release such Engineering Batch as a cGMP
Batch. Regardless of whether any Engineering Batch meets cGMP or the
Specifications, Customer shall pay to Lonza the Raw Materials Fee associated
with such Engineering Batches.

 

3.5 cGMP Batches. Lonza will, in accordance with the terms of this Agreement and
Quality Agreement, manufacture at the Facility and Release to Customer, cGMP
Batches that comply with the Manufacturing Process, cGMP and the Specifications,
together with a Certificate of Analysis; provided, however, that cGMP
manufacture shall not commence until Lonza has completed the Engineering Batches
described in Clause 3.4. Prior to commencement of cGMP manufacturing, the
Steering Committee shall review the process assumptions. In the event that there
is a material difference in the process assumptions as compared with the process
results demonstrated during the manufacture of Engineering Batches, the Parties
shall meet to discuss in good faith a revision to the fee structure hereunder to
reflect such difference. Any such revision would be effective only upon
execution by the Parties of a written amendment to this Agreement on mutually
acceptable terms.

 

3.6 Process Validation Batches. Lonza shall manufacture and deliver Process
Validation Batches as mutually agreed by Parties sufficient to document the
operability and reproducibility of the Manufacturing Process and permit the
Parties to complete and file the necessary regulatory documents.

 

  3.6.1 Prior to commencement of Process Validation Batches, Lonza and Customer
shall agree a process validation plan identifying the validation requirements of
the Manufacturing Process. Certain process validation activities, other than
manufacture of Process Validation Batches, may be excluded from the monthly
suite fee structure hereunder and shall be paid for by the Customer at the price
set out in the applicable Project Plan.

 

  3.6.2 Any regulatory support activities (including pre-Approval inspection)
required and agreed to by Customer to support the Approval of the Product from
the Facility shall be performed and supported by Lonza as reasonably requested
by Customer. All such regulatory support activities are excluded from the
monthly suite fee structure, shall be approved by the Customer in advance, and
shall be paid for by the Customer at the price set out in the applicable Project
Plan.

 

3.7

Supply of Customer Information and Customer Materials. Customer shall supply to
Lonza all Customer Information and Customer Materials and other information or
materials that may be reasonably required by Lonza to perform the Services other
than such information and materials that are in the possession of Lonza Houston,
Inc. Lonza shall not be responsible for any delays arising out of Customer’s
failure to provide such Customer Information, Customer Materials, or other
information or materials reasonably required to perform the Services to Lonza,
and Customer shall be responsible for all additional costs and expenses arising
out of such delay,

 

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  excluding any idle Facility capacity costs (which the Parties acknowledge is
already factored into the monthly suite fees under this Agreement).

 

3.8 Raw Materials. Lonza shall procure all required Raw Materials as well as
consumables other than those Raw Materials that are Customer Materials. Safety
stock quantities of Raw Materials as well as Downstream Materials will be
mutually agreed between Lonza and Customer and will be purchased at Customer’s
expense and invoiced when ordered (acquisition cost plus applicable handling
fees). Customer shall be responsible for payment for all Raw Materials and
Downstream Materials ordered or irrevocably committed to be procured by Lonza
hereunder. Upon cancellation of any Batch or termination of the Agreement, all
unused Raw Materials shall be paid for by Customer within thirty (30) days of
invoice and at Customer’s option will either be (a) held by Lonza for future use
for the production of Product, (b) delivered to Customer, (c) returned to the
supplier, to the extent permitted by the supplier, or (d) disposed of by Lonza.
Lonza will credit Customer for any credits received by Lonza in connection with
the return of Raw Materials to the supplier.

 

4 Project Management / Steering Committee

 

4.1 Project Plans. With respect to a new project to be governed by this
Agreement, a new Project Plan shall be added by agreement in a writing signed by
the Parties and appended to Appendix A. Each Project Plan shall include a
description of the Services to be provided, the Product to be manufactured,
Specifications, a schedule for completion of the Project Plan, pricing details
(if not already covered by the fee structure under this Agreement), and such
other information as is necessary for relevant Services. The Parties shall
discuss and reach mutual agreement on the budget for such Project Plan,
including agreement with respect to the amount of such costs that are already
covered by the fee structure under this Agreement. In the event of a conflict
between the terms of a Project Plan and this Agreement, the terms of this
Agreement will govern. Each Party shall at all times exercise good faith and be
commercially reasonable in negotiating Project Plans.

 

4.2 Project Management; Dispute Resolution. With respect to each Project Plan,
each party will appoint a project manager who will be the party responsible for
overseeing the Project Plan. The project managers designated by each party will
first attempt to resolve any disputes within […***…]. If the project managers
are unable to do so, then the dispute will be elevated to the Steering
Committee.

 

4.3 Steering Committee. Each Party shall name a mutually agreed upon equal
number of senior management representatives for the Steering Committee, which
shall meet at least quarterly, with one of such meetings each calendar year to
be held at a Lonza site located in the U.S. and one of such meetings each
calendar year to be held at Customer’s site, or as otherwise mutually agreed by
the Parties. In the event that Customer grants a Third Party any license or
rights to Product in the U.S. or the European Union, then subject to execution
of an appropriate confidentiality agreement between such Third Party and Lonza,
Customer may, but need not, permit such Third Party to be represented on the
Steering Committee or to participate in Steering Committee meetings as a
non-voting participant, at Customer’s sole discretion. In the event that a
Steering Committee is unable to resolve any dispute within […***…], then such
dispute shall be escalated to a senior executive of each of Customer and Lonza
for attempted resolution. If such senior executives are unable to resolve such
dispute within […***…] of such escalation, then either party may pursue any and
all remedies available at law or in equity.

 

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  The primary function of the Steering Committee is to ensure the ongoing
communication between the Parties (including, without limitation, ongoing
disclosure by Lonza to Customer regarding the status and progress of development
of the Detailed Design, any anticipated changes or updates to the […***…], and
the estimated timing of Facility Mechanical Completion and Facility OQ) and
discuss and resolve any issues arising under this Agreement. In addition to the
primary function described above, the Steering Committee shall also take on the
following responsibilities:

 

  4.3.1 discuss and seek resolution of issues around management of the Services,
including without limitation the ability and availability of Facility staff to
perform non-manufacturing Services included in Project Plans hereunder;

 

  4.3.2 monitor deadlines and milestones for the Services; and

 

  4.3.3 discuss and recommend any changes to the Services (although such changes
will not take effect until they have been incorporated into a written amendment
to the Project Plan which has been signed by the Parties).

 

4.4 Person in Plant. Beginning […***…] Batch in the Facility, Customer shall be
permitted to have, […***…] ([…***…]) employees in the clean rooms included in
the Dedicated Production Line as reasonably requested by Customer, for the
purpose of observing, reporting on, and consulting as to the performance of the
Services. Such employees shall be subject to and agree to abide by Lonza’s
customary practices and operating procedures regarding persons in plant, and
such employees agree to comply with all instructions of Lonza’s employees at the
Facility.

 

5 Quality

 

5.1 Responsibility for quality assurance and quality control of Product shall be
allocated between Customer and Lonza as set forth in the Quality Agreement and
in Lonza standard operating procedures. If there is a conflict between the terms
and conditions of this Agreement and the Quality Agreement, the terms and
conditions of the Quality Agreement shall control with respect to matters
related to coordinating Product quality control and quality assurance
activities, and this Agreement shall prevail in all other cases. If the Quality
Agreement is not in place at the Effective Date, Lonza and Customer commit to
enter into the Quality Agreement in a timely manner, but in no event later than
the commencement of cGMP manufacturing.

 

5.2 For clarity and without limiting any corresponding obligations in the
Quality Agreement, Lonza shall provide prompt written notice to Customer upon
receipt from any Governmental Authority of a warning letter or consent decree
with respect to the Facility.

 

5.3 Provisions regarding inspections by Regulatory Authorities and audits shall
be set out in the Quality Agreement.

 

6 Insurance

 

6.1

Each Party shall, during the Term and for five (5) years after delivery of the
last Product manufactured or Services provided under this Agreement, obtain and

 

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  maintain at its own cost and expense from a qualified insurance company,
insurance coverage in the following amounts:

 

  6.1.1 with respect to Lonza, comprehensive general liability insurance
including, but not limited to product liability coverage in the amount of at
least […***…] ([…***…]) […***…] dollars per claim and in the aggregate; and

 

  6.1.2 with respect to Customer, at least (a) […***…] ([…***…])[…***…] dollars
per occurrence and in the aggregate of product liability insurance and (b) at
least […***…] ([…***…]) million dollars per occurrence and […***…] ([…***…])
million dollars in the aggregate of general liability (non-product liability)
insurance.

 

6.2 In addition, if Customer exercises the Construction Trigger, then (a) Lonza
shall promptly, but in any event within thirty (30) days following the date of
Construction Trigger, obtain and maintain for the duration of the construction
at its own cost and expense from a qualified insurance company, a builder’s risk
policy on the Facility in an amount equal to at least the […***…]; and (b) upon
Facility OQ and for the remainder of the Term, Lonza shall obtain and maintain
at its own cost and expense from a qualified insurance company, property
coverage on the Facility, in an amount equal to at least […***…]. In the event
that, as a result of Force Majeure, the Facility is damaged but repairable,
then, unless otherwise mutually agreed by the Parties in writing, all insurance
proceeds from the applicable policy shall be used for repair (and further
construction, if applicable) of the Facility. In the event that, as a result of
Force Majeure, the Facility is destroyed, or damaged to such an extent that
construction of a new facility would be required, then:

 

  6.2.1 if the Parties mutually agree in writing to construct a new facility,
all insurance proceeds from the applicable policy shall be applied to such
construction; and

 

  6.2.2 if the Parties do not mutually agree in writing to construct a new
facility, then the insurance proceeds from the applicable policy shall be
allocated as follows:

 

  (a) if Lonza’s total […***…] as of the date of the Force Majeure event exceed
the aggregate milestones paid to Lonza from the Escrow Account to such date, the
proceeds will be used first, to reimburse Lonza for the amount of such excess,
and second, to reimburse Customer for the aggregate milestones […***…] to such
date, and any remaining proceeds will be retained by Lonza.

 

  (b) if the aggregate milestones paid to Lonza from the Escrow Account to such
date exceed Lonza’s […***…] as of the date of the Force Majeure event, the
proceeds will be used first to reimburse Customer for the […***…] to such date,
and any remaining proceeds will be retained by Lonza.

 

6.3

The foregoing provisions of this Clause 6.2 are in addition to any termination
right that Customer may have under Clause 15.1 as a result of such Force Majeure
event. Each Party shall ensure that the other Party is named as an additional
insured or loss

 

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  payee, as applicable, on such insurance and provide the respective other Party
with a certificate of such insurance upon reasonable request.

 

6.4 If Customer exercises the Construction Trigger, Lonza shall, within thirty
(30) days following the date of Construction Trigger, provide Customer with a
worker’s compensation certificate containing a waiver of subrogation in favor of
Customer and proof of auto liability coverage, and shall update such coverage as
additional FTEs are assigned to the projects covered by Project Plans.

 

7 Forecasting, Ordering and Cancellation

 

7.1 Forecasting. No later than the first (1st) day of each calendar quarter,
Customer shall supply Lonza with a written forecast showing Customer’s good
faith estimated quarterly requirements for Batches for the following […***…]
([…***…]) month period (the “Forecast”), which in no event shall exceed the
Maximum Capacity for any calendar year. No later than […***…] ([…***…]) business
days following Lonza’s receipt of a Forecast, Lonza shall provide Customer with
an estimated production schedule showing the estimated Commencement Date and
Release date of each Batch. The forecast given in this Clause 7.1 shall not be
binding on Customer or Lonza, except that Customer shall submit orders for
Batches scheduled to commence within the first […***…] ([…***…]) months of each
Forecast in order ensure that Raw Materials can be ordered in a timely manner.

 

7.2 Purchase Orders/Schedule. Each Purchase Order must be submitted at least
[…***…] ([…***…]) months prior to the earliest Commencement Date of the Batches
covered by such Purchase Order (as estimated by Lonza pursuant to Clause 7.1).

 

7.3 Shortfall Notice. If at any time during any calendar year following
commencement of cGMP manufacture of Product at the Facility, Lonza believes that
it will be unable to Deliver in such calendar year the number of Batches ordered
by Customer for Delivery during such calendar year, Lonza shall promptly provide
written notice thereof to Customer, which notice shall include (i) the number of
Batches that Lonza believes it will be unable to Deliver, (ii) the reasons for
Lonza’s inability to deliver such number of Batches and (iii) Lonza’s
anticipated timeline for being able to deliver such number of Batches (such
notice, a “Shortfall Notice”). Following delivery of a Shortfall Notice, Lonza
shall be obligated to provide written notice(s) to Customer promptly in the
event there are subsequent changes in the details covered by a particular
Shortfall Notice (e.g., if Lonza subsequently learns that it will be able to
Deliver more or less Batches than previously described in the Shortfall Notice
or any prior update notice, or if Lonza’s anticipated timelines for curing such
shortfall change). For clarity, the provisions of this Clause 7.3 and Clause 7.4
and other provisions relating to mechanisms addressing Lonza’s inability to
Deliver Batches set forth in Purchase Orders under this Agreement shall not
limit or otherwise affect Lonza’s obligations to continue efforts to manufacture
and Deliver Products in accordance with Clause 3.1 of this Agreement.

 

7.4 Minimum Quantity.

 

  7.4.1 Subject to Clause 7.4.2, during each calendar year after commencement of
cGMP manufacture of Product at the Facility during which Customer is paying less
than the Monthly […***…] Fee (other than due to reduction of monthly suite fees
as provided under Clause 9.9 of this Agreement), Customer will place orders
hereunder for Batches comprising not less than […***…]% of the world-wide
Product requirements of Customer and its strategic partners

 

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  and licensees. Notwithstanding the foregoing, in the event Customer desires
Product sooner than Lonza is able to supply it under this Agreement Customer
shall have the right to purchase and obtain Products from Third Party suppliers
until cGMP manufacture of Product commences at the Facility up to the quantities
reasonably necessary for Customer to obtain during such period, and Customer
shall notify Lonza in writing of the quantities it orders from such Third Party
suppliers.

 

  7.4.2 If at any time during any calendar year following commencement of cGMP
manufacture of Product at the Facility, Lonza provides a Shortfall Notice to
Customer or Lonza does not Deliver in such calendar year the number of Batches
ordered by Customer for Delivery during such calendar year, whichever occurs
first, then immediately upon the occurrence of such event, notwithstanding
Clause 7.4.1, Customer shall have the right to order and have supplied from any
Third Party (a) that number of Batches that Lonza is unable to Deliver (or so
indicates in a Shortfall Notice or update thereto) (the “Shortfall”); and
(b) that number of Batches equal to the product of (i) Customer’s total Batch
requirements for the first […***…] ([…***…]) months of the calendar year
following the calendar year in which the Shortfall occurred, multiplied by
(ii) a proportion, the numerator of which is the total number of Batches
included in the Shortfall during the preceding calendar year and the denominator
of which is the total number of Batches set forth in Purchase Orders which
should have been Delivered in the preceding calendar year (including the Batches
included in the Shortfall). For clarity, in the event Customer elects to
purchase Batches from any Third Party pursuant to this Clause 7.4.2, the
Products included in such Batches actually purchased shall not be included in
Customer’s and its strategic partners’ and licensees’ total Product requirements
for purposes of the calculation described in Clause 7.4.1. Customer’s right to
purchase Batches from a Third Party as described in this Clause 7.4.2 shall
apply regardless of whether Lonza subsequently Delivers the Shortfall Batches or
is able to meet Customer’s Product requirements for the first […***…] ([…***…])
months after the calendar year in which the Shortfall occurred.

 

8 Delivery and Acceptance

 

8.1 Delivery. All Product shall be delivered EXW (as defined by Incoterms® 2010)
the Facility. Following completion of the batch review procedures as set forth
in the Quality Agreement (during which Customer and Lonza shall review and
resolve comments pertaining to the executed batch records and related lot
documentation), Lonza shall deliver to Customer a final Certificate of Analysis
for each cGMP Batch and such other documentation as is reasonably required to
meet all applicable regulatory requirements of the Governmental Authorities
(collectively, the “Batch Documentation”) within […***…] ([…***…]) business days
after Release of such cGMP Batch. Lonza shall provide Customer with prompt
written notice of Release of each cGMP Batch. With respect to any Customer
Materials, title and risk of loss shall remain with the Customer and shall not
transfer to Lonza. With respect to Product, title and risk of loss shall
transfer to Customer upon Delivery in accordance with this provision, provided
that if Lonza has not delivered the Batch Documentation for such Product to
Customer prior to Delivery, then title and risk of loss shall transfer to
Customer upon delivery of such Batch Documentation.

 

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8.2 Storage. Customer shall arrange for pickup of such Batch from the Facility,
at Customer’s expense, within […***…] days after Release or pay applicable
storage costs. Lonza shall provide storage on a bill and hold basis for such
Batch(es) at no charge for up to […***…] ([…***…]) days; provided that any
additional storage beyond […***…] ([…***…]) days will be subject to availability
and, if available, will be charged to Customer and will be subject to a separate
agreement. In addition to Clause 8.2, Customer shall be responsible for all
value added tax (VAT) and any other applicable taxes, levies, import, duties and
fees of whatever nature imposed as a result of any storage. Notwithstanding
anything to the contrary contained in this Agreement, in no event shall Lonza be
required to store any Batch for more than […***…] ([…***…]) calendar days after
Release. Within […***…] ([…***…]) days following a written request from Lonza,
Customer shall provide Lonza with a letter in form satisfactory to Lonza
confirming the bill and hold status of each stored Batch.

 

8.3 Acceptance/Rejection of Product.

 

  8.3.1 Within […***…] ([…***…]) days after Customer’s receipt of all Batch
Documentation for a Batch, or such other period as may be specified in the
Quality Agreement, Customer shall determine by review of such Batch
Documentation whether or not such Batch conforms to the Product Warranty.
Promptly following receipt of each Batch, Customer shall inspect such Batch.
Customer shall have the right to reject any Batch that fails to conform to the
Product Warranty. Customer shall notify Lonza in writing of any rejection of a
Batch based on any claim of non-conformity to the Product Warranty within
[…***…] ([…***…]) days of Customer’s receipt of the Batch, after which time such
Batch shall be deemed accepted. Customer shall have the right to revoke its
acceptance and reject a Batch if within […***…] ([…***…]) months following
Release of such Batch, Customer discovers a latent defect in such Batch which
Customer could not have reasonably discovered upon inspection of such Batch and
the related Batch Documentation, and Customer provides written notice thereof to
Lonza within […***…] ([…***…]) business days of discovery thereof.

 

  8.3.2 In the event that Lonza believes that a Batch has been incorrectly
rejected, Lonza may require that Customer provide to it Batch samples for
testing. Lonza may retain and test the samples of such Batch. In the event of
(a) a discrepancy between Customer’s and Lonza’s test results such that Lonza’s
test results fall within relevant Specifications, or (b) there exists a dispute
between the Parties over the extent to which such failure is attributable to a
given Party (including, without limitation, any such dispute over whether such
failure is a Lonza Responsibility) that the Parties are unable to resolve within
[…***…] days of delivery by a Party to the other Party of written notice of the
existence of such dispute, the Parties shall cause an independent laboratory
promptly to review records, test data and perform comparative tests and/or
analyses on samples of the Product that allegedly fails to conform to
Specifications. Such independent laboratory and analytical procedures shall be
mutually agreed upon by the Parties. The independent laboratory’s results shall
be in writing and shall be final and binding. Unless otherwise agreed to by the
Parties in writing, the costs associated with such testing and review shall be
borne by the Party against whom the independent laboratory rules.

 

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  8.3.3 Lonza shall replace any cGMP Batch that does not conform to the Product
Warranty (a “Failed cGMP Batch”) with a cGMP Batch conforming to the Product
Warranty. If a Failed cGMP Batch is a Lonza Responsibility, Lonza shall replace
such Batch at no additional cost to Customer (except for the cost of Customer
Materials). Such replacement shall be made as promptly as practicable. Customer
acknowledges and agrees that, except in the case of Persistent Supply Failure
(for which Customer shall have the rights and remedies expressly provided in
this Agreement), Customer’s sole remedy with respect to a Failed cGMP Batch is
as set forth in this Clause 8.3.3. Lonza shall be responsible for the cost of
Raw Materials (other than Customer Materials) consumed in any Failed cGMP Batch
for which Lonza Responsibility has been established, but not otherwise.

 

  8.3.4 Notwithstanding anything else in this Agreement, if the sole reason that
any Failed cGMP Batch failed to conform to the Product Warranty was the failure
of the Customer Materials provided by Customer for use in the manufacture of
such Batch to conform to the applicable specifications for such materials, then,
provided that Lonza performed quality testing and release on such Customer
Materials in accordance with the Quality Agreement prior to their use, Lonza
shall have no liability or responsibility for such Failed cGMP Batch under
Clause 8.3.3.

 

9 Price and Payment

 

9.1 Milestones. Upon completion or occurrence of each of the Milestones set
forth below, Lonza shall invoice Customer the amount set forth opposite such
Milestone, less applicable credits posted to Customer’s account pursuant
Clause 2. Unless Customer notifies Lonza in writing that it disputes any such
invoice within fifteen (15) business days following the date thereof, stating in
reasonable detail the basis for disputing such invoice, Lonza shall be entitled
to withdraw the amount of such invoice from the Escrow Account by presenting to
the Escrow Agent a copy of the invoice evidencing completion of the applicable
Milestone. If Customer timely disputes any such invoice, the matter will be
resolved by the Steering Committee; provided that if the Steering Committee is
unable to resolve such dispute within […***…] ([…***…]) days following the date
of Customer’s notice to Lonza, either Party may seek resolution of the matter
pursuant to Clause 16.9. Lonza will not make a withdrawal from the Escrow
Account as described above unless and until any dispute regarding the underlying
invoice timely notified hereunder by Customer has been resolved in Lonza’s
favor. Customer will not give a “Counter Notice” under the Escrow Agreement
unless it has timely notified Lonza that it disputes in good faith an invoice
presented pursuant to this Clause, and such dispute has not been resolved in
Lonza’s favor. If Customer gives a Counter Notice under the Escrow Agreement and
the underlying dispute is subsequently resolved in Lonza’s favor, Customer will,
upon request of Lonza, execute and deliver with Lonza a joint instruction to the
Escrow Agent to disburse to the amount of the relevant Milestone Payment to
Lonza.

 

Milestone

  

Milestone Payment amount

Customer’s exercise of the Construction Trigger    […***…]% of […***…]
Completion of the 1st engineering run, but no later than […***…] months after
exercise of the    […***…]% of […***…]

 

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Construction Trigger; provided that such […***…]- month period shall be extended
by the duration of any delay in completion of the 1st engineering run caused by
or within the reasonable control of Lonza Successful completion of a PAI, but no
later than […***…] months after Facility OQ; provided that such […***…]-month
period shall be extended by the duration of any delay in successful completion
of the PAI caused by or within the reasonable control of Lonza […***…]% of
[…***…] First Approval of commercial Product, but no later than […***…] months
after Facility OQ; provided that such […***…]-month period shall be extended by
the duration of any delay in First Approval of commercial Product caused by or
within the reasonable control of Lonza […***…]% of […***…]

[…***…] months following First Approval of commercial Product, but no later than
[…***…] months after Facility OQ; provided that such […***…]-month period shall
be extended by the duration of any delay in First Approval of commercial Product
caused by or within the reasonable control of Lonza.

 

Payment of this Milestone Payment will be delayed until the date on which Lonza
has supplied in accordance with this Agreement and the applicable Purchase
Orders (1) the total number of Batches ordered by Customer for Delivery during
the first […***…] ([…***…]) months following completion of final Process
Validation Batch, or (2) […***…] Batches (including Process Validation Batches),
whichever is less, but only if and to the extent the delay in production is
caused by or within the reasonable control of Lonza.

[…***…]% of […***…]

For purposes of the third milestone above and Clause 9.9.5 below, “Successful
completion of a PAI” shall mean completion of a PAI and either (a) the FDA or
EMA, as applicable, issues no comments as a result of the PAI, or (b) if the FDA
or EMA, as applicable, issues comments as a result of the PAI, final remediation
of all such comments by Lonza to the satisfaction of the FDA or EMA, as
applicable.

In addition to the Milestones described above, if Lonza completes the 1st
engineering run on or before […***…] ([…***…]) months after exercise of the
Construction Trigger, Customer shall pay to Lonza a […***…]. Lonza shall notify
Customer within thirty (30) days after such completion, and Customer will pay

 

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Lonza such […***…] or notify Lonza in writing that it disputes such completion
(stating in reasonable detail the basis for such dispute) within thirty
(30) days after the date of such notice from Lonza. If Customer disputes such
completion, the matter will be resolved by the Steering Committee; provided that
if the Steering Committee is unable to resolve such dispute within thirty
(30) days following the date of Customer’s notice to Lonza, […***…]. For
clarity, Customer shall not be required to […***…].

Notwithstanding any other provision in this Agreement, the Milestone payments
made pursuant to this Clause 9.1 shall not be refundable for any reason and
shall be paid only once.

 

9.2 Monthly Suite Fees. Customer shall pay monthly suite fees beginning upon
Facility Mechanical Completion according to the schedule set forth below,
subject to reduction in accordance with this Clause 9 and Appendix D. Lonza
shall invoice Customer for the applicable monthly suite fee at the beginning of
the calendar month for which it applies.

 

Period

  

Monthly Suite Fee

Facility Mechanical Completion to completion of Facility OQ    $[…***…]
(“Monthly Start-up Fee”) Completion of Facility OQ through the […***…]
anniversary of First Approval or until a different monthly suite fee becomes
applicable hereunder    $[…***…] (“Monthly Base Fee”) […***…] month period
beginning […***…] months following request to increase Facility capacity to
[…***…] Batch/year production level (“[…***…] Request Period”)    $[…***…] End
of […***…] Request Period through the [***] anniversary of First Approval or
until a different monthly suite fee becomes applicable hereunder   

$[…***…] (“Monthly […***…] Fee”)*

Based on […***…] FTEs, with adjustment subject to a lower limit of […***…] FTEs

[…***…] month period beginning […***…] months following request to increase
Facility capacity to […***…] Batch/year production level (“[…***…] Request
Period”)    $[…***…] End of […***…] Request Period through the […***…]
anniversary of First Approval or until a different monthly suite fee becomes
applicable hereunder   

$[…***…] (“Monthly […***…] Fee”)*

Based on […***…] FTEs, with adjustment subject to a lower limit of […***…] FTEs

 

* Subject to potential reduction based on re-evaluation of applicable staffing
plan to reduce FTEs as mutually agreed in good faith, but not below the lower
limit specified above, in which case monthly suite fee would automatically be
reduced by $[…***…] per FTE reduction. The foregoing suite fee reduction would
not apply with respect to staff reductions resulting from Facility improvements
made at Lonza’s cost.

 

***Confidential Treatment Requested

 

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Lonza may perform certain non-production Services outlined in each Project Plan,
at […***…], Portsmouth, NH, and/or at other Lonza sites or facilities located in
Portsmouth, NH, but there shall be no additional charges for such Services
(outside of monthly suite fees described above) except to the extent such
charges are described in the applicable Project Plan. Monthly suite fees do not
include: (a) shipment, insurance, taxes, duties, and VAT that may be applicable,
(b) Raw Materials Fees, costs of Downstream Materials and Downstream Materials
Handling Fees, (c) costs from External Laboratories (if applicable) and any
other Third Party contractors which will be passed through to Customer with a
[…***…]% management fee for sample preparation, results processing and review,
(d) any unplanned capital expenditures not accounted for in Facility
Construction, (e) all regulatory support services, (f) validation services
(other than manufacturing of Process Validation Batches) that cannot reasonably
be performed by the staff assigned to the Facility. All such validation work
will be authorized in writing in advance by Customer and will be paid for by
Customer at specified rates mutually agreeable with Lonza. Lonza will plan to
reasonably use the Facility staff to meet objectives and deliverables as part of
a cooperative Master Validation Plan with Lonza Houston Inc. All Process
Validation and related activities performed by Lonza Houston Inc. employees will
be contracted separately.

 

9.3 Unless otherwise indicated in writing by Lonza, all prices and charges are
exclusive of value added tax (VAT) and of any other applicable taxes, levies,
import, duties and fees of whatever nature imposed by or under the authority of
any government or public authority and all such charges applicable to the
Services shall be paid by Customer. When sending payment to Lonza, the Customer
shall quote the relevant invoice number in its remittance advice.

 

9.4 Charges for Raw Materials (other than Downstream Materials) and the Raw
Materials Fee for each Batch shall be invoiced upon the Release of each Batch.
Charges for Downstream Materials shall be invoiced by Lonza upon placement of
purchase orders for such Downstream Materials by Lonza at cost plus the
Downstream Material Handling Fee.

 

9.5 Any additional Services contracted by Customer that are not included in the
monthly suite fees (such as regulatory support activities) will be invoiced as
provided in the applicable Project Plan.

 

9.6 All invoices are strictly net and payment must be made within thirty
(30) days of date of invoice. Payment shall be made without deduction,
deferment, set-off, lien or counterclaim.

 

9.7 If in default of payment of any undisputed invoice on the due date, interest
shall accrue on any amount overdue at the rate of […***…] percent ([…***…]%) per
month on a day to day basis until full payment; and Lonza shall, at its sole
discretion, and without prejudice to any other of its accrued rights, be
entitled to suspend the provision of the Services and or delivery of Product
until all overdue amounts have been paid in full including interest for late
payments.

 

9.8 Price adjustments.

 

  9.8.1

Not more than […***…], and beginning no earlier than […***…], Lonza may adjust
the monthly suite fees hereunder in accordance with the […***…] Index,

 

***Confidential Treatment Requested

 

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  […***…] (or any successor index) increase for the previous calendar year.

 

  9.8.2 In addition to the above, the […***…] may be […***…], to […***…];
provided, that Lonza (a) provides Customer with reasonable prior written notice
of such […***…] (but in any event no less than 3 months’ prior written notice);
(b) together with the notice provided pursuant to clause (a), provides […***…]
and […***…]; and (c) […***…] regarding such […***…] including providing any
additional information regarding such […***…] as reasonably requested by
Customer.

 

9.9 Other Reductions of Suite Fees.

 

  9.9.1 Measurement Period Notice. If, at any time during a Measurement Period,
Lonza determines that it will be unable to successfully manufacture during such
Measurement Period the number of Batches required to meet the Minimum Production
Target for such Measurement Period, Lonza shall promptly provide written notice
thereof to Customer (such notice, a “Measurement Period Notice”).

 

  9.9.2 Reduction for Minimum Production Failure. Beginning in the first
calendar month following delivery by Lonza of a Measurement Period Notice with
respect to a Measurement Period during which it fails to meet the Minimum
Production Target, but not later than the first calendar month of the Target
Fulfillment Period with respect to such a Measurement Period, the applicable
monthly suite fee shall be reduced (a) by […***…] percent ([…***…]%) through the
[…***…] ([…***…]) calendar month of such Target Fulfillment Period; and
(b) beginning in the […***…] ([…***…]) calendar month of such Target Fulfillment
Period, by […***…] percent ([…***…]%) until the end of such Target Fulfillment
Period.

 

  9.9.3 Operational Failure Reduction. If at any time an Operational Failure
occurs, then during the Operational Failure, the applicable monthly suite fee
shall be reduced by […***…] percent ([…***…]%); provided that, such reduction
shall include (and not be in addition to) any reduction applied pursuant to
Clause 9.9.2; and provided further that if Lonza Delivers, within the applicable
calendar year, all Batches ordered by Customer for Delivery during each calendar
year in which such Operational Failure exists, then Customer shall pay Lonza the
total amount of the fee reductions applied pursuant to this provision as a
result of such Operational Failure within thirty (30) days after Delivery of the
last such Batch.

 

  9.9.4 Reduction for Delay in Completion of 1st Engineering Run. If Lonza does
not complete the 1st engineering run within […***…] months after exercise of the
Construction Trigger, then the applicable monthly suite fee shall be reduced
beginning in the next following calendar month until Lonza completes the 1st
engineering run as follows: (a)

 

***Confidential Treatment Requested

 

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       the applicable monthly suite fee shall be reduced by […***…] percent
([…***…]%) through the […***…] ([…***…]) calendar month of such reduction; and
(b) beginning in the […***…] ([…***…]) calendar month of such reduction, the
applicable monthly suite fee shall be reduced by […***…] percent ([…***…]%),
provided that such […***…]-month period shall be extended for, and such
reductions shall not apply during, any period(s) of delay […***…]. The reduction
set forth in this Clause 9.9.4 shall be in addition to any reduction applied
pursuant to Clause 9.9.3.

 

  9.9.5 Reduction for Delay in Completion of PAI. If Lonza does not successfully
complete a PAI within […***…] months after Facility OQ, then the applicable
monthly suite fee shall be reduced beginning in the next following calendar
month until Lonza successfully completes a PAI as follows: (a) the applicable
monthly suite fee shall be reduced by […***…] percent ([…***…]%) through the
[…***…] ([…***…]) calendar month of such reduction; and (b) beginning in the
[…***…] ([…***…]) calendar month of such reduction, the applicable monthly suite
fee shall be reduced by […***…] percent ([…***…]%); provided that such
[…***…]-month period shall be extended for, and such reductions shall not apply
during, any period(s) of delay […***…]. The reduction set forth in this Clause
9.9.5 shall be in addition to any reduction applied pursuant to Clause 9.9.3.

 

9.10 Escrow. If Customer’s financial position materially improves at any time
during the term of the Agreement, Customer may present Lonza with a credit risk
re-assessment proposal, which Lonza will consider in good faith in assessing
whether to release all or a portion of the escrowed funds.

 

10 Intellectual Property

 

10.1 Except as expressly otherwise provided herein, neither Party will, as a
result of this Agreement, acquire any right, title, or interest in any
Background Intellectual Property of the other Party.

 

10.2 Subject to Clause 10.3, Customer shall own all right, title, and interest
in and to any and all Intellectual Property that Lonza and/or its Affiliates,
the External Laboratories or other contractors or agents of Lonza develops,
conceives, invents, first reduces to practice or makes, solely or jointly with
Customer or others, in the course of performance of the Services that is
principally a direct derivative of or improvement to, or that uses or
incorporates, Customer Information and/or Customer Background Intellectual
Property (collectively, the “New Customer Intellectual Property”). For avoidance
of doubt, “New Customer Intellectual Property” shall include any material,
processes or other items that solely embody, or that solely are claimed or
covered by, any of the foregoing Intellectual Property, but shall exclude any
New General Application Intellectual Property.

 

10.3 Notwithstanding Clause 10.2, and subject to the licenses granted in
Clause 10.5, Lonza shall own all right, title and interest in Intellectual
Property that Lonza and/or its Affiliates, the External Laboratories or other
contractors or agents of Lonza, solely or jointly with Customer, develops,
conceives, invents, or first reduces to practice or makes in the course of
performance of the Services that (i) is generally applicable to the development
or manufacture of chemical or biological products or product components or
(ii) is an improvement of, or direct derivative of, any Lonza

 

***Confidential Treatment Requested

 

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     Background Intellectual Property, and, in each case, does not require the
use of, or incorporate any Customer Information and/or Customer Background
Intellectual Property (“New General Application Intellectual Property”). For
avoidance of doubt, “New General Application Intellectual Property” shall
include any material, processes or other items that embody, or that are claimed
or covered by, any of the foregoing Intellectual Property.

 

10.4 Lonza hereby assigns to Customer all of its right, title and interest in
any New Customer Intellectual Property. Lonza shall execute, and shall require
its personnel as well as its Affiliates, External Laboratories or other
contractors or agents and their personnel involved in the performance of the
Services to execute, any documents reasonably required to confirm Customer’s
ownership of the New Customer Intellectual Property, and any documents required
to apply for, maintain and enforce any patent or other right in the New Customer
Intellectual Property.

 

10.5 Subject to the terms and conditions set forth herein, Lonza hereby grants
to Customer a non-exclusive, world-wide, fully paid-up, irrevocable,
transferable license, including the right to grant sublicenses, under the New
General Application Intellectual Property, to use, sell, have sold, offer for
sale and import the Product manufactured under this Agreement. In addition, if
Lonza incorporates any of its Background Intellectual Property (including the
New General Application Intellectual Property described above) into the
Manufacturing Process without first obtaining Customer’s written consent, then,
subject to Clause 10.7, Lonza will grant to Customer a non-exclusive,
world-wide, fully paid-up, irrevocable, transferable license, including the
right to grant sublicenses, under such Intellectual Property, to develop, make,
have made, use, sell, have sold, offer for sale and import the Product.

 

10.6 Customer hereby grants Lonza the non-exclusive right to use the Customer
Information, Customer Background Intellectual Property and New Customer
Intellectual Property during the Term solely for the purpose of fulfilling its
obligations under this Agreement.

 

10.7 Customer will have an irrevocable right, exercisable by written notice to
Lonza, to transfer the Manufacturing Process to itself and/or any Third Party
for the manufacture of the Product (but no other product); provided, however, to
the extent such technology transfer is to a Third Party and includes Lonza
Confidential Information, Lonza Background Intellectual Property or New General
Application Intellectual Property, such transfer would be subject to the Third
Party entering into a reasonable and appropriate confidentiality agreement with
Lonza, and to the extent such Third Party is or will be engaged as a contract
manufacturer for Customer or otherwise derives a significant amount of its
business revenue from providing contract manufacturing services, such technology
transfer would be subject to a reasonable licensing fee (a “Technology Fee”) to
be agreed upon by the Parties, subject to the following:

 

  10.7.1 to the extent such Lonza Confidential Information, Lonza Background
Intellectual Property or New General Application Intellectual Property was
incorporated into the Manufacturing Process by Lonza without Customer’s prior
written consent, no Technology Fee shall be due;

 

  10.7.2 if there has been a Persistent Supply Failure, or if such transfer of
the Manufacturing Process is due to termination of this Agreement

 

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       for reasons other than uncured material breach of Customer under
Clause 14.3.6, then no Technology Fee shall be due;

 

  10.7.3 if a Technology Fee is applicable, the amount shall be negotiated in
good faith […***…]; and

 

  10.7.4 In the event of any disagreement between the Parties under this Clause
10.7 with respect to whether the Technology Fee is due or as to the amount of
any such Technology Fee, the Parties shall within thirty (30) days of a Party’s
written request, identify and appoint a mutually agreed upon independent
industry expert (the “Expert”). In such case, each Party will provide the Expert
with the relevant information as well as a briefing document setting forth
specific detailed reasons underlying such Party’s position, and the Expert shall
within an additional thirty (30) days following his appointment, make the
determination in a writing stating his reasons for whether the Technology Fee is
due or the amount of any such Technology Fee, as applicable, which determination
shall be final and binding on the Parties. All costs associated with identifying
and utilizing such Expert shall be borne equally by the Parties. Notwithstanding
the foregoing in this Clause 10.7.4 and pending resolution of the disagreement,
Lonza shall continue to conduct technology transfer of the Manufacturing Process
to Customer and/or its designated Third Party.

For the avoidance of doubt, Customer may, in its sole discretion, elect not to
have transferred or disclosed to it any Lonza Confidential Information, Lonza
Background Intellectual Property and New General Application Intellectual
Property, in which case Customer’s sole payment obligation with respect to
exercise of its technology transfer right under this Clause 10.7 shall be as set
forth in Clause 10.8. A technology transfer pursuant to this Clause 10.7 will
include […***…].

 

10.8 If Customer exercises its technology transfer right under Clause 10.7,
Lonza shall provide reasonable technology transfer assistance services and
access to necessary documentation to Customer as reasonably necessary to
complete such technology transfer and enable Customer or its Third Party
designee to replicate the Manufacturing Process as performed by Lonza, and
Customer shall pay Lonza for such services (at Lonza’s then-standard rates) and
reimburse Lonza for reasonable out-of-pocket expenses incurred in providing such
services and access.

 

11 Warranties

 

11.1 Lonza Representations and Warranties. Lonza warrants that:

 

***Confidential Treatment Requested

 

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  11.1.1 the Services shall be performed in accordance with all Applicable Laws;

 

  11.1.2 except with respect to any development services and Engineering
Batches, all Product Delivered by Lonza hereunder shall: (a) conform to the
applicable Specifications in effect at the time of Release; (b) be manufactured
and delivered in accordance with the Quality Agreement and cGMP; (c) not be
adulterated within the meaning of the United States Food, Drug and Cosmetic Act,
as amended, and any regulations promulgated thereunder (the “Act”); and (d) be
free and clear of any lien, encumbrance or other Third Party claim
(collectively, the “Product Warranty”);

 

  11.1.3 it or its Affiliate holds all necessary permits, approvals, consents
and licenses to enable it to perform the Services at the Facility;

 

  11.1.4 it has not been debarred by the FDA pursuant to 21 U.S.C. § 335a or its
successor provisions;

 

  11.1.5 it will not use in the performance of Services hereunder, any
personnel, Affiliate or Third Party that has been debarred by the FDA pursuant
to 21 U.S.C. § 335a or its successor provisions; and

 

  11.1.6 it has the necessary corporate authorizations to enter into and perform
this Agreement.

 

11.2 Customer Representations and Warranties. Customer warrants that:

 

  11.2.1 to Customer’s knowledge as of the Effective Date, Customer has all the
rights necessary to permit Lonza to manufacture Products without infringing the
Intellectual Property rights of any Third Party and the manufacture of Product
does not infringe any Third Party Intellectual Property rights;

 

  11.2.2 Customer will promptly notify Lonza in writing if it receives or is
notified of a formal written claim from a Third Party that Customer Information
and/or Customer Intellectual Property or the use thereof by Lonza in the
provision of the Services infringes any Intellectual Property or other rights of
any Third Party; and

 

  11.2.3 Customer has the necessary corporate authorizations to enter into this
Agreement.

 

11.3 DISCLAIMER: THE WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT ARE IN
LIEU OF ALL OTHER WARRANTIES, AND ALL OTHER WARRANTIES, BOTH EXPRESS AND
IMPLIED, ARE EXPRESSLY DISCLAIMED, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

 

12 Indemnification and Liability

 

12.1 Indemnification by Lonza. Lonza shall indemnify, defend and hold harmless
the Customer, its Affiliates, and their respective officers, employees and
agents (“Customer Indemnitees”) from and against any loss, damage, costs and
expenses, including reasonable attorney fees (collectively, “Losses”) that
Customer Indemnitees

 

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     may suffer as a result of any Third Party claim to the extent such Losses
arise out of or result from: (i) any material breach of this Agreement by Lonza;
(ii) gross negligence or willful misconduct on the part of one or more of the
Lonza Indemnitees (defined below); or (iii) any claims alleging that the
Services (excluding use by Lonza of Customer Information and/or Customer
Background Intellectual Property) infringe any Intellectual Property rights of a
Third Party; except, in each case, to the extent that such claims resulted from
the negligence, intentional misconduct or breach of this Agreement by any
Customer Indemnitees.

 

12.2 Indemnification by Customer. Customer shall indemnify, defend and hold
harmless Lonza, its Affiliates, and their respective officers, employees and
agents (“Lonza Indemnitees”) from and against any Losses that Lonza Indemnitees
may suffer as a result of any Third Party claim to the extent such Losses arise
out of or result from: (i) any material breach of this Agreement; (ii) gross
negligence or willful misconduct on the part of one or more of the Customer
Indemnitees; (iii) any claims alleging that the performance of Services (except
to the extent the claim is based on use by Lonza of Lonza Information or Lonza
Background Intellectual Property) infringes any Intellectual Property rights of
third parties; or (iv) the manufacture, use, sale, or distribution of any
Product, including any claims of product liability; except, in each case, to the
extent that such claims resulted from the negligence, intentional misconduct or
breach of this Agreement by any Lonza Indemnitees.

 

12.3 Indemnification Procedure. If the Party to be indemnified intends to claim
indemnification under this Clause 12, it shall promptly notify the indemnifying
Party in writing of such claim. The indemnitor shall have the right to control
the defense and/or settlement thereof; provided, however, that any indemnitee
shall have the right to retain its own counsel at its own expense. The
indemnitee, its employees and agents, shall reasonably cooperate with the
indemnitor in the investigation of any liability covered by this Clause 12. The
failure to deliver prompt written notice to the indemnitor of any claim, to the
extent prejudicial to its ability to defend such claim, shall relieve the
indemnitor of any obligation to the indemnitee under this Clause 12.

 

12.4 DISCLAIMER OF CONSEQUENTIAL DAMAGES. Except in the case of a Party’s breach
of Clause 13, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR
INCIDENTAL, INDIRECT, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES, LOST PROFITS
OR LOST REVENUES ARISING FROM OR RELATED TO THIS AGREEMENT, EXCEPT TO THE EXTENT
RESULTING FROM FRAUD, GROSS NEGLIGENCE OR INTENTIONAL MISCONDUCT BY SUCH PARTY;
provided, however, that this Clause 12.4 shall not be construed to limit the
Parties’ indemnification obligations with respect to Third Party claims under
Clauses 12.1 and 12.2.

 

12.5 LIMITATION OF LIABILITY. LONZA’S LIABILITY UNDER THIS AGREEMENT FOR CLAIMS
RELATING TO LONZA’S BREACH OF ITS OBLIGATIONS WITH RESPECT TO COMPLETION OF THE
DETAILED DESIGN OR OTHER OBLIGATIONS RELATING TO DESIGN OR CONSTRUCTION OF THE
FACILITY PRIOR TO EXERCISE OF THE CONSTRUCTION TRIGGER, SHALL IN NO EVENT
EXCEED, IN THE AGGREGATE FOR ALL SUCH CLAIMS, […***…]. LONZA’S LIABILITY UNDER
THIS AGREEMENT FOR CLAIMS RELATING TO CONSTRUCTION OF THE FACILITY SHALL IN NO
EVENT EXCEED, IN THE AGGREGATE FOR ALL SUCH CLAIMS, THE TOTAL AMOUNT OF […***…]
TO LONZA IN THE EVENT OF EARLY TERMINATION. LONZA’S LIABILITY UNDER THIS
AGREEMENT FOR ALL OTHER CLAIMS SHALL IN NO EVENT EXCEED, IN

***Confidential Treatment Requested

 

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     THE AGGREGATE FOR CLAIMS BASED ON SIMILAR OR RELATED EVENTS, […***…]
([…***…]) MONTH PERIOD PRECEDING THE FIRST SUCH EVENT. NOTWITHSTANDING THE
FOREGOING, IN NO EVENT SHALL THE LIMITATIONS ON LIABILITY SET FORTH IN THIS
CLAUSE 12.5 APPLY TO ANY DAMAGES TO THE EXTENT RESULTING FROM LONZA’S […***…] OR
[…***…].

 

13 Confidentiality

 

13.1 A Party receiving Confidential Information (the “Receiving Party”) agrees
to strictly keep secret any and all Confidential Information received during the
Term from or on behalf of the other Party (the “Disclosing Party”) using at
least the same level of measures as it uses to protect its own Confidential
Information, but in any case at least commercially reasonable and customary
efforts. For purposes of this Clause 13, New Customer Intellectual Property
shall be treated as Confidential Information of Customer, and Customer and Lonza
shall be deemed the Disclosing Party and Receiving Party, respectively, with
respect thereto, regardless of which party first discloses New Customer
Intellectual Property. Confidential Information shall include information
disclosed in any form including but not limited to in writing, orally,
graphically or in electronic or other form to the Receiving Party, observed by
the Receiving Party or its employees, agents, consultants, or representatives,
or otherwise learned by the Receiving Party under this Agreement, which the
Receiving Party knows or reasonably should know is confidential or proprietary.
This Agreement and its terms shall be Confidential Information of each Party.

 

13.2 Notwithstanding the foregoing, Receiving Party may disclose to any courts
and/or other authorities Confidential Information which is or will be required
pursuant to applicable governmental or administrative or public law, rule,
regulation or order. In such case the Party that received the Confidential
Information will, to the extent legally permitted, inform the other Party
promptly in writing and cooperate with the Disclosing Party in seeking to
minimize the extent of Confidential Information which is required to be
disclosed to the courts and/or authorities.

 

13.3 The obligation to maintain confidentiality under this Agreement does not
apply to Confidential Information, which:

 

  13.3.1 at the time of disclosure was publicly available; or

 

  13.3.2 is or becomes publicly available other than as a result of a breach of
this Agreement by the Receiving Party; or

 

  13.3.3 as the Receiving Party can establish by competent proof, was rightfully
in its possession at the time of disclosure by the Disclosing Party and had not
been received from or on behalf of Disclosing Party (provided, that New Customer
Intellectual Property shall not be subject to this Clause 13.3.3); or

 

  13.3.4 is supplied to a Party by a Third Party which was not in breach of an
obligation of confidentiality to Disclosing Party or any other party; or

 

***Confidential Treatment Requested

 

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  13.3.5 is developed by the Receiving Party independently from and without use
of the Confidential Information, as evidenced by contemporaneous written
records.

 

13.4 The Receiving Party will use Confidential Information only for the purposes
of this Agreement and will not make any use of the Confidential Information
except as necessary to perform its obligations or to exercise its rights under
this Agreement. The Receiving Party agrees to return or destroy promptly (and
certify such destruction) on Disclosing Party’s request all written or tangible
Confidential Information of the Disclosing Party, except that one copy of such
Confidential Information may be kept by the Receiving Party in its confidential
files for record keeping purposes only.

 

  Each Party will restrict the disclosure of Confidential Information to such
officers, employees, consultants and representatives of itself and its
Affiliates who have been informed of the confidential nature of the Confidential
Information and who have a need to know such Confidential Information for the
purpose of this Agreement. Prior to disclosure to such persons, the Receiving
Party shall bind its and its Affiliates’ officers, employees, consultants and
representatives to confidentiality and non-use obligations no less stringent
than those set forth herein. The Receiving Party shall notify the Disclosing
Party as promptly as practicable of any unauthorized use or disclosure of the
Confidential Information. Additionally, each Party shall have the right to
disclose Confidential Information of the other Party (including the Agreement)
to actual or potential Third Party investors or actual or potential Third Party
acquirers, licensees or collaborative or other partners, and to their bankers,
lawyers, accountants, agents, provided, in each case that each such Third Party
or advisor thereof is bound to confidentiality and non-use obligations no less
stringent than those set forth herein.

 

13.5 The Receiving Party shall at any time be fully liable for any and all
breaches of the confidentiality obligations in this Clause 13 by any of its
Affiliates or the employees, consultants and representatives of itself or its
Affiliates.

 

13.6 Each Party hereto expressly agrees that any breach or threatened breach of
the undertakings of confidentiality provided under this Clause 13 by a Party may
cause irreparable harm to the other Party and that money damages may not provide
a sufficient remedy to the non-breaching Party for any breach or threatened
breach. In the event of any breach and/or threatened breach, then, in addition
to all other remedies available at law or in equity, the non-breaching Party
shall be entitled to seek injunctive relief and any other relief deemed
appropriate by the non-breaching Party.

 

13.7 The Parties shall coordinate in advance with each other in connection with
the disclosure or filing of this Agreement (including redaction of certain
provisions of this Agreement) with the U.S. Securities and Exchange Commission
(the “SEC”), the NASDAQ stock exchange or any other stock exchange or
governmental agency on which securities issued by a Party or its Affiliate are
traded, and each Party shall use reasonable efforts to seek confidential
treatment for the terms proposed to be redacted; provided, that each Party shall
ultimately retain control over what information to disclose to the SEC, the
NASDAQ stock exchange or any other stock exchange or governmental agency, as the
case may be. Other than such obligation, neither Party (nor its Affiliates)
shall be obligated to consult with or obtain approval from the other Party with
respect to any filings to the SEC, the NASDAQ stock exchange or any other stock
exchange or governmental agency.

 

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14 Term and Termination

 

14.1 Term. This Agreement shall commence on the Effective Date and shall end on
the earlier of (a) the sixth (6th) anniversary of the date of First Approval, or
(b) expiration of the Reservation Period prior to Customer exercising the
Construction Trigger, unless terminated earlier as provided herein or extended
as provided herein (the “Term”). Notwithstanding the foregoing, each Project
Plan may have separate term and termination provisions so long as the term of
any Project Plan does not extend beyond the Term.

 

14.2 Extension. If Customer exercises the Construction Trigger, begins paying
the Monthly […***…] Fee (as defined below) prior to the third anniversary of
First Approval, and thereafter continues paying the Monthly […***…] Fee (or a
higher monthly suite fee) until the end of the initial term, then Customer shall
have a one-time extension right, exercisable by written notice prior to the date
that is four years following First Approval and subject to continued payment of
the Monthly […***…] Fee (or a higher monthly suite fee), to extend the term of
the Agreement for an additional three years (for a total term of nine years
following First Approval). Such extension would be subject to a good faith
negotiation of commercially reasonable pricing applicable during the extension
term, provided that the lowest monthly suite fee during any extension term would
not be lower than the Monthly […***…] Fee. Any further extension of the term
would be subject to mutual agreement. At either party’s request, the parties
will engage in good faith negotiations regarding such further extension during
the […***…]-year period prior to expiration, provided neither party shall be
obligated to further extend the term unless and until a definitive agreement
regarding extension is executed and delivered by the parties.

 

14.3 Termination. This Agreement may be terminated as follows:

 

  14.3.1 Customer shall have the right to terminate this Agreement at any time
during the Reservation Period upon written notice to Lonza, provided, that upon
exercise of the Construction Trigger, Customer’s right to terminate this
Agreement pursuant to this sub-clause shall terminate and be of no further force
or effect.

 

  14.3.2 After exercise of the Construction Trigger but prior to completion of
the first Engineering Batch, Customer shall have the right to terminate this
Agreement upon ninety (90) days’ written notice to Lonza in the event that:
(a) Customer receives from FDA (i) notice of FDA’s refusal to approve Customer’s
application for approval to market the Product or (ii) a complete response
letter indicating that Customer’s application for approval to market the Product
cannot be approved without one or more additional clinical trials being
performed (in each case, a “Product Non-Approval Notice”), and a Customer
Withdrawal occurs; (b) Customer receives from FDA notice of FDA’s withdrawal of
approval to market the Product (“FDA Withdrawal Notice”), and a Customer
Withdrawal occurs; or (c) a Customer Withdrawal occurs.

 

  14.3.3 After completion of first Engineering Batch but prior to First
Approval, Customer shall have the right to terminate this Agreement upon ninety
(90) days’ written notice to Lonza in the event that (a) Customer receives a
Product Non-Approval Notice and a Customer Withdrawal subsequently occurs; or
(b) a Customer Withdrawal occurs.

 

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  14.3.4 After First Approval, Customer shall have the right to terminate this
Agreement upon ninety (90) days’ written notice to Lonza in the event that
(a) marketing approval of the Product is withdrawn by the FDA and the EMA (to
the extent such marketing approval had previously been granted in each such
jurisdiction) and a Customer Withdrawal subsequently occurs; or (b) a Customer
Withdrawal occurs.

 

  14.3.5 Customer shall have the right to terminate immediately upon written
notice to Lonza upon the occurrence of any of the following events: (a) failure
of Lonza to timely perform its obligations under Clause 3.2.1 and to cure such
failure within […***…] ([…***…]) days of receiving written notice of such
failure from Customer; (b) a […***…]; or (c) Lonza, any of its Affiliates or
Third Party subcontractors performing Services hereunder, or any person used by
any of them to perform Services hereunder, or any of their respective officers
or directors, as applicable, involved in performing Services, is debarred by the
FDA, under the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 335(a), (b)(1),
and (b)(2)) and this adversely impacts Lonza’s ability to perform the Services
hereunder (ie., Lonza is unable to replace such Affiliate, Third Party
subcontractor or person in a timely manner).

 

  14.3.6 by either Party if the other Party breaches a material provision of
this Agreement or a Project Plan and fails to cure such breach to the reasonable
satisfaction of the non-breaching Party within ninety (90) days (except that the
cure period for non-payment shall be ten (10) days and the cure period for
Lonza’s breach of Clause 3.2.1 shall be thirty (30) days) following written
notification of such breach from the non-breaching party to the breaching party;
provided, however, that such ninety (90) day period shall be extended as agreed
by the Parties if the identified breach is incapable of cure within ninety
(90) days and if the breaching Party provides a plan and timeline to cure the
breach, promptly commences efforts to cure the breach and diligently prosecutes
such cure; and provided, further, that this extended period shall be unavailable
for (a) any breach regarding non-payment, or (b) any breach by Lonza of
Clause 3.2.1;

 

  14.3.7 by either Party, immediately, if the other Party becomes insolvent, is
dissolved or liquidated, makes a general assignment for the benefit of its
creditors, or files or has filed against it, a petition in bankruptcy or has a
receiver appointed for a substantial part of its assets; or

 

  14.3.8 by either Party pursuant to Clause 15.

 

14.4 Consequences of Termination. In the event of termination hereunder, Lonza
shall be compensated for (i) […***…]; and (ii) all costs incurred through the
date of termination, including Raw Materials costs and Raw Materials Fees for
Raw Materials used or purchased for use in connection with the Project Plan (but
without […***…] and excluding, in each case, […***…]). In addition:

 

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  14.4.1 Upon termination pursuant to Clause 14.3.2, Customer shall pay to Lonza
[…***…] ([…***…] date of termination) plus an amount equal to […***…] ([…***…])
[…***…] of […***…] at the […***…]. If notice of termination occurs during a
month prior to a month when the […***…] would be due then the […***…].

 

  14.4.2 Upon termination pursuant to Clause 14.3.3 or 14.3.4, Customer shall
pay to Lonza […***…] ([…***…] prior to the date of termination) plus an amount
equal to […***…] ([…***…]) […***…] at the rate paid during the month of
termination notification.

 

  14.4.3 In the event of Lonza’s […***…], or in the event of Customer’s
termination pursuant to Clause 14.3.5 or 14.3.6, then (a) until product is
approved at a new manufacturing site, Lonza will make available Lonza employees
to Customer at the new manufacturing site to the extent necessary, at Customer’s
cost and expense, to provide reasonable technical support and assistance, for a
duration of time not to exceed […***…] months; and (b) Lonza shall provide the
assistance described in Clause 10.8 at no charge to Customer.

 

  14.4.4 In the event of any such termination pursuant to Clause 14.3.5 or
14.3.6, all amounts remaining in the Escrow Account shall be returned to
Customer pursuant to Clause 14.4.5.

 

  14.4.5 Upon termination of this Agreement and payment in full of all amounts
owed under this Clause 14.4 by Customer, the Parties will cooperate to send a
joint notice to the Escrow Agent terminating the Escrow Agreement and
instructing the Escrow Agent to return any amounts remaining in the Escrow
Account to Customer.

 

14.5 Survival. The rights and obligations of each Party which by their nature
survive the termination or expiration of this Agreement shall survive the
termination or expiration of this Agreement, including Clauses 1, 6, 10, 12-14,
15.1 and 16 (to the extent relevant).

 

15 Force Majeure

 

15.1

If Lonza is prevented or delayed in the performance of any of its obligations
under the Agreement by Force Majeure and gives written notice thereof to
Customer specifying the matters constituting Force Majeure together with such
evidence as Lonza reasonably can give and specifying the period for which it is
estimated that such prevention or delay will continue, Lonza shall be excused
from the performance or the punctual performance of such obligations as the case
may be from the date of such notice for so long as such cause of prevention or
delay shall continue. If a Force Majeure persists for more than […***…]
([…***…]) days, Customer shall then be entitled to a reduced facility fee rate
equal to half of the then current rate. If such Force Majeure persists for an
additional […***…] days, then Customer shall have the right to terminate the
Agreement upon written notice to Lonza and, if Customer had

 

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  previously exercised the Construction Trigger and subject to Clause 6.2 (if
applicable), […***…] ([…***…]).

 

15.2 “Force Majeure” shall mean any reason or cause beyond Lonza’s reasonable
control affecting the performance by Lonza of its obligations under the
Agreement, including, but not limited to, any cause arising from or attributable
to acts of God, strike, lockouts, restrictive governmental orders or decrees,
riots, insurrection, war, terrorists acts, interruption of energy supplies or
the inability of Lonza to obtain any required raw material, equipment or
transportation due to a general shortage of such materials, equipment or
transportation.

 

15.3 With regard to Lonza, any such event of Force Majeure affecting services or
production at its Affiliates or suppliers shall be regarded as an event of Force
Majeure.

 

16 Miscellaneous

 

16.1 Non-Solicitation. During the term of this Agreement and for […***…]
([…***…]) years thereafter, each of the Parties agrees not to seek to induce or
solicit any employee of the other Party or its Affiliates to discontinue his or
her employment with the other Party or its Affiliate in order to become an
employee or an independent contractor of the soliciting Party or its Affiliate;
provided, however, that neither Party shall be in violation of this Clause 16.1
as a result of making a general solicitation for employees or independent
contractors. For the avoidance of doubt, the publication of an advertisement
shall not constitute solicitation or inducement.

 

16.2 Severability. If any part of this Agreement shall be found to be invalid or
unenforceable under applicable law in any jurisdiction, such part shall be
ineffective only to the extent of such invalidity or unenforceability in such
jurisdiction, without in any way affecting the remaining parts of this Agreement
in that jurisdiction or the validity or enforceability of the Agreement as a
whole in any other jurisdiction. The Parties hereto shall use their commercially
reasonable efforts to replace the invalid, illegal or unenforceable provision(s)
with valid, legal and enforceable provision(s) in a way that, to the extent
practicable and legally permissible, implements the original intent of the
Parties.

 

16.3 Amendments. Modifications and/or amendments of this Agreement must be in
writing and signed by the Parties.

 

16.4 Assignment. Neither Party may assign its interest under the Agreement
without the prior written consent of the other Party, such consent not to be
unreasonably withheld; provided, however, that either Party may assign this
Agreement: (i) to any Affiliate of such Party, provided that the assigning Party
shall remain liable and responsible to the non-assigning Party hereto for the
performance and observance of all such duties and obligations by such Affiliate;
or (ii) in connection with the transfer or sale of all or substantially all of
the business of such Party to which this Agreement relates to a Third Party,
whether by merger, sale of stock, sale of assets or otherwise (a “Sale
Transaction”), provided, in the case of a Sale Transaction involving Customer,
that the acquiring Third Party in such Sale Transaction is not an entity whose
business primarily derives from providing contract manufacturing services. In
addition, Lonza shall be entitled to sell, assign and/or transfer its trade
receivables resulting from this Agreement without the consent of the Customer.
The rights and obligations of the Parties under this Agreement shall be binding
upon and inure to the benefit of the successors and permitted assigns of the
Parties, and the name of a

 

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     Party appearing herein will be deemed to include the name of such Party’s
successors and permitted assigns to the extent necessary to carry out the intent
of this clause. Any purported assignment of this Agreement not in accordance
with this Clause 16.4 shall be void. No assignment shall relieve any Party of
responsibility for the performance of any obligation that accrued prior to the
effective date of such assignment.

 

16.5 Notice. All notices required or permitted hereunder shall be in writing and
shall be deemed effectively given: (a) upon personal delivery to the party to be
notified; (b) when sent by confirmed facsimile or email if sent during normal
business hours of the recipient, and if sent other than during normal business
hours of the recipient, on the next business day; (c) five calendar days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid; or (d) one business day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent to the other party
hereto at such party’s mailing address, facsimile number or email address set
forth below, or at such other mailing address, facsimile number or email address
as such party may designate by 10 days’ advance written notice to the other
party hereto.

 

     If to Lonza:

Lonza Biologics, Inc.

101 International Drive

Portsmouth, New Hampshire 03801

Attention: Carson Sublett, Sr. Site Director

Fax:                     

Email: […***…]

 

     With a copy to:

Lonza America Inc.

90 Boroline Road

Allendale, New Jersey 07401

Attention: Scott Waldman, General Counsel

Fax:                     

Email: […***…]

 

     If to Customer:

Celladon Corporation

11988 El Camino Real, Suite 650

San Diego, CA 92130-3579

USA

Attention: Paul Cleveland, President and CFO

Fax: […***…]

Email: […***…]

 

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     With a copy to:

Celladon Corporation

11988 El Camino Real, Suite 650

San Diego, CA 92130-3579

USA

Attention: Elizabeth Reed, Vice President and General Counsel

Fax: […***…]

Email: […***…]

 

16.6 Governing Law. This Agreement is governed in all respects by the laws of
Delaware without regard to its conflicts of laws principles.

 

16.7 Entire Agreement. This Agreement (including the Appendices hereto) and the
Clinical Agreement (as it relates to the statements of work entered into by the
Parties thereunder) collectively contain the entire agreement between the
Parties as to the subject matter hereof and thereof and supersede all prior and
contemporaneous agreements with respect to the subject matter hereof and
thereof. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, and all of which together shall
constitute one and the same document. Each party acknowledges that an original
signature or a copy thereof transmitted by facsimile or by .pdf shall constitute
an original signature for purposes of this Agreement.

 

16.8 Independent Contractors. Each of the Parties is an independent contractor
and nothing herein contained shall be deemed to constitute the relationship of
partners, joint venturers, nor of principal and agent between the Parties.
Neither Party shall at any time enter into, incur, or hold itself out to Third
Parties as having authority to enter into or incur, on behalf of the other
Party, any commitment, expense, or liability whatsoever.

 

16.9 Dispute Resolution. Other than disputes under Clause 4.3, if the Parties
are unable to resolve a dispute despite their good faith efforts, either Party
may refer the dispute to the President or Head of each Party’s respective
business unit (or other designee). In the event that no agreement is reached by
such representatives with respect to such dispute within thirty (30) days after
its referral to them, either Party may pursue any and all remedies available at
law or in equity.

 

16.10 Waiver. The failure of any Party at any time or times to require
performance of any provision of this Agreement or any Project Plan will in no
manner affect its rights at a later time to enforce the same. No waiver by any
Party of any term, provision or condition contained in this Agreement or any
Project Plan, whether by conduct or otherwise, in any one or more instances,
shall be deemed to be or construed as a further or continuing waiver of any such
term, provision or condition or of any other term, provision or condition of
this Agreement or any Project Plan.

 

16.11 Titles and Subtitles. All headings, titles and subtitles used in this
Agreement or any Project Plan are for convenience only and are not to be
considered in construing or interpreting any term or provision of this Agreement
or any Project Plan.

 

16.12 Pronouns. Where the context requires, (i) all pronouns used herein will be
deemed to refer to the masculine, feminine or neuter gender as the context
requires, and (ii) the singular context will include the plural and vice versa.

 

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16.13 No Presumption Against Drafter. For purposes of this Agreement, each Party
hereby waives any rule of construction that requires that ambiguities in this
Agreement or any Project Plan be construed against the drafter.

 

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IN WITNESS WHEREOF, each of the Parties hereto has caused this Facility
Construction and Commercial Supply Agreement to be executed by its duly
authorized representative effective as of the date written above.

 

LONZA BIOLOGICS, INC. By:

/s/ Scott Waldman

Name: Scott Waldman Title: President CELLADON CORPORATION By:

/s/ Paul B. Cleveland

Name: Paul B. Cleveland Title: President and Chief Financial Officer

 

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Appendix A

Project Plans

[…***…]

 

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Appendix C

Estimated Construction Timeline

[…***…]

 

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Appendix D

Minimum Production Targets

[…***…]

[…***…]

 

[...***...] [...***...]

[…***…]

 

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Appendix E

Form of Escrow Agreement

[…***…]

 

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Appendix G

Form of Common Stock Purchase Agreement

[…***…]

 

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Appendix H

Customer Background Intellectual Property

[…***…]

 

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