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EXHIBIT 10.38
 
[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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Manufacturing Services Agreement
 
DECEMBER 19, 2011
 
 
 

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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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Table of Contents
 
ARTICLE 1
1
   
INTERPRETATION
1
   
1.1
DEFINITIONS
1
1.2
CURRENCY
6
1.3
SECTIONS AND HEADINGS
6
1.4
SINGULAR TERMS
6
1.5
SCHEDULES
6
     
ARTICLE 2
8
   
PATHEON'S MANUFACTURING SERVICES
8
   
2.1
MANUFACTURING SERVICES
8
2.2
ACTIVE MATERIAL YIELD
9
     
ARTICLE 3
11
     
CLIENT'S OBLIGATIONS
11
   
3.1
PAYMENT
11
3.2
ACTIVE MATERIALS
11
     
ARTICLE 4
12
     
CONVERSION FEES AND COMPONENT COSTS
12
   
4.1
FIRST YEAR PRICING
12
4.2
PRICE ADJUSTMENTS – SUBSEQUENT YEARS’ PRICING
12
4.3
PRICE ADJUSTMENTS – CURRENT YEAR PRICING
13
4.4
ADJUSTMENTS DUE TO TECHNICAL CHANGES
14
4.5
MULTI-COUNTRY PACKAGING REQUIREMENTS
15
     
ARTICLE 5
15
     
ORDERS, SHIPMENT, INVOICING, PAYMENT
15
   
5.1
ORDERS AND FORECASTS
15
5.2
RELIANCE BY PATHEON
16
5.3
MINIMUM ORDERS
17

 
 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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5.4
SHIPMENTS
17
5.5
ON TIME DELIVERY
17
5.6
INVOICES AND PAYMENT
18
     
ARTICLE 6
18
     
PRODUCT CLAIMS AND RECALLS
18
   
6.1
PRODUCT CLAIMS
18
6.2
PRODUCT RECALLS AND RETURNS
19
6.3
PATHEON’S RESPONSIBILITY FOR DEFECTIVE AND RECALLED PRODUCTS
20
6.4
DISPOSITION OF DEFECTIVE OR RECALLED PRODUCTS
21
6.5
HEALTHCARE PROVIDER OR PATIENT QUESTIONS AND COMPLAINTS
21
6.6
SOLE REMEDY
21
     
ARTICLE 7
21
     
CO-OPERATION
21
   
7.1
QUARTERLY REVIEW
21
7.2
GOVERNMENTAL AGENCIES
21
7.3
RECORDS AND ACCOUNTING BY PATHEON
21
7.4
INSPECTION OF RECORDS
22
7.5
CLIENT INSPECTIONS OF MANUFACTURING SITE
22
7.6
REGULATORY INSPECTIONS OF MANUFACTURING SITE
22
7.7
REPORTS
22
7.8
FDA FILINGS
22
     
ARTICLE 8
24
     
TERM AND TERMINATION
24
   
8.1
INITIAL TERM
24
8.2
TERMINATION
24
8.3
PRODUCT DISCONTINUATION
25
8.4
OBLIGATIONS ON TERMINATION
25
     
ARTICLE 9
26
     
REPRESENTATIONS, WARRANTIES AND COVENANTS
26
   
9.1
AUTHORITY
26
9.2
CLIENT WARRANTIES
26

 
 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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9.3
PATHEON WARRANTIES
26
9.4
DEBARRED PERSONS
27
9.5
PERMITS
27
9.6
NO WARRANTY
27
     
ARTICLE 10
28
     
REMEDIES AND INDEMNITIES
28
   
10.1
CONSEQUENTIAL DAMAGES
28
10.2
LIMITATION OF LIABILITY
28
10.3
PATHEON
28
10.4
CLIENT
29
10.5
INDEMNIFICATION PROCEDURE
29
10.6
REASONABLE ALLOCATION OF RISK
29
     
ARTICLE 11
29
     
CONFIDENTIALITY
29
   
11.1
CONFIDENTIALITY
29
     
ARTICLE 12
30
     
DISPUTE RESOLUTION
30
   
12.1
COMMERCIAL DISPUTES
30
12.2
TECHNICAL DISPUTE RESOLUTION
30
     
ARTICLE 13
30
     
MISCELLANEOUS
30
   
13.1
INVENTIONS
30
13.2
INTELLECTUAL PROPERTY
31
13.3
INSURANCE
31
13.4
INDEPENDENT CONTRACTORS
31
13.5
NO WAIVER
32
13.6
ASSIGNMENT
32
13.7
FORCE MAJEURE
32
13.8
ADDITIONAL PRODUCT
32
13.9
NOTICES
33
13.10
SEVERABILITY
34

 
 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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13.11
ENTIRE AGREEMENT
34
13.12
OTHER TERMS
34
13.13
NO THIRD PARTY BENEFIT OR RIGHT
34
13.14
EXECUTION IN COUNTERPARTS
34
13.15
USE OF CLIENT NAME
34
13.16
GOVERNING LAW
35

 
 
- iv -

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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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MANUFACTURING SERVICES AGREEMENT
 
 THIS MANUFACTURING SERVICES AGREEMENT (the "Agreement") is made as of December
19, 2011 (the “Effective Date”)
 
B E T W E E N:
 

 
PATHEON PHARMACEUTICALS INC.,
 
a corporation existing under the laws of the State of Delaware
     
("Patheon"),
     - and -      
POZEN INC.,
 
a corporation existing under the laws of the State of Delaware
     
("Client").

 
THIS AGREEMENT WITNESSES THAT in consideration of the rights conferred and the
obligations assumed herein, and for other good and valuable consideration (the
receipt and sufficiency of which are acknowledged by each party), and intending
to be legally bound the parties agree as follows:
 
ARTICLE 1
 
INTERPRETATION
 
1.1  Definitions.
 
The following terms will, unless the context otherwise requires, have the
respective meanings set out below and grammatical variations of these terms will
have corresponding meanings:
 
"Active Materials", “Active Pharmaceutical Ingredients” or “API” means the
materials listed on Schedule D;
 
"Active Materials Credit Value" means the value of the Active Materials for
certain purposes of this Agreement, as set forth on Schedule D;
 
“Actual Annual Yield” or “AAY” has the meaning specified in Section 2.2(a);
 
 
- 1 -

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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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"Affiliate" means:

 
(a)
a business entity which owns, directly or indirectly, a controlling interest in
a party to this Agreement, by stock ownership or otherwise; or

 

 
(b)
a business entity which is controlled by a party to this Agreement, either
directly or indirectly, by stock ownership or otherwise; or

 

 
(c)
a business entity, the controlling interest of which is directly or indirectly
common to the majority ownership of a party to this Agreement;

 
For this definition, "control" means the ownership of shares carrying at least a
majority of the votes for the election of the directors of a corporation;
 
“Annual Product Review Report” means the annual product review report prepared
by Patheon as described in Title 21 of the United States Code of Federal
Regulations, Section 211.180(e);
 
"Annual Report" means the annual report to the FDA prepared by Client regarding
the Product as described in Title 21 of the United States Code of Federal
Regulations, Section 314.81(b)(2);
 
"Annual Volume" means the minimum volume of Product to be manufactured in any
Year of this Agreement as set forth in Schedule B;
 
"Applicable Laws" means (i) for Patheon, the Laws of State of Ohio and the laws
of the United States and its territories and possessions, being the
jurisdictions where the Manufacturing Site is located; (ii) the laws of other
jurisdictions where Patheon may perform Manufacturing Services with respect to
the Products during the term of this Agreement and (iii) for Client and the
Products, the Laws of all jurisdictions where the Products are manufactured,
distributed, sold and marketed;
 
"Authority" means any governmental or regulatory authority, department, body or
agency or any court, tribunal, bureau, commission or other similar body, whether
federal, state, provincial, county or municipal;
 
“Bill Back Items” means the actual, substantiated costs for all third party
supplier fees for the purchase of columns, standards, tooling, PAPR or PPE suits
(where applicable), RFID tags and supporting equipment, and other project
specific items necessary for Patheon to perform the Manufacturing Services, and
which are not included as Components, as set forth in Section 2.1(g);
 
“Breach Notice” will have the meaning specified in Section 8.2(a);
 
"Business Day" means a day other than a Saturday, Sunday or a day that is a
statutory Federal holiday in the United States;
 
"cGMPs" means current good manufacturing practices as described in Parts 210 and
211 of Title 21 of the United States' Code of Federal Regulations together with
the latest FDA guidance documents pertaining to manufacturing and quality
control practice, all as updated, amended and revised from time to time and
foreign equivalents to any such regulations which may apply to any Manufacturing
Site outside of the United States;
 
 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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“Capital Equipment” means the equipment described in the Capital Expenditure and
Equipment Agreement entered into by the parties simultaneously with this
Agreement;
 
“Capital Expenditure and Equipment Agreement” means the agreement attached
hereto as Schedule K;
 
“Client Intellectual Property” means Intellectual Property generated or derived
by Client before entering into this Agreement, or by Patheon while performing
any Manufacturing Services or otherwise generated or derived by Patheon in its
business which Intellectual Property is specific to, or dependent upon, Client’s
Active Material or Product;
 
“Client Property” will have the meaning specified in Section 8.4(f);
 
“CMC” has the meaning specified in Section 7.8(c);
 
“Commencement Date” means a date certain, specified in a written notice from
Client to Patheon delivered at least 60 days prior to the date, when Patheon
will begin the Manufacturing Services under this Agreement;
 
"Components" means, collectively, all packaging components, raw materials, and
ingredients (including labels, product inserts and other labelling for the
Products), required to manufacture the Products in accordance with the
Specifications, other than the Active Materials;
 
"Confidentiality Agreement" means the agreement about the non-disclosure of
confidential information between Patheon and Client dated *** as amended ***;
 
“Deficiency” has the meaning specified in Section 7.8(d);
 
"Deficiency Notice" has the meaning specified in Section 6.1(a);
 
“Delivery Date” means the date scheduled for shipment of Product under a Firm
Order as set forth in Section 5.1(e);
 
“Equipment” will have the meaning ascribed to it in the Capital Equipment
Agreement;
 
"FDA" means the United States Food and Drug Administration;
 
"Firm Orders" has the meaning specified in Section 5.1(c);
 
“First Firm Order” has the meaning specified in Section 5.1(b);
 
“Force Majeure” will have the meaning specified in Section 13.7;
 
 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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“Initial Manufacturing ***” has the meaning specified in Section 5.1(b);
 
“Initial Manufacturing Period” has the meaning specified in Section 5.1(b);
 
“Initial Term” has the meaning specified in Section 8.1;
 
"Intellectual Property" includes, without limitation, rights in patents, patent
applications, formulae, trade-marks, trade-mark applications, trade-names,
Inventions, copyrights, industrial designs, trade secrets, and know how;
 
"Invention" means information about any innovation, improvement, development,
discovery, computer program, device, trade secret, method, know-how, process,
technique or the like, whether or not written or otherwise fixed in any form or
medium, regardless of the media on which it is contained and whether or not
patentable or copyrightable;
 
"Inventory" means all inventories of Components and work-in-process produced or
held by Patheon for the manufacture of the Products but, for greater certainty,
does not include the Active Materials;
 
“Late Delivery” has the meaning specified in Section 5.5;
 
"Laws" means all laws, statutes, ordinances, regulations, rules, by-laws,
judgments, decrees or orders of any Authority;
 
"Manufacturing Services" means the manufacturing, quality control, quality
assurance, retention of samples, stability testing, packaging, and related
services, set forth in this Agreement, required to manufacture Product or
Products from Active Materials and Components and to release and deliver such
Products to Client;
 
"Manufacturing Site" means the facility owned and operated by Patheon that is
located at 2110 East Galbraith Road, Cincinnati, OH 45237-1625 or such other
facility owned and operated by Patheon and mutually agreed upon by the parties
at which Manufacturing Services are performed pursuant to this Agreement;
 
“Materials” means all Components, Bill Back Items, and other materials used to
manufacture the Product other than Active Materials;
 
"Maximum Credit Value" means the maximum value of Active Materials that may be
credited by Patheon under this Agreement, as set forth on Schedule D, updated
each Year to reflect documented variations in the cost of Active Materials and
variations in the volume of Active Materials required to Manufacture Products in
accordance with the first estimated forecast for the Year;
 
"Minimum Order Quantity" means the minimum number of batches of a Product to be
produced during the same cycle of manufacturing as set forth in Schedule B;
 
 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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“Patheon Intellectual Property” means Intellectual Property generated or derived
by Patheon before performing any Manufacturing Services, Intellectual Property
developed by Patheon while performing the Manufacturing Services, or otherwise
generated or derived by Patheon in its business which Intellectual Property is
not specific to, or dependent upon, Client’s Active Material or Product
including, without limitation, Inventions and Intellectual Property which may
apply to manufacturing processes or the formulation or development of drug
products, drug product dosage forms or drug delivery systems unrelated to the
specific requirements of the Product(s);
 
“Price” means the price measured in US Dollars to be charged by Patheon for
performing the Manufacturing Services, and includes the cost of Components,
certain cost items as set forth in Schedule B, and annual stability testing
costs as set forth in Schedule C;
 
"Product(s)" means the product(s) listed on Schedule A;
 
"Quality Agreement" means the agreement (the form of which is set forth in
Schedule F) between the parties setting out the quality assurance standards for
the Manufacturing Services to be performed by Patheon for Client;
 
“Recall” has the meaning specified in Section 6.2(a);
 
"Regulatory Authority" means the FDA and any other foreign regulatory agencies
competent to grant marketing approvals for pharmaceutical products including the
Products in the Territory;
 
“RFID” means Radio Frequency Identification Devices which (at present or in the
future) may be affixed to Products or Materials to assist in inventory control,
tracking, and identification;
 
“Remediation Period” has the meaning specified in Section 8.2(a);
 
“Shortfall” has the meaning specified in Section 2.2(b);
 
"Specifications" means the file, for each Product, which is given by Client to
Patheon in accordance with the procedures listed in Schedule A and which
contains documents relating to each Product, including, without limitation:
 

 
(a)
specifications for Active Materials and Components;

 

 
(b)
manufacturing specifications, directions, and processes, including, but not
limited to, in-process specifications ;

 

 
(c)
storage requirements;

 

 
(d)
all environmental, health and safety information for each the Product including
material safety data sheets; and

 

 
(e)
the finished Product specifications, packaging specifications and shipping
requirements for each Product;

 
 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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all as updated, amended and revised from time to time by Client in accordance
with the terms of this Agreement;
 
“Target Yield” has the meaning specified in Section 2.2(a);
 
“Target Yield Determination Batches” has the meaning specified in Section
2.2(a);
 
"Technical Dispute" has the meaning specified in Section 12.2;
 
"Territory" means the United States, its territories and possessions;
 
"Third Party Rights" means the Intellectual Property of any third party;
 
"Year" means in the first year of this Agreement the period from the Effective
Date up to and including December 31 of the same calendar year, and thereafter
will mean a calendar year.
 
1.2  Currency.
 
Unless otherwise indicated, all monetary amounts are expressed in this Agreement
in the lawful currency of the United States of America.
 
1.3  Sections and Headings.
 
The division of this Agreement into Articles, Sections, Subsections, and
Schedules and the insertion of headings are for convenience of reference only
and will not affect the interpretation of this Agreement.  Unless otherwise
indicated, any reference in this Agreement to a Section or Schedule refers to
the specified Section or Schedule to this Agreement.  In this Agreement, the
terms "this Agreement", "hereof", "herein", "hereunder" and similar expressions
refer to this Agreement and not to any particular part, Section or Schedule of
this Agreement.
 
1.4  Singular Terms.
 
Except as otherwise expressly stated or unless the context otherwise requires,
all references to the singular will include the plural and vice versa.
 
1.5  Schedules.
 
The following Schedules are attached to, incorporated in, and form part of this
Agreement:
 
Schedule A
-
Product List and Specifications
Schedule B
-
Minimum Order Quantity, Annual Volume, and Price
Schedule C
-
Annual Stability Testing
Schedule D
-
Active Materials, Active Materials Credit Value, and Maximum Credit Value
Schedule E
-
Technical Dispute Resolution

 
 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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Schedule F
-
Commercial Quality Agreement
Schedule G
-
(Reserved)
Schedule H
-
Quarterly Active Materials Inventory Report
Schedule I
-
Report of Annual Active Materials Inventory Reconciliation and Calculation of
Actual Annual Yield
Schedule J
-
(Reserved)
Schedule K
-
Capital Expenditure and Equipment Agreement

 
 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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ARTICLE 2
 
PATHEON'S MANUFACTURING SERVICES
 
2.1  Manufacturing Services.
 
Patheon will perform the Manufacturing Services for the Territory for the fees
specified in Schedules B and C to manufacture Products for Client.  Schedule B
sets forth a list of cost items that are included in the Price for Products; all
cost items that are not included in this list are excluded from the Price and
are subject to additional fees to be paid by the Client.  Patheon may change the
Manufacturing Site for the Products only with the prior written consent of
Client.  If Manufacturing Services have not started within 12 months of the date
of execution of this Agreement, Patheon may amend the fees set out in Schedules
B and C in accordance with the provisions of Section 4.2 hereof.  During the
Initial Term, Client agrees that it will purchase and Patheon agrees to
manufacture at least ***% of Client’s requirements of Products offered for sale
by Client in the Territory. Patheon will cooperate with Client to qualify a
secondary manufacturing site owned by Patheon or one of its Affiliates. In
performing the Manufacturing Services, Patheon and Client agree that:
 

 
(a)
Conversion of Active Materials and Components.  Patheon will convert Active
Materials and Components into Products.

 

 
(b)
Quality Control and Quality Assurance.  Patheon will perform the quality control
and quality assurance testing specified in the Quality Agreement.  Batch review
and release to Client will be the responsibility of Patheon’s quality assurance
group.  Patheon will perform its batch review and release responsibilities in
accordance with Patheon’s standard operating procedures.  Each time Patheon
ships Products to Client, it will give Client a certificate of analysis and
certificate of compliance or, in the case of packaged Product, a certificate of
completion, each in a form to be mutually agreed upon by the parties, including
a statement that the batch has been manufactured and tested in accordance with
Specifications and cGMPs.  Client will have sole responsibility for the release
of Products to the market.  The form and style of batch documents, including,
but not limited to, batch production records, lot packaging records, equipment
set up control, operating parameters, and data printouts, raw material data, and
laboratory notebooks are the exclusive property of Patheon.  Specific Product
related information contained in those batch documents is exclusive property of
Client.

 

 
(c)
Components.  Patheon will purchase and test all Components (with the exception
of those that are supplied by Client) at Patheon's expense and as required by
the Specifications.  With respect to all Components purchased by Patheon for use
in the Manufacture of the Products, Patheon will seek to obtain for Client the
right to reference the supplier’s Drug Master File (DMF) in connection with
Client’s regulatory filings relating to the Products.

 

 
(d)
Stability Testing.  Patheon will conduct stability testing on the Products in
accordance with the protocols set out in the Specifications for the separate
fees and during the time periods set out in Schedule C.  Patheon will not make
any changes to these testing protocols without prior written approval from
Client.  If a confirmed stability test failure occurs, Patheon will notify
Client within one Business Day, after which Patheon and Client will jointly
determine the proceedings and methods to be undertaken to investigate the cause
of the failure, including which party will bear the cost of the
investigation.  Patheon will not be liable for these costs unless it has failed
to perform the Manufacturing Services in accordance with the Specifications,
cGMPs, and Applicable Laws.  Patheon will give Client copies of all stability
test data and results at Client’s request.

 
 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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(e)
Packaging.  Patheon will package the Products as set out in the
Specifications.  Client will be responsible for the cost of artwork
development.  Patheon will determine and imprint the batch numbers and
expiration dates for each Product shipped.  The batch numbers and expiration
dates will be affixed on the Products and on the shipping carton of each Product
as outlined in the Specifications and as required by cGMPs.  Client may, in its
sole discretion, make changes to labels, product inserts, and other packaging
for the Products.  Those changes will be submitted by Client to all applicable
governmental agencies and other third parties responsible for the approval of
the Products, as required.  Client will be responsible for the cost of labelling
obsolescence when changes occur, as contemplated in Section 4.4.  Patheon's name
will not appear on the label or anywhere else on the Products unless: (i)
required by any Laws; or (ii) Patheon consents in writing to the use of its
name.

 

 
(f)
Active Materials.  Patheon will order the Active Materials on behalf of Client
and will manage the Active Materials inventory.  Invoices from the Active
Materials supplier will be sent directly from the supplier to Client for
payment. Patheon will charge Client a handling fee of ***% of the cost of the
Active Materials which will be included in the Price for the Products.  All
shipments of Active Material will be accompanied by certificate(s) of analysis
from the Active Material manufacturer confirming the identity and purity of the
Active Materials and its compliance with the Active Material
specifications.  Patheon will test all Active Materials in accordance with
Patheon’s then current standard operating procedures.

 

 
(g)
Bill Back Items.  Bill Back Items will be charged to Client at Patheon’s actual
cost plus a ***% handling fee.

 

 
(h)
Product Rejection for Finished Product Specification Failure.  Internal process
specifications will be defined and mutually agreed upon.  If Patheon
manufactures Product in accordance with the agreed upon process specifications
and a batch or portion of batch of Product does not meet a Finished Product
Specification, Client will pay Patheon the applicable fee per unit for the
non-conforming Product.

 
2.2    Active Material Yield.  
 

 
(a)
Reporting.  Patheon will give Client a monthly inventory report of the Active
Materials held by Patheon (if active manufacturing is taking place during the
month) using the inventory report form set out in Schedule H, which will contain
the following information for the month:

 
 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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Quantity Received:  The total quantity of Active Materials that complies with
the Specifications and is received at the Manufacturing Site during the
applicable period.
 
Quantity Dispensed:  The total quantity of Active Materials dispensed at the
Manufacturing Site during the applicable period.  The Quantity Dispensed is
calculated by adding the Quantity Received to the inventory of Active Materials
that complies with the Specifications held at the beginning of the applicable
period, less the inventory of Active Materials that complies with the
Specifications held at the end of the period.  The Quantity Dispensed will only
include Active Materials received and dispensed in commercial manufacturing of
Products and, for certainty, will not include any (i) Active Materials that must
be retained by Patheon as samples, (ii) Active Materials contained in Product
that must be retained as samples, (iii) Active Materials used in testing (if
applicable), and (iv) Active Materials received or dispensed in technical
transfer activities or development activities during the applicable period,
including without limitation, any regulatory, stability, validation or test
batches manufactured during the applicable period.
 
Quantity Converted:  The total amount of Active Materials contained in the
Products manufactured with the Quantity Dispensed (including any additional
Products produced in accordance with Section 6.3(a) or 6.3(b)), delivered by
Patheon, and not rejected, recalled or returned in accordance with Section 6.1
or 6.2 because of Patheon’s failure to perform the Manufacturing Services in
accordance with Specifications, cGMPs, and Applicable Laws.
 
Within *** days after the end of each Year, Patheon will prepare an annual
reconciliation of Active Materials on the reconciliation report form set forth
in Schedule I including the calculation of the "Actual Annual Yield" or "AAY"
for the Product at the Manufacturing Site during the Year.  AAY is the
percentage of the Quantity Dispensed that was converted to Products and is
calculated as follows:
 
***
 
After Patheon has produced a minimum of *** commercial production batches of
Product and has produced commercial production batches for at least six months
at the Manufacturing Site (collectively, the "Target Yield Determination
Batches"), the Parties will mutually agree on the target yield for the Product
at the Manufacturing Site (each, a "Target Yield"). The Target Yield
Determination Batches will not include any batches that, upon mutual agreement
of the parties, were produced in production runs involving technical
difficulties or involving an extraordinary loss of Active Materials. Once the
Target Yield is established for a given Year, Patheon will use commercially
reasonable efforts to maintain Actual Annual Yield for each Product equal to or
above the applicable Target Yield for such Year.  The Target Yield will be
revised annually to reflect the actual manufacturing experience as agreed to by
the parties.
 

 
(b)
Shortfall Calculation. If the Actual Annual Yield falls more than *** percent
below the respective Target Yield in a Year, then the shortfall for the Year
(the "Shortfall") will be calculated as follows:

 
 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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***
 
 
(c)
Credit for Shortfall.  If there is a Shortfall for a Product in a Year, then
Patheon will credit Client’s account for the amount of the Shortfall not later
than *** days after the end of the Year.

 
Each credit under this Section 2.2(c) will be summarized on the reconciliation
report form set forth in Schedule I.  Upon expiration or termination of this
Agreement, any remaining credit owing under this Section 2.2 will be promptly
paid to Client.  The Annual Shortfall, if any, will be disclosed by Patheon on
the reconciliation report form.
 
 
(d)
Maximum Credit.  Patheon's liability for Active Materials calculated in
accordance with this Section 2.2 for any Product in a Year will not exceed, in
the aggregate, the Maximum Credit Value set forth in Schedule D.

 
 
(e)
No Material Breach.  It will not be a material breach of this Agreement by
Patheon under Section 8.2(a) if the Actual Annual Yield is less than the Target
Yield if Patheon credits Client for any amount of Shortfall within the time
period specified in Section 2.2 (c) above. But if the Annual Yield is more than
***% below the Target Yield, Client will have all rights available to it under
Section 8.2.

 
ARTICLE 3
 
CLIENT'S OBLIGATIONS
 
3.1  Payment.
 
Client will pay Patheon for performing the Manufacturing Services according to
the Prices specified in Schedules B and C. These prices may be subject to
adjustment under other parts of this Agreement.  Client will also pay Patheon
for any Bill Back Items.
 
3.2  Active Materials.
 
If applicable, Patheon and the Client will reasonably cooperate to permit the
import of the Active Materials into the United States.  Client’s obligation will
include obtaining the proper release of the Active Materials from U.S. Customs
and the FDA. Client or Client’s designated broker will be the “Importer of
Record” for Active Materials imported into the United States. The Active
Materials will be held by Patheon on behalf of Client as set forth in this
Agreement.  Title to the Active Materials will at all times remain the property
of Client.  Any Active Materials received by Patheon will only be used by
Patheon to perform the Manufacturing Services.
 
 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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ARTICLE 4
 
CONVERSION FEES AND COMPONENT COSTS
 
4.1  First Year Pricing.
 
The tiered Price and annual stability Price for the Products for the first Year
are listed in Schedules B and C and are subject to the adjustments set forth in
Sections 4.2 and 4.3.
 
4.2  Price Adjustments – Subsequent Years’ Pricing.
 
After the first Year of the Agreement, Patheon may adjust the Price effective
January 1st of each Year as follows:
 

 
(a)
Manufacturing Costs. Patheon may adjust the Price for inflation/deflation, based
upon the preliminary number for any increase or decrease in the Producer Price
Index *** (“PPI”) published by the United States Department of Labor, Bureau of
Labor Statistics in August of the preceding Year compared to the final number
for the same month of the Year prior to that, unless the parties otherwise agree
in writing.  On or about November 1st of each Year, Patheon will give Client a
statement setting forth the calculation for the inflation adjustment which may
be applied in calculating the Price for the next Year. Patheon’s right to adjust
the Price under this Section 4.2(a) only applies to labor and overhead expenses
incorporated into the Price, and no other elements of the Price including,
without limitation the cost of Components, which are addressed in Sections
4.2(b) and 4.3.

 

 
(b)
Component Costs.  If Patheon incurs an increase or decrease in Component costs
during the Year, it may increase or decrease the Price for the next Year to pass
through the new Component costs., On or about November 1st of each Year, Patheon
will give Client information about the increase or decrease in Component costs
which will be applied to the calculation of the Price for the next Year to
reasonably demonstrate that the Price increase is justified.  Patheon will not
be required to give information to Client that is subject to obligations of
confidentiality between Patheon and its suppliers but Patheon will use
commercially reasonable efforts to obtain consent of its suppliers to disclose
pricing information applicable to Client’s Products.

 

 
(c)
Pricing Basis. Client acknowledges that the Price in any Year is quoted based
upon the Minimum Order Quantity and the Annual Volume specified in Schedule B.
The Price is subject to change for the next Year if the specified Minimum Order
Quantity is revised downward or if the Annual Volume is not ordered in a Year,
unless otherwise agreed by the parties. For greater certainty, if Patheon and
Client agree that the Minimum Order Quantity will be reduced or the Annual
Volume will not be ordered in a Year whether as a result of a decrease in
estimated Annual Volume or otherwise, except for decreases in volume which
result from Patheon’s failure to manufacture the Products in accordance with the
provisions of this Agreement, and, as a result of the reduction, Patheon
demonstrates to Client that its costs to perform the Manufacturing Services or
to acquire the Materials for the Product will increase on a per unit basis
(including the amount of the increase), then Patheon may increase the Price by
an amount sufficient to absorb the documented increased costs. Patheon
acknowledges that Annual Volume which exceeds the highest tier or the forecast
provided in Section 5.1(a) may result in greater manufacturing efficiencies and,
if these efficiencies are achieved, the fee for Manufacturing Services will be
decreased to reflect the greater efficiencies. On or about November 1st of each
Year, Patheon will give Client a statement setting forth the information to be
applied in calculating those adjustments, if any, for the next Year. Patheon
will not be required to give information to Client that is subject to
obligations of confidentiality between Patheon and its suppliers but, at the
request of Client, Patheon will use commercially reasonable efforts to obtain
consent of its suppliers to disclose pricing information applicable to Client’s
Products.

 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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(d)
Tier Pricing (if applicable). The pricing in Schedule B is set forth in Annual
Volume tiers based upon the Client’s volume forecasts under Section 5.1.  The
Client will be invoiced during the Year for the unit price set forth in the
Annual Volume tier based on the *** forecast provided in *** of the previous
Year.  Within *** days of the end of each Year or of the termination of the
Agreement, Patheon will send Client a reconciliation of the actual volume of
Product ordered by the Client during the Year with the pricing tiers.  If Client
has overpaid during the Year, Patheon will issue a credit to the Client for the
amount of the overpayment within *** days of the end of the Year or will issue
payment to the Client for the overpayment within *** days of the expiration or
termination of the Agreement.  If Client has underpaid during the Year, Patheon
will issue an invoice to the Client under Section 5.6 for the amount of the
underpayment within *** days of the end of the Year or of the expiration or
termination of the Agreement.  If Client disagrees with the reconciliation, the
parties will work in good faith to resolve the disagreement amicably. If the
parties are unable to resolve the disagreement within *** days, the matter will
be handled under Section 12.1.

 
For all Price adjustments under this Section 4.2, Patheon will deliver to Client
on or about *** of each Year a revised Schedule B to be effective for the next
Year together with documentation reasonably sufficient to demonstrate that an
adjustment is justified as set forth above.  The revised fee will be effective
for any Product ordered after the end of the then current Year but Client will
have the option upon *** days prior written notice to Patheon to source any
Component for which the price has increased by more than ***% from the preceding
Year.
 
4.3  Price Adjustments – Current Year Pricing.
 
During any Year of this Agreement, the Prices set out in Schedule B will be
adjusted as follows:
 
Extraordinary Increases or Decreases in Component Costs.  If, at any time during
a Year, market conditions result in Patheon's cost of Components being
materially greater or less than normal forecasted increases or decreases, then
the parties will be entitled to an adjustment to the Price for any affected
Product to compensate it for the increased or decreased Component
costs.  Changes materially greater or less than normal forecasted increases will
have occurred if: (i) the cost of a Component increases or decreases by ***% of
the cost for that Component upon which the most recent fee quote was based; or
(ii) the aggregate cost for all Components required to manufacture a Product
increases or decreases by ***% of the total Component costs for the Product upon
which the most recent fee quote was based.  If Component costs have been
previously adjusted to reflect an increase or decrease in the cost of one or
more Components, the adjustments set out in (i) and (ii) above will operate
based on the last cost adjustment for such Components.
 
 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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For a Price adjustment under this Section 4.3, Patheon will deliver to Client a
revised Schedule B and budgetary pricing information, adjusted Component costs
or other documents reasonably sufficient to demonstrate that a Price adjustment
based on extraordinary increases in Component costs is justified.  Patheon will
have no obligation to deliver any supporting documents that are subject to
obligations of confidentiality between Patheon and its suppliers but, at the
request of Client, Patheon will use commercially reasonable efforts to obtain
consent of its suppliers to disclose pricing information applicable to Client’s
Products.  The revised Price will be effective for any Product delivered on or
after the first day of the month following Client’s receipt of the revised
Schedule B but, upon *** days prior written notice to Patheon, Client will have
the right to directly source any Component, the price for which has been
increased pursuant to this Section 4.3.
 
4.4  Adjustments Due to Technical Changes.
 
Amendments to the Specifications or the Quality Agreement requested by Client
will only be implemented following a technical and cost review by Patheon and
are subject to Client and Patheon reaching agreement on Price changes, if any,
required because of the requested amendment.  Amendments to the Specifications,
the Quality Agreement, or the Manufacturing Site requested by Patheon will only
be implemented following the written approval of Client, the approval not to be
unreasonably withheld. The Client will not be deemed to have unreasonably
withheld consent if approval of the changes requested by Patheon will increase
the Price or result in delays in the delivery of the Products.  If Client
accepts a proposed Price change, the proposed change in the Specifications will
be implemented, and the Price change will become effective, only for those
orders of Products that are manufactured under the revised Specifications.  In
addition, if the amendment to the Specifications has been requested by Client,
Client agrees to purchase, at Patheon's cost (including all costs incurred by
Patheon for the purchase and handling of the Inventory), all Inventory used
under the "old" Specifications and purchased or maintained by Patheon in order
to fill Firm Orders or under Section 5.2, to the extent (i) the Inventory can no
longer be used under the revised Specifications, (ii) cannot be utilized by
Patheon on behalf of another client, or (iii) cannot be returned to the supplier
for a credit or refund.  Open purchase orders for Components unique to the
Manufacture of the Products and no longer required under any revised
Specifications that were placed by Patheon with suppliers in order to fill Firm
Orders or under Section 5.2 will be cancelled where possible, and if the orders
cannot be cancelled without penalty, will be assigned to and satisfied by
Client.
 
 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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4.5  Multi-Country Packaging Requirements.
 
If Client decides to have Patheon perform Manufacturing Services for the Product
for countries outside of the United States, then Client will inform Patheon of
the packaging requirements for each new country and Patheon will prepare a
quotation for consideration by Client of any additional Component costs and the
change-over fees for the Product destined for each new country.  The agreed
additional packaging requirements and related packaging costs and change over
fees will be set out in a written amendment to this Agreement.
 
ARTICLE 5
 
ORDERS, SHIPMENT, INVOICING, PAYMENT
 
5.1 Orders and Forecasts.
 

 
(a)
Rolling *** Forecast.  When this Agreement is executed, Client will give Patheon
a non-binding *** forecast of the volume of Product that Client expects to order
in the first *** of commercial manufacture of the Product.  Beginning with
Initial Manufacturing Period defined in subsection (b) below, this forecast will
then be updated by Client on or before the *** on a rolling forward
basis.  Client will update the forecast forthwith if it determines that the
volumes estimated in the most recent forecast have changed by more than
***%.  The most recent *** forecast will prevail.

 

 
(b)
Firm Orders for Initial Manufacturing ***.  At least *** before the start of
commercial manufacture of the Product, Client will update the rolling forecast
for the first *** of manufacture of the Product (the “Initial Manufacturing
Period”).  The first *** of this updated forecast (“Initial Manufacturing ***”)
will constitute a firm written order in the form of a purchase order or
otherwise ("First Firm Order") by Client to purchase and, when accepted by
Patheon, for Patheon to manufacture the quantity of the Product.  Client may
cancel any Batches from the First Firm Order at no cost if notice of
cancellation is received by Patheon *** days or more before the scheduled
Delivery Date under the First Firm Order.  Client may cancel any Batches from
the First Firm Order if notice of cancellation is received by Patheon more than
*** days but fewer than *** days before the scheduled Delivery Date under the
First Firm Order, but Client will pay Patheon $*** for each cancelled batch if
Patheon is unable to utilize this production capacity for another client. The
parties agree that this payment will be considered liquidated damages for
Patheon’s loss of manufacturing capacity due to the Client’s cancellation of
manufacturing and will not be considered a penalty.  If the First Firm Order is
changed or adjusted as described above, then the initial rolling *** forecast
will also be adjusted as necessary.

 

 
(c)
Firm Orders Thereafter. Before and during the Initial Manufacturing Period, and
on a rolling basis during the term of this Agreement, Client will issue an
updated *** forecast on or before the *** day of each month. The first *** of
this updated forecast will be firm orders. Concurrent with the *** forecast,
Client will issue a firm written order in the form of a purchase order or
otherwise (“Firm Order”) by Client to purchase and, when accepted by Patheon,
for Patheon to manufacture and deliver the agreed quantity of the Products on a
date not less than *** from the first day of the month immediately following the
date that the Firm Order is submitted. Firm Orders submitted to Patheon will
specify Client's Manufacturing Services purchase order number, quantities by
Product type, *** delivery schedule, and any other elements necessary to ensure
the timely manufacture and shipment of the Products. The quantities of Products
ordered in those written orders will be firm and binding on Client and may not
be reduced by Client.

 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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(d)
*** Forecast.  On or before the *** day of *** of each Year, Client will give
Patheon a written, non-binding *** forecast, broken down by *** for the *** of
the forecast, of the volume of each Product Client then anticipates will be
required to be manufactured and delivered to Client during the *** period.

 

 
(e)
Acceptance of Firm Order.  Patheon will accept Firm Orders by sending an
acknowledgement to Client within ten Business Days of its receipt of the Firm
Order.  The acknowledgement will include, subject to confirmation from the
Client, the Delivery Date for the Product ordered. The Delivery Date may be
amended by agreement of the Parties or as set forth in Sections 2.1(f) or
5.1(b).

 
5.2  Reliance by Patheon.
 
(a)           Client understands and acknowledges that Patheon will rely on the
Firm Orders and rolling forecasts submitted under Sections 5.1(a), (b), and (c)
in ordering the Components required to meet the Firm Orders.  In addition,
Client understands that to ensure an orderly supply of the Components, Patheon
may want to purchase the Components in sufficient volumes to meet the production
requirements for Products during part or all of the forecasted periods referred
to in Section 5.1(a) or to meet the production requirements of any longer period
agreed to by Patheon and Client.  Accordingly, Client authorizes Patheon to
purchase Components to satisfy the Manufacturing Services requirements for
Products for the first *** contemplated in the most recent forecast given by
Client under Section 5.1(a).  Patheon may make other purchases of Components to
meet Manufacturing Services requirements for longer periods if agreed to in
writing by the parties.  The Client will give Patheon written authorization to
order Components for any launch quantities of Product requested by Client which
will be considered a Firm Order when accepted by Patheon.  If Components ordered
by Patheon under Firm Orders or this Section 5.2 are not included in finished
Products manufactured for Client within *** after the forecasted *** for which
the purchases have been made (or for a longer period as the parties may agree)
or if the Components have expired during the period, then *** to *** (including
*** by *** of the *** including a ***).  But if these Components are used in
Products subsequently manufactured for Client or in third party products
manufactured by Patheon, *** will *** for *** of *** to ***.
 
(b)           If Client fails to take possession or arrange for the destruction
of Components within *** of purchase or, in the case of finished Product, within
*** of manufacture, Client will pay Patheon $*** per pallet, per *** thereafter
for storing the Components or finished Product.  Storage fees for Components or
Product which contain controlled substances or require refrigeration will be
charged at $*** per pallet per ***.  Storage fees are subject to a one pallet
minimum charge per ***.  Patheon may ship finished Product held by it longer
than three months to the Client at Client’s expense on *** days written notice
to the Client.
 
 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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5.3  Minimum Orders.
 
Client may only order Manufacturing Services for batches of Products in
multiples of the Minimum Order Quantities as set out in Schedule B. At the
request of Client, Patheon will split batches of Products into different
packaging configurations, ***.
 
5.4  Shipments.
 
Shipments of Products will be made EXW (INCOTERMS 2010) Patheon’s shipping point
unless otherwise mutually agreed.  Risk of loss or of damage to Products will
remain with Patheon until Patheon loads the Products onto the carrier’s vehicle
for shipment at the shipping point at which time risk of loss or damage will
transfer to Client.  Patheon will, in accordance with Client’s instructions and
as agent for Client, (i) arrange for shipping to be paid by Client and (ii) at
Client’s risk and expense, obtain any export licence or other official
authorization necessary to export the Products.  Client 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.  Products will be transported in accordance with the Specifications.
 
5.5  On Time Delivery.
 
(a)
Patheon and the Client understand that there may be uncertainties and necessary
adjustments in production schedules during the Initial Manufacturing
Period.  The parties agree that they will work together closely to expedite
deliveries and manage the scheduling of the initial Product launch.

 
(b)
If, after the Initial Manufacturing Period, Patheon is unable to deliver the
quantity of Product ordered under a Firm Order on the Delivery Date due to an
act or omission by Patheon (a “Late Delivery”), Client will receive a credit
from Patheon for the Late Delivery that will be applied against the purchase
price under the next Firm Order.  The credit will be ***% of the Price of the
quantities of Product not delivered by Patheon under the Firm Order on the
Delivery Date (i.e., Client Credit = ***e).

 
(c)
A Late Delivery will not be a material breach of this Agreement by Patheon for
the purposes of Section 8.2. If Patheon has two Late Deliveries in a calendar
quarter or four Late Deliveries in a given Year, the parties will meet as
necessary to amicably resolve the reasons for the Late Deliveries.  If the
parties are unable to resolve the matter within 30 days after the second Late
Delivery, Client may exercise its right to terminate this Agreement for cause
pursuant to Section 8.2(a), without a further opportunity to cure.

 
(d)
For clarity, a Late Delivery will not include any delay in shipment of Product
caused by events outside of Patheon’s reasonable control, such as a Force
Majeure Event, a delay in delivery of API or Materials supplied by Client, a
delay in Product release approval from Client, receipt of non-conforming API or
Components supplied by Client or any market driven delays in deliveries from
approved vendors.

 
 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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5.6  Invoices and Payment.
 
Invoices will be sent by fax or email to the fax number or email address given
by Client to Patheon in writing.  Invoices will be sent when the Product is
manufactured and released by Patheon to the Client.  Patheon will also submit to
Client, with each shipment of Products, a duplicate copy of the invoice covering
the shipment.  Patheon will also give Client an invoice covering any Inventory
or Components which are to be purchased by Client under Section 5.2 of this
Agreement.  Each invoice will, to the extent applicable, identify Client’s
Manufacturing Services purchase order number, Product numbers, names and
quantities, unit price, freight charges, and the total amount to be paid by
Client.  Client will pay all invoices within *** days of the date
thereof.  Interest on past due accounts will accrue at ***% per month which is
equal to an annual rate of ***%.  The Late Delivery credits set forth in this
Section 5 are only available to Client if all outstanding undisputed invoices
have been paid in full or are within *** days outstanding from the invoice date
when the Late Delivery arose.
 
ARTICLE 6
 
PRODUCT CLAIMS AND RECALLS
 
6.1  Product Claims.
 
(a)           Product Claims.  Client has the right to reject any portion of any
shipment of Products that fails to meet the warranties set forth in Section 9.3
hereof (the “Product Warranties”) or fails to comply with the Specifications,
cGMPs, or Applicable Laws without invalidating any remainder of the
shipment.  Client will inspect the Products manufactured by Patheon upon receipt
and will give Patheon written notice (a "Deficiency Notice") of all claims for
Products that fail to meet the Product Warranties or fail to comply with the
Specifications, cGMPs, or Applicable Laws within *** days after Client’s receipt
thereof (or, in the case of any defects not reasonably susceptible to discovery
upon receipt of the Product, within 30 days after discovery by Client, but not
after the expiration date of the Product).  Should Client fail to give Patheon
the Deficiency Notice within the applicable *** day period, then the delivery
will be deemed to have been accepted by Client on the *** day after delivery or
discovery, as applicable.  Except as set out in Section 6.3, Patheon will have
no liability for any noncompliance or deviations for which it has not received
notice within the applicable *** day period.
 
(b)           Determination of Deficiency.  Upon receipt of a Deficiency Notice,
Patheon will have *** days to advise Client by notice in writing whether it
disagrees with the contents of the Deficiency Notice.  If Client and Patheon
fail to agree within *** days after Patheon's notice to Client as to whether any
Products identified in the Deficiency Notice fail to conform to the Product
Warranties or deviate from the Specifications, cGMPs, or Applicable Laws, then
the parties will mutually select an independent laboratory to evaluate if the
Products fail to conform to the Product Warranties or deviate from the
Specifications, cGMPs, or Applicable Laws.  This evaluation will be binding on
the parties. If the evaluation certifies that any Products fail to conform to
the Product Warranties or deviate from the Specifications, cGMPs, or Applicable
Laws, Client may reject those Products in the manner contemplated in this
Section 6.1 and Patheon will be responsible for the cost of the evaluation.  If
the evaluation does not so certify for any of the Products, then Client will be
deemed to have accepted delivery of the Products on the ***th day after delivery
(or, in the case of any defects not reasonably susceptible to discovery upon
receipt of the Product, on the ***th day after discovery thereof by Client, but
not after the expiration date of the Product) and Client will be responsible for
the cost of the evaluation.
 
 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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(c)            Shortages. Quantities actually shipped pursuant to a purchase
order may vary from the quantities reflected in the purchase order by up to ***%
and still be deemed to be in compliance with the purchase order. Client will
only be invoiced and required to pay for the quantities of Product which Patheon
actually ships to Client. Upon Client’s request, Patheon will use commercially
reasonable efforts to include any quantities ordered but not shipped in the next
shipment of Product ordered by Client.
 
6.2  Product Recalls and Returns.
 
(a)           Records and Notice.  Patheon and Client will each maintain records
necessary to permit a Recall of any Products delivered to Client or customers of
Client.  Each party will promptly notify the other by telephone (to be confirmed
in writing) of any information which might affect the marketability, safety or
effectiveness of the Products or which might result in the Recall or seizure of
the Products.  Upon receiving this notice or upon this discovery, each party
will stop making any further shipments of any Products in its possession or
control until a decision has been made whether a Recall or some other corrective
action is necessary.  The decision to initiate a Recall or to take some other
corrective action, if any, will be made and implemented by solely
Client.  "Recall" will mean any action (i) by Client to recover title to or
possession of quantities of the Products sold or shipped to third parties
(including, without limitation, the voluntary withdrawal of Products from the
market); or (ii) by any regulatory authorities to detain or destroy any of the
Products.  Recall will also include any action by either Party to refrain from
selling or shipping quantities of the Products to third parties which would have
been subject to a Recall if sold or shipped.
 
(b)           Recalls.  If (i) any governmental or regulatory authority issues a
directive, order or, following the issuance of a safety warning or alert about a
Product, a written request that any Product be Recalled, (ii) a court of
competent jurisdiction orders a Recall, or (iii) Client determines that any
Product should be Recalled or that a "Dear Doctor" letter is required relating
the restrictions on the use of any Product, Patheon will co-operate as
reasonably required by Client, having regard to all Applicable Laws.
 
(c)           Product Returns.  Client will have the responsibility for handling
customer returns of the Products.  Patheon will give Client any assistance that
Client may reasonably require to handle the returns.
 
6.3  Patheon’s Responsibility for Defective and Recalled Products.
 
(a)         Defective Product.  If Client rejects Products under Section 6.1 and
the deviation is determined to have arisen from Patheon’s failure to provide the
Manufacturing Services in accordance with the Specifications, cGMPs, and
Applicable Laws or for the Product to conform to the Product Warranties, Patheon
will credit Client’s account for Patheon’s invoice price for the defective
Products.  If Client previously paid for the defective Products, Patheon will
promptly, at Client’s election, either: (i) refund the invoice price for the
defective Products; (ii) offset the amount paid against other amounts due to
Patheon hereunder; or (iii) replace the Products with conforming Products
without Client being liable for payment therefor under Section 3.1, contingent
upon the receipt from Client of all Active Materials required for the
manufacture of the replacement Products.  For greater certainty, Patheon’s
responsibility for any loss of Active Materials in defective Product will be
captured and calculated in the Active Materials Yield under Section 2.2.
 
 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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(b)          Recalled Product.  If a Recall or return results from, or arises
out of, a failure by Patheon to perform the Manufacturing Services in accordance
with the Specifications, cGMPs, and Applicable Laws or for the Product to
conform to the Product Warranties, Patheon will be responsible for the
documented out-of-pocket expenses of the Recall or return and will use its
commercially reasonable efforts to replace the Recalled or returned Products
with new Products as soon as practicable, contingent upon the receipt from
Client of all Active Materials required for the manufacture of the replacement
Products.  For greater certainty, Patheon’s responsibility for any loss of
Active Materials in Recalled Product will be captured and calculated in the
Active Materials Yield under Section 2.2.  If Patheon is unable to replace the
Recalled or returned Products (except where this inability results from a
failure to receive the required Active Materials) within thirty (30) days, then
Client may, at its option, request Patheon to reimburse Client for the price
that Client paid to Patheon for Manufacturing Services for the affected Products
or purchase such Product from another manufacturer.  In all other circumstances,
Recalls, returns, or other corrective actions will be made at Client's cost and
expense.
 
(c)           Except as set forth in Sections 6.3(a) and (b) above, Patheon will
not be liable to Client nor have any responsibility to Client for any
deficiencies in, or other liabilities associated with, any Product manufactured
by it, (collectively, "Product Claims").  For greater certainty, Patheon will
have no obligation for any Product Claims to the extent the Product Claim (i) is
caused by deficiencies in the Specifications, the safety, efficacy, or
marketability of the Products or any distribution thereof, (ii) results from a
defect in a Component that is not reasonably discoverable by Patheon using the
test methods set forth in the Specifications, (iii) results from a defect in the
Active Materials or Components supplied by Client that is not reasonably
discoverable by Patheon using the test methods set forth in the Specifications,
(iv) is caused by actions of third parties occurring after the Product is
shipped by Patheon under Section 5.4, (v) is due to packaging design or
labelling defects or omissions for which Patheon has no responsibility, (vi) is
due to any unascertainable reason despite Patheon having performed the
Manufacturing Services in accordance with the Product Warranties,
Specifications, cGMP’s, and Applicable Laws, or (vii) is due to any other breach
by Client of its obligations under this Agreement.
 
6.4  Disposition of Defective or Recalled Products.
 
Client will not dispose of any damaged, defective, returned, or Recalled
Products for which it intends to assert a claim against Patheon without
Patheon’s prior written authorization to do so.  Alternatively, Patheon may
instruct Client to return the Products to Patheon.  Patheon will bear the cost
of disposition for any damaged, defective, returned or Recalled Products for
which it bears responsibility under Section 6.3.  In all other circumstances,
Client will bear the cost of disposition, including all applicable fees for
Manufacturing Services, for any damaged, defective, returned, or Recalled
Products.
 
6.5  Healthcare Provider or Patient Questions and Complaints.
 
Client will have the sole responsibility for responding to questions and
complaints from its customers.  Questions or complaints received by Patheon from
Client's customers, healthcare providers or patients will be promptly referred
to Client.  Patheon will co-operate as reasonably required to allow Client to
determine the cause of and resolve any questions and complaints.  This
assistance will include follow-up investigations, including testing.  In
addition, Patheon will give Client all mutually agreed upon information that
will enable Client to respond properly to questions or complaints about the
Products as set forth in the Quality Agreement.  Unless it is determined that
the cause of the complaint resulted from a failure by Patheon to perform the
Manufacturing Services in accordance with the Product Warranties, the
Specifications, cGMPs, and Applicable Laws, all costs incurred under this
Section 6.5 will be borne by Client.
 
 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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6.6  Sole Remedy.
 
Except for the indemnity set forth in Section 10.3 and subject to the
limitations set forth in Sections 10.1 and 10.2, the remedies described in this
Article 6 will be Client’s sole remedy for any failure by Patheon to provide the
Manufacturing Services in accordance with the Specifications, cGMPs, Applicable
Laws, or the Product Warranties.
 
ARTICLE 7
 
CO-OPERATION
 
7.1  Quarterly Review.
 
Each party will forthwith upon execution of this Agreement appoint one of its
employees to be a relationship manager responsible for liaison between the
parties.  The relationship managers will meet not less than quarterly to review
the current status of the business relationship and manage any issues that have
arisen.
 
7.2  Governmental Agencies.
 
Subject to Section 7.8, each party may communicate with any governmental agency,
including but not limited to Regulatory Authorities , regarding the Products if,
in the opinion of that party's counsel, the communication is necessary to comply
with the terms of this Agreement or the requirements of any law, governmental
order or regulation.  Unless, in the reasonable opinion of its counsel, there is
a legal prohibition against doing so, a party will permit the other party to
accompany and take part in any communications with the agency, and to receive
copies of all communications from the agency and to review and provide comments
on any responses to the communications.
 
7.3 Records and Accounting by Patheon.
 
Patheon will keep records of the manufacture, testing, and shipping of the
Products, and retain samples of the Products as are necessary to comply with
manufacturing regulatory requirements applicable to Patheon relating to the
conduct of the Manufacturing Services, as well as to assist with resolving
Product complaints and other similar investigations.  Copies of the records and
samples will be retained for one year following the date of Product expiry, or
longer if required by law, at which time Client will be contacted concerning the
delivery and destruction of the documents and/or samples of Products.  Patheon,
on behalf of Client, is responsible for retaining samples of the Products
necessary to comply with the legal/regulatory requirements applicable to Client.
 
 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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7.4  Inspection of Records.
 
Client may inspect Patheon reports and records relating to this Agreement during
normal business hours and with reasonable advance notice, but a Patheon
representative must be present during the inspection.
 
7.5  Client Inspections of Manufacturing Site.
 
Patheon will give Client reasonable access at mutually agreeable times to the
areas of the Manufacturing Site in which the Products are manufactured, stored,
tested, handled, or shipped to permit Client to verify that the Manufacturing
Services are being performed in accordance with the Specifications, cGMPs, and
Applicable Laws.  But, with the exception of “for-cause” audits, Client will be
limited each Year to one cGMP-type audit, lasting no more than two days, and
involving no more than two auditors.  Client may request additional cGMP-type
audits, additional audit days, or the participation of additional auditors
subject to payment to Patheon of a fee of $*** for each additional audit day and
$*** per audit day for each additional auditor.  The right of access set forth
in this Section 7.5 will not include a right to access or inspect Patheon’s
financial records.
 
7.6  Regulatory Inspections of Manufacturing Site.
 
If a Regulatory Authority gives Patheon notice of an inspection of any
Manufacturing Site and the inspection relates, in whole or in part, to the
Manufacturing Services, Patheon will notify Client within *** Business Day ***
hours of receiving the notice and will provide Client with copies of all
correspondence or portions of correspondence which relate to the Product.  Where
reasonably practicable, Client will be given the opportunity to have a
representative present at a Manufacturing Site during an inspection by a
Regulatory Authority that relates to the Client’s products.
 
7.7  Reports.
 
Patheon will supply on an annual basis all Product data in its control,
including release test results, complaint test results, and all investigations
(in manufacturing, testing, and storage), that Client reasonably requires in
order to complete any filing under any applicable regulatory regime, including
any Annual Report that Client is required to file with the FDA.  At the Client’s
request, Patheon will provide a copy of the Annual Product Review Report to the
Client at no additional cost.  Any additional report requested by Client beyond
the scope of cGMPs and customary FDA requirements will be subject to an
additional fee to be agreed upon between Patheon and the Client.
 
7.8 FDA Filings.
 
(a)           Regulatory Authority.  Client will have the sole responsibility
for filing all documents with all Regulatory Authorities and taking any other
actions that may be required for the receipt and/or maintenance of Regulatory
Authority approval for the commercial manufacture of the Products.  Patheon will
assist Client, to the extent consistent with Patheon’s obligations under this
Agreement, to obtain Regulatory Authority approval for the commercial
manufacture of all Products as quickly as reasonably possible.
 
 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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(b)           Verification of Data.  At least *** days prior to filing any
documents with any Regulatory Authority that incorporate data generated by
Patheon, Client will give Patheon a copy of the documents incorporating this
data to give Patheon the opportunity to verify the accuracy and regulatory
validity of those documents as they relate to Patheon generated data.
 
(c)           Verification of CMC.  At least *** days prior to filing with any
Regulatory Authority any documentation which is or is equivalent to the FDA’s
Chemistry and Manufacturing Controls (“CMC”) related to any Marketing
Authorization, such as a New Drug Application or Abbreviated New Drug
Application, Client will give Patheon a copy of the CMC as well as all
supporting documents which have been relied upon to prepare the CMC.  This
disclosure will permit Patheon to verify that the CMC accurately describes the
work that Patheon has performed and the manufacturing processes that Patheon
will perform under this Agreement.  Client will give Patheon copies of all FDA
filings at the time of submission which contain CMC information regarding the
Product.

(d)           Deficiencies.  If, in Patheon’s sole discretion, acting
reasonably, Patheon determines that any of the information given by Client under
clauses (b) and (c) above is inaccurate or deficient in a material manner (the
"Deficiencies"), Patheon will notify Client in writing of the Deficiencies.  The
parties will work together to have the Deficiencies resolved prior to submission
of the information to a Regulatory Authority.

(e)           Client Responsibility.  For clarity, the parties agree that in
reviewing the documents referred to in clause (b) above, Patheon’s role will be
limited to verifying the accuracy of the description of the work undertaken or
to be undertaken by Patheon.  Subject to the foregoing, Patheon will not assume
any responsibility for the accuracy of any application for receipt of an
approval by a Regulatory Authority.  The Client is solely responsibility for the
preparation and filing of the application for approval by the Regulatory
Authorities and any relevant costs will be borne by the Client.

(f)            Inspection by Regulatory Authorities.  If Client does not give
Patheon the documents requested under clause (b) above within the time specified
and if Patheon reasonably believes that Patheon’s standing with a Regulatory
Authority may be jeopardized, Patheon may, in its sole discretion, delay or
postpone any inspection by the Regulatory Authority until Patheon has reviewed
the requested documents and is satisfied with their contents.
 
 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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ARTICLE 8
 
TERM AND TERMINATION
 
8.1  Initial Term.
 
This Agreement will become effective as of the Effective Date and will continue
until December 31 of the Year that is four Years after the Commencement Date
(the "Initial Term"), unless terminated earlier by one of the parties in
accordance herewith.  This Agreement will automatically continue after the
Initial Term for successive terms of two years each unless either party gives
written notice to the other party of its intention to terminate this Agreement
at least 18 months prior to the end of the Initial Term and 12 months prior to
the end of any renewal  term.
 
8.2  Termination.
 
(a)           Either party at its sole option may terminate this Agreement upon
written notice where the other party has failed to remedy a material breach of
any of its representations, warranties, or other obligations under this
Agreement within 60 days following receipt of a written notice (the "Remediation
Period") of the breach that expressly states that it is a notice under this
Section 8.2(a) (a "Breach Notice").  The aggrieved party's right to terminate
this Agreement under this Section 8.2(a) may only be exercised for a period of
60 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 the aggrieved party will be deemed to have waived the breach of the
representation, warranty, or obligation described in the Breach Notice.
 
(b)           Either party at its sole option may immediately terminate this
Agreement upon written notice, but without prior advance notice, to the other
party if: (i) the other party is declared insolvent or bankrupt by a court of
competent jurisdiction; (ii) a voluntary petition of bankruptcy is filed in any
court of competent jurisdiction by the other party; or (iii) this Agreement is
assigned by the other party for the benefit of creditors.
 
(c)           Client may terminate this Agreement as to any Product upon 30
days' prior written notice if any Authority takes any action, or raises any
objection, that prevents Client from importing, exporting, purchasing, or
selling the Product or if it is determined that Client’s formulation or sale of
the Product infringes any patent rights or other intellectual property rights of
any other party.  But if this occurs, Client will still fulfill all of its
obligations under Section 8.4 below and under the Capital Expenditure and
Equipment Agreement regarding this Product.
 
(d)           Patheon may terminate this Agreement upon six months' prior
written notice if Client assigns under Section 13.6 any of its rights under this
Agreement to an assignee that, in the opinion of Patheon acting reasonably, is:
(i) not a credit worthy substitute for Client; or (ii) a competitor of Patheon;
 
(e)           Notwithstanding anything in this Article 8 to the contrary, Client
may terminate this Agreement at any time during the Initial Term or any
subsequent renewal term upon 24 months’ prior written notice to Patheon, if
Client assigns, sells, licenses, or otherwise transfers any rights to
commercialize the Product in the United States to a third party.
 
 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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8.3  Product Discontinuation.
 
Client will give at least three months' advance notice if it intends to no
longer order Manufacturing Services for a Product due to this Product's
discontinuance in the market, except for discontinuance due to recall or other
legally mandated discontinuance.
 
8.4  Obligations on Termination.
 
If this Agreement is completed, expires, or is terminated in whole or in part
for any reason, then:
 

 
(a)
Client will take delivery of and pay for all undelivered Products that are
manufactured and/or packaged under a Firm Order, at the price in effect at the
time the Firm Order was placed;

 

 
(b)
Client will purchase, at Patheon's cost (including all costs incurred by Patheon
for the purchase of the Inventory including a ***% handling fee), the Inventory
applicable to the Products which was purchased, produced or maintained by
Patheon in contemplation of filling Firm Orders or in accordance with Section
5.2 prior to notice of termination being given;

 

 
(c)
Client will satisfy the purchase price payable under Patheon's orders with
suppliers of Components, if the orders were made by Patheon in reliance on Firm
Orders or in accordance with Section 5.2 and which are not currently usable by
Patheon to manufacture products for third parties or cannot be returned to
suppliers for a full or partial refund;

 
 
(d)
Patheon will return to Client all unused Active Materials (with shipping and
related expenses, if any, to be borne by Client);

 
 
(e)
Client acknowledges that no competitor of Patheon will be permitted access to
the Manufacturing Site; and

 
 
(f)
Client will make commercially reasonable efforts, at its own expense, to remove
from Patheon site(s), within 30 days, all of Client’s Components, Inventory and
Materials (whether current or obsolete), supplies, undelivered Product,
chattels, Equipment or other moveable property owned by Client, related to the
Agreement and located at a Manufacturing Site or that is otherwise under
Patheon’s care and control (“Client Property”).  If Client fails to remove the
Client Property within 30 days following the completion, termination, or
expiration of the Agreement Client will pay Patheon $*** per pallet, per ***,
one pallet minimum ($*** per pallet, per ***, one pallet minimum, for any of the
Client Property that contains controlled substances or requires refrigeration)
thereafter for storing the Client Property and will assume any third party
storage charges invoiced to Patheon regarding the Client Property.  Patheon will
invoice Client for the storage charges as set forth in Section 5.6 of this
Agreement.

 
 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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Any termination or expiration of this Agreement will not affect any outstanding
obligations or payments due hereunder prior to the termination or expiration,
nor will it prejudice any other remedies that the parties may have under this
Agreement or the Capital Expenditure and Equipment Agreement.  For greater
certainty, termination of this Agreement for any reason will not affect the
obligations and responsibilities of the parties under Articles 10 and 11 and
Sections 5.4, 5.6, 8.4, 13.1, 13.2, 13.3, and 13.15, all of which survive any
termination.
 
ARTICLE 9
 
REPRESENTATIONS, WARRANTIES AND COVENANTS
 
9.1  Authority.
 
Each party covenants, represents, and warrants that it has the full right and
authority to enter into this Agreement and that it is not aware of any
impediment that would inhibit its ability to perform its obligations hereunder.
 
9.2  Client Warranties.
 
Client covenants, represents, and warrants that:
 

 
(a)
the Specifications for each of the Products are its or its Affiliate's property
and that Client may lawfully disclose the Specifications to Patheon;

 

 
(b)
to Client’s knowledge, there are no actions or other legal proceedings,
concerning the infringement of Third Party Rights related to  the sale, use, or
other disposition of any Product made in accordance with the Specifications;

 

 
(c)
the Specifications for all Products conform to all applicable cGMPs and
Applicable Laws;

 

 
(d)
upon Client’s receipt of approval from a Regulatory Authority for any country in
the Territory, the Products, if labelled and manufactured in accordance with the
Specifications and in compliance with applicable cGMPs and Applicable Laws may
be lawfully sold and distributed in such country;

 
9.3  Patheon Warranties.
 
Patheon covenants, represents, and warrants that:
 
 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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(a)
at the time of sale and shipment to Client by Patheon the Product (a) will
conform to the Specifications then in effect, (b) will have been manufactured in
accordance with (i) cGMPs and Applicable Laws and (ii) the process and
conditions set forth in the CMC section of Clients’ New Drug Application for the
Product maintained by FDA or similar regulatory submission by another Regulatory
Authority, and (c) will not be (i) adulterated or misbranded by Patheon within
the meaning of the FD&C Act or (ii) an article that many not be introduced into
interstate commerce under the provisions of Sections 404 or 505 of the FD&C Act;

 

 
(b)
any Patheon Intellectual Property used by Patheon to perform the Manufacturing
Services (i) is Patheon’s or its Affiliate's unencumbered property, (ii) may be
lawfully used by Patheon, and (iii) does not infringe and will not infringe any
Third Party Rights; and

 

 
(c)
during the term of this Agreement, Patheon agrees to manufacture and sell the
Products *** to Client and to *** and *** and *** in a ***in a ***.

 
9.4  Debarred Persons.
 
Patheon covenants that it will not in the performance of its obligations under
this Agreement use the services of any person debarred or suspended under 21
U.S.C. §335(a) or (b).  Patheon represents that it does not currently have, and
covenants that it will not hire, as an officer or an employee, contractor,
supplier or agent any person who has been convicted of a felony under the laws
of the United States for conduct relating to the regulation of any drug product
under the Federal Food, Drug, and Cosmetic Act (United States). If during the
term of this Agreement, Patheon or any of its employees performing services
pursuant to this Agreement or of any individual, corporation, partnership or
association providing services to Patheon which directly or indirectly relate to
activities under this Agreement (i) becomes debarred or (ii) receives notice of
an action or threat of an action with respect to its debarment, Patheon will
notify the Client immediately.
 
9.5  Permits.
 
Client will be solely responsible for obtaining or maintaining, on a timely
basis, any permits or other regulatory approvals for the Products or the
Specifications, including, without limitation, all marketing and post-marketing
approvals.
 
Patheon will maintain at all relevant times all governmental permits, licenses,
approval, and authorities required to enable it to lawfully and properly perform
the Manufacturing Services.
 
9.6  No Warranty.

PATHEON MAKES NO WARRANTY OF ANY KIND, EITHER EXPRESSED OR IMPLIED, BY FACT OR
LAW, OTHER THAN THOSE EXPRESSLY SET FORTH IN THIS AGREEMENT.  PATHEON MAKES NO
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE OR WARRANTY OF MERCHANTABILITY FOR
THE PRODUCTS.
 
 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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ARTICLE 10
 
REMEDIES AND INDEMNITIES
 
10.1  Consequential Damages.
 
Under no circumstances whatsoever will either party be liable to the other in
contract, tort, negligence, breach of statutory duty, or otherwise for (i) any
(direct or indirect) loss of profits, of production, of anticipated savings, of
business, or goodwill or (ii) for any other liability, damage, costs, or expense
of any kind incurred by the other party of an indirect or consequential nature,
regardless of any notice of the possibility of these damages.
 
10.2  Limitation of Liability.
 
(a)           Active Materials.  Except as expressly set forth in Section 2.2,
under no circumstances will Patheon be responsible for any loss or damage to the
Active Materials.  Patheon’s maximum responsibility for loss or damage to the
Active Materials will not exceed the Maximum Credit Value set forth in Schedule
D.
 
(b)           Maximum Liability.  Patheon’s maximum liability to Client under
this Agreement for any reason whatsoever, including, any liability arising under
Article 6 or resulting from any and all breaches of its representations,
warranties, or any other obligations under this Agreement, but excluding any
liability under Section 10.3 hereof, will not exceed in a Year ***% of annual
revenue to Patheon up to a maximum of $*** in the aggregate.
 
10.3  Patheon.
 
Patheon agrees to defend, indemnify, and hold Client, its directors, officers,
employees, and agents harmless against any and all losses, damages, costs
(including reasonable attorneys’ fees), claims, demands, judgments and liability
to, from and in favour of third parties (other than Affiliates) resulting from,
or relating to any claim of personal injury or property damage to the extent
that the injury or damage is the result of (i) a breach of this Agreement by
Patheon, including, without limitation, any representation or warranty contained
herein, (ii) a failure by Patheon to perform the Manufacturing Services in
accordance with the Specifications, cGMPs, and Applicable Laws, or (iii)
Patheon’s infringing or misappropriating any proprietary or confidential
information or Third Party Rights in the performance of its obligations
hereunder, except to the extent that the losses, damages, costs, claims,
demands, judgments, and liability are due to the negligence or wrongful act(s)
of Client, its directors, officers, employees, agents, or Affiliates.
 
 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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10.4  Client.
 
Client agrees to defend, indemnify, and hold Patheon, its directors, officers,
employees, and agents harmless against any and all losses, damages, costs
(including reasonable attorneys’ fees), claims, demands, judgments and liability
to, from and in favour of third parties (other than Affiliates) resulting from,
or relating to (i) any claim of infringement or alleged infringement of any
Third Party Rights in the Products, or any portion thereof, or (ii) any claim of
personal injury or property damage to the extent that the injury or damage is
the result of a breach of this Agreement by Client, including, without
limitation, any representation or warranty contained herein, except to the
extent that the losses, damages, costs, claims, demands, judgments, and
liability are due to the negligence or wrongful act(s) of Patheon, its
directors, officers, employees, or agents.
 
10.5  Indemnification Procedure.
 
 If a claim occurs, the party seeking indemnification will: (a) promptly notify
the other party of the claim; (b) use commercially reasonable efforts to
mitigate the effects of the claim; (c) cooperate fully with the indemnifying
party and its legal representatives in the defense of the claim; and (d) permit
the indemnifying party to control the defense and settlement of the claim, all
at the indemnifying party’s cost and expense; provided, however, that no
settlement of any such claim will include any admission of wrongdoing on the
part of the indemnified party, without the prior written consent of the
indemnified party, which such consent will not be unreasonably
withheld.  Subject to the indemnifying party’s right to direct and control the
defense of such claim, the indemnified party will have the right, but not the
obligation, at its own expense to select and to obtain representation by
separate legal counsel.
 
10.6  Reasonable Allocation of Risk.
 
This Agreement (including, without limitation, this Article 10) is reasonable
and creates a reasonable allocation of risk for the relative profits the parties
each expect to derive from the Products.  Patheon assumes only a limited degree
of risk arising from the manufacture, distribution, and use of the Products
because Client has developed and holds the marketing approval for the Products,
Client requires Patheon to manufacture and label the Products strictly in
accordance with the Specifications and Product Warranties, and Client, not
Patheon, is best positioned to inform and advise potential users about the
circumstances and manner of use of the Products.
 
ARTICLE 11
 
CONFIDENTIALITY
 
11.1  Confidentiality.
 
The Confidentiality Agreement will apply to all confidential information
disclosed by the parties under this Agreement.  If the Confidentiality Agreement
expires or is terminated prior to the expiration or termination of this
Agreement, the terms of the Confidentiality Agreement will continue to govern
the parties’ obligations of confidentiality for any confidential or proprietary
information disclosed by the parties hereunder, for the term of this Agreement,
as though the Confidentiality Agreement remained in full force and effect.
 
 
- 29 -

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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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

 
ARTICLE 12
 
DISPUTE RESOLUTION
 
12.1  Commercial Disputes.
 
If any dispute arises out of this Agreement (other than a dispute under Section
6.1(b) or a Technical Dispute, as defined herein), the parties will first try to
resolve it amicably.  In that regard, any party may send a notice of dispute to
the other, and each party will appoint, within ten Business Days from receipt of
the notice of dispute, a single representative having full power and authority
to solve the dispute.  The representatives will meet as necessary in order to
resolve the dispute.  If the representatives fail to resolve the matter within
one month from their appointment, or if a party fails to appoint a
representative within the ten Business Day period set forth above, the dispute
will immediately be referred to the Chief Operating Officer (or another officer
as he/she may designate) of each party who will meet and discuss as necessary to
try to resolve the dispute amicably within 30 days.  Should the parties fail to
reach a resolution under this Section 12.1, the dispute will be referred to a
court of competent jurisdiction in accordance with Section 13.16.
 
12.2  Technical Dispute Resolution.
 
If a dispute arises (other than disputes under Sections 6.1(b) or 12.1) between
the parties that is exclusively related to technical aspects of the
manufacturing, packaging, labelling, quality control testing, handling, storage,
or other activities under this Agreement (a "Technical Dispute"), the parties
will make all reasonable efforts to resolve the dispute by amicable
negotiations.  In that regard, senior representatives of each party will, as
soon as practicable and in any event no later than ten Business Days after a
written request from either party to the other, meet in good faith to resolve
any Technical Dispute.  If, despite this meeting, the parties are unable to
resolve a Technical Dispute within a reasonable time, and in any event within 30
Business Days of the written request, the Technical Dispute will, at the request
of either party, be referred for determination to an expert in accordance with
Schedule E.  If the parties cannot agree that a dispute is a Technical Dispute,
Section 12.1 will prevail.  For greater certainty, the parties agree that the
release of the Products for sale or distribution under the applicable marketing
approval for the Products will not by itself indicate compliance by Patheon with
its obligations for the Manufacturing Services and further that nothing in this
Agreement (including Schedule E) will remove or limit the authority of the
relevant qualified person (as specified by the Quality Agreement) to determine
whether the Products are to be released for sale or distribution.
 
ARTICLE 13
 
MISCELLANEOUS
 
13.1  Inventions.
 
(a)           For the term of this Agreement, Client hereby grants to Patheon a
non-exclusive, paid-up, royalty-free, non-transferable license of Client’s
Intellectual Property which Patheon must use in order to perform the
Manufacturing Services.
 
 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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

 
(b)           All Intellectual Property generated or derived by Patheon while
performing the Manufacturing Services, to the extent it is specific to the
development, manufacture, use, and sale of Client’s Product that is the subject
of the Manufacturing Services, will be the exclusive property of Client.
 
(c)           All Patheon Intellectual Property will be the exclusive property
of Patheon. Patheon hereby grants to Client a perpetual, irrevocable,
non-exclusive, paid-up, royalty-free, transferable license to use the Patheon
Intellectual Property used by Patheon to perform the Manufacturing Services to
enable Client to manufacture or have the Product(s) manufactured by a third
party.
 
(d)           Each party will be solely responsible for the costs of filing,
prosecution, and maintenance of patents and patent applications on its own
Inventions.
 
(e)           Either party will give the other party written notice, as promptly
as practicable, of all Inventions which can reasonably be deemed to constitute
improvements or other modifications of the Products or processes or technology
owned or otherwise controlled by the party.
 
13.2   Intellectual Property.
 
Subject to Section 13.1, all Client Intellectual Property will be owned by
Client and all Patheon Intellectual Property will be owned by Patheon.  Neither
party has, nor will it acquire, any interest in any of the other party’s
Intellectual Property unless otherwise expressly agreed to in writing.  Neither
party will use any Intellectual Property of the other party, except as
specifically authorized by the other party or as required for the performance of
its obligations under this Agreement.
 
13.3   Insurance.
 
Each party will maintain commercial general liability insurance, including
blanket contractual liability insurance covering the obligations of that party
under this Agreement through the term of this Agreement and for a period of
three years thereafter.  This insurance will have policy limits of not less than
(i) $*** for each occurrence for personal injury or property damage liability;
and (ii) $*** in the aggregate per annum for product and completed operations
liability.  If requested each party will give the other a certificate of
insurance evidencing the above and showing the name of the issuing company, the
policy number, the effective date, the expiration date, and the limits of
liability.  The insurance certificate will further provide for a minimum of 30
days' written notice to the insured of a cancellation of, or material change in,
the insurance.  If a party is unable to maintain the insurance policies required
under this Agreement through no fault of its own, then the party will forthwith
notify the other party in writing and the parties will in good faith negotiate
appropriate amendments to the insurance provision of this Agreement in order to
provide adequate assurances.
 
13.4   Independent Contractors.
 
The parties are independent contractors and this Agreement will not be construed
to create between Patheon and Client any other relationship such as, by way of
example only, that of employer-employee, principal agent, joint-venturer,
co-partners, or any similar relationship, the existence of which is expressly
denied by the parties.
 
 
- 31 -

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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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

 
13.5   No Waiver.
 
Either party's failure to require the other party to comply with any provision
of this Agreement will not be deemed a waiver of the provision or any other
provision of this Agreement, with the exception of Sections 6.1 and 8.2.
 
13.6  Assignment.
 
 
(a)
Patheon may not assign this Agreement or any of its rights or obligations
hereunder without the written consent of Client.  But Patheon may arrange for
subcontractors to perform specific testing services arising under this Agreement
with the consent of Client, which consent will not be unreasonably withheld.

 

 
(b)
Subject to Section 8.2(d), Client may assign this Agreement or any of its rights
or obligations hereunder without approval from Patheon.  But Client will give
Patheon prior written notice of any assignment, any assignee will covenant in
writing with Patheon to be bound by the terms of this Agreement.  Any partial
assignment will be subject to Patheon’s cost review of the assigned Products and
Patheon may terminate this Agreement or any assigned part thereof, on 18 months’
prior written notice to Client and the assignee if good faith discussions do not
lead to agreement on amended Manufacturing Service fees within a reasonable
time.

 

 
(c)
Despite the foregoing provisions of this Section 13.6, either party may assign
this Agreement to any of its Affiliates or to a successor to or purchaser of all
or substantially all of its business, but the assignee must execute an agreement
with the non-assigning party whereby it agrees to be bound hereunder.

 
13.7   Force Majeure.
 
Neither party will be liable for the failure to perform its obligations under
this Agreement if the failure is caused by an event beyond that party's
reasonable control, including, but not limited to, strikes or other labor
disturbances, lockouts, riots, quarantines, communicable disease outbreaks,
wars, acts of terrorism, fires, floods, storms, interruption of or delay in
transportation, , lack of or inability to obtain fuel, power or components, or
compliance with any order or regulation of any government entity acting within
colour of right (a "Force Majeure Event").  A party claiming a right to excused
performance under this Section 13.7 will immediately notify the other party in
writing of the extent of its inability to perform, which notice will specify the
event beyond its reasonable control that prevents the performance. Neither party
will be entitled to rely on a Force Majeure Event to relieve it from an
obligation to pay money (including any interest for delayed payment) which would
otherwise be due and payable under this Agreement.
 
13.8  Additional Product.
 
Additional products may be added to this Agreement and the additional products
will be governed by the general conditions hereof with any special terms
(including, without limitation, price) governed by amendments to Schedules A, B,
and C as applicable.
 
 
- 32 -

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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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

 
13.9  Notices.
 
Any notice, approval, instruction or other written communication required or
permitted hereunder will be sufficient if made or given to the other party by
personal delivery, by telecopy, facsimile communication, or confirmed receipt
email or by sending the same by first class mail, postage prepaid to the
respective addresses, telecopy or facsimile numbers or electronic mail addresses
set forth below:
 
If to Client:
 
POZEN Inc.
 
1414 Raleigh Road
 
Suite 400
 
Chapel Hill, NC 27517
 
Attention:  Bruce Cao, Director, Pharmaceutical Development
 
Telecopier No.: 919-913-1039
 
Email address:bcao@pozen.com
 
With a copy to:  General Counsel
 
If to Patheon:
 
Patheon Pharmaceuticals Inc.
2110 East Galbraith Road
Cincinnati, OH 45237-1625
Attention:  Director of Legal Services
Telecopier No.: 513-948-6927
 
Email address: [Frank.McCune@patheon.com]
 
With a copy to:
 
Patheon Inc.
4721 Emperor Boulevard
Research Triangle Park,
NC 27703
Attention: General Counsel
Telecopier No.: 919-474-2269

or to any other addresses, telecopy or facsimile numbers or electronic mail
addresses given to the other party in accordance with the terms of this Section
13.9.  Notices or written communications made or given by personal delivery,
telecopy, facsimile, or electronic mail will be deemed to have been sufficiently
made or given when sent (receipt acknowledged), or if mailed, five days after
being deposited in the United States, Canada, or European Union mail, postage
prepaid or upon receipt, whichever is sooner.
 
 
- 33 -

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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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

 
13.10   Severability.
 
If any provision of this Agreement is determined by a court of competent
jurisdiction to be invalid, illegal, or unenforceable in any respect, that
determination will not impair or affect the validity, legality, or
enforceability of the remaining provisions hereof, because each provision is
separate, severable, and distinct.
 
13.11   Entire Agreement.
 
This Agreement, together with the Quality Agreement, the Confidentiality
Agreement, and the Capital Expenditure and Equipment Agreement constitutes the
full, complete, final and integrated agreement between the parties relating to
the subject matter hereof and supersedes all previous written or oral
negotiations, commitments, agreements, transactions, or understandings
concerning the subject matter hereof.  Any modification, amendment, or
supplement to this Agreement must be in writing and signed by authorized
representatives of both parties.
 
13.12   Other Terms.
 
No terms, provisions or conditions of any purchase order or other business form
or written authorization used by Client 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 Client or Patheon to object to the
terms, provisions, or conditions unless the document specifically refers to this
Agreement and is signed by both parties.
 
13.13   No Third Party Benefit or Right.
 
For greater certainty, nothing in this Agreement will confer or be construed as
conferring on any third party any benefit or the right to enforce any express or
implied term of this Agreement.
 
13.14   Execution in Counterparts.
 
This Agreement may be executed in two or more counterparts, by original or
facsimile signature, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
 
13.15  Use of Client Name.
 
Patheon will not make any use of Client’s name, trademarks or logo or any
variations thereof, alone or with any other word or words, without the prior
written consent of Client, which consent will not be unreasonably withheld. 
Despite this, Client agrees that Patheon may include Client’s name and logo in
customer lists or related marketing and promotional material for the purpose of
identifying users of Patheon’s Manufacturing Services. 
 
 
- 34 -

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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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

 
13.16   Governing Law.
 
This Agreement will be construed and enforced in accordance with the laws of the
State of New York and the laws of the United States of America applicable
therein and subject to the exclusive jurisdiction of the courts thereof.  The UN
Convention on Contracts for the International Sale of Goods will not apply to
this Agreement.
 
[Signature Page to follow immediately]
 
 
- 35 -

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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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

 
IN WITNESS WHEREOF, the duly authorized representatives of the parties have
executed this Agreement as of the date first written above.
 

  PATHEON PHARMACEUTICALS INC.           By:
/s/ Dean Wilson
   
Name: 
Dean Wilson
    Title:
VP Corporate Controller
           
POZEN INC.
          By:
/s/ John R. Plachetka
   
Name: 
John R. Plachetka, Pharm.D.
    Title:
President & Chief Executive Officer
 

 
 
- 36 -

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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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

 
SCHEDULE A
 
PRODUCT LIST AND SPECIFICATIONS
 
Product List
 
PA 325/40 Tablets, ***.
 
Specifications
 
Prior to the start of commercial manufacturing of Product under this Agreement
Client will give Patheon the originally executed copies of the FDA approved
Specifications. If the Specifications received are subsequently amended, then
Client will give Patheon the revised and originally executed copies of the
revised Specifications.  Upon acceptance of the revised Specifications, Patheon
will give Client a signed and dated receipt indicating Patheon’s acceptance of
the revised Specifications. If the manufacture of validation batches occurs
prior to the receipt of final FDA approved Specifications, the proposed
Specifications in the FDA filing will be used to manufacture the validation
batches.
 
 
 

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

 
 
[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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SCHEDULE B
 
MINIMUM ORDER QUANTITY, ANNUAL VOLUME, AND PRICE
 
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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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- 2 -

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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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- 3 -

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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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- 4 -

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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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- 5 -

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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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- 6 -

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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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- 7 -

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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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

 
SCHEDULE C
 
ANNUAL STABILITY TESTING
 
Patheon and Client will agree in writing on any stability testing to be
performed by Patheon on the Products.  This agreement will specify the
commercial and Product stability protocols applicable to the stability testing
and the fees payable by Client for this testing.
 
 
 

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

 
 
[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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

 
SCHEDULE D
 
***
 
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--------------------------------------------------------------------------------

 
 
[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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

 
SCHEDULE E
 
TECHNICAL DISPUTE RESOLUTION
 
Technical Disputes which cannot be resolved by negotiation as provided in
Section 12.2 will be resolved in the following manner:
 
1.             Appointment of Expert. Within ten Business Days after a party
requests under Section 12.2 that an expert be appointed to resolve a Technical
Dispute, the parties will jointly appoint a mutually acceptable expert with
experience and expertise in the subject matter of the dispute.  If the parties
are unable to so agree within the ten Business Day period, or in the event of
disclosure of a conflict by an expert under Paragraph 2 hereof which results in
the parties not confirming the appointment of the expert, then an expert
(willing to act in that capacity hereunder) will be appointed by an experienced
arbitrator on the roster of the American Arbitration Association.
 
2.             Conflicts of Interest.  Any person appointed as an expert will be
entitled to act and continue to act as an expert even if at the time of his
appointment or at any time before he gives his determination, he has or may have
some interest or duty which conflicts or may conflict with his appointment if
before accepting the appointment (or as soon as practicable after he becomes
aware of the conflict or potential conflict) he fully discloses the interest or
duty and the parties will, after the disclosure, have confirmed his appointment.
 
3.             Not Arbitrator.  No expert will be deemed to be an arbitrator and
the provisions of the American Arbitration Act or of any other applicable
statute (foreign or domestic) and the law relating to arbitration will not apply
to the expert or the expert's determination or the procedure by which the expert
reaches his determination under this Schedule E.
 
4.             Procedure.  Where an expert is appointed:
 
 
(a)
Timing.  The expert will be so appointed on condition that (i) he promptly fixes
a reasonable time and place for receiving representations, submissions or
information from the parties and that he issues the authorizations to the
parties and any relevant third party for the proper conduct of his determination
and any hearing and (ii) he renders his decision (with full reasons) within 15
Business Days (or another other date as the parties and the expert may agree)
after receipt of all information requested by him under Paragraph 4(b) hereof.

 
 
(b)
Disclosure of Evidence.  The parties undertake one to the other to give to any
expert all the evidence and information within their respective possession or
control as the expert may reasonably consider necessary for determining the
matter before him which they will disclose promptly and in any event within five
Business Days of a written request from the relevant expert to do so.

 
 
(c)
Advisors.  Each party may appoint any counsel, consultants and advisors as it
feels appropriate to assist the expert in his determination and so as to present
their respective cases so that at all times the parties will co-operate and seek
to narrow and limit the issues to be determined.

 
 
 

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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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(d)
Appointment of New Expert.  If within the time specified in Paragraph 4(a) above
the expert will not have rendered a decision in accordance with his appointment,
a new expert may (at the request of either party) be appointed and the
appointment of the existing expert will thereupon cease for the purposes of
determining the matter at issue between the parties save this if the existing
expert renders his decision with full reasons prior to the appointment of the
new expert, then this decision will have effect and the proposed appointment of
the new expert will be withdrawn.

 
 
(e)
Final and Binding.  The determination of the expert will, except for fraud or
manifest error, be final and binding upon the parties.

 
 
(f)
Costs.  Each party will bear its own costs for any matter referred to an expert
hereunder and, in the absence of express provision in the Agreement to the
contrary, the costs and expenses of the expert will be shared equally by the
parties.

 
For greater certainty, the release of the Products for sale or distribution
under the applicable marketing approval for the Products will not by itself
indicate compliance by Patheon with its obligations for the Manufacturing
Services and further that nothing in this Agreement (including this Schedule E)
will remove or limit the authority of the relevant qualified person (as
specified by the Quality Agreement) to determine whether the Products are to be
released for sale or distribution.
 
 
 

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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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SCHEDULE F
 
COMMERCIAL QUALITY AGREEMENT

 
To be mutually agreed upon by the parties
 
 
 

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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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SCHEDULE G (Reserved)
 
 
 

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

 
 
[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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SCHEDULE H
 
MONTHLY ACTIVE MATERIALS INVENTORY REPORT

TO: 
POZEN INC.

FROM: 
PATHEON PHARMACEUTICALS INC.

RE:
Active Materials monthly inventory report under Section 2.2(a) of the
Manufacturing Services Agreement dated December 9, 2011 (the "Agreement")

 

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Reporting month:
             
Active Materials on hand at beginning of month:
 
 kg
(A)
       
Active Materials on hand at end of month:
 
 kg
(B)
       
Quantity Received during month:
 
 kg
(C)
       
Quantity Dispensed1 during month:
 
 kg
 
(A + C – B)
             
Quantity Converted during month:
 
 kg
 
(total Active Materials in Products produced and not rejected, recalled or
returned)
             
Capitalized terms used in this report have the meanings given to the terms in
the Agreement.

 
PATHEON PHARMACEUTICALS INC.
DATE: 
           
Per:
       
Name: 
       
Title:
       

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1 Excludes any (i) Active Materials that must be retained by Patheon as samples,
(ii) Active Materials contained in Product that must be retained as samples,
(iii) Active Materials used in testing (if applicable), and (iv) Active
Materials received or consumed in technical transfer activities or development
activities, including, without limitation, any regulatory, stability,
validation, or test batches manufactured during the month.
 
 
 

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

 
 
[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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 SCHEDULE I
 
REPORT OF ANNUAL ACTIVE MATERIALS INVENTORY RECONCILIATION
 
AND CALCULATION OF ACTUAL ANNUAL YIELD
 
TO: 
POZEN INC.

FROM: 
PATHEON PHARMACEUTICALS INC.

RE:
Active Materials annual inventory reconciliation report and calculation of
Actual Annual Yield under Section 2.2(a) of the Manufacturing Services Agreement
dated December 9, 2011 (the "Agreement")

 

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

 

Reporting month:
                 
Active Materials on hand at beginning of month:
   
 kg
(A)
         
Active Materials on hand at end of month:
   
 kg
(B)
         
Quantity Received during Year:
   
 kg
(C)
         
Quantity Dispensed1 during Year:
   
 kg
(D)
(A + C – B)
                 
Quantity Converted during Year:
   
 kg
(E)
(total Active Materials in Products produced and not rejected, recalled or
returned)
                 
Active Materials Credit Value:
$
 
 / kg
(F)

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

 
1 Excludes any (i) Active Materials that must be retained by Patheon as samples,
(ii) Active Materials contained in Product that must be retained as samples,
(iii) Active Materials used in testing (if applicable), and (iv) Active
Materials received or consumed in technical transfer activities or development
activities, including, without limitation, any regulatory, stability,
validation, or test batches manufactured during the month.
 
 
 

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

 
 
[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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

 
Target Yield:
     %
(G)
         
***
     %
(H)
         
***
 
***
   

 
Based on the foregoing reimbursement calculation Patheon will reimburse Client
the amount of $_________________.
 
Capitalized terms used in this report have the meanings given to the terms in
the Agreement.
 

DATE:             
PATHEON PHARMACEUTICALS INC.
     
Per:
   
Name: 
   
Title:
   

 
 
- 2 -

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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
 

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

 
SCHEDULE J (Reserved)
 
 

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