Exhibit 10.1

MANUFACTURING AND SUPPLY AGREEMENT

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***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.

MANUFACTURING AND SUPPLY AGREEMENT

This MANUFACTURING AND SUPPLY AGREEMENT (this “Agreement”) dated as of July 31,
2015 (the “Effective Date”) is made by and between Flexion Therapeutics, Inc., a
Delaware corporation having its principal place of business at 10 Mall Road,
Suite 301, Burlington, Massachusetts, United States (“Flexion”) and Patheon UK
Limited, a company incorporated in England and Wales having its principal place
of business at Kingfisher Drive, Covingham, Swindon, SN35BZ, United Kingdom
(“Patheon”). Flexion, and Patheon are sometimes referred to herein individually
as a “Party” and collectively as the “Parties.”

RECITALS

WHEREAS, Flexion has a commercial interest in the Manufacture (as defined
herein) and commercialization of FX006 drug product, an extended-release
formulation of triamcinolone acetonide (TCA) which is manufactured using the
Flexion Manufacturing Process (the “Product”);

WHEREAS, Patheon has expertise and experience in manufacturing and packaging
pharmaceutical products and is interested in providing Manufacturing services to
Flexion in connection with the Product;

WHEREAS, in anticipation of this Agreement and the goods and services that
Patheon will supply hereunder, the Parties are executing an agreement pursuant
to which Patheon would undertake certain technical transfer and construction
services in order to validate and scale up Flexion’s technology package and
prepare Patheon’s facilities for the Manufacture of the Product (the “Technical
Transfer Agreement”); and

NOW, THEREFORE, in consideration of the foregoing, the mutual promises and
covenants of the Parties contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties hereto, intending to be legally bound, do hereby agree as follows:

ARTICLE I. DEFINITIONS

The following terms shall have the meanings set forth below. Unless the context
indicates otherwise, the singular shall include the plural and the plural shall
include the singular. Any term not defined hereunder shall have the meaning
ascribed to such term in the Technical Transfer Agreement.

1.1 “Additional Services” means any services requested and approved by Flexion
that supplement Patheon’s regular performance of the Services, as described in
Schedule 2.1(a).

1.2 “Affiliate(s)” means, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person. For the purposes of
this Section 1.2 only, a Person will be regarded as in control of another Person
if such Person owns, or directly or indirectly controls, more than 50% of the
voting securities (or comparable equity interests) or other

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ownership interests of the other Person, or if such Person directly or
indirectly possesses the power to direct or cause the direction of the
management or policies of the other Person, whether through the ownership of
voting securities, by contract, or any other means whatsoever.

1.3 “Agreed Delivery Date” has the meaning set forth in Section 2.3(d).

1.4 “Agreement” has the meaning set forth in the Preamble hereto.

1.5 “API” means the active pharmaceutical ingredient Triamcinolone Acetonide,
Micronised.

1.6 “Applicable Law” means applicable United States, Canadian, English and other
foreign federal, state, and local laws, orders, rules, regulations, guidelines,
standards, customs and ordinances, including, without limitation, those (to the
extent they are applicable) of the FDA, Health Canada, the Medicines and
Healthcare Products Regulatory Agency in the United Kingdom and other comparable
foreign Regulatory Authorities, including the FDA Act.

1.7 “Base Fee” means the monthly fee paid by Flexion in consideration for the
Services, as more specifically set forth in Schedule 2.1(a) of this Agreement.
For the avoidance of doubt, Base Fees do not include Capital Expenditures (as
defined in the Technical Transfer Agreement), Product Fees, Material Costs, or
charges for Bill Back Items or Additional Services.

1.8 “Bill Back Items” means the items and services set forth in Schedule 2.1(a)
that are used or necessary in connection with the Manufacture of the Products
and which result in a nominal cost to Flexion.

1.8a “Certificate of Analysis” means a certificate evidencing the analytical
tests conducted on a specific batch of Product or Material and setting forth,
inter alia, the items tested, specifications, and test results.

1.9 “Certificate of Compliance” means a certificate stating that a specific
batch of Product complies with the warranty set forth in Section 6.3.

1.11 “Change of Control” has the meaning set forth in Section 10.5A.

1.12 “Claim” has the meaning set forth in Section 9.3(a).

1.13 “Control” or “Controlled” means ownership or the right by a Party to assign
or grant a license or sublicense under intellectual property rights to the other
Party of the scope set forth herein, without breaching the terms of any
agreement with a Third Party.

1.14 “Diligent and Reasonable Steps” has the meaning set forth in
Section 6.4(a).

1.15 “Deficiency Notice” has the meaning set forth in Section 2.8(a).

 

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1.16 “Disclosing Party” has the meaning set forth in Section 1.90.

1.17 “Discretionary Manufacturing Changes” has the meaning set forth in
Section 2.9(c).

1.18 “Effective Date” has the meaning set forth in the Preamble hereto

1.19 “EMA” means the European Medicines Agency.

1.20 “Equipment” means any equipment used in the Manufacture of the Product as
more fully set forth in Section 2.9 herein.

1.21 “Existing Flexion Intellectual Property” has the meaning set forth in
Section 5.1(a).

1.22 “Existing Patheon Intellectual Property” has the meaning set forth in
Section 5.1(b).

1.23 “Expected Yield Rate” has the meaning set forth in Section 2.8(f).

1.24 “Expert” has the meaning set forth in Section 2.8(e).

1.25 “Exploit” means to make, have made, import, use, sell, offer for sale,
receive or otherwise dispose of a product or process, including the research,
development (including the conduct of clinical trials), registration,
modification, enhancement, improvement, Manufacture, storage, formulation,
optimization, export, transport, distribution, promotion, or marketing of a
product or process.

1.26 “Facility” means the facility of Patheon located at Kingfisher Drive,
Swindon, Wiltshire SN3 5BZ, United Kingdom, or such other facility approved in
accordance with Section 3.3(a).

1.27 “FDA” means the United States Food and Drug Administration and any
successor organization thereto and all agencies under its direct control.

1.28 “FDA Act” means the Federal Food, Drug, and Cosmetic Act, as amended.

1.29 “FDA Approval Date” means the date of receipt of FDA approval allowing for
Patheon’s manufacturing, testing, and packaging for the Product from the Phase I
Filling Space and Phase II Manufacturing Space.

1.30 “Filing Party” has the meaning set forth in Section 3.15(a).

1.31 “Flexion” has the meaning set forth in the Preamble hereto.

1.32 “Flexion Assignors” has the meaning set forth in Section 5.1(m).

 

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1.33 “Flexion Improvements” has the meaning set forth in Section 5.1(e)(ii).

1.34 “Flexion Indemnified Parties” has the meaning set forth in Section 9.2.

1.35 “Flexion Manufacturing Equipment” has the meaning set forth in
Section 2.9(a).

1.36 “Flexion Manufacturing Equipment Improvements” has the meaning set forth in
Section 5.1(e)(i).

1.37 “Flexion’s Manufacturing Process” means the proprietary process owned or
Controlled by Flexion for Manufacturing the Product, as disclosed by Flexion to
Patheon, and each intermediate of the Product, as established as of the
Effective Date, including without limitation, as set forth in the
investigational new drug application filed with the FDA, and, when applicable,
as set forth in the NDA as may be filed with, and approved by, the FDA.

1.38 “Flexion’s Manufacturing Process Improvements” has the meaning set forth in
Section 5.1(e)(i).

1.39 “Flexion On Site Representative” has the meaning set forth in Section 3.4.

1.40 “Flexion Product Improvements” has the meaning set forth in
Section 5.1(e)(i).

1.41 “Flexion Specification Improvements” has the meaning set forth in
Section 5.1(e)(i).

1.41a “Flexion Specific Improvements” has the meaning set forth in
Section 5.1(e)(i)

1.42 “Flexion-Supplied Materials” has the meaning set forth in Section 2.2(a).

1.43 “Forecast” has the meaning set forth in Section 2.3(a).

1.44 “GMP” means the current good manufacturing practices applicable from time
to time to the Manufacturing of the Product, or any intermediate of the Product,
pursuant to Applicable Law, including those promulgated under the FDA Act at 21
C.F.R. (chapters 210 and 211), and those promulgated under EC Directive
2003/94/EC, together with the latest FDA and EMA guidance documents pertaining
to manufacturing and quality control practice, all as updated, amended and
revised from time to time.

1.45 “Indemnification Claim Notice” has the meaning set forth in Section 9.3(a).

1.46 “Indemnified Party” has the meaning set forth in Section 9.3(a).

 

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1.47 “Indemnifying Party” has the meaning set forth in Section 9.3(a).

1.48 “Initial Draft” has the meaning set forth in Section 3.15(b).

1.49 “Initial Term” has the meaning set forth in Section 8.1.

1.50 “Key Personnel” has the meaning set forth in Section 2.1(f).

1.51 “Late Product” has the meaning set forth in Section 2.7(b).

1.52 “Letter Agreement” means the Letter Agreement between the Parties dated
1 May 2015.

1.53 “Long Term Forecast” has the meaning set forth in Section 2.3(b).

1.54 “Loss” means any claims, lawsuits, losses, damages, liabilities, penalties,
costs, and expenses (including reasonable attorneys’ fees and disbursements).

1.55 “Maintenance” means the maintenance of Equipment and Facilities in
satisfactory operating condition, including the performance of systematic
inspection and service of Equipment pursuant to the applicable Standard
Operating Procedures of Patheon, as reviewed and agreed to by Flexion (the
“Equipment Standard Operating Procedures”), or the manufacturer’s terms of
operation and recommended procedures.

1.56 “Make Good Costs” has the meaning set forth in Section 8.3(e).

1.57 “Manufacture” and “Manufacturing Services” means the manufacturing,
processing, formulating, filling, sterilization, packaging, labelling, storage,
handling, and quality control testing of Materials or of the Product.

1.58 “Manufacturing Suite IOQ” means the completion of the Phase I Filling Space
and Phase II Manufacturing Space, including without limitation, the
installation, qualification and operational qualification of the Equipment in
each of the Phase I Filling Space and the Phase II Manufacturing Space,
including the computer systems, utilities and manufacturing area enabling the
initiations of technical transfer activities, as agreed to by the Parties and
indicated by the delivery by Patheon to Flexion of the interim IOQ report for
the Phase I Filling Space and Phase II Manufacturing Space.

1.59 “Manufacturing Services Termination Costs” has the meaning set forth in
Section 8.3(g).

1.60 “Manufacturing Suite” means the manufacturing suite at the Facility capable
of Manufacturing the Product pursuant to Flexion’s Manufacturing Process, whose
footprint is set forth in Schedule 1.60, together with the areas identified in
the plan attached as Schedule 1.60 as the areas for the bulk powder Manufacture
and bulk vial filling, and, pursuant to the terms of Section 2.10, the Phase I
Filling Space. The footprint of the Manufacturing Suite is diagrammatic in
nature and is intended to generally depict the location

 

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and approximate size of current and future spaces allocated to Flexion. Such
footprint may be amended during the Term of and pursuant to the Technical
Transfer Agreement to be specifically adapted to the Manufacture of the Product,
and the Parties shall agree upon the definitive footprint, taking into account
parameters such as the exact design of the space, space classifications, code
requirements, equipment, material, personnel, waste stream process flows,
equipment sizing and utility requirements. For purposes of clarity, prior to the
Phase III Manufacturing Suite Clearance Date (as defined in Section 2.10
herein), the definition of Manufacturing Suite shall include the Phase I Filling
Space.

1.61 “Marketing Authorization” means an approved New Drug Application as defined
in the FDA Act and the regulations promulgated thereunder, or any corresponding
foreign application, registration, or certification, necessary or reasonably
useful to market any Product in a country or regulatory jurisdiction other than
the United States, including applicable pricing and reimbursement approvals, and
all supplements and amendments thereto.

1.62 “Materials” means all API, excipients and processing aids, and processing,
filling and packaging components, used in connection with the Manufacture of the
Product and listed in Schedule 1.62, as amended prior to Product launch, based
on the Parties’ most recent usage experience rate, and to reflect changes to the
Specifications.

1.64 “Material Costs” has the meaning set forth in Section 2.2(a).

1.65 “Maximum Manufacturing Services Termination Costs” has the meaning set
forth in Section 8.3(g).

1.66 Not used.

1.67 “NDA” means the new drug application for a product, including the Product,
requesting permission to place a drug on the market in accordance with 21 C.F.R.
Part 314, and all supplements filed pursuant to the requirements of the FDA,
including all documents, data, and other information filed concerning such
product that are necessary for FDA approval to market such product in the
Territory.

1.68 “Non-Conforming Product” means (a) a batch of Product that fails, or is
aborted during processing; or (b) a Product Manufactured by Patheon that fails
to […***…].

1.69 “Non-Filing Party” has the meaning set forth in Section 3.15(a).

1.69a “Non-Specific Improvement” has the meaning set forth in Section 5.1(e)(ii)

1.70 “PAI” has the meaning set forth in Section 3.8.

 

 

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1.71 “Party” and “Parties” have the meanings set forth in the Preamble hereto.

1.72 “Patheon” has the meaning set forth in the Preamble hereto.

1.73 “Patheon Assignors” has the meaning set forth in Section 5.1(l).

1.74 “Patheon Improvements” has the meaning set forth in Section 5.1(f)(ii).

1.75 “Patheon Indemnified Parties” has the meaning set forth in Section 9.1.

1.76 “Patheon Independent Manufacturing Equipment Improvements” has the meaning
set forth in Section 5.1(f)(i).

1.77 “Patheon Manufacturing Equipment” has the meaning set forth in
Section 2.9(a)(ii).

1.78 “Patheon Non-Applicable Inventions” has the meaning set forth in
Section 5.1(f)(ii).

1.79 “Patheon Nonconformance” has the meaning set forth in Section 2.8(c).

1.80 “Patheon-Supplied Materials” has the meaning set forth in Section 2.2(a).

1.81 Not used.

1.82 “Person” means an individual, sole proprietorship, partnership, limited
partnership, limited liability partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, or other similar entity or organization, including a government
or political subdivision, department, or agency of a government.

1.83 “Phase I Filling Space”, “Phase II Manufacturing Space” and “Phase III
Manufacturing Suite” shall each be as represented in Schedule 1.60. After the
Phase III Manufacturing Suite Clearance Date, the Phase II Manufacturing Space
shall be incorporate into the Phase III Manufacturing Suite.

1.84 “Phase I Filling Space Fee” has the meaning set forth in Schedule 2.1(a) at
section II.

1.85 “Phase III Manufacturing Suite Clearance Date” has the meaning set forth in
section 2.10(d).

1.86 “Phase III Option” has the meaning set forth in section 2.10 (b).

 

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1.87 “Product” has the meaning set forth in the Recitals hereto in finished,
unpackaged form, according to the Specifications, as the same may be amended
from time to time.

1.88 “Product Fee” has the meaning set forth in Section 2.4.

1.89 “Project Manager” and “Project Managers” have the meaning set forth in
Section 3.4.

1.90 “Proprietary Information” means any information disclosed hereunder by one
Party (the “Disclosing Party”) to another Party (the “Receiving Party”) (whether
disclosed in oral, written, electronic or visual form) that is non-public,
confidential or proprietary including, without limitation, information relating
to the Disclosing Party’s patent and trademark applications, process designs,
process models, drawings, plans, designs, data, databases and extracts
therefrom, formulae, methods, know-how and other intellectual property, its
clients or client confidential information, finances, marketing, products and
processes and all price quotations, manufacturing or professional service
proposals and information relating to composition and proprietary technology. In
addition, all analyses, compilations, studies, reports or other documents
prepared by any Party’s directors, officers, employees, advisers, agents,
consultants, subcontractors, service partners, professional advisors, or
representatives (collectively, “Representatives”) containing the Proprietary
Information will be deemed to be Proprietary Information.

1.91 “Purchase Order” means a written purchase order that sets forth (a) the
quantities of each presentation of Product to be delivered by Patheon to
Flexion, (b) the requested delivery dates therefor, and (c) the size of the
vials and bulk packaging to be used for such Product.

1.92 “Quality Agreement” has the meaning set forth in Section 3.1.

1.94 “Receiving Party” has the meaning set forth in Section 1.90.

1.95 “Regulatory Approval” means any and all approvals (including pricing and
reimbursement approvals), licenses, registrations, or authorizations of any
Regulatory Authority necessary to Exploit the Product in any country in the
Territory, including any (a) approval of a Product, Marketing Authorization and
supplements and amendments thereto; (b) pre- and post-approval marketing
authorizations (including any prerequisite Manufacturing approval or
authorization related thereto); (c) labelling approval; and (d) technical,
medical, and scientific licenses.

1.96 “Regulatory Authority” means any applicable supra-national, federal,
national, regional, state, provincial, or local regulatory agencies,
departments, bureaus, commissions, councils, or other government entities
regulating or otherwise exercising authority with respect to the Exploitation of
a Product in the Territory.

1.97 “Regulatory Filings” has the meaning set forth in Section 3.15.

 

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1.98 “Regulatory Obligations” has the meaning set forth in Section 3.15.

1.99 “Remediation Period” has the meaning set forth in Section 8.2(a)(iii).

1.100 “Replacement Entity” has the meaning set forth in Section 8.3(f).

1.101 “Reports” has the meaning set forth in Section 3.11.

1.102 “Required Manufacturing Changes” has the meaning set forth in
Section 2.9(b).

1.103 “Scheduled Production Date” has the meaning set forth in Section 2.3(d).

1.104 “Services” means the (a) Manufacturing Services performed by Patheon under
this Agreement and (b) the Transfer Services performed by Patheon pursuant to
the Technical Transfer Agreement.

1.105 “Shipment Costs” has the meaning set forth in Section 2.8(c).

1.106 “Specifications” means the specifications for each presentation of Product
(i.e., the dosage forms in Schedule 1.82) given by Flexion to Patheon relating
to the specifications of the Materials; the manufacturing specifications,
directions and processes; the storage requirements; all environmental, health
and safety information for the Product including material safety data sheets and
the finished Product specifications, specifications for bulk and primary
packaging and shipping requirements for the Product, as amended, modified, or
supplemented from time to time.

1.107 “Steering Committee” has the meaning set forth in the Technical Transfer
Agreement.

1.108 “Supplies” means various consumables / disposables used in small
quantities for gowning, cleaning of Equipment and Manufacturing Suite, and in
quality control testing of Materials and Product.

1.109 “Taxes” means all forms of taxation and statutory, governmental, state,
federal, provincial, local, government or municipal charges, duties, imposts,
contributions, levies, withholding or liabilities wherever chargeable and
whether of the United Kingdom or any other jurisdiction (including for the
avoidance of doubt, national insurance contributions in the United Kingdom) and
any penalty, fine, surcharge, interest, charge, charges or costs thereto.

1.110 “Technical Transfer Agreement” has the meaning set forth in the Recitals.

1.111 “Term” has the meaning set forth in Section 8.1.

 

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1.112 “Territory” means […***…] and other territories agreed by the Parties
pursuant to Section 2.2(h) from time to time.

1.113 “Third Party” means a Person who is neither a Party nor an Affiliate of a
Party.

1.114 “Third Party Losses” means Losses incurred as a result of claims brought
by Third Parties.

1.115 “Transfer Services” has the meaning set forth in Section 1.64 of the
Technical Transfer Agreement.

1.116 “TUPE” has the meaning set forth in Section 8.3(f).

1.117 “VAT” has the meaning set forth in Section 4.4(c).

1.118 “Yield” has the meaning set forth in Section 2.8(f).

1.119 “Yield Reimbursement Payment” has the meaning set forth in Section 2.8(f).

ARTICLE II. MANUFACTURING SERVICES

2.1 Supply Obligations.

(a) Subject to the terms and conditions hereof and in consideration for the
payments set forth in Schedule 2.1(a), Patheon shall provide the Manufacturing
Services and shall supply the Product […***…] to Flexion. Flexion agrees to
purchase from Patheon such quantities of Product as Flexion may order, in its
discretion, in accordance with the terms herein during the Term.

(b) Pursuant to the Technical Transfer Agreement, Flexion will develop and
Patheon will confirm Flexion’s Manufacturing Process. Flexion’s Manufacturing
Process is the Proprietary Information of Flexion, as further clarified in
Article V.

(c) Patheon shall Manufacture all Products delivered hereunder (i) in accordance
with the Specifications, this Agreement, the Quality Agreement, and (ii) in
compliance with GMP and all other Applicable Law.

(d) Patheon shall ensure that sufficient numbers of adequately educated and
experienced staff are retained at the Facility in order to Manufacture evenly
throughout the year the volumes of Product set out in the Forecast. Patheon
shall perform all activities necessary to maintain a GMP compliant status of the

 

 

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manufacturing lines and areas of the Facility applicable to the Manufacture of
the Product.

(e) Flexion reserves the right to request replacement of any personnel assigned
by Patheon to perform the Services hereunder. If Patheon disagrees with such
request and the Parties cannot reach resolution on Flexion’s request for
replacement, such request will be discussed by the Steering Committee pursuant
to the procedures set forth in Exhibit 2.7 of the Technology Transfer and
Services Agreement.

(f) Patheon shall perform the Services under the direction of key personnel of
Patheon to a project for the duration of the project (“Key Personnel”). Key
Personnel include the Project Manager, Operational Manager, Quality Manager or
other personnel reasonably agreed-to by the Parties. Patheon shall provide
information on the qualifications and background of all proposed Key Personnel
prior to such Key Personnel’s commencement of activities under this Agreement on
Patheon’s behalf. Patheon will not remove Key Personnel without Flexion’s prior
written consent (not to be unreasonably withheld, conditioned or delayed) except
in the event of such Key Personnel’s promotion, resignation, incapacity or
death, or termination for cause. Patheon will use commercially reasonable
efforts to minimize turnover in Key Personnel, and will provide […***…] business
days’ notice to Flexion, whenever practical, of any changes to the Key
Personnel, at which point, both Parties shall discuss and reasonable agree on a
suitable replacement.

2.2 Materials, Bill Back Items and Additional Services.

(a) All Materials necessary for the Manufacture of the Product are set forth in
Schedule 1.62. Patheon shall source all of the Materials set forth on Schedule
1.62 under the heading “Patheon Supplied Materials (“Patheon-Supplied
Materials”), and such Materials will be invoiced to Flexion monthly at the time
of purchase by Patheon, at cost plus an […***…]% handling fee, in accordance
with the invoicing procedure set forth in ARTICLE IV (“Material Costs”). Flexion
will purchase, and ship to Patheon in accordance with Schedule 1.62 under the
heading “Flexion Supplied Materials” (the “Flexion-Supplied Materials”) unless
otherwise agreed to by the Parties. Patheon shall store, handle, and protect the
Materials with a reasonable level of care, which shall include taking all
reasonable precautions to ensure that the Materials are not subject to
contamination, deterioration, destruction, or theft. Patheon shall keep adequate
records of its usage of the Materials during the Term.

(b) Flexion acknowledges that Patheon is required under GMP to follow certain
verification and approval processes for all vendors used by

 

 

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Patheon in the procurement of Materials. In the event that Flexion requests
Patheon to procure Materials from a vendor that is not currently verified by
Patheon, Flexion will be liable for Patheon’s fees for the performance of the
initial audit and verification activities by Patheon under this Section 2.2(b)
as an Additional Service.

(c) Flexion will, at its sole cost and expense, deliver to Patheon the
Flexion-Supplied Materials to the Facility DDP (Incoterms 2010) at no cost to
Patheon at least […***…] days before the Scheduled Production Date, in
sufficient quantities for Patheon to Manufacture the desired quantities of
Product and to ship Product by the Agreed Delivery Date. If the Flexion-Supplied
Materials are not received […***…] days before the Scheduled Production Date,
Patheon may delay the shipment of Product for a period of time proportionate to
such delay. All shipments of Flexion-Supplied Materials, if required, will be
accompanied by Certificate(s) of Analysis from the Material manufacturer or
Flexion, confirming its compliance with the Material’s specifications. Flexion
will obtain the proper release of the Flexion-Supplied Materials from the
applicable customs agency and/or Regulatory Authority. Flexion or Flexion’s
designated broker will be the “Importer of Record” for Flexion-Supplied
Materials imported to the Facility. Flexion-Supplied Materials will be held by
Patheon on behalf of Flexion as set forth in this Agreement. Title to
Flexion-Supplied Materials will at all times remain the property of Flexion. Any
Flexion-Supplied Materials received by Patheon will only be used by Patheon to
perform the Manufacturing Services or associated activities necessary to perform
the Manufacturing Services (e.g. media fills or validation runs).

(d) Flexion and Patheon will agree upon a minimum inventory level of
Patheon-Supplied Materials required to support the Manufacture of the Product
based on the last Forecast received by Patheon from Flexion. Patheon will keep
on hand all Materials necessary to support the Manufacture of the Product based
on such agreed-upon minimum inventory levels.

(e) Patheon will provide sufficient storage capacity to support storage of the
required quantity of Materials pursuant to Section 2.2 of this Agreement for up
to the longer of […***…] or the amount of time set forth next to the applicable
Material on Schedule 1.62 herein. Patheon will also provide sufficient storage
capacity to support storage of Product for up to […***…] post Manufacture
[…***…]. Any additional storage, or storage of Materials (either
Flexion-Supplied Materials or Patheon-Supplied Materials) or Product beyond the
applicable period stated herein, will be subject to the mutual agreement of the
Parties. For any such additional storage, Flexion will pay Patheon £[…***…] per
pallet, per month for storing any Materials or Product. Storage of Materials or
Product that contain controlled substances or require refrigeration will be
charged at £[…***…] per pallet per month. Storage fees are subject to a one
pallet minimum

 

 

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charge per month. […***…] will be liable for all risk or loss of damage to
stored Materials or Product to the extent such damage was caused by […***…]’s,
or its subcontractor’s or vendors’, […***…]. Patheon shall store the Product
according to GMP, any applicable storage guidelines stipulated by Flexion and
agreed by Patheon and the provisions under the Quality Agreement.

(f) Bill Back Items will be charged to Flexion at Patheon’s cost plus a […***…]%
handling fee. Patheon shall invoice Flexion monthly for any Bill Back Items used
in connection with the Manufacture of the Products during the preceding month in
accordance with ARTICLE IV. Patheon may only invoice Bill Back Items that have
been quoted to and approved in writing by Flexion’s Project Manager, or
otherwise mutually agreed to by the Parties in advance.

(g) If Flexion is interested in having Patheon perform Additional Services,
Flexion will provide Patheon with a written request containing sufficient detail
to enable Patheon to provide Flexion with a quote and proposal to provide such
Additional Services. Patheon may only invoice for Additional Services that have
been quoted to and approved in writing by an authorized person of Flexion and
that have been agreed in writing by the Parties in a Change of Scope Agreement.
Where a rate for Additional Services has been specified in Schedule 2.1 (a),
such rates are calculated as at 1st January, 2015. These fees will be adjusted
on 1st January of each year (first review […***…]) to reflect any increase in
the UK Consumer Price Index: All Items Index published by the Office for
National Statistics (as published at www.ons.gov.uk, specific details are
located at http://www.ons.gov.uk/ons/rel/cpi/consumer-price-indices during the
previous 12 months (based on the average of the monthly changes over the
12-month period). Patheon shall invoice Flexion monthly for any Additional
Services performed by Patheon during the preceding month in accordance with
ARTICLE IV.

(h) If Flexion decides to have Patheon perform Manufacturing Services for the
Product for a Territory outside the […***…], then Flexion will inform Patheon of
the additional requirements for each new country and Patheon will prepare a
quotation for consideration by Flexion of any additional costs for the Product
destined for each new country. The agreed additional requirements and change
over fees will be set out in a written amendment to this Agreement.

(i) Patheon-Supplied Materials.

(i) Patheon will purchase all Patheon-Supplied Materials. Flexion understands
and acknowledges that Patheon will rely on Flexion’s Purchase Orders and
Forecasts in ordering the Patheon-Supplied Materials required to meet the
Purchase Orders. In addition, Flexion understands that to ensure an orderly

 

 

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supply of Patheon-Supplied Materials, Patheon may want to purchase
Patheon-Supplied Materials in sufficient volumes to meet the production
requirements for Products during part or all of the Forecast or to meet the
production requirements of any longer period agreed to by Patheon and Flexion.
Accordingly, Flexion authorizes Patheon to purchase Patheon-Supplied Materials
to satisfy the Manufacturing Services requirements for Products for the first
[…***…] contemplated in the most recent Forecast. Patheon may make other
purchases of Patheon-Supplied Materials to meet Manufacturing Services
requirements for longer periods if agreed to in writing by the Parties. Flexion
will give Patheon written authorization to order Patheon Supplied Materials for
any launch quantities of Product request by Flexion which will be considered a
Purchase Order when accepted by Patheon. Flexion will reimburse Patheon for any
destruction costs, as mutually agreed to in good faith, of any Patheon-Supplied
Material ordered by Patheon under Purchase Orders or under Section 2.2(i) that
are not included in finished Products Manufactured for Flexion within […***…]
after the forecasted month for which the purchases have been made (or for a
longer period as the Parties may agree). If any non-expired Patheon-Supplied
Materials are used in Products subsequently manufactured for Flexion, Flexion
will receive credit for any costs of those Patheon-Supplied Materials previously
paid to Patheon by Flexion.

2.3 Forecasting, Order, and Delivery of Products.

(a) No later than […***…] prior to the anticipated FDA Approval Date and
thereafter at least […***…] prior to the […***…] of each […***…] during the
Term, Flexion shall deliver to Patheon a written good faith […***…] month
forecast, calculated by month, estimating the quantities of each presentation of
Product that Flexion expects to purchase from Patheon during such period (each,
a “Forecast”). If Patheon is unable to accommodate any portion of the Forecast,
it will notify Flexion and the Parties will agree on any revisions to the
Forecast. Flexion shall update the Forecast on or before the […***…] of each
[…***…] on a rolling forward basis. Flexion shall use commercially reasonable
efforts to also update the Forecast prior to the next […***…] deadline if it
determines that the volumes estimated in the most recent Forecast have changed
by more than […***…] percent […***…]%). The most recent Forecast will prevail.
Except as set forth in Section 2.3(c) below, each Forecast shall be non-binding
and shall be used by Patheon for planning purposes only.

(b) Commencing on […***…], Flexion will give Patheon a written non-binding
[…***…]-year forecast for strategic purposes, of the volume of Product Flexion
then anticipates to purchase from Patheon for each year during such period (the
“Long Term Forecast”). The Long Term Forecast will thereafter be updated every
six months (as of June 1 and December 1) during the

 

 

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Term. If Patheon is unable to accommodate any portion of the Long Term Forecast,
it will notify Flexion and the Parties will agree on any revisions to the Long
Term Forecast.

(c) […***…]. Flexion will issue Purchase Order(s) to purchase and, when accepted
by Patheon, for Patheon to Manufacture and deliver the forecasted quantity or a
quantity greater than the forecasted quantity of the Product for each such
[…***…] period, provided that the delivery lead time must be at least […***…]
days from the date of Patheon’s acceptance of the Purchase Order pursuant to
clause (d) below. The quantities of Products ordered in Purchase Orders will be
firm and binding on Flexion and may not be reduced by Flexion. Unless otherwise
stated herein, expedited Purchase Orders will be subject to additional fees.

(d) Patheon shall accept all Purchase Orders for Product that are issued
consistent with the terms of this Agreement. Patheon shall accept in writing any
Purchase Order by sending an acknowledgement to Flexion within […***…] business
days of its receipt of the Purchase Order. The acknowledgement will include,
subject to confirmation from Flexion, the delivery date for the Product ordered
which shall be approximately […***…] days from the date of Patheon’s acceptance
of the Purchase Order (“Agreed Delivery Date”) and the scheduled date of
production for such Products (“Scheduled Production Date”) for the purposes of
Section 2.2(c). The Agreed Delivery Date may be amended by agreement of the
Parties or as set forth in Section 2.2(c). If Patheon fails to acknowledge
receipt of a Purchase Order within the […***…] business day period, the Purchase
Order will be deemed to have been accepted by Patheon.

(e) Patheon shall deliver Product to Flexion […***…] the Facility (as defined in
Incoterms 2010) by the Agreed Delivery Date. All Product shall be packed for
shipping in accordance with the Specifications. Title and risk of loss to
Product shall pass to Flexion (or a designated Flexion Affiliate) […***…]. Each
delivery of Product shall be accompanied by a Certificate of Analysis and a
Certificate of Compliance and such other documents as may be required pursuant
to the Quality Agreement. The costs of all freight, insurance, handling fees,
taxes, and other costs associated with the shipment of Product, as well as
export licenses, import license, and customs formalities for the import and
export of goods will be borne by […***…]. Patheon shall endeavour to make all
deliveries of Product hereunder utilizing stock rotation based on expiration
dating, with Product expiring earliest delivered first, save that a failure to
comply with this requirement shall not be grounds for Flexion to reject any
Product. Flexion shall collect shipments reasonably promptly from the Facility
following notification of availability for

 

 

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delivery from Patheon. Storage of Product will be as described in
Section 2.2(e). Patheon will, in accordance with Flexion’s instructions and as
agent for Flexion, at Flexion’s risk, arrange for shipping to be paid by
Flexion. Flexion will arrange for insurance and will select the freight carrier
used by Patheon to ship Products and may monitor Patheon’s shipping and freight
practices as they pertain to this Agreement.

(f) If Flexion cancels any Purchase Order after receipt thereof by Patheon,
Flexion will pay Patheon […***…]% of the Product Fee for the Purchase Order.

2.4 Product Fees. The purchase price for all Products Manufactured hereunder
(the “Product Fee”) shall be as set forth on Schedule 2.1(a). Patheon shall
invoice Flexion for all quantities of Product Manufactured and ready for
collection by Flexion not previously invoiced in accordance with Purchase
Orders. All Product Fees will be due and payable in accordance with the
invoicing procedures set forth in ARTICLE IV.

2.5 Base Fees. Patheon will invoice Flexion monthly in advance for the Base Fee
and any Phase I Filling Space Fee set forth Schedule 2.1(a). All Base Fees and
Phase I Filling Space Fees will be due and payable in accordance with the
invoicing procedures set forth in ARTICLE IV.

2.6 Product Fee Adjustment. The Parties shall use commercially reasonable
efforts to reduce, through operating efficiencies, the cost of Manufacture of
the Products during the Term and the benefits of such reduction in costs shall
be shared equally by the Parties. The Product Fee stated herein is calculated as
at the 1st January 2015. Starting on the […***…], the Product Fee shall be
adjusted annually to reflect any increase in the UK Consumer Price Index: All
Items Index published by the Office for National Statistics (as published at
www.ons.gov.uk, specific details are located at
http://www.ons.gov.uk/ons/rel/cpi/consumer-price-indices/) during the preceding
twelve (12) months (based on the average of the monthly changes over the
12-month period). Schedule 2.1(a) shall be deemed amended pursuant to the terms
hereof. The Product Fee is subject to adjustment if, after […***…] from the FDA
Approval Date, (i) Flexion does not submit Purchase Orders for at least […***…]
vials of Product per calendar year, in which case the Product Fee may increase
by an amount reasonably sufficient for Patheon to absorb its increased costs,
and (ii) Flexion submits Purchase Orders for more than […***…] vials of Product
per calendar year, in which case the Product Fee may decrease for the volumes of
Product exceeding […***…] vials per calendar year as reasonably agreed-on by the
Parties in order to adjust for additional volume discounts and economies of
scale.

 

 

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2.7 Failure or Inability to Supply Product.

(a) Patheon shall ensure that Product is Manufactured and delivered to Flexion
on a timely basis consistent with the terms of this Agreement (including the
Forecast and Purchase Order procedures set forth in Section 2.3). In the event
that Patheon, at any time during the Term, shall have reason to believe that it
will be unable to supply Flexion with the full quantity of Product forecasted to
be ordered or actually ordered by Flexion in a timely manner and in conformity
with the warranty set forth in Section 6.3 (whether by reason of force majeure
or otherwise), Patheon shall notify Flexion thereof within […***…] business
days. Promptly thereafter, the Parties shall meet to discuss how Flexion shall
obtain such full quantity of conforming Product. Compliance by Patheon with this
Section 2.7(a) shall not relieve Patheon of any other obligation or liability
under this Agreement, including any obligation or liability under clause
(b) below. If Patheon’s inability is partial, Patheon shall fulfill Purchase
Orders with such quantities of Product as are available. In the event Patheon’s
inability to meet Purchase Orders or forecasts is due to a shortage of
production capacity in the Manufacturing Suite, Patheon shall in addition to the
foregoing requirements, promptly notify Flexion of such shortage of production
capacity and the estimated date such shortage of production capacity is to end.

(b) If Patheon fails to Manufacture the full quantity of Product specified in a
Purchase Order by the Agreed Delivery Date and in conformity with the warranty
set forth in Section 6.3 (and such failure is directly due to the acts or
omissions of Patheon where such acts or omission does not constitute a force
majeure event pursuant to the terms of Section 10.2) (“Late Product”), and
Patheon is unable to cure such failure within […***…] days, in full and final
settlement of such failure, Flexion, at its option, may (i) cancel the
unfulfilled portion of such Purchase Order, in which event Flexion shall have no
liability with respect to the portion of such Purchase Order so cancelled, or
(ii) accept late delivery of all or any portion of the Product specified in such
Purchase Order, in which event (A) Patheon shall pay all reasonable documented
shipping costs for the expedited shipment of Product that are required in
addition to the shipping costs for a non-expedited shipment (which shall be the
responsibility of Flexion), and (B) the Product Fee otherwise payable by Flexion
with respect to all Product delivered late but accepted by Flexion under such
Purchase Order shall be reduced by […***…]% per day for each day of delay after
such Agreed Delivery Date, but not to exceed in aggregate an amount equal to
[…***…]% of the Product Fees of the Product delivered late (i.e., […***…] days)
per Purchase Order; provided that, sub-Section (ii) shall only apply after the
Manufacture and delivery of the first […***…] batches of commercial Product
(including validation batches) pursuant to this Agreement, following which, if
the Parties agree that the Manufacturing process is sufficiently robust to allow
the Product to be delivered in a timely manner, this sub-Section (ii)

 

 

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shall be implemented. Any Product which is delivered to Flexion with less than
[…***…] of expiry, assuming a product shelf life of […***…], shall be considered
Non-Conforming Product subject the provisions of Section 2.8(c); provided that,
if the Product shelf life is not […***…] (as set forth in the FDA approved label
for the Product), the Parties shall mutually agree in good faith on the
reasonably appropriate minimum amount of expiry a Product should have when
delivered.

2.7 A. Batch Numbering and Expiration Dates: Each batch of the Product
manufactured by Patheon will bear a unique lot number using Patheon batch
numbering system. This number will be printed on the aluminium cap of the vial
and will appear on all documents relating to the particular batch of Product and
shall identify the date of manufacture for the batch of Product. Patheon will
calculate the expiration date for the Product for each batch by adding the
expiration period of the Product supplied by Flexion to the date of manufacture
of each batch.

2.8 Non-Conforming Product.

(a) In the event Patheon discovers a potential Non-Conforming Product prior to
delivery of such Product to Flexion, Patheon shall provide written notice to
Flexion as soon as practicable describing in detail the Non-Conforming Product
and the potential cause of such Non-Conforming Product. Flexion (or its shipping
carrier) will perform a customary inspection of the Products Manufactured by
Patheon on receipt. For the avoidance of doubt, such inspection will be limited
to a visual inspection of the shipment-ready packaged Products (and associated
shipping documentation) and Flexion will not be obliged to perform any testing
of the Product. Flexion shall within (i) […***…] days after delivery thereof by
Patheon or (ii) within […***…] days after Flexion discovers or is informed of a
discovery of nonconformity that could not reasonably have been detected by the
customary inspection on delivery (but not after the expiration date of the
Product), give Patheon notice of any Non-Conforming Product (including a sample
of such Non-Conforming Product, if applicable) (a “Deficiency Notice”). Subject
to Flexion’s rights under 3.10 and 3.12, should Flexion fail to give Patheon the
Deficiency Notice within the applicable […***…] day period, then the delivery
will be deemed to have been accepted by Flexion on the […***…] day after
delivery or discovery, as applicable. Patheon shall have no liability under this
Section 2.8 for Nonconforming Product for which it has not received a Deficiency
Notice within such applicable […***…] day period.

(b) Patheon shall conduct a root-cause analysis to verify whether a Product
constitutes a Non-Conforming Product and, if found, to determine the cause of
such Non-Conforming Product (including by undertaking an appropriate evaluation
of a Non-Conforming Product sample, as applicable).

 

 

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Flexion shall provide reasonable cooperation to Patheon in connection with any
such root-cause analysis. Patheon shall notify Flexion in writing of its
determination regarding whether the Product constitutes a Non-Conforming Product
within […***…] days after either discovery of the Non-Conforming Product or
receipt of such Deficiency Notice from Flexion, as applicable. Such notification
shall include Patheon’s good faith determination of the cause of the
Non-Conforming Product.

(c) “Patheon Nonconformance” shall mean (i) Patheon’s failure to perform […***…]
pursuant to Section […***…], and (ii) Patheon’s failure to provide the […***…]
in accordance with the […***…]. In the event of a Non-Conforming Product caused
by a Patheon Nonconformance, Patheon, at Flexion’s option, promptly shall
(x) supply Flexion with a conforming quantity of Product at Patheon’s expense
(subject to Flexion supplying Patheon with Flexion-Supplied Materials and
Patheon reimbursing Flexion for the actual costs of […***…]) and reimburse
Flexion for any incurred shipment costs in the event that the Non-Conforming
Product was shipped from the Facility at the time of the discovery of the
Patheon Nonconformance (“Shipment Costs”)); or (y) reimburse Flexion for the
applicable Product Fee (including the cost of any Patheon-Supplied Materials),
the actual costs of the […***…] and Shipment Costs with respect to such
Non-Conforming Product (in each case, to the extent already paid by Flexion).
For each of (x) and (y) above, Patheon’s obligation to reimburse […***…] shall
be subject to the limitation of liability in Section 9.5(a) herein but
Section 9.5(a) (1) shall not apply in relation to the internal expenses incurred
by Patheon to supply conforming Product to Flexion pursuant to (x), including
the cost of any Patheon-Supplied Materials or any Shipment Costs, and (2) shall
not apply to the reimbursement of the Product Fee pursuant to (y). For the
avoidance of doubt, Flexion will not be liable for Product Fees for
Non-Conforming Product caused by a Patheon Nonconformance.

(d) If the Non-Conforming Product was caused by any reason other than a Patheon
Nonconformance or the cause of such non-conformance is not due to Patheon
Nonconformance (where applicable, as may be determined by an Expert in
accordance with 2.8(e), Flexion shall be liable for all expected Product Fees
for such Non-Conforming Product, to the extent not already paid.

(e) If, following the root-cause analysis described in Section 2.8(b), Patheon
notifies Flexion that it does not believe the Product is a Non-Conforming
Product, or if the Parties disagree as to the cause of a Non-Conforming Product,
the Parties shall first submit such dispute to the Project Managers for prompt
resolution. If the Project Managers cannot resolve the dispute, the Parties

 

 

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shall submit the dispute to an independent expert or (if mutually agreed to by
the Parties) a testing lab, each as agreed by the Parties (a “Expert”) for
evaluation, provided that both Parties shall be entitled to observe and obtain
copies of all results of such evaluation. The Expert shall determine (i) whether
the Product is a Non-Conforming Product and (ii) the cause of the Non-Conforming
Product; provided that, if the cause of the Non-Conforming Product is
undeterminable the Expert shall give an opinion as to the likely cause. Both
Parties shall cooperate with the Expert’s reasonable requests for assistance in
connection with its evaluation hereunder. The findings of the Expert shall be
binding on the Parties, absent fraud or manifest error. The expenses of the
Expert shall be borne (x) by Patheon if the testing confirms the Non-Conforming
Product and the cause or likely cause is found to be a Patheon Nonconformance;
(y) by Flexion if the testing confirms the Non-Conforming Product and the cause
or likely cause is found not to be a Patheon Nonconformance or the cause or
likely cause of such non-conformance is not identifiable; and (z) by the Party
stating the Product was Non-Conforming in the event the testing concludes that
the Product meets the warranty set forth in Section 6.3. Costs of dealing with
Product Complaints and Inquiries will be dealt with in accordance with
Section 3.10. Costs of recalls will be dealt with in accordance with
Section 3.12. Patheon shall have no liability for any Non-conforming Product
unless such Non-conforming Product is identified as being due to a Patheon
Nonconformance (where applicable, as may be determined by an Expert in
accordance with 2.8(e).

(f) During its performance of the Manufacturing Services, Patheon is expected to
produce a certain percentage of saleable batches of Product (the “Yield”). For
the avoidance of doubt, Nonconforming Product arising from anything other than a
Patheon Nonconformance is treated as good and saleable Product for the purposes
of this Section 2.8(f). The Parties shall calculate and mutually agree on the
expected Yield after each anniversary of the initial batch of commercial
Manufacture of Product and based on at least […***…] batches of Product (the
“Expected Yield Rate”). In the event the actual Yield in any calendar year is
more than […***…]% lower than the then-current Expected Yield Rate for such
calendar year, (i) Patheon and Flexion will engage in good faith discussions to
agree to a remediation plan describing the steps to be taken to achieve the
then-current Expected Yield Rate and (ii) Patheon will reimburse Flexion for
[…***…] used by Patheon as a result of Patheon’s failure to meet the Expected
Yield Rate in such batches (i.e., a pro-rated refund of […***…] paid by Flexion
and/or reimbursement to Flexion for the costs of any […***…]) subject to the
limitation of liability in Section 9.5(a) (the “Yield Reimbursement Payment”).
In the event the actual Yield in any calendar year is more than […***…]% greater
than the then-current Expected Yield Rate for such calendar year, Patheon shall
be entitled to reduce any Yield Reimbursement Payment to be made in the next
calendar year by an amount equal to the excess Materials that would have been

 

 

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used by Patheon if the Yield for such calendar year was equal to the
then-current Expected Yield Rate in such batches.

2.9 Equipment and Amendment of Product Specifications, Manufacturing Process,
Equipment and Formulation.

(a) Equipment.

(i) “Flexion Manufacturing Equipment” shall mean process equipment necessary to
Manufacture the bulk Product and shall consist of equipment for the bulk
Manufacturing, vial preparation, fill/finish, and in-process control testing of
the Product and its intermediates as more fully set forth on Schedule 2.9
attached hereto which must comply with all EU mandatory requirements including
without limitation, Supply of Machinery (Safety) Regulations 2008 (UK
Regulations, Secondary UK Legislation), Electrical equipment of machines
(General requirements BS EN 60204-1:2006+A1:2009) (British Product Standards),
Machinery Directive 2006/42/EC (European Union Directive), Low Voltage Directive
(LVD) 2006/95/EC (European Union Directive), and Electromagnetic Compatibility
(EMC) Directive 2004/108/EC (European Union Directive).

(ii) “Patheon Manufacturing Equipment” shall mean any equipment, other than the
Flexion Manufacturing Equipment, necessary to Manufacture the Product including
as more fully set forth in Schedule 2.9 attached hereto, waste handling systems
and all building infrastructure and any and all improvements or additions made
thereto, as approved in writing by Flexion.

(iii) Patheon, acting as Flexion’s agent, shall purchase the Flexion
Manufacturing Equipment on Flexion’s behalf and pursuant to Flexion’s written
instruction. The inclusion of items of Flexion Manufacturing Equipment in
Schedule 2.9, as may be amended by agreement from time to time, shall constitute
written instruction to purchase. Title to all Flexion Manufacturing Equipment
will be held by Flexion unless otherwise set forth in Schedule 2.9. Title to all
Patheon Manufacturing Equipment will be held by Patheon.

(iv) Patheon is authorized to use the Flexion Manufacturing Equipment solely for
the purposes of performing the Manufacturing Services for Flexion.

(v) During the Term, Flexion shall be responsible for additions and replacement
cost of any Flexion Manufacturing Equipment and Patheon Manufacturing Equipment.

(vi) During the Term, Patheon shall, at its sole cost and expense, subject to
this subsection (vi), provide all Maintenance for the Equipment and Facilities.
Notwithstanding the foregoing, with respect to the Flexion Manufacturing
Equipment and Patheon Manufacturing Equipment, Maintenance does not include
(A) the cost of spare parts, (B) Equipment breakdowns caused by any reason
outside of Patheon’s reasonable control (other than breakdowns caused

 

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by Patheon’s negligence or failure to maintain the Equipment in accordance with
the applicable Equipment Standard Operating Procedures of Patheon or the
manufacturer’s terms of operation and recommended procedures), or
(C) specialized maintenance services not within Patheon’s technical expertise or
that requires specialist equipment, in each case where Patheon is required to
utilize a Third Party contractor. Patheon’s costs associated with such spare
parts and Third Party contractors will be reimbursed by Flexion as a Bill Back
Item. Patheon shall not be liable for ordinary wear and tear of the Flexion
Manufacturing Equipment or Patheon Manufacturing Equipment; Patheon shall only
be liable for the repair or replacement of any damage caused to such Equipment
where such damage arises due to its negligence or willful misconduct or its
failure to maintain Equipment pursuant the applicable Equipment Standard
Operating Procedures of Patheon or the manufacturer’s terms of operation and
recommended procedures. Throughout the Term of this Agreement, Patheon shall
maintain property insurance on Flexion Manufacturing Equipment in the amount
equal to the replacement value of such Equipment.

(b) For changes to the Specifications, Quality Agreement, Flexion’s
Manufacturing Process, the Equipment, the Services to be provided pursuant
hereto or the formulation of the Product that are required by Applicable Law
(collectively, “Required Manufacturing Changes”), Patheon and Flexion shall
cooperate to promptly make such changes within the required timeline.

(c) For changes to the Specifications, Quality Agreement, Flexion’s
Manufacturing Process, the Equipment, the Services to be provided hereto or the
formulation of the Product that are not Required Manufacturing Changes
(collectively, “Discretionary Manufacturing Changes”), Patheon and Flexion must
each agree to any Discretionary Manufacturing Changes and shall cooperate in
making such changes, and each agrees that it shall not unreasonably withhold,
condition or delay its consent to such Discretionary Manufacturing Changes.

(d) Notwithstanding the foregoing, all internal and external costs, including,
without limitation, costs of obsolete Materials, work-in-process and Product
(i) associated with Required Manufacturing Changes shall be borne by Flexion,
and (ii) all such costs associated with Discretionary Manufacturing Changes
shall be agreed between the Parties; provided that, in each case, all such costs
shall be commensurate with costs common in the industry for the types of changes
being made.

(e) In the event that Flexion changes the Specifications, Quality Agreement,
Flexion’s Manufacturing Process, the Equipment, the Services to be provided
hereto or the formulation of the Product, or consents to any change by Patheon,
Patheon shall provide to Flexion at Flexion’s cost as an Additional Service any
such documentation or other information with respect thereto as they relate to
the Manufacturing Services as Flexion may reasonably request in order to obtain
or maintain any Regulatory Approval or comply with GMP or other Applicable Law.

 

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2.10 Phase I Filling Space Option.

(a) Prior to the Phase III Manufacturing Suite Clearance Date, Patheon shall
provide the Manufacturing Services utilizing the Phase I Filling Space and Phase
II Manufacturing Space. During this period, the Phase I Filling Space Fee set
forth in Schedule 2.1(a) shall be payable if a period of […***…] has elapsed
after the date on which Flexion submitted for approval to the FDA or other
applicable Regulatory Authority for the Manufacture of Product in the Phase III
Manufacturing Suite for commercial sale in the Territory. The Phase I Filling
Space Fee shall cease to be payable on the Phase III Manufacturing Suite
Clearance Date unless Flexion exercises the Phase I Option.

(b) After the Phase III Manufacturing Suite Clearance Date, (1) Patheon will
provide the Manufacturing Services set forth herein utilizing the Phase II
Manufacturing Space and Phase III Manufacturing Suite and (2) Flexion shall have
the option to elect to have Patheon continue to provide the Manufacturing
Services utilizing the Phase I Filling Space for all or any portion of the
remaining Term (the “Phase I Option”), provided that, (i) Flexion pays the Phase
I Filling Space Fee set forth in Schedule 2.1(a) commencing after election of
the Phase I Option, and (ii) the Phase I Option shall cease to be applicable if
Flexion does not exercise the Phase I Option within […***…] from Patheon’s
notice to Flexion that […***…]. After the Phase III Manufacturing Suite
Clearance Date, Patheon shall have no obligation to provide the Manufacturing
Services utilizing the Phase I Filling Space unless Flexion has exercised the
Phase I Option in accordance with this Section 2.10(b).

(c) The extent of the use of the Phase I Filling Space for the Manufacturing
Services shall be at Flexion’s sole discretion both prior to and after the Phase
III Manufacturing Suite Clearance Date except that the Parties acknowledge that
the Phase I Filling Space will […***…] after the Phase III Manufacturing Suite
Clearance Date. The Parties shall discuss and agree […***…] in good faith but
any associated costs or fees would be payable by […***…].

(d) For purposes of this Section 2.10, the “Phase III Manufacturing Suite
Clearance Date” shall mean the date upon which, in Flexion’s sole discretion,
the FDA or other applicable Regulatory Authority, has approved or will allow the
Product to be Manufactured in the Phase III Manufacturing Suite for commercial
sale in the applicable Territory.

 

 

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ARTICLE III. REGULATORY, ACCESS, AND OTHER MATTERS

3.1 Quality Agreement. Within […***…] of the Effective Date, the Parties shall
enter into a mutually agreed upon quality agreement (“Quality Agreement”). If
the is any inconsistency between this Agreement and the Quality Agreement, the
terms of the Quality Agreement shall control solely with respect to quality
issues, and this Agreement shall control with respect to all other issues.

3.2 Release. All Product shall be released in accordance with the terms of the
Quality Agreement.

3.3 Maintenance of Facility.

(a) Patheon shall Manufacture the Product […***…] at the Facility, unless
Flexion has granted prior written consent to Manufacture the Product at any
other facility, such consent to be granted by Flexion in its sole discretion.

(b) Subject to Section 2.9(b)-(d), Patheon shall ensure that any and all
necessary licenses, registrations, and Regulatory Authority approvals have been
obtained in connection with the Facility and Equipment used in connection with
the Manufacture of the Product by Patheon.

(c) Subject to Section 2.9, Patheon shall maintain the Facility and Equipment in
a state of repair and operating efficiency consistent with the requirements of
the Specifications, the Regulatory Approvals, Flexion’s Manufacturing Process,
GMP, and all other Applicable Law. Prior to each use of Equipment in
Manufacturing the Product, Patheon shall ensure that such Equipment is cleaned
and consistent with any procedures reasonably established by Flexion and
notified to Patheon, the Specifications, the Regulatory Approvals, Flexion’s
Manufacturing Process, GMP, and all other Applicable Law. Without limitation of
the foregoing, Patheon agrees to implement, in connection with the Manufacture
of the Product, quality assurance and quality control procedures, including
validation protocols and process change procedures that are reasonably
satisfactory to Flexion.

(d) Patheon shall maintain in the Facility an adequate GMP and temperature
controlled area for the Product, all intermediates thereof, and Materials used
in Manufacturing the Product in accordance with the Specifications, the
Regulatory Approvals, Flexion’s Manufacturing Process, any risk mitigation plan,
the Quality Agreement, GMP, and all Applicable Law. All Product, intermediates
and Materials (as applicable) shall be held by Patheon in a GMP and temperature
controlled area (on a separate pallet and SAP reference from other products)
until delivery to Flexion.

 

 

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(e) Patheon shall only use qualified disposal services or sites that have
appropriate environmental and operating permits and are in compliance with the
Quality Agreement and Applicable Law.

3.4 Flexion On Site Representatives; Project Managers. For so long as Patheon is
obliged to Manufacture and supply the Products for Flexion, Flexion shall have
the right at all times throughout the Term to have […***…] representatives
present (or other number as reasonably requested by Flexion after discussion by
the members of the Steering Committee) (each, a “Flexion On Site
Representative”) in that portion of Patheon’s Manufacturing facilities that is
being used to Manufacture the Product or store Materials to observe the
procedures and processes used to Manufacture the Product. Subject to the
following sentence, such representatives shall have full access to the
Manufacturing Suite and to all non-financial records that relate to the Product,
the Materials and Bill Back Items. Patheon shall provide reasonable
(semi-permanent) on-site accommodations at the Facility for the Flexion On Site
Representatives (e.g., office space). For the avoidance of doubt, the term
“non-financial records” as used in this Agreement does not include the Reports
(defined in Section 3.11 below). Flexion On Site Representatives shall be
appropriately trained by Flexion (e.g. GMP training) and shall observe at all
times Patheon’s policies and procedures (as amended from time-to-time) as they
pertain to the Facility, including policies relating to health and safety and
compliance with GMP, and comply with all reasonable directions of Patheon in
relation to the same; provided that Flexion is given notice of such policies and
given a reasonable period of time to review and implement such policies. Patheon
may refuse or limit in its sole discretion at any time admission to the Facility
by any Flexion On Site Representative who fails to observe such policies or
comply with such reasonable directions. For the avoidance of doubt, Flexion On
Site Representatives shall have (i) no management authority over any Patheon
employee and (ii) no authority to conclude contracts on behalf of Flexion.
Patheon and Flexion will each appoint a project manager (each, a “Project
Manager” and, together, the “Project Managers”), who will meet as needed to
resolve any issues or problems arising in the performance of this Agreement.
Flexion’s Project Manager may be one of the Flexion On Site Representatives.

3.5 Notification of Regulatory Inspections. Patheon shall notify Flexion by
telephone within […***…], and in writing within […***…], after learning of any
proposed or unannounced visit or inspection of any part of the Facility by any
Regulatory Authority, including the Occupational Safety and Health
Administration or any equivalent governmental agencies of the country of
Manufacture, and shall permit Flexion or its agents to be present at the
Facility to support Patheon during such visit or inspection if it, directly or
indirectly relates to the Product or Manufacturing Suite or may reasonably be
expected to adversely affect the Product or the Manufacturing Suite. For the
avoidance of doubt the responsibility for conducting the inspection rests with
Patheon. Flexion personnel will be permitted to take part in the inspection
where this participation is directly requested either by the authorized agent of
the Regulatory Authority or by Patheon. Patheon shall provide to Flexion in so
far as it, directly or indirectly, affects the Product or the Manufacturing
Suite or may reasonably be expected to adversely affect the Product or the

 

 

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Manufacturing Suite, either a copy of any report and other written
communications received from such Regulatory Authority in connection with any
visit or inspection, including the Form 483 observations and responses or any
equivalent form under Applicable Law. Such copy or summary shall be provided to
Flexion within […***…] business days of Patheon’s receipt thereof (and may be
redacted as Patheon acting reasonably deems necessary to protect the
confidentiality of matters not affecting, or not reasonably likely to affect,
the Product or the Manufacturing Suite which are confidential to Patheon or to
other clients of Patheon). Flexion shall have the right to review and comment on
any communications with such Regulatory Authority pertaining to such inspection
as set forth in Section 3.15.

3.6 Manufacturing Records. Patheon shall maintain, or cause to be maintained,
(a) all records necessary to comply with GMP and all other Applicable Law
relating to the Manufacture of Product, (b) all Manufacturing records, standard
operating procedures, equipment log books, batch records, laboratory notebooks,
and all raw data relating to the Manufacturing of the Product, and (c) such
other records as Flexion may reasonably require in order to ensure compliance by
Patheon with the terms of this Agreement. The template, form and style of all
records referred to herein are the exclusive property of Patheon; Flexion
Proprietary Information and all Product-specific related information contained
in these records shall be deemed Proprietary Information of Flexion and be
retained for such period as may be required by GMP and all other Applicable Law
or for such longer period as Flexion may reasonably require.

3.7 Compliance with Applicable Laws. Patheon shall comply and shall cause each
of subcontractors and its Materials and Bill Back Items suppliers to comply with
the Quality Agreement, GMP and Applicable Law in carrying out the Manufacturing
of the Product and its other duties and obligations under this Agreement. Should
during the Term of this Agreement a change or changes in Applicable Law lead to
Patheon (a) providing services not originally contemplated by Patheon, or
(b) incurring increased costs in order to comply with said change or changes,
any such services or costs (to the extent pertaining to the Product or related
to Flexion’s Manufacturing Process or Flexion Manufacturing Equipment) shall
constitute an Additional Service subject to mutual written agreement of the
Parties.

3.8 Compliance Audits. Flexion and its designated representatives shall have the
right to audit all applicable non-financial records of Patheon for the purpose
of determining Patheon’s compliance with the obligations set forth in this
Agreement and the Technical Transfer Agreement, including Sections 2.2(a) and
6.2 of this Agreement, and the terms of any Purchase Order. Such audit right
shall include the right to inspect: (a) the Materials used in the Manufacture of
the Product, (b) the holding facilities for such Materials and Product, (c) the
Equipment used in the Manufacture of the Product, (d) all non-financial records
relating to the Manufacturing Suite and the Manufacturing of the Product
(subject to any other restrictions set forth in this Agreement) and (e) all
other documentation set forth in the Quality Agreement. Flexion shall provide
Patheon with reasonable prior advance notice of its intention to conduct such
audit and the Parties will determine a mutually agreeable date for such audit.

 

 

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Flexion shall include no more than […***…] of Flexion’s representatives in each
such audit, with each such audit lasting no more than […***…] days without
Patheon’s prior written consent. Flexion may exercise its audit rights under
this Section 3.8 no more than […***…] per calendar year; provided that, in the
event any of the following circumstances arise, Flexion may elect and Patheon
shall permit Flexion to conduct additional audits in a timely manner: (i) where
there is the occurrence of a condition or event relating to the Materials or any
Product which constitutes a serious health risk; (ii) where either Party has
received correspondence or a report from a Regulatory Authority pointing out a
deficiency in the Product by or on behalf of Patheon; (iii) where the
Specifications have not been complied with or there is otherwise evidence that
compliance with the Specifications is at risk; or (iv) in the event of a recall
related to the Product. The Steering Committee will discuss the findings of any
audit conducted by Flexion under this Section 3.8 and shall mutually agree upon
a plan to remedy any issues identified by Flexion in such audit and Patheon
shall use commercially reasonable efforts to implement such plan in a timely
manner. Patheon will support the first Product approval, including its
inspection if required, of the FDA or equivalent regulatory launch for other
jurisdictions (where applicable) (a “PAI”) (including one mock-readiness review
and efforts conducted with Flexion representatives in advance of such
inspection). Patheon will be prepared for the successful completion of the PAI
with respect to the Manufacturing of the Product at the Facility a minimum of
[…***…] in advance of the anticipated date of the PAI and Patheon will cooperate
with Flexion to prepare for and to complete the PAI in accordance with
guidelines and requirements set forth by the applicable Regulatory Authority.
Additional support (including, without limitation, subsequent regulatory
launches or Product approval inspections/resulting reports for other
jurisdictions) will be subject to additional fees.

3.9 Inventory Reviews. Without limiting the foregoing, Flexion shall have the
right, with Patheon’s assistance, to conduct an annual inventory count of the
Materials and of the Products. Following an audit or inventory, Flexion may
discuss its observations and conclusions with Patheon, and Patheon shall
promptly implement such corrective actions after notification thereof by
Flexion. In the event the Parties are unable to agree upon whether or not
corrective actions are necessary, such dispute shall be resolved pursuant to the
terms of Section 10.9.

3.10 Product Inquiries and Complaints.

(a) With respect to Products Manufactured by Patheon, each Party will promptly
(as may be further defined in the Quality Agreement) submit to the other Party
any Product safety and efficacy inquiries, Product quality complaints, and
adverse drug event reports received by such Party, together with all available
evidence and other information relating thereto, in accordance with procedures
to be agreed upon by the Parties. Except as otherwise required by, or to comply
with, Applicable Law or the terms of this Agreement, Flexion, as the Party
holding the applicable Regulatory Approval, will be responsible for
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and responding to all such inquiries, complaints, and adverse events regarding
the Product, and reporting to the FDA or any other Regulatory Authority.

(b) Pursuant to a reported complaint or adverse drug event pertaining to the
Products Manufactured by Patheon, if the nature of the reported complaint or
adverse drug event requires testing, Patheon will, upon Flexion’s request and
approval, perform analytical testing of corresponding Product complaint or
retention samples and provide the results thereto to Flexion as soon as
reasonably practicable, but no later than […***…] days after Flexion’s request.
Such testing shall be performed using approved testing procedures as set forth
in the applicable Regulatory Approval or the Quality Agreement. If such
analytical testing concludes that the reported complaint or adverse drug event
was the result of a Patheon Nonconformance, Patheon shall reimburse Flexion for
[…***…] associated with such complaint or adverse drug event and incurred by
Flexion with respect to such nonconforming Product, including […***…]. Costs of
recalls will be dealt with in accordance with Section 3.12. If such analytical
testing concludes that the reported complaint or adverse drug event was not the
result of a Patheon Nonconformance, Flexion shall compensate Patheon for all
costs associated with such complaint or adverse drug event and incurred by
Patheon with respect to such nonconforming Product, including costs of recalls,
market withdrawals, returns, and destruction.

(c) If the Parties disagree as to which Party is responsible, Patheon and
Flexion representatives shall attempt to resolve such dispute. If the
representatives cannot resolve such dispute within […***…] days, the retention
samples shall be submitted by Patheon and Flexion to an Expert and Section 2.8
shall apply.

3.11 Reports. Prior to the start of Patheon’s commercial Manufacture of the
Product (or as reasonably requested by Flexion prior to such date), Patheon and
Flexion will work together in good faith to develop and agree upon Patheon’s
ordinary course reporting obligations. Such reports (“Reports”) will include
those reports as necessary for Flexion to (a) manage Product inventory;
(b) manage its financial close and reporting; (c) monitor on-going Product and
process performance for its internal analysis and reporting; and (d) comply with
Applicable Law. Patheon will deliver such reports via electronic delivery
methods, including by utilizing Patheon’s existing IT systems as practicable.

3.12 Product Recalls.

(a) In the event (i) any Regulatory Authority issues a request, directive, or
order that Product be recalled, (ii) a court of competent jurisdiction orders
such a recall, or (iii) Flexion as holder of the applicable Regulatory Approval
shall reasonably determine that Product should be recalled, withdrawn, or a
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correction issued, the Parties shall take all appropriate corrective actions,
and shall cooperate in the investigations surrounding the recall. In the event
that Flexion determines that Product should be recalled, to the extent
reasonably possible, Flexion shall consult with Patheon prior to taking any
corrective actions. In the event of any Product recall, withdrawal, or field
correction resulting from a Patheon Nonconformance, Patheon shall bear […***…]
associated with such recall, withdrawal, or field correction, which shall
include […***…] of the recalled Product and all other […***…] incurred in
connection with such recall, plus […***…] incurred by Flexion with respect to
such Product. In all other circumstances, all costs associated with any Product
recall, withdrawal, or field correction shall be borne by Flexion.

(b) If there is any dispute concerning which Party’s acts or omissions gave rise
to such recall of Product, Patheon and Flexion representatives shall attempt to
resolve such dispute. If the representatives cannot resolve such dispute within
[…***…] days, the matter shall be submitted by Patheon and Flexion to an Expert
and Section 2.8 shall apply.

3.13 Payment Audits.

(a) Upon […***…] days’ prior written notice, Flexion may audit any Third Party
invoices subsequently invoiced to Flexion pertaining to Patheon’s provision of
Equipment, Materials, Bill Back Items and Additional Services hereunder;
provided, however, that Flexion will not be entitled to more than one audit
during any […***…] period. Such audits will be conducted during normal business
hours, without undue disruption to Patheon’s business, and may be conducted by
Flexion, or by an independent public accounting firm designated by Flexion who
is bound by confidentiality obligations at least as stringent as those set forth
in the Confidentiality Agreement. Except as hereinafter set forth, Flexion will
bear the full cost of the performance of any such audit.

(b) If, as a result of any audit described in Section 3.13(a), it is shown that
the payments or credits from one Party to the other under this Agreement with
respect to the period of time audited were less than or more than the amount
that should have been paid or credited, then the Parties will reconcile the
amounts owed by each Party to the other. In addition, if such audit demonstrates
that Patheon has overcharged Flexion hereunder by more than […***…]% for the
period audited, then Patheon will also reimburse Flexion for its documented
reasonable out-of-pocket costs and expenses incurred in connection with the
audit.

 

 

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3.14 Subcontractors. Prior to subcontracting any of Patheon’s obligations
hereunder, Patheon will notify Flexion (1) in advance of engaging a proposed
subcontractor that directly relates to the Manufacture of the Product and will
obtain Flexion’s prior written approval of each such subcontractor, and
(2) within six (6) months, of all other subcontractors so engaged. The terms of
any subcontract directly relating to the Manufacture of the Product will be in
writing and will be consistent with this Agreement, including (i) the
confidentiality obligations set forth in Article VII, (ii) the representations
and warranties of Patheon in Section 6.3, and (iii) compliance with Applicable
Law as required hereunder. No subcontracting will release Patheon from its
responsibility for its obligations under this Agreement and Patheon will be
responsible for the work and activities of each such subcontractor as they
relate to performance of Patheon’s obligations under this Agreement, including
compliance with the terms of this Agreement.

3.15 Regulatory Filing Obligations. Except as otherwise set forth in this
Agreement or the Technical Transfer Agreement, each Party will be responsible
for all routine filings and communications with Regulatory Authorities
(“Regulatory Filings”) required with respect to such Party’s Regulatory
Obligations hereunder. “Regulatory Obligations” shall mean: (i) with respect to
Flexion, any Regulatory Filings pertaining to the Product, Flexion’s
Manufacturing Process, and filling and packaging processes and procedures; and
(ii) with respect to Patheon, any Regulatory Filings pertaining to the Facility,
including in connection with a Facility inspection by a Regulatory Authority
(e.g., those described in Section 3.5). For the avoidance of doubt, Flexion
shall have the sole responsibility and Regulatory Obligation for the filing of
all documents with all applicable Regulatory Authorities, and to take any other
actions that may be required, for the receipt of Regulatory Approval for the
development or commercial manufacture of the Product. Flexion shall provide
Patheon with a copy of any Regulatory Approval directly relevant to this
Agreement on request including any Regulatory Approval required for the storage,
receipt or distribution of the Product by Flexion or its designee.

(a) Cooperation. Each Party (“Non-Filing Party”) will provide reasonable
assistance and cooperation to the other Party (“Filing Party”) in the connection
with the Filing Party’s Regulatory Obligations consistent with the terms of this
Section 3.15 and the Non-Filing Party’s obligations under this Agreement. The
Filing Party shall notify the Non-Filing Party in writing of any written
communications received by the Filing Party from a Regulatory Authority related
to the other Party’s Regulatory Obligations within […***…] business days after
receipt thereof. The Filing Party shall consult with the Non-Filing Party
concerning the response of the Filing Party to each such communication, unless
such filing is not relevant to the Non-Filing Party’s Regulatory Obligations.

(b) Verification of Data. Prior to filing any documents or communications with a
Regulatory Authority that incorporate or uses data generated by the Non-Filing
Party or otherwise relate to the Non-Filing Party’s Regulatory Obligations, the
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such document or communication (“Initial Draft”) to give the Non-Filing Party
the opportunity to verify the accuracy and regulatory validity of such Initial
Draft. The Non-Filing Party shall be given a minimum of […***…] calendar days to
review the Initial Draft, but the Parties may mutually agree to a different time
for the review as needed under the circumstances. The Initial Draft may be
redacted by the Filing Party as reasonably deems necessary to protect the
confidentiality of matters not affecting the Non-Filing Party or which are
confidential to the Filing Party or to other clients or customers of the
Non-Filing Party. The Parties agree that in reviewing the Initial Draft, the
Non-Filing Party’s role will be limited to verifying the accuracy of the
description of its Regulatory Filing Obligations or accuracy of its data or
information in the Initial Draft. Notwithstanding the forgoing, nothing in this
Section 3.15(b) shall be deemed to limit a Party’s ability to make any filing
with, or otherwise communicate with, any Regulatory Authority if such Party
reasonably determines that such filing or communication is legally required and
must be made in an expedited manner and consultation with the other Party as
provided herein is not reasonably possible.

(c) Inaccuracies. If the Non-Filing Party determines that any of its data or
information in the Initial Draft is inaccurate or any other errors relating to
the Non-Filing Party’s Regulatory Obligations, the Non-Filing Party will notify
Filing Party in writing of such inaccuracy and provide a recommendation to
remediate the Initial Draft. Such notice shall also include documentation and
data sufficient to substantiate the Non-Filing Party’s claim that the Initial
Draft is inaccurate to the Filing Party’s reasonable satisfaction. The
Non-Filing Party shall provide comments to the Initial Draft no later than
[…***…] days prior to the required filing date with the applicable Regulatory
Authority. If the Non-Filing Party does not provide comments or notify the
Filing Party of inaccuracies within such […***…] day period, the Non-Filing
Party will be deemed to have approved any data or language related to its
Regulatory Obligations in the Initial Draft. The Filing Party shall be required
to incorporate the Non-Filing Party’s recommendations to the extent they
directly relate to an error in the Non-Filing Party’s data or information or the
Non-Filing Party’s Regulatory Filing Obligations. The Parties will work together
in good faith to resolve any inaccuracies contained in the Initial Draft as soon
as practicable under the circumstances to prevent a delay or postponement of
such filing (or any related inspections by such Regulatory Authority to which
the filing relates). Any on-going disagreement regarding the Deficiencies shall
be escalated to the Steering Committee for resolution on an expedited basis.

(d) Responsibilities. Patheon shall deliver a copy of the final version of the
filing to Flexion at least […***…] days prior to the required filing date.
Flexion shall deliver a copy of the final version of the filing to Patheon
promptly after the required filing date. Subject to the foregoing, the
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Party will not assume any responsibility for the accuracy of any other materials
submitted by the Filing Party to a Regulatory Authority in connection with this
Agreement. Except as otherwise set forth in this Agreement or the Technical
Transfer Agreement, the Filing Party is solely responsible for the preparation
and filing of any materials required by a Regulatory Authority with respect to
such Party’s Regulatory Filing Obligations hereunder and any relevant costs will
be borne by the Filing Party.

ARTICLE IV. FEES AND INVOICING

4.1 General. (a) Patheon shall invoice Flexion for all applicable fees and
charges incurred by Patheon as set out in this Agreement or the Technical
Transfer Agreement. (b) All invoices shall be sent electronically to […***…].
Payment shall be due thirty (30) days after receipt by Flexion of an undisputed
invoice. All payments from Flexion to Patheon hereunder shall be in British
Pounds (GBP).

4.2 Late Fees. In relation to all invoices issued by Patheon pursuant to this
Agreement, if Flexion fails to make any payment due to Patheon by the due date
for payment, then, without limiting Patheon’s remedies under ARTICLE VIII or at
law, Patheon may charge interest on past due accounts at […***…]% per month
which is equal to an annual rate of […***…]%.

4.3 Disputed Invoices. If Flexion disputes any portion of an invoice,
(a) Flexion shall provide Patheon with written notice of the disputed portion
within […***…] business days of receipt by Flexion of Patheon’s invoice and its
reasons therefor and shall not be obliged to pay such disputed portion unless
and until such disputed portion is determined to be due and owing, and
(b) Patheon shall cancel such invoice and issue a new invoice reflecting the
undisputed invoiced amount, which shall be paid by Flexion within […***…] days.
The Parties shall use good faith efforts to resolve the dispute regarding the
disputed amount promptly, and if the Parties agree that a balance is due,
Patheon shall issue an invoice for such balance, and payment shall be due
[…***…] days after receipt of such invoice. In the event of any inconsistency
between an invoice and this Agreement, the terms of this Agreement shall
control.

4.4 Taxes.

(a) Subject to (b) and (c) below, Patheon will bear all Taxes however designated
as a result of the provision of the Services under this Agreement.

(b) Flexion acknowledges that it will be responsible for all Taxes that arise in
respect of the following:

(i) The acquisition of the Flexion-Supplied Materials.

 

 

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(ii) The acquisition of the Flexion Manufacturing Equipment.

(c) Any payment due under this Agreement for the provision of Services to
Flexion by Patheon is exclusive of value added or equivalent tax in any other
jurisdiction, including any related interest and penalties (hereinafter all
referred to as “VAT”). If any VAT is payable on a Service supplied by Patheon to
Flexion under this Agreement, this VAT will be added to the invoice amount and
will be for the account of (and reimbursable to Patheon by) Flexion. Where
applicable, Patheon will use its reasonable commercial efforts to ensure that
its invoices to Flexion are issued in such a way that these invoices meet the
requirements for deduction of input VAT by Flexion, to the extent permitted by
law to do so.

(d) Flexion acknowledges that all amounts due in respect of any fees payable by
Flexion under this Agreement shall be paid in full without any set-off,
counterclaim, deduction or withholding in respect of any Tax liabilities.

ARTICLE V. INTELLECTUAL PROPERTY

5.1 Ownership.

(a) Flexion shall maintain ownership and Control of all of its technology and
intellectual property rights existing prior to the Effective Date (“Existing
Flexion Intellectual Property”).

(b) Patheon shall maintain ownership and Control of all of its technology and
intellectual property rights existing prior to the Effective Date (“Existing
Patheon Intellectual Property”).

(c) Existing Flexion Intellectual Property shall include and Flexion shall own
all right, title, and interest in and to (i) the Product, (ii) the
Specifications, and (iii) Flexion’s Manufacturing Process.

(d) Existing Patheon Intellectual Property shall include and Patheon shall own
all right, title, and interest in and to the Patheon Manufacturing Equipment as
of the Effective Date.

(e) Flexion shall own all right, title, and interest in and to, all intellectual
property (specifically including inventions and patents and patent applications
therefor) with respect to, and any data with respect to:

(i) (A) any improvement of, modification of, change of, enhancement of, new
indication for, new formula for, new formulation for, new ingredients for, new
dosage for, new dosage strength for, new means of delivery for, or new labelling
or packaging for, the Product (“Flexion Product Improvements”); (B) any
improvement of, modification of, change of, or enhancement of the Specifications
(“Flexion Specification Improvements”); (C) any improvement of, modification of,
change of, enhancement of, new process for, new procedure for, or new step
related to Flexion’s Manufacturing Process (“Flexion Manufacturing Process
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of or enhancement of Flexion Manufacturing Equipment (the “Flexion Manufacturing
Equipment Improvements”) in each of case (A), (B), (C) and (D) , (1) that is
developed, conceived, or created after the Effective Date specifically as a
result of or in connection with this Agreement, including Patheon’s
Manufacturing of the Product hereunder, (2) whether or not patentable,
(3) whether developed, conceived, or created by employees of, or consultants to,
Flexion or Patheon, alone or jointly with each other or with permitted Third
Parties (including permitted sublicensees and subcontractors), and (4) that has
specific applicability, meaning it does not have applicability to products other
than the Product, to the Product, Specifications, Flexion’s Manufacturing
Process or the Flexion Manufacturing Equipment as applicable (together the
Flexion Specification Improvements, Flexion Product Improvements, Flexion’s
Manufacturing Process Improvements and the Flexion Manufacturing Equipment
Improvements shall be referred to as the “Flexion Specific Improvements”);

(ii) any improvement of, modification of, change of, enhancement of
manufacturing, processing, formulating, filling, labelling or packaging
technology or equipment which is (x) developed, conceived, created, generated or
derived after the Effective Date by Patheon, alone or jointly with Flexion or
other permitted Third Parties (including permitted sublicensees) specifically as
a result of or in connection with this Agreement, and (y) of generic application
to the Product, meaning it has application to or utility in relation to a range
of products which includes the Product (“Non-Specific Improvement”)(the Flexion
Specific Improvements and the Non-Specific Improvements are together “Flexion
Improvements”); and

(iii) any inventions, know how or other intellectual property developed,
conceived, or created by Flexion, alone or jointly with Third Parties (other
than Patheon or its Affiliates, or their respective employees and consultants),
in the course of conducting activities outside the scope of this Agreement and
without any use of any Existing Patheon Intellectual Property, Patheon
Independent Manufacturing Equipment Improvements and/or Patheon Non-Applicable
Inventions (as defined hereunder).

(f) Patheon shall own all right, title, and interest in and to, all intellectual
property (specifically including inventions and patents and patent applications
therefor) with respect to, and any data with respect to:

(i) any improvement of, modification of, change of, enhancement of Patheon’s
Manufacturing Equipment, (1) that is developed, conceived, or created as a
result of or in connection with this Agreement, including Patheon’s
Manufacturing of the Product hereunder, (2) whether or not patentable,
(3) whether developed, conceived, or created by employees of, or consultants to,
Flexion or Patheon, alone or jointly with each other or with permitted Third
Parties (including permitted sublicensees), and (4) that is of generic
application rather than a specific solution that only has applicability to the
Product, (“Patheon Independent Manufacturing Equipment Improvements”);

 

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(ii) any inventions, know how or other intellectual property developed,
conceived, or created by Patheon, alone or jointly with Flexion or other
permitted Third Parties (including permitted sub-licensees), in the course of
conducting activities under the scope of this Agreement where such inventions
know how or other intellectual property have no applicability to the Product,
the Specifications, Flexion’s Manufacturing Process or the Flexion Manufacturing
Equipment (“Patheon Non-Applicable Inventions”) (together the Patheon
Independent Manufacturing Equipment Improvements and the Patheon Non-Applicable
Inventions are together “Patheon Improvements”); and

(iii) any inventions, know how or other intellectual property developed,
conceived, or created by Patheon, alone or jointly with Third Parties, in the
course of conducting activities outside the scope of this Agreement and without
any use of any Existing Flexion Intellectual Property or Flexion Specific
Improvements.

(g) Patheon shall, and shall cause its Affiliates to, promptly disclose in
writing and in reasonable detail to Flexion any Flexion Improvements developed,
conceived, or created by employees, consultants, or subcontractors of Patheon or
its Affiliates, alone or jointly with employees, consultants or subcontractors
of Flexion or its Affiliates. Such written notice will be treated as the
Proprietary Information of Flexion hereunder.

(h) Flexion shall, and shall cause its Affiliates to promptly disclose in
writing and in reasonable detail to Patheon any potential Patheon Improvement
and any Flexion Non-Specific Improvements developed, conceived, or created by
employees, consultants, or subcontractors of Flexion or its Affiliates, alone or
jointly with employees, consultants, or subcontractors of Patheon or its
Affiliates. Such written notice in relation to Patheon Improvements will be
treated as the Proprietary Information of Patheon hereunder.

(i) The Specifications, Flexion’s Manufacturing Process, and any and all
information or material related to the Existing Flexion Intellectual Property,
and Flexion Improvements shall constitute Proprietary Information of Flexion,
which shall be deemed the disclosing Party with respect to such Proprietary
Information and shall be subject to the provisions of Article VII of this
Agreement.

(j) Patheon’s Manufacturing Equipment and any and all information or material
related to the Existing Patheon Intellectual Property and Patheon Improvements
shall constitute Proprietary Information of Patheon, which shall be deemed the
disclosing Party with respect to such Proprietary Information.

(k) Patheon shall, and shall cause its Affiliates, to disclose in writing and in
reasonable detail to Flexion prior to the implementation of any such Patheon
Improvement or Non-Specific Improvement into the Manufacturing Services or any
potential Patheon Improvements or Non-Specific Improvements and Flexion shall,
in its sole discretion, decide whether such improvement shall be

 

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used in the Manufacture of the Product. Such written notice will be treated as
the Proprietary Information of Patheon hereunder.

(l) Patheon agrees to, and hereby does, and shall cause each of its employees,
consultants, and Affiliates (collectively with Patheon, the “Patheon Assignors”)
to assign to Flexion all right, title and interest in and to the Flexion
Improvements developed, conceived or created by such Patheon Assignors, alone or
jointly with others including all intellectual property rights associated
therewith. Upon Flexion’s request and at Flexion’s sole expense, Patheon shall,
and shall use commercially reasonable efforts to cause each Patheon Assignor to,
assist Flexion or anyone Flexion reasonably designates in preparing, filing,
prosecuting, obtaining, enforcing or defending patent, copyright or other
intellectual property application or grant of right issuing therefrom in any and
all countries in the world.

(m) Flexion agrees to, and hereby does, and shall cause each of its employees,
consultants, and Affiliates (collectively with Flexion, the “Flexion Assignors”)
to assign to Patheon all right, title and interest in and to the Patheon
Improvements developed, conceived or created by such Flexion Assignors, alone or
jointly with others including all intellectual property rights associated
therewith. Upon Patheon’s request and at Patheon’s sole expense, Flexion shall,
and shall use commercially reasonable efforts to cause each Flexion Assignor to,
assist Patheon or anyone Patheon reason ably designates in preparing, filing,
prosecuting, obtaining, enforcing or defending patent, copyright or other
intellectual property application or grant of right issuing therefrom in any and
all countries in the world.

5.2 Licenses.

(a) Flexion hereby grants to Patheon a fully paid-up worldwide, non-exclusive
license, under Flexion’s entire right, title, and interest in and to the
Existing Flexion Intellectual Property for Patheon to Manufacture the Products
solely pursuant to the terms of this Agreement.

(b) Flexion hereby grants to Patheon a fully paid-up worldwide, non-exclusive
license, under Flexion’s entire right, title, and interest in and to the Flexion
Improvements, in each case to make Products solely pursuant to the terms of this
Agreement.

(c) Flexion hereby grants to Patheon a perpetual, irrevocable, fully paid-up
worldwide, exclusive license, with the right to grant sub-licences, under
Flexion’s entire right, title, and interest in and to the Non-Specific
Improvements for the manufacture, use, sale or supply of any and all products,
except Excluded Products or any and all products which, at any time, are owned
by or exclusively licensed to Flexion.

In addition, Flexion grants to Patheon a perpetual, irrevocable, fully paid-up
worldwide, co-exclusive license, with the right to grant sub-licences, under
Flexion’s entire right, title, and interest in and to the Non-Specific
Improvements

 

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for the manufacture, use, sale or supply of any and all products which, at any
time, are owned by or exclusively licensed (in terms of the right of Flexion to
sell such products) to Flexion except Excluded Products.

Accordingly, notwithstanding anything to the contrary herein, Flexion retains:

(i) co-exclusively with Patheon, rights to the Non-Specific Improvements for the
manufacture, use, sale or supply of any and all products which, at any time, are
owned by or exclusively licensed (in terms of the right of Flexion to sell such
products) to Flexion, and

(ii) exclusively, any and all rights to the Non-Specific Improvements for the
manufacture, use, sale or supply of Excluded Products;

provided that, in either case (i) or (ii),

 

  (1) Flexion may only sublicense its rights to Non-Specific Improvements to a
Third Party in conjunction with the license or assignment by Flexion of rights
to manufacture, use, sell or supply a therapeutic product that is, or were prior
to the assignment, owned by or exclusively license (in terms of the right of
Flexion to sell such products) to Flexion; and

 

  (2) other than with respect to permitted assignments of this Agreement under
Section 10.5A herein Flexion shall not assign or otherwise transfer its right to
Non-Specific Improvements without the prior written consent of Patheon. In the
event that Flexion wishes to assign any Non-Specific Improvement(s) to an
Affiliate, Patheon and Flexion shall enter into a novation agreement with that
Flexion Affiliate, to novate the rights and obligations hereunder in respect of
such Non-Specific Improvement(s) only.

For the purposes of this Section 5.2(c), “Excluded Products” means any product
which comprises as its active agent […***…]. For the avoidance of doubt,
co-exclusive means that only Patheon (and its authorised sub-licensees) and
Flexion (and its authorised sub-licensees) has rights in relation to the
Non-Specific Improvements, such rights and the scope and nature of authorised
sub-licensees being as expressly set out in this clause 5.2(c) and no wider.

 

 

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5.3 Technology Transfer. Upon the request of Flexion at any time during the
[…***…] period prior to expiry of this Agreement, Patheon shall, at Flexion’s
cost (i) promptly disclose to Flexion or its designee any Patheon Improvement,
(ii) have its representatives meet with representatives of Flexion or its
designee to enable Flexion or such designee to Manufacture the Product, and
(iii) provide such other assistance as Flexion may reasonably request to enable
Flexion or such designee to Manufacture the Product. Flexion shall reimburse
Patheon for its fees and all documented out-of-pocket expenses reasonably
incurred by Patheon in connection with such technology transfer. Patheon will
provide a quotation for the services which Flexion requires pursuant to this
Section 5.3 as Additional Services and on acceptance by Flexion of the same,
Patheon will provide the services stated therein.

5.4 Third Party Litigation. In the event that, during the Term, any Third Party
institutes against Patheon any action that alleges that the Manufacture of the
Product hereunder in accordance with the terms hereof infringes the intellectual
property rights held by such Third Party, then, as between Patheon and Flexion,
and subject to Flexion indemnifying and defending and holding harmless Patheon
in relation to such action pursuant Section 9.1(a)(iv) herein, Flexion, at its
sole expense, shall have the sole obligation to contest and assume discretion
and control of the defense of such action, including the right to settle such
action on terms determined by Flexion; provided, however, that in no event may
Flexion agree to the entry of any equitable or injunctive relief that is binding
on Patheon and its Affiliates without Patheon’s prior written consent, not to be
unreasonably withheld or delayed. Patheon, at Flexion’s expense, shall use all
commercially reasonable efforts to assist and cooperate with Flexion as
reasonably request by Flexion in such action.

5.5 Licenses of Rights to Intellectual Property. The licenses granted by the
Parties hereunder shall be deemed to be licenses of rights to “intellectual
property” as defined Section 101 of the United States Bankruptcy Code and, in
connection therewith, each Party shall have the rights set forth in
Section 365(n) of the United States Bankruptcy Code in the event of any
rejection or proposed rejection of this Agreement in any bankruptcy proceeding.

ARTICLE VI. REPRESENTATIONS AND WARRANTIES

6.1 Representations and Warranties of Each Party. Each Party hereby represents
and warrants to the other Party as follows:

(a) Such Party (i) is duly formed and in good standing under the laws of the
jurisdiction of its formation, (ii) has the power and authority and the legal
right to enter into this Agreement and perform its obligations hereunder, and
(iii) has taken all necessary action on its part required to authorize the
execution and delivery of this Agreement and the performance of its obligations
hereunder. This Agreement has been duly executed and delivered on behalf of such
Party and constitutes a legal, valid, and binding obligation of such Party and
is enforceable against it in accordance with its terms, subject to the effects
of bankruptcy,

 

 

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insolvency, or other similar laws of general application affecting the
enforcement of creditor rights and judicial principles affecting the
availability of specific performance and general principles of equity, whether
enforceability is considered a proceeding at law or equity.

(b) Except for the FDA’s approval of Patheon’s manufacturing, testing, and
packaging for the Product from the Manufacturing Suite, all necessary consents,
approvals, and authorizations of all Regulatory Authorities, other governmental
authorities, and other Persons required to be obtained by such Party in
connection with the execution and delivery of this Agreement and the performance
of its obligations hereunder have been obtained.

(c) The execution and delivery of this Agreement and the performance of such
Party’s obligations hereunder (i) do not and will not conflict with or violate
any requirement of Applicable Law or any provision of the articles of
incorporation, bylaws limited partnership agreement, or other constituent
document of such Party and (ii) do not and will not conflict with, violate, or
breach, or constitute a default or require any consent under, any contractual
obligation or court or administrative order by which such Party is bound.

6.2 Additional Representations, Warranties and Covenants, of Patheon. Patheon
warrants, represents and covenants, that:

(a) (i) it has facilities, personnel, experience, and expertise sufficient in
quality and quantity to perform the obligations hereunder, (ii) it shall perform
its obligations in conformity with GMPs where applicable, (iii) it will comply
with the Quality Agreement and comply with all agreed upon quality assurance,
quality controls, and review procedures in the performance of its obligations
hereunder and (iv) during the Term, the Facility will remain operational and
qualified for the purpose of the Manufacture of Product under the terms of this
Agreement;

(b) it has, as of the Effective Date observed and complied, and shall, during
the Term and at its cost (subject to Sections 2.9(b)-(d) and Section 3.7),
observe and comply, with all then-current Applicable Laws, including federal,
state, and local laws, orders, regulations, rules, customs, and ordinances now
in force or that may hereafter be in force, pertaining to the Facility and the
performance of the Manufacturing Services and including, without limitation,
(i) labor laws, orders, regulations, rules, customs, and ordinances of the
country of Manufacture and (ii) those issued by the FDA pertaining to the
Manufacturing Services and the Facility (but not those pertaining solely to
non-Manufacturing matters relating to the Product, compliance with which shall
be the responsibility of Flexion), and any laws, orders, regulations, rules, or
ordinances issued in addition to, as a supplement to or as a replacement of
Applicable Laws;

(c) none of it, its Affiliates, nor any Person under its direction or control,
has ever been, nor will it engage suppliers which have to its actual

 

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knowledge, after due inquiry, been, (i) debarred or convicted of a crime for
which a person can be debarred, under Section 335(a) or 335(b) of the FDA Act,
or any equivalent Applicable Law of the country of Manufacture, (ii) threatened
to be debarred under the FDA Act or any equivalent Applicable Law of the country
of Manufacture or (iii) indicted for a crime or otherwise (to its actual
knowledge after due inquiry) engaged in conduct for which a person can be
debarred under the FDA or any equivalent Applicable Law of the country of
Manufacture, and Patheon agrees that it will, within […***…], notify Flexion in
the event it receives notification of any such debarment, conviction, threat or
indictment. Should Patheon become aware of any actual or suspected noncompliance
with the foregoing, Patheon will notify Flexion in writing of such issue within
[…***…]. For the purpose of this Section 6.2, suppliers and subcontractors
engaged by Patheon to undertake the Manufacture of the Product shall be deemed
to be under Patheon’s direction or control;

(d) none of it, its Affiliates, nor any Person under its direction or control is
currently excluded from a federal or state health care program under Sections
1128 or 1156 of the Social Security Act, 42 U.S.C. §§ 1320a-7, 1320c-5 or any
equivalent Applicable Law of the country of Manufacture, as may be amended or
supplemented;

(e) none of it, its Affiliates, nor any Person under its direction or control is
otherwise currently excluded from contracting with the U.S. federal government
or the government of the country of Manufacture;

(f) none of it, its Affiliates, nor any Person under its direction or control is
otherwise currently excluded, suspended, or debarred from any U.S. or foreign
governmental program;

(g) it shall immediately notify Flexion if, at any time during the Term,
Patheon, its Affiliates, or any Person under its direction or control is
convicted of an offense that would subject it or Flexion to exclusion,
suspension, or debarment from any U.S. or foreign governmental program; and

(h) agrees to keep the Equipment free form all liens and encumbrances.

(i) it will not enter into any agreement or arrangement with any other Person
that would prevent its ability to perform its obligations hereunder.

6.3 Warranty. Patheon warrants that, at the time of delivery of Product to
Flexion: (a) such Product will have been Manufactured in accordance with the
[…***…]; (b) such Product will be in conformity with the

 

 

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[…***…] in accordance with the […***…] set out therein and will conform with the
[…***…] therefor provided pursuant to Section […***…]; (c) title to such Product
will pass to Flexion as provided herein free and clear of any security interest,
lien, or other encumbrance; (d) such Product will not be adulterated or
misbranded within the meaning of the FDA Act as a result of a Patheon
Nonconformance; and (e) such Product will not be articles that, under the
provisions of the FDA Act, may not be introduced into interstate commerce as a
result of a Patheon Nonconformance.

6.4 Additional Representations and Warranties of Flexion. Flexion warrants and
represents that:

(a) Non-Infringement.

(i) (1) as of the Effective Date, it or its Affiliates Control all issued
patents and pending patent applications set forth on Schedule 6.4(a), which
patents and applications are necessary for performance of the Manufacturing
Services; and (2) it has the right to authorize Patheon to use and exploit such
issued patents and pending patent applications to perform the Manufacturing
Services in accordance with the terms and conditions hereof;

(ii) as of the Effective Date, to the actual knowledge of Flexion’s management
team, having taken all Diligent and Reasonable Steps to ascertain the same, that
there are no facts or circumstances that would cause Flexion to conclude that
the performance of the Manufacturing Services, in accordance with the terms and
conditions hereof and using Flexion’s Manufacturing Process, or the manufacture,
use, supply or other disposition of the Product by Patheon as may be required to
perform its obligations under this Agreement, will result, in the infringement
or misappropriation of any Third Party’s intellectual property rights;

(iii) as of the Effective Date, Flexion or its Affiliates Control and have the
right to lawfully disclose the Specifications to Patheon and to authorize
Patheon to use the Specification to perform the Manufacturing Services;

(iv) as of the Effective Date, there are no actions or other legal proceedings
pending against Flexion and/or its Affiliates concerning the infringement of
Third Party intellectual property rights related to any of the Specifications,
Flexion’s Manufacturing Process, any of the Materials, or the sale, use, or
other disposition by Flexion of any Product made in accordance with the
Specifications.

For the purposes of part (ii) above, “Diligent and Reasonable Steps” means such
steps as would normally be taken by a company of the same size and nature as
Flexion for a product of

 

 

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similar market potential at a similar stage of its product life, when utilizing
sound and reasonable business practice.

(b) Quality and Compliance.

(i) during the Term, the Specifications for all Products conform to all
applicable GMPs and Applicable Laws;

(ii) during the Term, the Products, if labelled and manufactured in accordance
with the Specifications and in compliance with the Quality Agreement, applicable
GMPs and Applicable Laws may be lawfully sold and distributed in every
jurisdiction in which Flexion markets the Products; and

(iii) during the Term, on the date of shipment to Patheon, any Flexion-Supplied
Materials will conform to the specifications for the Flexion-Supplied Materials
that Flexion has given to Patheon and the Flexion-Supplied Materials will be
adequately contained, packaged, and labelled and will conform to the
affirmations of fact on the container.

(c) Flexion agrees that, as a pre-condition to the adding of any country to the
Territory pursuant to section 2.2(h), Flexion shall repeat the warranties above
as at the date on which the country is added to the Territory.

6.5 DISCLAIMER. THE FOREGOING EXPRESS WARRANTIES SET FORTH IN THIS ARTICLE VI
ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY
OF MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE, OR NONINFRINGEMENT, AND
ALL OTHER WARRANTIES ARE HEREBY DISCLAIMED AND EXCLUDED BY EACH PARTY.

6.6 Legal Compliance.

(a) Patheon confirms that all licences, registrations and Regulatory Authority
approvals to be obtained by Patheon pursuant to this Agreement and the Technical
Transfer Agreement shall be obtained in a lawful and ethical manner.

(b) Patheon has not and shall not cause Flexion or its subsidiaries or
affiliates to be in violation of any applicable U.S. export or import control or
customs law or regulation, U.S. sanctions or embargoes, the U.S. Foreign Corrupt
Practices Act of 1977 (as amended) (“FCPA”), the U.S. Travel Act, the UK Bribery
Act of 2010 (the “UK Bribery Act”), anti-corruption and anti-kickback laws and
regulations, any applicable anti-corruption laws or regulations of another
country, or any other applicable law or regulation. In relation to Flexion’s
business, Patheon has not and shall not directly or indirectly offer, pay,
solicit, or accept any bribes, kickbacks, or other improper payments/benefits to
or from any party, including, but not limited to, any employee, representative,
or official of the Flexion, any government, or any state-affiliated entity.
Patheon has not and shall not offer, pay, solicit, or accept any rebates or
refunds in connection with the Product

 

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or Flexion’s business without informing and obtaining the written approval of
Flexion in advance and ensuring that such rebate/refund is compliant with all
applicable laws and regulations. Patheon has in good faith provided to Flexion
accurate and complete due diligence information and materials regarding Patheon
and its employees and Affiliates in response to requests by Flexion. In relation
to the performance of this Agreement, Patheon shall fully cooperate with Flexion
in ensuring compliance with the FCPA, the UK Bribery Act and all other
applicable laws and regulations.

(c) Flexion may suspend its performance under this Agreement if Flexion
reasonably suspects that Patheon has or will violate the FCPA, the UK Bribery
Act or any other applicable law or regulation. Patheon shall reasonably
cooperate with Flexion with any audit or questioning related thereto.

(d) Patheon understands and acknowledges that a violation of the FCPA, the UK
Bribery Act or any of the terms of this Section 6.6 by Patheon or its employees,
agents, or contractors shall constitute a […***…] for the purpose of Section
[…***…] of this Agreement.

ARTICLE VII. CONFIDENTIALITY

7.1 Confidentiality Obligations.

(a) Subject to the provisions of clauses (b), (c) and (d) below, at all times
during the Term and for seven (7) years following the expiration or termination
thereof, the Receiving Party (i) shall keep completely confidential and shall
not publish or otherwise disclose any Proprietary Information furnished to it by
the Disclosing Party, except to those of the Receiving Party’s Representatives
or Affiliates to perform such Party’s obligations hereunder (and who shall be
advised of the Receiving Party’s obligations hereunder and who are bound by
confidentiality obligations with respect to such Proprietary Information no less
onerous than those set forth in this Agreement) and (ii) shall not use
Proprietary Information of the Disclosing Party directly or indirectly for any
purpose other than performing its obligations or exercising its rights
hereunder. The Receiving Party shall be jointly and severally liable for any
breach by any of its Representatives of the restrictions set forth in this
Agreement.

(b) The Receiving Party’s obligations set forth in this Agreement shall not
extend to any Proprietary Information of the Disclosing Party:

 

 

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(i) that is or hereafter becomes part of the public domain by public use,
publication, general knowledge or the like through no wrongful act, fault or
negligence on the part of a Receiving Party or its Representatives or
Affiliates;

(ii) that is received from a Third Party without restriction and without breach
of any agreement between such Third Party and the Disclosing Party;

(iii) that the Receiving Party can demonstrate by competent evidence was already
in its possession without any limitation on use or disclosure prior to its
receipt from the Disclosing Party;

(iv) that is generally made available to Third Parties by the Disclosing Party
without restriction on disclosure; or

(v) that the Receiving Party can demonstrate by competent evidence was
independently developed by the Receiving Party without reference to the
Proprietary Information of the Disclosing Party.

(c) Each Party may disclose Proprietary Information to the extent that such
disclosure is:

(i) made in response to a valid order of a court of competent jurisdiction or
other governmental body of a country or any political subdivision thereof of
competent jurisdiction; provided, however, that the Receiving Party shall first
have given notice to the Disclosing Party and given the Disclosing Party a
reasonable opportunity to quash such order and to obtain a protective order
requiring that the Proprietary Information and/or documents that are the subject
of such order be held in confidence by such court or governmental body or, if
disclosed, be used only for the purposes for which the order was issued; and
provided further that if a disclosure order is not quashed or a protective order
is not obtained, the Proprietary Information disclosed in response to such court
or governmental order shall be limited to that information which is legally
required to be disclosed in such response to such court or governmental order;

(ii) otherwise required by law or regulation, including the rules and
regulations of any securities authority or stock exchange on which such Party’s
or its Affiliate’s securities are traded, as determined in good faith by counsel
for the Receiving Party and acting in accordance with Section 10.10;

(iii) made in connection with the filing or prosecution of patent rights as
permitted by this Agreement;

(iv) made in connection with the enforcement of such Party’s rights under this
Agreement and in performing its obligations under this Agreement;

(v) made in connection with the prosecution or defense of litigation as
permitted by this Agreement;

 

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(vi) made to Affiliates, actual and potential licensees and sublicensees,
employees, consultants or agents of the Receiving Party who have a need to know
such information in order for the Receiving Party to exercise its rights or
fulfill its obligations under this Agreement, provided, in each case, that any
such Affiliate, actual or potential licensee or sublicensee, employee,
consultant or agent agrees to be bound by terms of confidentiality and non-use
comparable in scope to those set forth herein; and

(vii) made to Third Parties in connection with due diligence or similar
investigations by such Third Parties, and disclosure to potential Third Party
investors in confidential financing documents, provided, in each case, that any
such Third Party agrees to be bound by reasonable obligations of confidentiality
and non-use; and

(viii) with respect to disclosure by Flexion, made to Regulatory Authorities in
connection with obtaining and maintaining any Marketing Authorization.

(d) The Parties rights and obligations regarding the filing of this Agreement
with any securities authority or with any stock exchange on which securities
issued by a Party or its Affiliate are traded are set forth in Section 10.10.

(e) Subject to Patheon’s obligations with any Regulatory Authority, upon
expiration or termination of this Agreement, each Party, at the request of the
other, shall return all data, files, records and other materials in its
possession or control containing or comprising the other Party’s Proprietary
Information; provided that each Party may retain a copy of any Proprietary
Information of the other Party required in order to permit a Party to exercise
its rights pursuant to clause (c) above.

7.2 Injunctive Relief. Each Party acknowledges that a breach by either Party of
the this ARTICLE VII may not reasonably or adequately be compensated in damages
in an action at law and that such a breach may cause the other Party irreparable
injury and damage. By reason thereof, each Party agrees that the other Party may
be entitled, in addition to any other remedies it may have under this Agreement
or otherwise, to apply for preliminary and permanent injunctive and other
equitable relief to prevent or curtail any breach of this ARTICLE VII; provided,
however, that no specification in this Agreement of a specific legal or
equitable remedy will be construed as a waiver or prohibition against the
pursuing of other legal or equitable remedies in the event of such a breach.
Each Party agrees that the existence of any claim, demand, or cause of action of
it against the other Party, whether predicated upon this Agreement, or
otherwise, will not constitute a defense to the enforcement by the other Party,
or its successors or assigns, of the covenants contained in this ARTICLE VII.

 

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ARTICLE VIII. TERM AND TERMINATION

8.1 Term. This Agreement shall commence as of the Effective Date and, unless
earlier terminated in accordance with the terms hereof, shall expire on the
tenth (10th) anniversary of the FDA Approval Date (the “Initial Term”).
Notwithstanding, by mutual agreement the Parties may commence discussions three
(3) years prior to the end of the Initial Term with a view to extending the
Initial Term for such period or periods as may be agreed (collectively, the
Initial Term and any extensions thereof, the “Term”).

8.2 Termination. In addition to any other provision of this Agreement expressly
providing for termination of this Agreement, this Agreement may be terminated as
follows:

(a) Flexion may terminate this Agreement:

(i) at any time by giving Patheon one (1) month prior written notice in the
event that for efficacy or safety reasons the Product is withdrawn permanently
or, if not yet approved, the Product is barred from further development (in
either case for reasons outside of the reasonable control of Flexion) in the
United States or any other market in a country or countries of the Territory
that represent eighty percent (80%) or more of Flexion’s overall Product sales
including without limitation: (A) if any Regulatory Authority causes the
clinical hold or permanent withdrawal of the Product, (B) failure to receive
Marketing Authorization in the United States, (C) failure of the Product to
achieve its primary endpoint or key secondary endpoints with respect to either
of the ongoing (as of the Effective Date) Phase 2(b) and Phase 3 clinical
trials, or (D) safety data which Flexion determines may have a materially
adverse impact on use of the Product.

(ii) for convenience, at any time (x) prior to the FDA Approval Date, with three
(3) months written notice to Patheon, and (y) after the FDA Approval Date, by
giving twenty four (24) months prior written notice to Patheon; or

(iii) at any time upon written notice in the event of any material default by
Patheon in the performance of any of its obligations hereunder, which material
default has not been cured by Patheon within ninety (90) days after receiving
written notice thereof (“Remediation Period”), provided that Patheon shall
continue performing hereunder pursuant to the terms of Section 8.4 below.
Flexion’s right to terminate this Agreement for a particular breach under this
Section 8.2(a)(iii) may only be exercised for a period of one hundred twenty
(120) days following the expiry of the Remediation Period (where the breach has
not been remedied) and, if the termination right is not exercised during this
period, then Flexion will be deemed to have waived its right to terminate this
Agreement for such breach. For purposes of clarity, the Parties agree that a
“material default” of Patheon shall have occurred if (A) Patheon shall have
delivered Non-Conforming Product caused by Patheon Nonconformance with respect
to three (3) batches in any one calendar year, or (B) the Facility and/or the
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Suite violates GMP or other Applicable Law preventing the ability to continue
the Manufacturing of Product for at least six (6) months.

(b) Patheon may terminate this Agreement at any time upon written notice in the
event of (i) any material default by Flexion in the performance of any of its
obligations hereunder, which default has not been cured by Flexion within ninety
(90) days after receiving written notice thereof; or (ii) Flexion’s default of
its payment obligations in accordance with ARTICLE IV which default has not been
cured by Flexion within fifteen (15) days after receiving written notice
thereof; provided, however, that, if Flexion fails to cure such payment default,
Patheon may not terminate without first providing a second notice to the
attention of Flexion’s Chief Executive Officer and an additional fifteen
(15) day cure period.

(c) This Agreement may be terminated at any time by either Party immediately
upon written notice to the other Party (A) pursuant to Section 10.2 in the event
of a force majeure that remains uncured for the period provided in Section 10.2,
or (B) if the other Party shall file in any court or agency, pursuant to any
statute or regulation of any state or country, a petition in bankruptcy or
insolvency or for reorganization or for arrangement or for the appointment of a
receiver or trustee of the other Party or of its assets, or if the other Party
proposes a written agreement of composition of its debts, or if the other Party
shall be served with an involuntary petition against it, filed in any insolvency
proceeding, and such petition is consented to by such Party or is not dismissed
within sixty (60) days after the filing thereof, or if the other Party shall
propose or be a Party to any dissolution or liquidation, or if the other Party
shall make an assignment for the benefit of its creditors.

(d) Either Party may terminate this Agreement by giving three (3) months’ notice
to the other Party if a permanent injunction is granted pursuant to a Third
Party claim for intellectual property infringement in either the United Kingdom
and/or the United States preventing the further sale, promotion or marketing of
the Product in such country as applicable.

(e) This Agreement will automatically terminate should either Flexion or Patheon
exercise its right to terminate the Technical Transfer Agreement (but not in the
event of an expiration of such agreement as set forth in Section 8.2 thereof)
prior to the FDA Approval Date, in which case, any payment to Patheon will be
made in accordance with the Technical Transfer Agreement.

8.3 Effect of Termination.

(a) The expiration or termination of this Agreement shall be without prejudice
to any rights or obligations of the Parties that may have accrued prior to such
termination, and the provisions of Sections 2.8 (in respect of Product on the
market at the date of termination of this Agreement), 3.5, 3.6, 3.8, 3.10, 3.12,
3.13, 5.1, 5.2(c), 5.5, 6.3, 6.5, 8.3 and 8.4 and ARTICLE I (to the extent
definitions are used in other surviving sections pursuant to this
Section 8.3(a)), ARTICLE IV,

 

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ARTICLE VII, ARTICLE IX, and ARTICLE X; provided that, Section 3.8 shall only
survive for a period of […***…] days after expiration or termination of this
Agreement in respect of deviations that occurred before termination or
expiration and continue to be relevant shall survive the expiration or
termination of this Agreement. Except as otherwise expressly provided herein,
termination of this Agreement in accordance with the provisions hereof shall not
limit remedies that may otherwise be available in law or equity.

(b) Upon expiration or termination of this Agreement, subject to the Parties’
obligations under Section 8.4 below, each Party, at the request of the other,
shall return all data, files, records, and other materials in its possession or
control containing or comprising the other Party’s Proprietary Information.

(c) Upon expiration or termination of this Agreement for any reason, subject to
the Parties’ obligations under Section 8.4 below, (i) all submitted but unfilled
Purchase Orders with respect to which Patheon has (1) not begun Manufacture of
Product shall be cancelled, or (2) begun Manufacture of the Product shall be
completed, unless otherwise agreed (ii) Flexion shall remove all Flexion
Manufacturing Equipment and Materials from the Facility within […***…] days of
such termination under all sections other than Section 8.2(a)(iii) and within
[…***…] days […***…] of a termination by Flexion pursuant to Section 8.2(a)(iii)
that is not reasonably disputed by Patheon, failing which Flexion will pay a fee
equivalent to the aggregate monthly Base Fee for the Manufacturing Suite for
each month or part month the Flexion Manufacturing Equipment or Materials remain
at the Facility after […***…] days or […***…] days, as applicable, from such
termination.

(d) Upon expiration or termination of this Agreement, subject to the Parties’
obligations under Section 8.4 below, (i) Flexion shall purchase from Patheon at
Patheon’s cost, all unpaid Material Costs and Bill Back Items which were
ordered, purchased, produced or maintained by Patheon in contemplation of the
Manufacture of the Product in accordance with Section 2.2; (ii) Flexion shall
pay Patheon any earned but unpaid Product Fees, including those under any
outstanding Purchase Order as described in Section 8.3(c); (iii) Flexion shall
pay for any earned (through the month of such expiration or termination) but
undisputed and unpaid Base Fees, Phase I Filling Space Fees or Additional
Services; and (iv) Flexion shall pay all due and outstanding invoices under
ARTICLE IV.

(e) Upon expiration or termination of this Agreement for any reason other than
by […***…] pursuant to Section […***…] that is not reasonably disputed by
[…***…], subject to the Parties’ obligations under Section 8.4 below, Flexion
shall pay to Patheon all and any removal and Make Good Costs associated with the
removal of the Flexion Manufacturing Equipment

 

 

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from the Facility as agreed to in good faith by the Parties. “Make Good Costs”
means the reasonable costs required to repair the Facility and return it to a
clean, safe and useable area based on the repair of damage caused by the
installation or removal of Flexion Manufacturing Equipment. In relation to
termination of this Agreement by […***…] pursuant to Section […***…], Flexion
shall pay any Make Good Costs that are required in relation to and to the extent
that any damage that is caused to the Facility as a result of the negligence of
Flexion or its agent or a failure to materially comply with the reasonable
written instructions of Patheon in the removal of Flexion Manufacturing
Equipment.

(f) The Parties understand and believe that the expiration or termination of
this Agreement for any reason shall not constitute a “relevant transfer” as
defined by and pursuant to Regulation 3(1)(b) of the Transfer of Undertakings
(Protection of Employment) Regulations 2006 (“TUPE”). If, contrary to the
Parties’ understanding and belief, TUPE does apply on the expiration or
termination of this Agreement to the transfer of any employee or subcontractor
of Patheon to Flexion or to any person who, after expiration or termination of
this Agreement, provides to Flexion services similar to the Manufacturing
Services and/or the Additional Services (“Replacement Entity”) then:

 

  (i) without prejudice to Flexion’s obligations under Section 8.3(g) below,
following termination or expiry of this Agreement other than by […***…] pursuant
to Section […***…], Flexion shall indemnify Patheon for and against all claims,
costs, expenses or liabilities arising, incurred or suffered by Patheon in
relation to any claim made by or in respect of any person employed or formerly
employed by Patheon for which it is alleged Flexion and/or any Replacement
Entity may be liable by virtue of TUPE, provided that this indemnity shall not
apply if and to the extent that, (A) the aggregate amount payable by Flexion
pursuant to this Section 8.3(f)(i) and Section 8.3(g) exceeds the Maximum
Manufacturing Services Termination Costs; or (B) any such claim, cost, expense
or liability arises as a result of a failure by Patheon to comply with its
applicable obligations under TUPE.

 

  (ii)

if (A) this Agreement has been terminated by […***…] pursuant to Section
[…***…], or (B) this Agreement terminates or expires under any other
circumstances and the aggregate amount payable by Flexion pursuant to
Section 8.3(f)(i) and Section 8.3(g) exceeds the Maximum Manufacturing Services
Termination Costs, Patheon shall indemnify Flexion for and against all claims,
costs, expenses or liabilities arising, incurred or suffered by Flexion and/or
any Replacement Entity in relation to any claim

 

 

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  made by or in respect of any person employed or formerly employed by Patheon
for which it is alleged Flexion and/or any Replacement Entity may be liable by
virtue of TUPE provided that this indemnity shall not apply if and to the extent
that any such claim, cost, expense or liability arises as a result of a failure
by Flexion or the Replacement Entity to comply with its applicable obligations
under TUPE.

(g) Subject to the Parties’ obligations under Section 8.4 below, Flexion shall
pay to Patheon the following costs (“Manufacturing Services Termination Costs”):
(i) upon expiration or termination of this Agreement, all reasonable actual
costs incurred by Patheon to complete activities associated with such
completion, expiry or termination including, without limitation, disposal fees
that may be payable for any Materials and supplies owned by Flexion to be
disposed of by Patheon; and (ii) upon expiration or termination of this
Agreement other than by […***…] pursuant to Section […***…], all and any direct
costs and expenses or termination or cancellation fees payable by Patheon as a
consequence of or arising from the termination of this Agreement, to include but
not limited to, all and any reasonable redundancy costs of employees employed by
Patheon to work solely or mainly in providing the Services and/or Manufacturing
the Product, all and any termination costs in relation to subcontractors and
agency staff working solely or mainly in providing the Services and/or
Manufacturing the Product and any termination or cancellation fees payable to
Third Party suppliers. Patheon will use commercially reasonable efforts to
mitigate the Manufacturing Services Termination Costs and reallocate available
resources. Patheon will further provide Flexion with documentation in order to
substantiate the Manufacturing Services Termination Costs. Notwithstanding
anything in this Section 8.3(g), Flexion’s aggregate liability for the
Manufacturing Services Termination Costs (under both this Agreement and the
Technical Transfer Agreement combined) shall be limited to the payment to
Patheon of the first £[…***…] (the “Maximum Manufacturing Services Termination
Costs”).

(h) Flexion acknowledges that no Patheon Competitor (being a Person that derives
greater than […***…]% of its revenues from performing contract pharmaceutical or
biopharmaceutical development or commercial manufacturing services) will be
permitted access to the Facility.

(i) In relation to any representatives of Flexion that are permitted access to
the Facility pursuant to Section 8.3 or 8.4, Flexion shall ensure that such
representatives are appropriately trained by Flexion (e.g. GMP training) and
shall

 

 

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observe at all times Patheon’s policies and procedures (as amended from
time-to-time) as they pertain to the Facility, including policies relating to
health and safety and compliance with GMP, and comply with all reasonable
directions of Patheon in relation to the same; provided that Flexion is given
notice of such policies and given a reasonable period of time to review and
implement such policies. Patheon may refuse or limit in its sole discretion at
any time admission to the Facility by any of Flexion’s representatives who fail
to observe such policies or comply with such reasonable directions.

(j) The Parties agree that if any fees or charges are duplicated under
Section 8.11 of the Technical Transfer Agreement, Flexion shall only be
obligated to make such payment once.

8.4 Transition Assistance.

(a) Upon the delivery by either Party of a notice of termination of this
Agreement for any reason, upon the request of Flexion, and subject to terms set
forth in this Agreement including this Section 8.4(a), (i) Patheon shall provide
Flexion with the reasonable assistance of its staff and reasonable access to its
other internal resources to provide Flexion with a reasonable level of technical
assistance and consultation to transfer the Manufacture and the regulatory
qualification of the Product to a supplier of Flexion’s election, provided that
Flexion will reimburse Patheon for its fees and all documented costs and
out-of-pocket expenses incurred in connection with such assistance (Patheon
would provide a quotation for the services which Flexion requires pursuant to
this Section 8.4 as Additional Services and on acceptance by Flexion of the
same, Patheon will provide the services stated therein) and (ii) Patheon will
provide the deliverables set forth on Schedule 8.4(a) hereto subject to payment
of the fees and costs to be paid by Flexion as described above.

(b) Upon the delivery by […***…] of a notice of termination of this Agreement
pursuant to Section […***…] (but not including the giving of notice of
termination following an extension to this Agreement pursuant to this
Section 8.4(b)), if requested by Flexion in writing given at the same time as
the giving of such notice of termination including the term of such additional
supply, Patheon shall supply the Products pursuant to the terms of this
Agreement for a period not to exceed a maximum of […***…] from the delivery of a
notice of termination. For the avoidance of doubt, the termination date of this
Agreement shall be deemed the date upon which the Parties have completed their
obligations under this Section 8.4. Flexion acknowledges that, during such
transition assistance period, no Patheon Competitor (being a Person that derives
greater than […***…]% of its revenues from performing contract pharmaceutical or
biopharmaceutical development or commercial manufacturing services) will be

 

 

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permitted access to portions of the Facility other than those dedicated to the
Manufacture of the Product.

ARTICLE IX. INDEMNIFICATION

9.1 Flexion Indemnification Obligations. Flexion shall indemnify Patheon, its
Affiliates, and their respective directors, officers, employees, and agents (the
“Patheon Indemnified Parties”), and defend and save each of them harmless, from
and against any and all (a) Third Party Losses incurred by any of them in
connection with, arising from, or occurring as a result of (i) the breach by
Flexion of any of its obligations under this Agreement; (ii) the breach or
inaccuracy of any representation or warranty made by Flexion in this Agreement,
(iii) any negligence or willful misconduct by Flexion or any of its Affiliates,
(iv) any claim made by any Person that the Manufacture and supply of the Product
in accordance with the terms hereof infringes or misappropriates the patent,
trademark, or other intellectual property rights of such Person, and (v) any
product liability claim made by any Person with respect to any Product
Manufactured in accordance with the terms hereof, except to the extent liability
is based on a Patheon Nonconformance or (b) any Loss incurred by any of them as
a direct result of and to the extent of the negligence or willful misconduct of
the Flexion On Site Representatives at the Facility except, in each case, for
those Losses for which Patheon has an obligation to indemnify the Flexion
Indemnified Parties pursuant to Section 9.2, as to which Losses each Party shall
indemnify the other to the extent of their respective liability for such Losses
and provided, however, that Flexion will not be required to indemnify the
Patheon Indemnified Parties with respect to any such Loss hereunder to the
extent the same is caused by any breach of contract, negligent act or omission,
or intentional misconduct by any Patheon Indemnified Parties. For the avoidance
of doubt, the parties acknowledge that Patheon has not and will not conduct any
freedom to operate searches in relation to the Product and/or Flexion’s
Manufacturing Process nor reviewed any third party patents in relation thereto
and that Patheon’s failure or omission to do so will not be considered
negligence for the purposes of excluding or limiting a claim under this
indemnity.

9.2 Patheon Indemnification Obligations. Patheon shall indemnify Flexion, its
Affiliates, and their respective directors, officers, employees, and agents (the
“Flexion Indemnified Parties”), and defend and save each of them harmless, from
and against any and all (a) Third Party Losses incurred by any of them resulting
from, or relating to, any claim of personal injury or property damage to the
extent that the injury or damage is in connection with, arising from, or
occurring as a result of (i) the breach or inaccuracy of any representation or
warranty made by Patheon in this Agreement, (ii) any negligence or willful
misconduct by Patheon or any of its Affiliates; and (iii) any product liability
claim made by any Person with respect to any Product Manufactured by Patheon to
the extent any such liability is based on or caused by a Patheon Nonconformance;
(b) Third Party Losses incurred by any of them in connection with, arising from,
or occurring as a result of a claim that any Existing Patheon Intellectual
Property or Patheon Improvement used by Patheon in its Manufacture of the
Product infringes or misappropriates the patent, trademark, or other
intellectual property rights of such Person; except, in each case, for which
Flexion has an obligation to indemnify the Patheon Indemnified Parties pursuant
to Section 9.1, as to which Losses each Party shall indemnify the other to the
extent of their respective liability for such Losses and provided, however, that
Patheon will not be required to indemnify the Flexion Indemnified Parties with
respect to any

 

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such Loss hereunder to the extent the same is caused by any breach of contract,
negligent act or omission, or intentional misconduct by Flexion Indemnified
Parties.

9.3 Indemnification Procedure.

(a) Notice of Claim. The indemnified Party (the “Indemnified Party”) shall give
the indemnifying Party (the “Indemnifying Party”) prompt written notice (an
“Indemnification Claim Notice”) of any Loss, action, or discovery of facts upon
which such Indemnified Party intends to base a request for indemnification under
Section 9.1 or 9.2 (a “Claim”), but in no event shall the Indemnifying Party be
liable for any Losses that result from any delay in providing such notice. Each
Indemnification Claim Notice must contain a description of the claim and the
nature and amount of such Loss (to the extent that the nature and amount of such
Loss are known at such time). The Indemnified Party shall furnish promptly to
the Indemnifying Party copies of all papers and official documents received in
respect of any Losses upon which it intends to seek indemnification.

(b) Control of Defense. At its option, the Indemnifying Party may assume the
defense of any Claims by giving written notice to the Indemnified Party within
[…***…] days after the Indemnifying Party’s receipt of an Indemnification Claim
Notice; provided that the assumption of the defense of a Claim by the
Indemnifying Party shall not be construed as an acknowledgment that the
Indemnifying Party is liable to indemnify any Indemnified Party in respect of
the Claim, nor shall it constitute a waiver by the Indemnifying Party of any
defenses it may assert against any Indemnified Party’s Claim. Upon assuming the
defense of a Claim, the Indemnifying Party may appoint as lead counsel in the
defense of such Claim any legal counsel selected by the Indemnifying Party. In
the event the Indemnifying Party assumes the defense of a Claim, the Indemnified
Party shall immediately deliver to the Indemnifying Party all original notices
and documents (including court papers) received by any Indemnified Party in
connection with the Claim. Subject to clause (c) below, if the Indemnifying
Party assumes the defense of a Claim, the Indemnifying Party shall not be liable
to the Indemnified Party for any legal expenses subsequently incurred by such
Indemnified Party in connection with the analysis, defense, or settlement of
such Claim. In the event that it is ultimately determined that the Indemnifying
Party is not obliged to indemnify, defend, or hold harmless an Indemnified Party
from and against any Claim, the Indemnified Party shall reimburse the
Indemnifying Party for any and all costs and expenses (including attorneys’ fees
and costs of suit) and any Losses incurred by the Indemnifying Party in its
defense of such Claim.

(c) Right to Participate in Defense. Without limiting Section 9.3(b), any
Indemnified Party shall be entitled to participate in, but not control, the
defense of a Claim and to employ counsel of its choice for such purpose;
provided,

 

 

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however, that such employment shall be at the Indemnified Party’s own expense
unless (i) the employment thereof has been specifically authorized by the
Indemnifying Party in writing, (ii) the Indemnifying Party has failed to assume
the defense and employ counsel in accordance with Section 9.3(b) (in which case
the Indemnified Party shall control the defense), or (iii) the interests of the
Indemnified Party and the Indemnifying Party with respect to such Claim are
sufficiently adverse to prohibit the representation by the same counsel of both
Parties under Applicable Law, ethical rules, or equitable principles.

(d) Settlement. With respect to any Losses (i) relating solely to the payment of
money damages in connection with a Claim, (ii) that will not result in the
Indemnified Party becoming subject to injunctive or other relief or otherwise
adversely affect the business or reputation of the Indemnified Party in any
manner, and (iii) as to which the Indemnifying Party has acknowledged in writing
the obligation to indemnify the Indemnified Party hereunder, the Indemnifying
Party shall have the sole right to consent to the entry of any judgment, enter
into any settlement, or otherwise dispose of such Loss, on such terms as the
Indemnifying Party, in its sole discretion, shall deem appropriate. With respect
to all other Losses in connection with Claims, where the Indemnifying Party has
assumed the defense of the Claim in accordance with Section 9.3(b), the
Indemnifying Party shall have authority to consent to the entry of any judgment,
enter into any settlement, or otherwise dispose of such Loss; provided that it
obtains the prior written consent of the Indemnified Party, which consent shall
not be unreasonably withheld or delayed. The Indemnifying Party shall not,
without the prior written consent of the Indemnified Party, agree to any
settlement or acquiesce to any judgment with respect to a Claim that obligates
the Indemnified Party to pay any amount subject to indemnification by the
Indemnifying Party or causes the Indemnified Party to admit to any civil or
criminal liability.

(e) Cooperation. If the Indemnifying Party chooses to defend or prosecute any
Claim, the Indemnified Party shall cooperate in the defense or prosecution
thereof and shall, at the Indemnifying Party’s expense, furnish such records,
information, and testimony, provide such witnesses, and attend such conferences,
discovery proceedings, hearings, trials, and appeals as may be reasonably
requested in connection therewith. Such cooperation shall include access during
normal business hours afforded to the Indemnifying Party to, and reasonable
retention by the Indemnified Party of, records and information that are
reasonably relevant to such Claim, and making employees and agents available on
a mutually convenient basis to provide additional information and explanation of
any material provided hereunder, and the Indemnifying Party shall reimburse the
Indemnified Party for all its time and reasonable out-of-pocket expenses in
connection therewith.

(f) Expenses. Except as provided above, the reasonable and verifiable costs and
expenses, including fees and disbursements of counsel, incurred by the
Indemnified Party in connection with any Claim shall be reimbursed on a monthly
basis in arrears by the Indemnifying Party, without prejudice to the

 

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Indemnifying Party’s right to contest the Indemnified Party’s right to
indemnification and subject to refund in the event the Indemnifying Party is
ultimately held not to be obliged to indemnify the Indemnified Party.

9.4 Insurance. During the Term and for […***…] thereafter, each Party shall
procure and maintain at its own expense from a qualified and licensed insurer
liability insurance or indemnity policies, in an amount not less than $[…***…]
in the aggregate with respect to public and products liability, subject to such
deductible or self-retention limits as either Party in its business discretion
may elect. Such policies shall insure against liability on the part of each
Party and any of its Affiliates, as their interests may appear, due to injury,
disability, or death of any person or persons, or injury to property, arising
from the distribution of the Products. Each Party will either (a) include the
other Party and its officers and employees and consultants as additional
insureds on such policies, or (b) ensure that such policy contains an indemnity
to principal clause. Promptly following the execution of this Agreement, each
Party shall provide to the other a certificate of insurance (i) summarizing the
insurance coverage and (ii) identifying any exclusions. Each Party shall
promptly notify the other of any material adverse alterations to the terms of
this policy or decreases in the amounts for which insurance is provided.

9.5 Limitation on Damages

(a) Maximum Liability. Except with respect to (i) […***…] of Patheon or (ii) for
damages incurred by Flexion arising from, or occurring as a result of a claim by
a Third Party that any […***…] used by Patheon in its Manufacture of the Product
[…***…] or (iii) breaches of […***…], Patheon’s maximum liability to Flexion
under this Agreement for any reason whatsoever, including, without limitation,
any liability arising under Sections 2.7, 2.8, 3.10, 3.12 or 9.2 hereof or
resulting from any and all breaches of its representations, warranties, or any
other obligations under this Agreement in each calendar year (liability cap
pro-rated for part calendar years) will not exceed […***…]% of the revenues
received by Patheon pursuant to this Agreement in the […***…] period prior to
the month in which the underlying event occurred that gave rise to the liability
(e.g. the date of the incident or manufacture).

(b) NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR (I) ANY (DIRECT OR INDIRECT)
LOSS OF PROFITS, OF PRODUCTION, OF ANTICIPATED SAVINGS, OF BUSINESS, OF GOODWILL
OR OF USE OF THE PRODUCT OR COSTS OF ANY SUBSTITUTE SERVICES OR (II) ANY OTHER
LIABILITY, DAMAGE, COST OR EXPENSE OF ANY KIND INCURRED BY THE OTHER PARTY OF AN
INDIRECT OR CONSEQUENTIAL NATURE, REGARDLESS OF ANY

 

 

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NOTICE OF THE POSSIBILITY OF THE DAMAGES. NOTWITHSTANDING THE FOREGOING, NOTHING
IN THIS PARAGRAPH IS INTENDED TO LIMIT OR RESTRICT DAMAGES AVAILABLE FOR
[…***…].

(c) The limitations set forth in Sections 9.5(a) and 9.5(b) shall not act to
exclude or limit either Party’s liability for (i) personal injury or death
caused by the negligence of that Party, or for (ii) fraudulent
misrepresentation.

(d) Sole & Exclusive Remedies. Notwithstanding anything in this Article IX to
the contrary:

(i) Except as described in Section 9.5(c) above and except for Patheon’s
indemnification obligations set forth in Section 9.2, Patheon’s sole liability
and Flexion’s sole and exclusive remedy whether in contract, tort, equity or
otherwise for Non-Conforming Product based on or caused by a Patheon
Nonconformance shall be the rights and remedies set forth in Section 2.8, 3.10
and 3.12 of this Agreement and in Section 8.2(a)(iii) of this Agreement.

(ii) Patheon’s sole liability and Flexion’s sole and exclusive remedy whether in
contract, tort, equity or otherwise for Patheon’s failure to Manufacture the
full quantity of Product specified in a Purchase Order by the Agreed Delivery
Date shall be the rights and remedies set forth in Section 2.7 and
Section 8.2(a)(iii) of this Agreement.

9.6 Product Liability Claims. As soon as it becomes aware, each Party will give
the other prompt written notice of any defect or alleged defect in a Product,
any injury alleged to have occurred as a result of the use or application of the
Product, and any circumstances that may give rise to litigation or recall of a
Product or regulatory action that may affect the sale or Manufacture of a
Product, specifying, to the extent the Party has such information, the time,
place, and circumstances thereof and the names and addresses of the persons
involved. Each Party will also furnish promptly to the other copies of all
papers received in respect of any claim, action, or suit arising out of such
alleged defect, injury, or regulatory action.

9.7 Allocation of Risk. This Agreement (including, without limitation, this
ARTICLE IX) is reasonable and creates a reasonable allocation of risk for the
relative profits the Parties each expect to derive from the Products.

ARTICLE X. MISCELLANEOUS

10.1 Notices. Notwithstanding that advance notification of any notices or other
communications may be given by electronic mail transmission, all notices or
other communications that shall or may be given pursuant to this Agreement shall
be in writing

 

 

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(including by confirmed receipt electronic mail) and shall be deemed to be
effective (a) when delivered if sent by registered or certified mail, return
receipt requested, or (b) on the next business day, if sent by overnight
courier, (c) when sent if sent by electronic mail provided that receipt is
confirmed, in each case to the Parties at the following addresses (or at such
other addresses as shall be specified by like notice) with postage or delivery
charges prepaid:

If to Flexion:

Flexion Therapeutics, Inc.

Attn: Michael Clayman, MD

Telephone: […***…]

Email: […***…]

With a copy to: Legal

If to Patheon:

Attention:

Patheon UK Limited

Executive Director & General Manager

Kingfisher Drive, Covingham

Swindon, Wiltshire SN3 5BZ

England

Email: […***…]

with copy to

Legal Director.

10.2 Force Majeure. Neither Party shall be liable for delay in delivery,
performance or nonperformance, in whole or in part, nor shall the other Party
have the right to terminate this Agreement except as otherwise specifically
provided in this Section 10.2 where such delay in delivery, performance or
nonperformance results from acts beyond the reasonable control and without the
fault or negligence of such Party including, but not limited to, the following
conditions: fires, floods, storms, embargoes, shortages, epidemics, quarantines,
war, acts of war (whether war be declared or not), terrorism, insurrections,
riots, civil commotion, or acts, omissions, or delays in acting by any
governmental authority; provided that the Party affected by such a condition
shall, within five (5) days of its occurrence, give notice to the other Party
stating the nature of the condition, its anticipated duration, and any action
being taken to avoid or minimize its effect. The suspension of performance shall
be of no greater scope and no longer duration than is reasonably required, and
the nonperforming Party shall use its commercially reasonable efforts to remedy
its inability to perform; provided, however, that in the event the suspension of
performance continues for […***…] days after the date of the occurrence, and
such failure to perform would constitute a material breach of this Agreement in
the absence of such force majeure event, the non-affected Party may terminate
this Agreement immediately by written notice to the affected Party.

 

 

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10.3 Independent Contractor. The Parties to this Agreement are independent
contractors. Nothing contained in this Agreement shall be construed to place the
Parties in the relationship of employer and employee, partners, principal, and
agent or a joint venture. Neither Party shall have the power to bind or obligate
the other Party nor shall either Party hold itself out as having such authority.

10.4 Waiver. Save where expressly stated in Sections 2.8 and 8.2(a)(iii), no
waiver by either Party of any provision or breach of this Agreement shall
constitute a waiver by such Party of any other provision or breach, and no such
waiver shall be effective unless made in writing and signed by an authorized
representative of the Party against whom waiver is sought. No course of conduct
or dealing between the Parties will act as a modification or waiver of any
provision of this Agreement. Either Party’s consent to or approval of any act of
the other Party shall not be deemed to render unnecessary the obtaining of that
Party’s consent to or approval of any subsequent act by the other Party.

10.5 Entire Agreement. This Agreement (together with all Exhibits and Schedules
hereto, which are hereby incorporated by reference), the Quality Agreement, and
the Technical Transfer Agreement constitute the final, complete, and exclusive
agreement between the Parties relating to the subject matter hereof and
supersede all prior conversations, understandings, promises, and agreements
relating to the subject matter hereof, including without limitation that
(i) certain Confidentiality Agreement dated September 22, 2014 between Flexion
and Patheon and the Letter Agreement, and (ii) that certain Patheon Partner
External User Account/Access Form, Client Agreement and Authorization signed by
Flexion on June 5, 2015.

Neither Party has relied upon any communications, representations, terms or
promises, verbal or written, not set forth herein. No terms, provisions or
conditions of any purchase order or other business form or written authorization
used by Flexion or Patheon will have any effect on the rights, duties, or
obligations of the Parties under or otherwise modify this Agreement, regardless
of any failure of Flexion or Patheon to object to the terms, provisions, or
conditions unless the document specifically refers to this Agreement and is
signed by both Parties.

10.5A Assignment; Change of Control. This Agreement may not be assigned by
Patheon without the prior written consent of Flexion. Notwithstanding the
foregoing, either Party may assign this Agreement to an Affiliate or to an
acquirer or successor in interest in connection with a Change of Control of such
Party without the prior written consent of the other Party, provided that such
Party provides the other Party with written notice of any such assignment. This
Agreement shall be binding upon and inure to the benefit of Flexion and Patheon
and their respective successors, heirs, executors, administrators, and permitted
assigns. “Change of Control” means the closing of (a) a merger, consolidation or
similar transaction providing for the acquisition of the direct or indirect
ownership of more than fifty percent (50%) of a Party’s shares or similar equity
interests or voting power of the outstanding voting securities or that
represents the power to direct the management and policies of such Party
(including any acquisition arising through the offering of any shares of Patheon
or any of its Affiliates on any securities or stock exchange), or (b) the sale
of all or substantially all of a Party’s assets related to the subject matter of
the Agreement.

 

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10.6 Amendment; Modification. This Agreement may not be amended, modified,
altered, or supplemented except by a writing signed by both Parties. No
modification of any nature to this Agreement and no representation, agreement,
arrangement, or other communication shall be binding on the Parties unless such
is expressly contained in writing and executed by the Parties as an amendment to
this Agreement. This Agreement may not be amended in any respect by any purchase
order, invoice, acknowledgment, or other similar printed document issued by
either Party.

10.7 Governing Law

(a) The laws of […***…], whether procedural or substantive (but excluding
application of any choice of law provisions contained therein) shall apply to
all matters pertaining only to (a) title to and ownership of Materials,
Equipment or the Facility, and its appurtenances including, without limitation,
all rights therein and the creation, exercise and extinction of such rights,
obligations and liabilities or (b) employment law matters. In relation to such
matters, both Parties shall submit to the exclusive jurisdiction of the […***…]
Courts. For the avoidance of doubt, the Parties agree that nothing in this
Agreement shall (i) grant Flexion any property ownership rights in the Facility
or (ii) shall constitute a lease to the Facility.

(b) In all other respects, this Agreement shall be construed under and governed
by the laws of […***…] without regard to the application of principles of
conflicts of law. In relation to such matters, both Parties shall submit to the
exclusive jurisdiction of […***…].

(c) Any preliminary issue over which of sub-section 10.7(a) or (b) applies to a
particular claim or dispute shall be determined in accordance with provisions of
10.7(a).

(d) The Parties expressly exclude the application of the United Nations
Convention on Contracts for the International Sale of Goods, if applicable.

10.8 Compliance with Applicable Laws. Each Party and its Affiliates, and their
respective representatives, shall comply with all applicable laws, rules and
regulations in the performance of their obligations under this Agreement.
Without limiting the foregoing, each Party and its Affiliates, and their
respective representatives, shall comply with export control laws and
regulations of the country of Manufacture and of the United States. Neither
Party nor its Affiliates (or representatives) shall, directly or indirectly,
without prior U.S. government authorization, export, re-export, or transfer the
Product to any country subject to a U.S. trade embargo, to any resident or
national of any country subject to a U.S. trade embargo, or to any person or
entity listed on the “Entity List” or “Denied Persons List” maintained by the

 

 

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U.S. Department of Commerce or the list of “Specifically Designated Nationals
and Blocked Persons” maintained by the U.S. Department of Treasury. In so far as
the same applies to a Party or its Affiliates, each Party and its Affiliates and
respective representatives shall comply with the requirements of the Foreign
Corrupt Practices Act of 1977 (15 U.S.C. § 78dd-1, et seq.).

10.9 Dispute Resolution.

(a) The Parties recognize that disputes may arise from time to time during the
Term of this Agreement. It is the objective of the Parties to establish
procedures to facilitate the resolution of such disputes arising under this
Agreement in an expedient manner by mutual cooperation. To accomplish this
objective, the Parties agree to follow the procedures set forth in this
Section 10.9 if and when a dispute arises under this Agreement.

(b) Unless otherwise specifically recited in the Agreement, disputes between the
Parties under this Agreement will be first referred to the Project Manager of
each Party as soon as reasonably possible after such dispute has arisen. If the
Project Managers are unable to resolve such a dispute within fifteen (15) days
of being requested by a Party to resolve such dispute, either Party may, by
written notice to the other, have such dispute referred to the Steering
Committee. If the Steering Committee is unable to resolve such dispute within
thirty (30) days of being requested by a Party to resolve such dispute, each
Party shall have the right, pursuant to written notice, to refer such dispute to
the […***…] of each Party for attempted resolution by negotiations within thirty
(30) days after such written notice is received. If the […***…] are unable to
resolve such dispute within thirty (30) days of being requested by a Party to
resolve such dispute, each Party shall have the right to pursue any remedies
available to it at law or in equity.

10.10 Securities Authorities and Stock Exchange Filings; Press Releases; Use of
Trademarks.

(a) The Parties shall coordinate in advance with each other in connection with
(i) a Party’s decision to file this Agreement with any securities authority or
with any stock exchange on which securities issued by a Party or its Affiliate
are traded, or (ii) any other disclosure of information pertaining to this
Agreement as otherwise required by the rules and regulations of the Securities
and Exchange Commission or any other securities authority or stock exchange on
which securities issued by a Party or its Affiliates are traded, and, in each
such instance, (a) the filing Party will provide the other Party at least ten
(10) business days to review a draft redacted version of this Agreement, and
(b) both Parties shall work together in good faith to agree on the disclosure to
be made, having due and proper regard to their legal obligations; provided that
the filing Party subject to such rules and regulations shall ultimately retain
control over what information to disclose to any securities authority or stock
exchange. Each filing Party shall use reasonable efforts to seek confidential
treatment for terms proposed to be redacted; provided that the Parties shall use
their reasonable efforts to file redacted versions with any governing bodies
which are consistent with redacted versions previously filed with any other
governing bodies.

 

 

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Other than such obligations, neither Party (nor any of its Affiliates) shall be
obligated to consult with or obtain approval from the other Party with respect
to any filings to any securities authority or stock exchange.

(b) Except for the filings described in Section 10.10(a) above, the Parties
agree not to disclose in any press release or other public statement any terms
or conditions of this Agreement to any Third Party without the prior consent of
the other Party. Neither Party shall (a) issue a press release or make any other
public statement that references this Agreement or (b) use the other Party’s or
the other Party’s Affiliates’ names or trademarks for publicity or advertising
purposes, except with the prior written consent of the other Party. Each Party
agrees that it shall cooperate fully and in a timely manner with the other with
respect to all disclosures to the Securities and Exchange Commission or any
other governmental or regulatory agencies, including requests for confidential
treatment of Proprietary Information of either Party included in any such
disclosure.

10.11 Severability. If any provision of this Agreement is found by a proper
authority to be unenforceable, that provision to the extent it is found to be
unenforceable or invalid shall be severed and the remainder of the provision and
this Agreement will continue in full force and effect. The Parties shall use
their best efforts to agree upon a valid and enforceable provision as a
substitute for any invalid or unenforceable provision, taking in to account the
Parties’ original intent of this Agreement.

10.12 Construction. Unless the context of this Agreement otherwise requires:
(a) words of any gender include each other gender; (b) words using the singular
or plural number also include the plural or singular number, respectively;
(c) the terms “hereof,” “herein,” “hereby,” and derivative or similar words
refer to this entire Agreement; (d) the terms “Article,” “Section,” “Exhibit,”
“Schedule,” or “clause” refer to the specified Article, Section, Exhibit,
Schedule, or clause of this Agreement; (e) “or” is disjunctive but not
necessarily exclusive; and (f) the term “including” or “includes” means
“including without limitation” or “includes without limitation.” Whenever this
Agreement refers to a number of days, such number shall refer to calendar days
unless business days are specified. The captions and headings of this Agreement
are for convenience of reference only and in no way define, describe, extend, or
limit the scope or intent of this Agreement or the intent of any provision
contained in this Agreement. The language of this Agreement shall be deemed to
be the language mutually chosen by the Parties, and no rule of strict
construction shall be applied against either Party hereto.

10.13 Third Party Beneficiaries. This Agreement is not intended to confer upon
any non-party rights or remedies hereunder, except as may be received or created
as part of a valid assignment.

10.14 Further Assurances. Each of the Parties agrees to duly execute and
deliver, or cause to be duly executed and delivered, such further instruments
and do and cause to be done such further acts and things, including the filing
of such additional assignments, agreements, documents, and instruments, that may
be necessary or as the other Party hereto may at any time and from time to time
reasonably request in connection with this Agreement or to

 

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carry out more effectively the provisions and purposes of, or to better assure
and confirm unto such other Party its rights and remedies under, this Agreement.

10.15 Counterparts. This Agreement may be signed in counterparts, each and every
one of which shall be deemed an original. Electronic or Facsimile signatures
shall be treated as original signatures.

10.16 […***…]

[The remainder of this page is left blank intentionally.]

 

 

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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first written above.

 

PATHEON UK LIMITED:     FLEXION THERAPEUTICS, INC.: By:  

/s/ A.M. Botterill

    By:  

/s/ Michael D. Clayman, M.D.

Name:  

A.M. Botterill

    Name:  

Michael D. Clayman, M.D.

Title:  

Exec. Dir. & Gen. Manager

    Title:  

CEO

 

[…***…]

 

 

***Confidential Treatment Requested

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Schedule 2.9

[…***…]

 

 

***Confidential Treatment Requested for pages 64-65.

Omitted pages have been filed separately with the Commission.

64-65

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Schedule 1.60

[…***…]

 

 

***Confidential Treatment Requested for pages 66-71.

Omitted pages have been filed separately with the Commission.

66-71

--------------------------------------------------------------------------------

Schedule 1.62

[…***…]

 

 

***Confidential Treatment Requested

72

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Schedule 1.82

[…***…]

 

 

***Confidential Treatment Requested

73

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Schedule 2.1(a)

 

I. […***…]

 

 

***Confidential Treatment Requested for pages 74-80.

Omitted pages have been filed separately with the Commission.

74-80

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Schedule 6.4(a)

[…***…]

 

 

***Confidential Treatment Requested for pages 81-83.

Omitted pages have been filed separately with the Commission.

81-83

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Schedule 8.4(a)

[…***…]

 

 

***Confidential Treatment Requested for pages 84-85.

Omitted pages have been filed separately with the Commission.

84-85