Exhibit 10.21

Manufacturing Services Agreement  

CERTAIN MATERIAL (INDICATED BY ASTERISKS) HAS BEEN OMITTED FROM THIS DOCUMENT
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

Manufacturing Services Agreement

7 November 2017

 

 

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Manufacturing Services Agreement

Table of Contents

ARTICLE 11

Structure of Agreement and Interpretation1

1.1Definitions.1

1.2Currency.6

1.3Sections and Headings.6

1.4Singular Terms.6

1.5Schedules.7

ARTICLE 27

PATHEON'S MANUFACTURING services7

2.1Manufacturing Services.7

2.2Active Material Yield.10

ARTICLE 312

CLIENT'S OBLIGATIONS12

3.1Payment.12

3.2Active Materials and Qualification of Additional Sources of Supply.12

ARTICLE 413

CONVERSION fees AND COMPONENT COSTS13

4.1First Year Pricing.13

4.2Price Adjustments – Subsequent Years’ Pricing.13

4.3Price Adjustments – Current Year Pricing.15

4.4Adjustments Due to Technical Changes or Regulatory Authority Requirements.16

4.5Multi-Country Packaging Requirements.16

ARTICLE 516

ORDERS, SHIPMENT, INVOICING, PAYMENT16

5.1Orders and Forecasts.16

5.2Zero Volume Forecast.17

5.3Reliance by Patheon.17

5.4Minimum Orders.18

5.5Delivery and Shipping.18

5.6Invoices and Payment.19

ARTICLE 619

PRODUCT CLAIMS AND RECALLS19

6.1Product Claims.19

6.2Product Recalls and Returns.20

6.3Patheon’s Responsibility for Defective and Recalled Products.21

6.4Disposition of Defective or Recalled Products.21

6.5Healthcare Provider or Patient Questions and Complaints.22

6.6Sole Remedy.22

ARTICLE 722

CO-OPERATION22

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Manufacturing Services Agreement

7.1Quarterly Review.22

7.2Governmental Agencies.22

7.3Records and Accounting by Patheon.23

7.4Inspection.23

7.5Access.23

7.6Regulatory Inspections.23

7.7Reports.24

7.8Regulatory Filings.24

ARTICLE 825

TERM AND TERMINATION25

8.1Initial Term.25

8.2Termination for Cause.26

8.3Obligations on Termination.26

8.4Technology Transfer.27

ARTICLE 927

REPRESENTATIONS, WARRANTIES AND COVENANTS27

9.1Authority.27

9.2Client Warranties.28

9.3Patheon Warranties.29

9.4Permits.30

9.5No Warranty.30

ARTICLE 1030

REMEDIES AND INDEMNITIES30

10.1Consequential and Other Damages.30

10.2Limitation of Liability.30

10.3Patheon Indemnity.31

10.4Client Indemnity.31

10.5Indemnification Procedure31

10.6Reasonable Allocation of Risk.32

ARTICLE 1132

CONFIDENTIALITY32

11.1Confidential Information.32

11.2Use of Confidential Information.32

11.3Exclusions.33

11.4Photographs and Recordings.33

11.5Permitted Disclosure.33

11.6Marking.33

11.7Return of Confidential Information.34

11.8Remedies.34

ARTICLE 1234

DISPUTE RESOLUTION34

12.1Commercial Disputes.34

12.2Technical Dispute Resolution.34

ARTICLE 1335

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Manufacturing Services Agreement

MISCELLANEOUS35

13.1Inventions.35

13.2Intellectual Property.35

13.3Insurance.36

13.4Independent Contractors.36

13.5No Waiver.36

13.6Assignment.36

13.7Force Majeure.37

13.8Additional Product.37

13.9Notices.37

13.10Severability.38

13.11Entire Agreement.38

13.12Other Terms.38

13.13No Third Party Benefit or Right.39

13.14Execution in Counterparts.39

13.15Use of Client Name.39

13.16Taxes.39

13.17Governing Law.40

 

 

 

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Manufacturing Services Agreement

MANUFACTURING SERVICES AGREEMENT

THIS MANUFACTURING SERVICES AGREEMENT (the "Agreement") is made as of October
31, 2017 (the “Effective Date”)

B E T W E E N:

PATHEON UK LIMITED of Kingfisher Drive, Covingham, Swindon Wiltshire, SN23 5BZ,
UK

a corporation existing under the laws of England

 

("Patheon"),

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EVOKE PHARMA, INC. of 420 Stevens Ave, Suite 370, Solana Beach, California
92075, USA
a corporation existing under the laws of California

("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

Structure of Agreement and Interpretation

1.1Definitions.

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 in Schedule D;

"Active Materials Credit Value" means the value of the Active Materials for
certain purposes of this Agreement, as set forth in Schedule D;

“Actual Annual Yield” or “AAY” has the meaning specified in Section 2.2(a);

“Actual Yearly Volume” or “AYV” has the meaning specified in Section 4.2.1;

"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

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Manufacturing Services Agreement

 

(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 or an Affiliate of 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 the jurisdiction where the
Manufacturing Site is located; and (ii) for Client and the Products, the Laws of
all jurisdictions where the Products are manufactured, distributed, and marketed
as these are agreed and understood by the parties in this Agreement;

"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 expenses for all third party supplier fees for the
purchase or use of columns, standards, tooling, non-standard pallets, PAPR or
PPE suits (where applicable) and other project-specific items necessary for
Patheon to perform the Manufacturing Services, and which are not included as
Components;

"Business Day" means a day other than a Saturday, Sunday or a day that is a
statutory holiday in the United Kingdom or the jurisdiction where the
Manufacturing Site is located, namely France, and the USA;

“Capital Equipment Agreement” means a separate agreement that the parties may
enter into that will address responsibility for the purchase of capital
equipment and facility modifications that may be required to perform the
Manufacturing Services;

"cGMPs" means, as applicable, current good manufacturing practices as described
in:

 

(a)

Parts 210 and 211 of Title 21 of the United States' Code of Federal Regulations;

 

(b)

EC Directive 2003/94/EC; and

 

(c)

Division 2 of Part C of the Food and Drug Regulations (Canada);

together with the latest Health Canada, FDA and EMA guidance documents
pertaining to manufacturing and quality control practice, all as updated,
amended and revised from time to time;

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Manufacturing Services Agreement

“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 the development,
manufacture, use, and/or sale of Client’s Product or Active Materials that are
the subject of the Manufacturing Services (including, but not limited to, any
new use, new formulation or any change in the method of producing, testing or
storing Product in each case that are specific to the Product), including but
not limited to (i) any regulatory filings made by Client, formulations, chemical
compositions, or Specifications of the Product, and (ii) any and all
Confidential Information of Client, including any chemical structures,
composition of matter rights, process technology and other Inventions owned or
controlled by Client at the Effective Date;

“Client Property” has the meaning specified in Section 8.3(v);

“Client-Supplied Components” means those Components to be supplied by Client or
that have been supplied by Client;

“CMC” has the meaning specified in Section 7.8(c);

“Commencement Date” means the date on which any Regulatory Authority first
approves Client’s Product for commercial manufacture as notified by Client to
Patheon;

"Components" means, collectively, all packaging components, raw materials,
ingredients, excipients, containers, and other materials (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;

“Confidential Information” has the meaning specified in Section 11.1;

“Conversion Fee” means the Price for performing the Manufacturing Services
excluding the cost of Components;  

“C-TPAT” has the meaning specified in Section 2.1(f);

“Deficiencies” have 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(d);

“Disclosing Party” has the meaning specified in Section 11.1;

"EMA" means the European Medicines Agency;

"FDA" means the United States Food and Drug Administration;

"Firm Orders" have the meaning specified in Section 5.1(c);

“Force Majeure Event” has the meaning specified in Section 13.7;

"GST" has the meaning specified in Section 13.16(a)(iii);

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Manufacturing Services Agreement

"Health Canada" means the section of the Canadian Government known as Health
Canada and includes, among other departments, the Therapeutic Products
Directorate and the Health Products and Food Branch Inspectorate;

“Importer of Record” has the meaning specified in Section 3.2(a);

“Initial Term” has the meaning specified in Section 8.1;

"Intellectual Property" includes, without limitation, rights in patents, patent
applications, formulae, trademarks, trademark 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;

"Laws" means all laws, statutes, ordinances, regulations, rules, by-laws,
judgments, decrees or orders of any Authority;

“Long Term Forecast” has the meaning specified in Section 5.1(a);

"Manufacturing Services" means the manufacturing, quality control, quality
assurance, stability testing, packaging, and related services, as set forth in
this Agreement, required to manufacture Product or Products using the Active
Materials, Components, and Bill Back Items;

"Manufacturing Site" means the applicable facility where the Manufacturing
Services are performed that is owned and operated by Patheon France S.A.S that
is located at located at 40, boulevard de Champaret - BP 448 38317
Bourgoin-Jallieu Cedex (France);

“Materials” means all Components and Bill Back Items required to manufacture the
Products in accordance with the Specifications, other than the 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;

"Minimum Order Quantity" means the minimum number of batches of the Product to
be produced during the same cycle of manufacturing as set forth on Schedule B;

“Obsolete Stock” has the meaning specified in Section 5.2(b);

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Manufacturing Services Agreement

“Patheon Competitor” means a business that derives greater than [***] of its
revenues from performing contract pharmaceutical development or commercial
manufacturing services for third parties;  

“Patheon Intellectual Property” means Intellectual Property generated or derived
by Patheon before performing any Manufacturing Services, or Intellectual
Property that is 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); provided that Patheon
Intellectual Property shall not include Product Inventions;

“Price” means the price measured in EUROS to be charged by Patheon for
performing the Manufacturing Services, and includes the cost of Components
(other than Client-Supplied Components), certain cost items as set forth on
Schedule B, and annual stability testing costs as set forth on Schedule C (as
defined in Section 13.1);

"Product(s)" means the product(s) listed on Schedule A;

“Product Claims” have the meaning specified in Section 6.3(c);  

"Quality Agreement" means the separate and binding agreement between Client and
Patheon France S.A.S setting out the quality assurance standards for the
Manufacturing Services to be performed by Patheon for Client for this Agreement;

“Recall” has the meaning specified in Section 6.2(a);

“Recipient” has the meaning specified in Section 11.1;

"Regulatory Authority" means the FDA, EMA, and Health Canada and any other
foreign regulatory agencies competent to grant marketing approvals for
pharmaceutical products including the Products in the Territory;

“Regulatory Approval” has the meaning specified in Section 7.8(a);

“Representatives” means a party’s directors, officers, employees, advisers,
agents, consultants, subcontractors, service partners, professional advisors, or
representatives;

“Resident Jurisdiction" has the meaning specified in Section 13.16(a)(i);

“Shortfall” has the meaning specified in Section 2.2(b);

"Specifications" means the file for the Product, which is given by Client to
Patheon in accordance with the procedures listed on Schedule A and which
contains documents relating to the Product, including, without limitation:

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Manufacturing Services Agreement

 

(a)

specifications for Active Materials and Components;

 

(b)

manufacturing specifications, directions, and processes;

 

(c)

storage requirements;

 

(d)

all environmental, health and safety information for the Product including
material safety data sheets; and

 

(e)

the finished Product specifications, packaging specifications and shipping
requirements for the Product;

all as updated, amended and revised from time to time by Client in accordance
with the terms of this Agreement;

“Surplus” has the meaning specified in Section 2.2(c);

“Target Yield” has the meaning specified in Section 2.2(a);

“Target Yield Determination Batches” has the meaning specified in Section
2.2(a);

"Tax" or "Taxes" have the meaning specified in Section 13.16(a);

"Technical Dispute" has the meaning specified in Section 12.2;

"Territory" means world-wide;

"Third Party Rights" means the Intellectual Property of any third party;

"VAT" has the meaning specified in Section 13.16(d);

"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.

“Yearly Forecast Volume” or “YFV” has the meaning specified in Section 4.2.1;
and

“Zero Forecast Period” has the meaning specified in Section 5.1(f).

1.2Currency.  

Unless otherwise agreed in writing, all monetary amounts expressed in this
Agreement are in EUROS.

1.3Sections 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",

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Manufacturing Services Agreement

"hereof", "herein", "hereunder" and similar expressions refer to this Agreement
as a whole and not to any particular part, Section, or Schedule of this
Agreement.

1.4Singular Terms.

Except as otherwise expressly stated or unless the context otherwise requires,
all references to the singular will include the plural and vice versa.

1.5Schedules.

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 [and Validation Activities (if applicable)]

 

Schedule D

-Active Materials, Active Materials Credit Value, and Maximum Credit Value

 

Schedule E

-Technical Dispute Resolution

 

Schedule F

-Quarterly Active Materials Inventory Report

 

Schedule G

-Report of Annual Active Materials Inventory Reconciliation and Calculation of
Actual Annual Yield

 

ARTICLE 2

PATHEON'S MANUFACTURING services

2.1Manufacturing Services.

2.1.1

Appointment.  Subject to the terms of this Agreement, Client hereby appoints
Patheon to perform the Manufacturing Services for the “Territory” and to supply
“Product” to Client for its commercial purposes, and Patheon hereby agrees to
perform the Manufacturing Services and supply the Product to Client for its
commercial purposes in accordance with the Specifications, cGMPs and all
Applicable Laws for the Product Price set forth in Schedule B.  Except as
otherwise set forth in this Section 2.1, Client will have the right to purchase
Product from Patheon during the term of this Agreement by placing Firm Orders
for its Product requirements in accordance with Section 5.1.  Notwithstanding
the foregoing, during the Initial Term, Client agrees to purchase from Patheon
[***] of its Product requirements based on total number of bottles ordered (the
“Exclusivity Obligation”).  Any Product produced with respect to qualifying such
alternative Product manufacturers shall not count towards Client’s Exclusivity
Obligation hereunder.  Patheon will be obligated to manufacture and supply all
such Product ordered pursuant to Section 5.  But the Exclusivity Obligation will
cease to be binding on Client and will be permanently converted into a
non-exclusive right to purchase Product from Patheon for the remaining portion
of the Initial Term (i) in the event of a material breach by Patheon of any of
the terms of this Agreement, which breach is not cured within the period set
forth in Section 8.2(a), or (ii) under the circumstances set forth in Section
2.2(f).  In the event that Client’s requirements for Product exceed those
identified in Schedule B and such required increase in production by Patheon
needs additional capital investment, then the parties shall discuss in good
faith the allocation of cost and timelines associated therewith.  In the absence
of any good faith agreement, Client shall be entitled to obtain the additional
product above Patheon’s existing

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Manufacturing Services Agreement

capacity from a third party without any obligation to Patheon.  In the event
that Patheon enters into any other agreements, including licensing or
manufacturing agreements, with any third parties in relation to the manufacture
of any product(s) for intranasal administration of metoclopramide, Client’s
Exclusivity Obligation under this Section 2.1.1 shall immediately terminate.

Client will be entitled to take such steps as are necessary to qualify one or
more alternative Product manufacturers at any time during the term of this
Agreement. Patheon agrees to cooperate with Client and provide all assistance,
at Client’s expense, as may reasonably be requested by Client to qualify an
alternate manufacturer.  Patheon will not have to give an alternative
manufacturer access to the Manufacturing Site.

2.1.2

Performance of Manufacturing Services.  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 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 Client property.

 

(c)

Components.  Patheon will purchase all Components (with the exception of
Client-Supplied Components) and test all Components (including Client-Supplied
Components if required by the specifications) at Patheon's expense as required
by the Specifications.  

 

(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 [***], 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 and cGMPs.  Patheon
will give Client all stability test data and results at Client’s request.  

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Manufacturing Services Agreement

 

(e)

Packaging and Artwork.  Patheon will package the Products in accordance with the
Specifications.  Client will be responsible for the cost of artwork
development.  Patheon with consent of Client, will determine and imprint the
batch numbers and expiration dates for each Product shipped.  The batch numbers,
the serialization 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 Regulatory Authorities and other
third parties responsible for the approval of the Products.  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. At least [***] prior to the Delivery
Date of Product for which new or modified artwork is required, Client will
provide at no cost to Patheon, final camera ready artwork for all packaging
Components to be used in the manufacture of the Product that meet the
Specifications.  For the avoidance of doubt, the parties acknowledge and agree
that Client will be responsible for complying with any and all regulatory
requirements for the labeling of the Product.

 

(f)

Active Materials and Client-Supplied Components.  As soon as possible and at
least [***] before the scheduled production date, Client will deliver the Active
Materials and any Client-Supplied Components to the Manufacturing Site DDP
(Incoterms 2010), at no cost to Patheon, with any VAT paid by Client, in
sufficient quantity to enable Patheon to manufacture the desired quantities of
Product and to ship Product on the Delivery Date.  If the Active Materials
and/or Client-Supplied Components are not received [***] before the scheduled
production date, Patheon may delay the shipment of Product by the same number of
days as the delay in receipt of the Active Materials and/or Client-Supplied
Components.  But if Patheon is unable to manufacture Product to meet this new
shipment date due to prior third party production commitments, Patheon may delay
the shipment until a later date as agreed to by the parties.  All shipments of
Active Material will be accompanied by certificate(s) of analysis from the
Active Material manufacturer and the Client, confirming the identity and purity
of the Active Materials and its compliance with the Active Material
specifications. For Active Materials or Client-Supplied Components which may be
subject to import or export, Client agrees that its vendors and carriers will
comply with applicable requirements of the U.S. Customs and Border Protection
Service and the Customs Trade Partnership Against Terrorism (“C-TPAT”).

 

(g)

Bill Back Items.  Bill Back Items will be charged to Client, with prior written
approval, at Patheon’s cost plus an [***] handling fee, with a maximum handling
fee of [***] per item acquired.  Patheon will use commercially reasonable
efforts to obtain the best available pricing for all Bill Back Items, and will
provide Client with an estimate for the actual costs of Bill Back.

 

(h)

Validation Activities (if applicable).  At the Client’s request, Patheon will
(i) assist in the development and approval of the validation protocols for
analytical methods and manufacturing procedures (including packaging procedures)
for the Products and (ii) validate all applicable processes, methods, equipment,
utilities, facilities and computers

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Manufacturing Services Agreement

 

used in the manufacture, packaging, storage, testing and release of Products in
conformance with all Applicable Laws, including, but not limited to,
cGMPs.  Upon request, Patheon will provide to Client a copy of the results of
Product specific validation when such results are available. The fees for this
service are not included in the Price and will be mutually agreed from time to
time.

 

(i)

Product Rejection for Finished Product Specification Failure.  If a batch or a
portion of a batch is rejected (outside of typical batch yield variations) and
the deviation does not determine that Patheon has failed to provide the
Manufacturing Services in accordance with the Specifications, cGMPs, or
Applicable Laws (“Rejected Properly Manufactured Product”), Client will pay
Patheon the applicable fee per unit for the Rejected Properly Manufactured
Product. For greater certainty, Client will pay Patheon the applicable fee per
unit for the Rejected Properly Manufactured Product under the circumstances
described in Section 6.3(c). The API in the Rejected Properly Manufactured
Product will be included in the “Quantity Converted” for purposes of calculating
the “Actual Annual Yield” under Section 2.2(a).

 

(j)

Storage.  Until finished Products have been issued a Certificate of Analysis and
Compliance or unless otherwise directly requested by Client, Patheon shall store
all such Products in preparation for shipment to Client’s destination of choice
identifiably distinct from any other raw material and finished or filled product
stocks and shall comply with all storage requirements set forth in the
Specifications and all Applicable Laws, including, but not limited to,
cGMPs.  Patheon shall assume responsibility for any loss or damage to such
finished Product while stored by Patheon.

 

(k)

Additional Services.  If Client requests services other than those expressly set
forth herein (such as qualification of a new packaging configuration or shipping
studies, or validation of alternative batch sizes), Patheon will provide a good
faith and reasonable written quote of the fee for the additional services and
Client will advise Patheon whether it wishes to have the additional services
performed by Patheon. The scope of work and fees will be set forth in a separate
agreement signed by the parties.  The terms and conditions of this Agreement
will apply to these services.

2.2Active Material Yield.  

 

(a)

Reporting.  Patheon will give Client a quarterly inventory report of the Active
Materials held by Patheon using the inventory report form set out in Schedule F,
which will contain the following information for the quarter:

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)

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Manufacturing Services Agreement

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.

 

(b)

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.  

 

(c)

Within [***] after the end of each Year, Patheon will prepare an annual
reconciliation of Active Materials on the reconciliation report form set forth
in Schedule G 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:

 

Quantity Converted during the Yearx[***]

Quantity Dispensed during the Year

After Patheon has produced a minimum of 25 successful commercial production
batches of Product (for clarity, including batches for marketing product,
prescription product or a combination thereof) and has produced commercial
production batches for at least [***] at the Manufacturing Site (collectively,
the "Target Yield Determination Batches"), the parties will agree on the target
yield for the Product at the Manufacturing Site (each, a "Target Yield"). The
Target Yield will be revised annually to reflect the actual manufacturing
experience as agreed to by the parties.

 

(b)

Shortfall Credit Calculation.  Patheon will use commercially reasonable efforts
to maintain AAY levels for the Product above the applicable Target Yield.  If
the Actual Annual Yield falls more than [***] for less than [***] batch [***]
for [***] batches, or [***] for greater than [***] batches below the respective
Target Yield in a Year, then the shortfall for the Year (the "Shortfall") will
be calculated as follows:

Shortfall = [***]

 

(c)

Surplus Calculation.  If the Actual Annual Yield is more than the respective
Target Yield in a Year, then the surplus for that Year (the "Surplus") will be
determined based on the following calculation:

Surplus = [***]

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Manufacturing Services Agreement

 

(c)

Credit for Shortfall.  If there is a Shortfall for the Product in a Year, then
Patheon will credit Client’s account for the amount of the Shortfall not later
than [***] after the end of the Year. If there is a Surplus for a Product in a
Year, then Patheon will be entitled to apply the amount of the Surplus as a
credit against any Shortfall for that Product which may occur in the next
Year.  If there is no Shortfall in the next Year the Surplus credit will expire.
Each credit under this Section 2.2(c) will be summarized on the reconciliation
report form set forth in Schedule G.  Upon expiration or termination of this
Agreement, any remaining credit owing under this Section will be paid to
Client.  The Annual Shortfall, if any, will be disclosed by Patheon on the
reconciliation report form.

 

(d)

Casualty Losses.  Patheon shall notify Client in writing in the event that an
amount of API with a value greater than or equal to [***] of API is damaged,
lost or otherwise rendered unusable at any one time as soon as practicable
following such incident.  In addition, and notwithstanding any provision in this
Section 2.2 to the contrary, [***] involving Patheon’s Manufacturing Site (a
“Casualty Loss”) within [***] after Patheon receives the proceeds of insurance
from its insurance provider in cleared funds and an appropriate invoice from
Client.  Patheon’s liability for a Casualty Loss will not exceed the lesser of
[***] USD or [***].  Patheon shall only insure Active Materials up to the values
recommended and provided to Patheon by Client.  If any such losses are
unrecoverable due to the under-estimation of such values, then Patheon shall not
be liable for such unrecoverable losses.  Said insurance shall be on an “all
risks of physical damage” form, subject to the policy’s terms and conditions
with exclusions such as: Delay, Deterioration, Inherent Vice, Nuclear Hazards,
Loss of Market, Wear and Tear, Error or Deficiency in Design, Mechanical or
Electrical Malfunction, Infidelity of the Assured or its Employees, Radioactive
Contamination, Losses caused by Process, Mysterious Disappearance, Taking of
Inventory, Biological, Biochemical or Electromagnetic Contamination.  For
purposes of calculating the AAY above, all Active Materials reimbursed to Client
as a Casualty Loss shall be removed from the Quantity Received and Quantity
Dispensed totals.

 

(e)

Maximum Credit.  Excluding liability for Casualty Losses, Patheon's liability
for Active Material calculated in accordance with this Section 2.2 the Product
in a Year will not exceed, in the aggregate, the Maximum Credit Value set forth
in Schedule D.

 

(f)

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.  But Client will be released from the Exclusivity Obligation set forth in
Section 2.1.1 if the Actual Annual Yield falls more than [***] below the Target
Yield in any Year.  

ARTICLE 3

CLIENT'S OBLIGATIONS

3.1Payment.

Upon receipt of a properly rendered invoice in accordance with Section 5.5,
Client will pay Patheon for performing the Manufacturing Services according to
the Prices specified in Schedules B and

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Manufacturing Services Agreement

C. These Prices may be subject to adjustment under other parts of this
Agreement.  Client will also pay Patheon for any Bill Back Items.

3.2Active Materials and Qualification of Additional Sources of Supply.

 

(a)

Client will at its sole cost and expense deliver the Active Materials to Patheon
in accordance with Section 2.1(f). If applicable, Patheon and the Client will
reasonably cooperate to permit the import of the Active Materials to the
Manufacturing Site. Client’s obligation will include obtaining the proper
release of the Active Materials from the applicable Customs Agency and
Regulatory Authority. Client or Client’s designated broker will be the “Importer
of Record” for Active Materials imported to the Manufacturing Site. 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. Client will be responsible for
paying for all rejected Product that arises from defects in the Active Materials
which could not be reasonably discoverable by Patheon using the test methods set
forth in the Specifications. Client’s failure to supply Patheon with Active
Materials in accordance with the timeframes set forth in Section 2.1(f) will not
be deemed a breach of this Agreement.

 

(b)

If Client asks Patheon to qualify an additional source for the Active Material
or any Component, Patheon may agree to evaluate the Active Material or Component
to be supplied by the additional source to determine if it is suitable for use
in the Product. The parties will agree on the scope of work to be performed by
Patheon at Client’s cost. For an Active Material, this work at a minimum will
include: (i) laboratory testing to confirm the Active Material meets existing
specifications; (ii) manufacture of an experimental batch of Product that will
be placed on [***] accelerated stability; and (iii) manufacture of [***]
validation batches that will be placed on concurrent stability (one batch may be
the registration batch if manufactured at full scale).

 

(d)

Patheon will promptly advise Client if it encounters supply problems, including
delays and/or delivery of non-conforming Active Material or Components from a
Client designated additional source; and Patheon and Client will cooperate to
reduce or eliminate any supply problems from these additional sources of supply.
Client will be obligated to certify all Client designated sources of supply on
an annual basis at its expense and will provide Patheon with copies of these
annual certifications as specified in the Quality Agreement. If Patheon agrees
to certify a Client designated additional sources of supply on behalf of Client,
it will do so at Client’s expense.      

ARTICLE 4

CONVERSION fees AND COMPONENT COSTS

4.1First Year Pricing.

The Price for the first Year will be listed in Schedules B and C and will be
subject to the adjustments set forth in Sections 4.2 and 4.3. The Price may also
be [***] by Patheon at any time upon

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Manufacturing Services Agreement

written notice to Client if there are changes to the underlying manufacturing,
packaging or testing assumptions set forth in Schedule B that result in an
increase or decrease in the cost of performing the Manufacturing Services.

4.2Price Adjustments – Subsequent Years’ Pricing.

After the first Year, Patheon may adjust the Price effective January 1st of each
Year as follows:

 

(a)

Manufacturing and Stability Testing Costs. Patheon may adjust the conversion
component of the Price and the annual stability testing costs for inflation,
based upon the preliminary number for any increase in the “Indices de salaires
mensuels de base des salaries de l'industrie pharmaceutique”, published by Les
Entreprises du médicament (LEEM) during the prior Contractual Year (For
illustration:
http://www.leem.org/article/les-indices-des-salaires-de-lindustrie-pharmaceutique)
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 [***] of each Year, Patheon will give Client a statement setting forth the
calculation for the inflation adjustment to be applied in calculating the Price
for the next Year.

 

(b)

Component Costs.  If Patheon incurs an increase in Component costs during the
Year (for clarity, this excludes Client-Supplied Components), it may increase
the Price for the next Year to pass through the additional Component costs at
Patheon’s cost; provided, however, that in the event any proposed increase in
the cost of a Component exceeds [***] of the cost for that Component upon which
the most recent fee quote was based, and that a change of supplier is mutually
agreed between Patheon and Client pursuant to Section 4.2(e), Patheon and Client
will use commercially reasonable efforts to locate an equivalent alternative
lower cost supplier for the applicable Component.  If as a result of both
parties’ efforts pursuant to Section 4.2(e) (but not if Patheon is acting alone)
Patheon incurs a net decrease (including any rebates or discounts) in Component
costs during the Year, the net cost savings will be [***] in accordance with
Section 4.2(e) and it will decrease the Price for the next Year to pass through
the additional Component cost savings allocated to Client (but not those
allocated to Patheon).  On or about [***] 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 any Price increase or decrease is in compliance with this
Section 4.2(b).  But Patheon will not be required to give information to Client
that is subject to obligations of confidentiality between Patheon and its
suppliers.

 

(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 if the specified Minimum Order
Quantity changes or if the Annual Volume is not ordered in a Year.  For greater
certainty, if Patheon and Client agree that the Minimum Order Quantity will be
reduced or the Annual Volume in the lowest tier will not be ordered in a Year
whether as a result of a decrease in estimated Annual Volume or otherwise and,
as a result of the reduction, Patheon demonstrates to Client that its costs to
perform the Manufacturing Services or to acquire the Components for the Product

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Manufacturing Services Agreement

 

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.  On or before November 30 of each Year, Patheon will give
Client a statement setting forth the information to be applied in calculating
those cost increases for the next Year.  But Patheon will not be required to
give information to Client that is subject to obligations of confidentiality
between Patheon and its suppliers.

 

(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 September of the
previous Year.  Within [***] after 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 [***] after the end of the Year or will issue
payment to the Client for the overpayment within [***] after the termination of
the Agreement.  If Client has underpaid during the Year, Patheon will issue an
invoice to the Client under Section 5.5 for the amount of the underpayment
within [***] after the end of the Year 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 [***], the matter will be handled under Section 12.1.  

 

(e)

Cost Improvement Program.  Patheon and Client agree to work together to develop
cost reduction initiatives as part of an overall cost improvement program,
provided such program does not involve additional capital or extraordinary costs
unless otherwise agreed to by parties in writing. All net cost savings (net of
implementation costs) realized from the cost improvement program [***], unless
otherwise agreed to by the parties in writing. A "Cost Reduction Initiative" for
the purpose of this Agreement will be an initiative that reduces the internal or
out-of-pocket costs incurred by a party in connection with the performance of
its obligations under this Agreement. It is further agreed by the parties that
on-going method improvements developed or adopted by either Client or Patheon
independently of the other party(ies), will not be a cost reduction initiative
under this section, and there will be no obligation on such party to share the
net cost savings realized from such improvement with the other party(ies) to
this Agreement.

 

(f)

For all Price adjustments under this Section 4.2, Patheon will deliver to Client
on or before [***] of each Year a revised Schedule B to be effective for Product
delivered on or after the first day of the next Year. If in any Year Patheon
would have been entitled to increase the Price based on any of the provisions of
this Section 4.2 but Patheon did not exercise its right to do so, then at the
expiry of any subsequent Year, Patheon will be entitled to make cumulative
adjustments as set out in Section 4.2 based on changes during all of the
preceding Years since Patheon last adjusted the Price.

 

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Manufacturing Services Agreement

4.3Price Adjustments – Current Year Pricing.

During any Year, the Prices set out in Schedule B will be adjusted as follows:

Extraordinary Increases in Component Costs.  If, at any time, market conditions
result in Patheon's cost of Components being materially greater than normal
forecasted increases, then Patheon will be entitled to adjust the Price for any
affected Product to compensate it for the increased Component costs.  Changes
materially greater than normal forecasted increases will have occurred if: (i)
the cost of a Component increases by [***] of the cost for that Component upon
which the most recent Price or fee quote was based; or (ii) the aggregate cost
for all Components required to manufacture the Product increases 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
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 the Components.

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,
and other documents reasonably sufficient to demonstrate that a Price adjustment
is justified. Upon request of Client, Patheon will share the standard prices to
be paid by Patheon to its supplier for the Components as stipulated in Patheon’s
SAP system, it being understood and agreed that Patheon will have no obligation
to deliver any supporting documents that are subject to obligations of
confidentiality between Patheon and its suppliers, but Patheon shall use
commercially reasonable efforts to minimize the restrictions imposed by such
confidentiality obligations on disclosure of supporting documents to
Client.  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.

4.4Adjustments Due to Technical Changes or Regulatory Authority Requirements.

Amendments to the Specifications or the Quality Agreement requested by Client
will be implemented only following a technical and cost review that Patheon will
perform at Client’s cost and are subject to Client and Patheon reaching
agreement on Price changes required because of the 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, conditioned or delayed.  If Client
accepts a proposed Price change, the proposed change in the Specifications or
the Quality Agreement and the associated scope of work will be implemented at
Client’s cost, and the Price change will become effective, only for those orders
of Product that are manufactured under the revised Specifications.  In addition,
Client agrees to purchase, at the price paid by Patheon (including all costs
incurred by Patheon for the purchase, handling and transport of the Inventory),
all Inventory held under the "old" Specifications and purchased or maintained by
Patheon in order to fill Firm Orders or under Section 5.2, if the Inventory can
no longer be used under the revised Specifications.  Patheon will use
commercially reasonable efforts to cancel any open purchase orders for
Components 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 and
if the orders may not be cancelled without penalty, will be assigned to and paid
for by Client. Additional payments or price increases may also be required to
compensate Patheon for fees and other expenses incurred by Patheon to comply
with additional Regulatory Authority requirements which apply to the
Manufacturing Services.

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Manufacturing Services Agreement

4.5Multi-Country Packaging Requirements.  

If Client decides to have Patheon perform Manufacturing Services for the Product
for more than one country inside the Territory, then Client will inform Patheon
of the packaging requirements for each such country and Patheon will prepare a
quotation for consideration by Client of any additional costs for Components
(other than Client-Supplied Components) and the changeover 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

5.1Orders and Forecasts.  

 

(a)

Long Term Forecast.  As soon as reasonably practicable following the Effective
Date, Client will give Patheon a non-binding [***] forecast of Client’s volume
requirements for the Product for each Year during the term of the Agreement (the
“Long Term Forecast”).  The Long Term Forecast will thereafter be updated [***]
during the Initial Term.  If Patheon is unable to accommodate any portion of the
Long Term Forecast, it will notify Client and the parties will agree on any
revisions to the forecast.

 

(b)

Rolling [***] Forecast.  As soon as reasonably practicable following the
Effective Date, 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.  This forecast will then be updated by Client on or
before the tenth day of each month 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.

 

(c)

Firm Orders.  On a rolling basis during the term of this Agreement, Client will
issue an updated [***] forecast on or before the [***] of each month. This
forecast will start on the first day of the next month. The first [***] of this
updated forecast will be considered binding firm orders.  Concurrent with the
[***] forecast, Client will issue a new 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. The Delivery Date will not be less than [***] following the
date that the Firm Order is submitted. Firm Orders submitted to Patheon will
specify Client's purchase order number, quantities by Product type, monthly
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.  Expedited Firm Orders will be subject to additional fees.  

 

(d)

Acceptance of Firm Order. Patheon will accept Firm Orders by sending an
acknowledgement to Client within [***] of its receipt of the Firm Order.  The
acknowledgement will include, subject to confirmation from the Client, the
Delivery Date

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Manufacturing Services Agreement

 

for the Product ordered. The Delivery Date may be amended by agreement of the
parties or as set forth in Section 2.1(f). If Patheon fails to acknowledge
receipt of a Firm Order within the [***] period, the Firm Order will be deemed
to have been accepted by Patheon.

 

(e)

Cancellation of a Firm Order.  If Client cancels a Firm Order, Client will pay
Patheon [***] of the Conversion Fee for the Firm Order.

5.2Zero Volume Forecast.

If Client forecasts zero volume for [***] period during the term of this
Agreement (the “Zero Forecast Period”), then Patheon will have the option, at
its sole discretion, to provide a [***] notice to Client of Patheon’s intention
to terminate this Agreement on a stated day within the Zero Forecast
Period.  Client thereafter will have [***] to either (i) withdraw the zero
forecast and re-submit a reasonable volume forecast, or (ii) negotiate other
terms and conditions on which this Agreement will remain in effect. Otherwise,
Patheon will have the right to terminate this Agreement at the end of the [***]
notice period.

5.3Reliance by Patheon.

(a)Client understands and acknowledges that Patheon will rely on the Firm Orders
and rolling forecasts submitted under Section 5.1(b) in ordering the Components
(other than Client-Supplied 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(b) 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(b).  Patheon may make other purchases
of Components to meet Manufacturing Services requirements for longer periods if
agreed to in writing by the parties.  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.  

(b)Client will reimburse Patheon for the cost of Components ordered by Patheon
under Firm Orders or under Section 5.2(a) that are not included in finished
Products manufactured for Client within six months after the forecasted month
for which the purchases have been made (or for a longer period as the parties
may agree) or if the Components have expired or are rendered obsolete due to
changes in artwork or applicable regulations during the period (collectively,
“Obsolete Stock”). This reimbursement will include Patheon’s cost to purchase
(plus a [***] handling fee up to [***] per line item) and destroy the Obsolete
Stock; provided, however, that the client will have the option but not the
obligation to take title to and possession of all or any portion of such
Components by written notice to Patheon, in which case Patheon will cooperate
with the Client in the surrender, delivery and transfer of such Components as
promptly as is commercially reasonable, with any shipping and related expenses
to be borne by the Client. If any non-expired Components are used in Products
subsequently manufactured for Client or in third party products manufactured by
Patheon, Client will receive credit for any costs of those Components previously
paid to Patheon by Client.

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Manufacturing Services Agreement

(c)If Client fails to take possession or arrange for the destruction of
non-expired Components within [***] of purchase or, in the case of the delivery
of conforming finished Product not accepted by Client within [***] of
manufacture, Client will pay Patheon [***] per pallet per month 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 month.  Storage fees are subject to a one pallet
minimum charge per month.  Patheon may ship finished Product held by it longer
than one month to the Client at Client’s expense on [***] written notice to the
Client.

5.4Minimum Orders.

Client may order Manufacturing Services for batches of Products only in
multiples of the Minimum Order Quantities as set out in Schedule B.

5.5Delivery and Shipping.

The Product will be delivered to Client only after it has been manufactured and
packaged in accordance with the Specifications.  Unless agreed in advance by the
Parties in writing, Patheon shall not deliver any Products prior to approval by
Patheon’s Quality Assurance department in accordance with the applicable Quality
Agreement and Applicable Law. 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, at Client’s risk (i) arrange
for shipping, including preparing and executing a packing list, so that the
Product will be delivered to the delivery address on the delivery date set forth
in the applicable Firm Order, with such shipping to be paid by Client and (ii)
at Client’s risk and expense, obtain any export license or other official
authorization necessary to export the Products. For clarity, the export of a
drug product to non-EU countries which do not have a marketing authorization in
France is subject to an export declaration to the French Health Authorities
(ANSM). The export declaration can be handled by Patheon, this activity is
charged [***] per export declaration that is actually shipped (as requested by
Client). Client will arrange for insurance (including transit insurance) for the
Product at all times from delivery 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.  Shipment charges will either be
paid by Client directly to the shipping company or by Patheon to the shipping
company on Client’s behalf, in which case Client will pay Patheon the cost of
shipment together with a handling fee of [***] up to [***] per shipment. Client
will be responsible for complying with all applicable export laws and
regulations and will pay any applicable export fees or taxes.  Products will be
packed and transported in accordance with the Specifications.  Patheon will use
commercially reasonable efforts to ensure that the date that Product is QP batch
certified by Patheon will not be more than three months after the date of
manufacture (excluding any Product that is the subject of a deviation or any
event not solely within Patheon’s control).

5.6Invoices and Payment.

Invoices will be sent by email to the email address given by Client to Patheon
in writing.  Invoices will be issued 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, Bill
Back Items or Components

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Manufacturing Services Agreement

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 [***] of the date of confirmed delivery email transmission of
the invoice, i.e. confirmed by delivery receipt of the email transmission.  If
any portion of an invoice is disputed, the Client will pay Patheon for the
undisputed amount and the parties will use good faith efforts to reconcile the
disputed amount as soon as practicable.  Interest on undisputed past due
accounts will accrue at [***] per month which is equal to an annual rate of
[***].  

5.7Delays.  

Claims for late delivery of Products will be dealt with by reasonable agreement
of the parties, it being understood and agreed that Patheon, upon Client’s
request, will in any case use all reasonable efforts to remedy any late delivery
of Products to be delivered under this Agreement.  It is understood and agreed
that if the Firm Order is more than [***] late Client may cancel any Firm Order
for Products that are not delivered by Patheon in accordance with the agreed
timelines, without any payment for such Firm Order being due by Client to
Patheon provided that a Firm Order may not be cancelled (i) if any delay is
caused by a late or incomplete delivery of Active Material or any related
documentation or (ii) if Patheon has commenced performance of the Manufacturing
Services relating to the Firm Order.  Patheon shall be entitled to invoice any
part of a Firm Order that has been delivered in accordance with Section
5.5.  Any claim for a late delivery by Patheon will be deemed waived if it has
not been presented within [***] of the date of receipt of invoice by
Client.  Any Firm Orders for Products cancelled pursuant to this Section 5.7
shall count towards Client’s Exclusivity Obligation.  

ARTICLE 6

PRODUCT CLAIMS AND RECALLS

6.1Product Claims.

(a)Product Claims.  Client has the right to reject and return, at Patheon’s
expense for any Products for which Patheon has responsibility under Section 6.3
(and otherwise at Client’s expense), any portion of any shipment of Products
that deviate from the Specifications, cGMPs, or Applicable Laws, without
invalidating any remainder of the shipment.  Client will visually inspect the
Products manufactured by Patheon upon receipt thereof and will give Patheon
written notice (a "Deficiency Notice") of all claims for Products that deviate
from the Specifications, cGMPs, or Applicable Laws, within [***] after Client’s
receipt thereof (or, in the case of any defects not reasonably susceptible to
discovery upon receipt of the Product, within [***] 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 [***] period, then the
delivery will be deemed to have been accepted by Client on the [***] after
delivery or discovery, as applicable.

(b)Determination of Deficiency.  Upon receipt of a Deficiency Notice, Patheon
will have [***] to advise Client by notice in writing that it disagrees with the
contents of the Deficiency Notice, if applicable.  If Client and Patheon fail to
agree within [***] after Patheon's notice to Client as to whether any Products
identified in the Deficiency Notice deviate from the Specifications, cGMPs, or
Applicable Laws, then the parties will mutually select an independent laboratory
to evaluate if the Products deviate from the Specifications, cGMPs, or
Applicable Laws.  The parties will cause the independent laboratory to conduct

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Manufacturing Services Agreement

its evaluation as promptly as reasonably practicable.  This evaluation will be
binding on the parties. If the evaluation certifies that any Products 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 which are deemed to be conforming on the date the
evaluation is delivered by the independent laboratory to the parties and Client
will be responsible for the cost of the evaluation.  With respect to any
Products which Patheon agrees are deficient in accordance with the Deficiency
Notice, or which are otherwise found to be deficient by the independent
laboratory, Client will be entitled to the remedies set forth in Section 6.3(a).

(c)Shortages. Claims for shortages in the amount of Products shipped by Patheon
will be dealt with by reasonable agreement of the parties.

6.2Product 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 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 be subject to a Recall
if sold or shipped.

(b)Recalls.  If (i) any Regulatory Authority issues a directive, order or,
following the issuance of a safety warning or alert about the 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 and regulations.

(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.

6.3Patheon’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, or
Applicable Laws, 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, (provided that Patheon is able to manufacture replacement
Product at the same Manufacturing Site as that of the rejected Products),without
Client being liable for payment therefor under Section 3.1, contingent upon the
receipt from Client of all Active Materials and Client-Supplied Components
required for the manufacture of the replacement Products.  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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Manufacturing Services Agreement

(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, or Applicable Laws, Patheon will be responsible for the
documented out-of-pocket expenses of the Recall or return and will promptly, at
Client’s election, either: (i) refund the invoice price for such Recalled or
returned Products; (ii) offset such Recalled Product Credit Amount against other
amounts due to Patheon hereunder; or (iii) use its commercially reasonable
efforts to replace such Recalled or returned Products with conforming Products
using the next available manufacturing slot without the Client being liable for
payment therefore, contingent upon the receipt from Client of all Active
Materials and Client-Supplied Components required for the manufacture of the
replacement Products.  In all other circumstances, Recalls, returns, or other
corrective actions will be made at Client's direction, cost and expense.
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.

(c)Except as set forth in Sections 6.3(a) and (b) above and for breaches of its
representations and warranties set forth in Section 9.3 below, 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, Client-Supplied Components or Components supplied by a Client
designated additional source that is not reasonably discoverable by Patheon
using the test methods set forth in the Specifications, (iv) is caused by
actions of Client or third parties occurring after the Product is shipped by
Patheon under Section 5.5, (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 Specifications, cGMP’s, and Applicable Laws, or
(vii) is due to any other breach by Client of its obligations under this
Agreement.  

6.4Disposition 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, and will promptly reimburse
Client for any such costs which may be incurred by Client.  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.  Notwithstanding the foregoing, the Client will
have the right at all times to retain a reasonable sample of such Products for
its own archival purposes.

6.5Healthcare 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 agreed upon information that will enable
Client to respond properly to questions or complaints about the Products as set
forth in the Quality Agreement.  Patheon will notify Client promptly and in any
event not later than specified in the Quality Agreement after it becomes aware
of any adverse event associated with the use of the Products, whether or not
determined to be attributable to the Products, and whether or not deemed to be
serious or

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Manufacturing Services Agreement

non-serious.  Such information will be sent to the Client as set forth in the
Quality Agreement.  If it is determined that the cause of the complaint or
adverse event resulted from a failure by Patheon to perform the Manufacturing
Services in accordance with the Specifications, cGMPs, and Applicable Laws,
Patheon will bear all costs incurred under this Section 6.5.  In all other
circumstances, such costs will be borne by Client.

6.6Sole 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, and
Applicable Laws or for any breach by Patheon of its representations and
warranties set forth in Section 9.3.

ARTICLE 7

CO-OPERATION

7.1Quarterly 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.

7.2Governmental Agencies.

Subject to Section 7.8, each party may communicate with any governmental agency,
including but not limited to governmental agencies responsible for granting
Regulatory Approval for the Products, 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.

7.3Records and Accounting by Patheon.

Patheon will keep records of the manufacture, testing, and shipping of the
Products, Active Materials, and Components and retain samples of the Products,
Active Materials, and Components as are necessary to comply with all Applicable
Laws, including manufacturing regulatory requirements applicable to Patheon, the
Manufacturing Site, the Products, the Active Materials and/or Components
(provided that the requirements applicable to the Products, Active Materials and
Components are notified and agreed with Patheon in advance), 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 or
regulation, following which time Client will be contacted concerning the
delivery and destruction of the documents and/or samples of Products.  Patheon
reserves the right to destroy or return to Client, at Client’s sole expense, any
document or samples for which the retention period has expired if Client fails
to arrange for destruction or return within [***] of receipt of notice from
Patheon.  Client

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is responsible for retaining samples of the Products necessary to comply with
the legal/regulatory requirements applicable to Client.

7.4Inspection.

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.

7.5Access.

Patheon will give Client reasonable access at agreed times to the areas of the
Manufacturing Site in which the Products are manufactured, stored, 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 [***] 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
Sections 7.4 and 7.5 will not include a right to access or inspect Patheon’s
financial records.  Patheon will support the Pre-Approval Inspection of the FDA
(“PAI”) and equivalent regulatory inspection for other jurisdictions (where
applicable) and provide a copy of the resulting report. The first PAI is at no
cost to Client.  Additional PAI or equivalent support will be subject to
additional fees.

7.6Regulatory Inspections.

Patheon will make its internal practices, books and records relating to the
manufacture of the Products available and allow access to all facilities used
for manufacturing the Products to any Authority having jurisdiction over the
manufacture of the Products for the purposes of determining Patheon’s compliance
with Applicable Laws, including, but not limited to, cGMPs.  Patheon will notify
Client by telephone and e-mail within [***] of any proposed or announced
inspections, and as soon as possible (but in any case within [***]) after any
unannounced inspection, by any Authority relating to the Products.  Patheon will
provide the Client with a reasonable description in writing of each such
inspection promptly (but in no event later than specified in the Quality
Agreement) thereafter, and with copies of any Authority-issued inspection
observation reports (including, without limitation, form 483s and equivalent
forms from other regulatory bodies) and Authority correspondence, purged only of
confidential information that is unrelated to the Products.  Patheon will also
notify Client of receipt of any other form 483’s or warning letters or any other
significant regulatory action which Patheon’s quality assurance group determines
could impact the regulatory status of the Products. Patheon and Client will
cooperate in resolving any concerns with any Authority, and the Client may
review Patheon’s responses to any such reports and communications, and Patheon
will in its reasonable discretion incorporate into such responses any comments
received from the Client. Patheon will also inform the Client of any action
taken by any Authority against Patheon or any of its officers or employees which
may be reasonably expected to adversely affect the Products or Patheon's ability
to supply the Products hereunder within a time period specified in the Quality
Agreement.

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Manufacturing Services Agreement

7.7Reports.

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 Patheon standard Annual Product
Review Report to the Client at no additional cost unless otherwise specified in
Schedule B.  Any additional data or report requested by Client beyond the scope
of cGMPs and customary FDA requirements, including Continuous Process
Verification data, will be subject to an additional fee to be agreed upon
between Patheon and the Client.

7.8Regulatory Filings.

(a)Regulatory Authority.  Client will have the sole responsibility at Client’s
expense 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, distribution and
sale of the Products (“Regulatory Approval”) and will provide copies thereof to
Patheon on request.  Patheon will assist Client, to the extent consistent with
Patheon’s obligations under this Agreement, to obtain Regulatory Authority
approval for the commercial manufacture, distribution and sale of the Products
as quickly as reasonably possible.

 

(b)Verification of Data.  At least [***] 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; provided, however, that the parties may
agree to a shorter time for the review as needed.

 

(c)Verification of CMC.  At least [***] 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 US New Drug Application, US Abbreviated New Drug Application, US Biologics
Licence Application, or EU Marketing Authorisation 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 validation or scale-up work that Patheon
has performed and the manufacturing processes that Patheon will perform under
this Agreement.  Client will give Patheon copies of all regulatory filings at
the time of submission which contain CMC information regarding the
Product.  Notwithstanding the foregoing, Client may omit from the materials
provided to Patheon any CMC documentation and supporting documents which have
been previously provided to Patheon by Client and which have not been modified
or edited by Client.

 

(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 any manner whatsoever (the "Deficiencies"),
Patheon will notify Client in writing of the Deficiencies.  The parties will
work together to have the Deficiencies resolved prior to the date of filing of
the relevant application and in any event before any pre-approval inspection or
before the Product is placed on the market if a pre-approval inspection is not
performed, provided that to the extent of any disagreement

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Manufacturing Services Agreement

concerning the form or content any information or submissions covered by
subsections (b) and (c) above, Client will have the final decision-making
authority.

 

(e)Client Responsibility.  For clarity, the parties agree that in reviewing the
documents referred to in subsections (b) and (c) 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 responsible for the
preparation and filing of the application for approval by the Regulatory
Authority and any relevant costs will be borne by the Client, excepts as
otherwise provided in this Section 7.8.

 

(f)Inspection by Regulatory Authorities.  If Client does not give Patheon the
documents requested under subsection (b) and (c) 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.

 

(g)Pharmacovigilance.  Client will be responsible, at its expense, for all
pharmacovigilance obligations for the Products pursuant to Applicable Laws.
Patheon will promptly provide to Client any information or data which it
compiles pursuant to pharmacovigilance obligations or activities as specified in
the Quality Agreement.

 

(h)No Patheon Responsibility.  Patheon will not assume any responsibility for
the accuracy or cost of any application for Regulatory Approval. If a Regulatory
Authority, or other governmental body, requires Patheon to incur fees, costs or
activities in relation to the Products which Patheon considers unexpected and
extraordinary, then Patheon will notify Client in writing and the parties will
discuss in good faith appropriate mutually acceptable actions, including
fee/cost sharing, or termination of all or any part of this Agreement.  Patheon
will not be obliged to undertake these activities or to pay for the fees or
costs if, in Patheon’s sole discretion, doing so is commercially inadvisable for
Patheon.

 

 

ARTICLE 8

TERM AND TERMINATION

8.1Initial Term.

This Agreement will become effective as of the Effective Date and will continue
until December 31 of the Year that is five full Years after the Commencement
Date (the "Initial Term"), unless terminated earlier by one of the parties in
accordance herewith.  This Agreement will automatically renew after the Initial
Term for successive terms of one Year each (each a “Renewal Term”), 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
or 18 months prior to the end of any Renewal Term.

8.2Termination for Cause.

(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

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Manufacturing Services Agreement

obligations under this Agreement within [***] following receipt of a written
notice of the breach from the aggrieved party that expressly states that it is a
notice under this Section 8.2(a).  

(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 upon [***] prior written notice if any
Authority takes any action, or raises any objection, that prevents Client from
importing, exporting, purchasing, or selling the Product.  But if this occurs,
Patheon and Client must still fulfill all of its obligations under Section 8.3
and 8.4 below and under any Capital Equipment Agreement regarding the Product.

(d)Patheon or Client may terminate this Agreement upon [***] prior written
notice if Client or Patheon assigns under Section 13.6 any of its rights under
this Agreement to an assignee that is: (i) in the opinion of the non-assigning
Party acting reasonably, not a credit worthy substitute for the assigning Party;
or (ii) a Patheon or Client Competitor.

8.3Obligations on Termination.

 

(a)

If this Agreement is completed, expires, or is terminated in whole or in part
for any reason, then:

 

(i)

Patheon will cease the manufacture of Products and will terminate any unfilled
orders with third parties that Patheon may have previously submitted with
respect to Components, to the extent such orders may be terminated or revoked;

 

(ii)

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;

 

(iii)

Client will purchase, at Patheon's out-of-pocket cost (including all costs
incurred by Patheon for the purchase and handling of the Inventory), 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
5.3 prior to expiration or notice of termination being given;

 

(iv)

Client will satisfy the purchase price payable under Patheon's non-cancellable
orders with suppliers of Components, if the orders were made by Patheon in
reliance on Firm Orders or in accordance with Section 5.3 and prior to
expiration or notice of termination being given; and

 

(v)

Client acknowledges that no Patheon Competitor will be permitted access to the
Manufacturing Site; and Client will make commercially reasonable efforts, at its
own expense, to remove from Patheon site(s), within [***], all unused Active

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Manufacturing Services Agreement

 

Material and Client-Supplied Components, all applicable 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 Patheon site or that is otherwise under Patheon’s care and
control (“Client Property”).  If Client fails to remove the Client Property
within [***] following the completion, termination, or expiration of the
Agreement, Client will pay Patheon [***] per pallet, per month, one pallet
minimum (except that Client will pay [***] per pallet, per month, one pallet
minimum, for any of the Client Property that contains controlled substances,
requires refrigeration or other special storage requirements) 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.

 

(b)

Any completion, termination or expiration of this Agreement will not affect any
outstanding obligations or payments due prior to the completion, termination or
expiration, nor will it prejudice any other remedies that the parties may have
under this Agreement or any related Capital Equipment Agreement.  For greater
certainty, completion, termination or expiration of this Agreement for any
reason will not affect the obligations and responsibilities of the parties under
Articles 10 and 11 and Sections 5.5, 5.6, 8.3, 13.1, 13.2, 13.3 and 13.16, all
of which survive any completion, termination or expiration.

8.4Technology Transfer.

Following termination of this Agreement for any reason, or at Client’s request
during a period beginning at least [***] before the end of the term of this
Agreement following the Parties’ reasonable conclusion that this Agreement will
not be extended after the term of this Agreement, Patheon shall provide
assistance to transfer part or all of the Client’s manufacturing process,
know-how and analytical testing methodology for the Product to Client or
Client’s designee (“Technology Transfer”) to assist Client or its designee to
manufacture the Product. Patheon shall also disclose to Client or its designee
any Patheon Intellectual Property that has been used by Patheon to perform the
Manufacturing Services.  For the purposes of such assistance, Patheon shall,
upon request of Client prepare a written proposal to implement the Technology
Transfer, including fees therefore. Client shall pay the agreed fees for any of
such Technology Transfer provided by Patheon.  No Patheon Competitor will be
permitted access to the Manufacturing Site pursuant to this Section.

ARTICLE 9

REPRESENTATIONS, WARRANTIES AND COVENANTS

9.1Authority.

Each party covenants, represents, and warrants that:

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Manufacturing Services Agreement

 

(a)

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;

 

(b)

this Agreement has been duly executed and delivered by, and is a legal and valid
obligation binding upon such party, subject to the effects of bankruptcy,
insolvency, or other laws of general application affecting the enforcement of
creditor rights and judicial principles affecting the availability of specific
performance and general principles of equity, whether enforceability is
considered a proceeding at law or equity; and

 

(c)

the entry into, the execution and delivery of, and the carrying out and other
performance of its obligations under this Agreement by such party (i) does not
conflict with, or contravene or constitute any default under, any agreement,
instrument or understanding, oral or written, to which it is a party, including,
but not limited to, its certificate of incorporation or by-laws, and (ii) does
not violate Applicable Laws or any judgment, injunction, order or decree of any
Authority having jurisdiction over it.

9.2Client Warranties.

Client covenants, represents, and warrants that:

 

(a)

Non-Infringement.

 

(i)

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

 

(ii)

any Client Intellectual Property, used by Patheon in performing the
Manufacturing Services according to the Specifications (A) is owned or
controlled by Client or its Affiliate, (B) may be lawfully used as directed by
Client, and (C) to its knowledge does not infringe and will not infringe any
Third Party Rights;

 

(iii)

to the knowledge of Client, the performance of the Manufacturing Services by
Patheon for the Product under this Agreement or the use or other disposition of
the Product by Patheon as may be required to perform its obligations under this
Agreement does not and will not infringe any Third Party Rights;

 

(iv)

to the knowledge of Client, there are no actions or other legal proceedings
involving the Client that concerns the infringement of Third Party Rights
related to any of the Specifications, or any of the Active Materials and the
Components, or the sale, use, or other disposition of any Product made in
accordance with the Specifications;

 

(b)

Quality and Compliance.

 

(i)

the Specifications for the Product conforms to all applicable cGMPs and
Applicable Laws;

 

(ii)

the Products, if labelled and manufactured in accordance with the Specifications
and in compliance with applicable cGMPs and Applicable Laws (i) may be lawfully
sold and distributed in every jurisdiction in which Client markets the Products,
(ii) will be fit for the purpose intended, and (iii) will be safe for human
consumption;

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Manufacturing Services Agreement

 

(iii)

on the date of shipment, the API will conform to the specifications for the API
that Client has given to Patheon and that the API will be adequately contained,
packaged, and labelled and will conform to the affirmations of fact on the
container.

9.3Patheon Warranties.

Patheon covenants, represents, and warrants that:

 

(a)

it will perform the Manufacturing Services in accordance with the
Specifications, cGMPs, and Applicable Laws;

 

(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;

 

(c)

it will not in the performance of its obligations under this Agreement use the
services of any person it knows is debarred or suspended under 21 U.S.C. §335(a)
or (b);

 

(d)

it does not currently have, and it will not hire, as an officer or an employee
any person whom it knows 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 United States Federal Food, Drug, and Cosmetic Act;

 

(e)

it has and will maintain throughout the term of this Agreement, the expertise,
with respect to personnel and equipment, to fulfill the obligations established
hereunder, and has obtained all requisite material licenses, authorizations and
approvals required by all Authorities to manufacture the Products (excluding the
Regulatory Approval);

 

(f)

the Manufacturing Site, all other facilities, all equipment and all personnel to
be employed by Patheon in rendering the Manufacturing Services are currently,
and will be at the time each batch of Products is produced, qualified in
accordance with all Applicable Laws, including, but not limited to, cGMPs;

 

(g)

there are no pending or uncorrected citations or adverse conditions noted in any
inspection of the Manufacturing Site or any other facilities to be employed by
Patheon in rendering the Manufacturing Services which would cause the Products
to be misbranded or adulterated within the meaning of the Act, including, but
not limited to, all cGMPs;

 

(h)

to the knowledge of Patheon, the Patheon Intellectual Property used by Patheon
to manufacture the finished Product in accordance with this Agreement does not
and will not infringe any Third Party Rights, except to the extent caused or
contributed to by any breach of Client’s warranties under Section 9.2(a);

 

(i)

to the knowledge of Patheon, there are no claims against Patheon asserting that
any Patheon Intellectual Property to be used for the Manufacturing Services
infringes, misappropriates, or violates any Third Party Rights;

 

(j)

all employees, consultants, subcontractors and agents performing services for
Patheon hereunder have assigned, or will assign, in writing to Patheon all of
their right, title and interest in, to and under any and all Inventions directly
relating to the Product; and

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Manufacturing Services Agreement

 

(k)

all Product manufactured and supplied to the Client under this Agreement will
not be, as a result of any failure by Patheon to provide the Manufacturing
Services in accordance with the Specifications, cGMPs, or Applicable Laws,
adulterated or misbranded within the meaning of the Federal Food, Drug, and
Cosmetic Act or other Applicable Laws as of the time that the finished Product
is transferred to the carrier at Patheon’s shipping point.

9.4Permits.

 

(a)

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.

 

(b)

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.

9.5No Warranty.

 

EXCEPT AS SET FORTH IN THIS SECTION 9, NEITHER PARTY MAKES ANY 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 OR CONDITION OF FITNESS
FOR A PARTICULAR PURPOSE NOR ANY WARRANTY OR CONDITION OF MERCHANTABILITY FOR
THE PRODUCTS.

ARTICLE 10

REMEDIES AND INDEMNITIES

10.1Consequential and Other 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.

10.2Limitation of Liability.

(a)Active Materials.  Except as expressly set forth in Section 2.2 and Article
6, 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.  Except for any liability arising (i) [***], or (ii) under
[***], or (iii) in connection with Section 10.2(c), and subject to Section
10.2(d), Patheon’s maximum aggregate liability to Client in any Year under this
Agreement, including, without limitation, any liability arising under Section

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Manufacturing Services Agreement

6.3(b) relating to the expenses of a Recall or Product return, Sections 2.2 or
10.3 (except as stated above) hereof or resulting from any and all breaches of
its representations, warranties, or any other obligations under this Agreement
will not exceed [***] of revenues (being payments of the Price) received from
Client and its Affiliates or properly invoiced under this Agreement by Patheon
during the 12-month period prior to the event giving rise to the applicable
claim or set of related claim(s) arising out of the same facts or circumstances.

(c)Defective or Recalled Product. Patheon’s maximum aggregate liability to
Client for any obligation to (i) refund, offset or replace any defective Product
under Section 6.3(a) or (ii) replace any recalled Product under Section 6.3(b),
will not exceed [***] of the Price for the defective or recalled Product as
applicable.  This Section 10.2(c) will not be subject to Section 10.2(b).

(d)Death, Personal Injury and Fraudulent Misrepresentation.  Nothing contained
in this Agreement shall act to exclude or limit either party’s liability for (i)
personal injury or death caused by the negligence of either party; (ii)
fraudulent misrepresentation; or (iii) any acts or omissions for which the
governing law prohibits the exclusion or limitation of liability.

10.3Patheon Indemnity.

Patheon agrees to defend and indemnify Client, its officers, employees, and
agents against all losses, damages, costs, 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 failure by
Patheon to perform the Manufacturing Services in accordance with the
Specifications, cGMPs, and Applicable Laws, or (ii) any other breach of the
Agreement by Patheon, including, without limitation, any representation,
warranty or covenant 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 Client, its officers, employees, agents, or
Affiliates.

10.4Client Indemnity.

Client agrees to defend and indemnify Patheon, its officers, employees, and
agents against all losses, damages, costs, claims, demands, judgments and
liability to, from and in favour of third parties (other than Affiliates)
resulting from, or relating to any claim of infringement or alleged infringement
of any Third Party Rights in the Products, or any portion thereof, or any claim
of personal injury or property damage to the extent that the injury or damage is
arises other than from (i) a failure by Patheon to perform the Manufacturing
Services in accordance with the Specifications, cGMPs, and Applicable Laws, or
(ii) any other breach of this Agreement by Patheon, including, without
limitation, any representation, warranty or covenant 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 officers,
employees, agents, or Affiliates.

10.5Indemnification Procedure

If a claim occurs for which a party has an indemnification obligation under
Section 10.3 or 10.4, the indemnified party (the “Indemnitee”) will: (a)
promptly notify the indemnifying party (the “Indemnitor”) in writing of the
claim; (b) use commercially reasonable efforts to mitigate the effects of the
claim; (c) reasonably cooperate with the Indemnitor in the defense of the claim;
and (d) permit the

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Indemnitor to control the defense and settlement of the claim, with counsel
reasonably satisfactory to the Indemnitee, all at the Indemnitor 's cost and
expense.  If the Indemnitor assumes the defense of the claim, the Indemnitee may
participate in such defense with the Indemnitee’s own counsel who will be
retained, at the Indemnitee’s sole cost and expense; provided, however, that
neither the Indemnitor nor the Indemnitee will consent to the entry of any
judgment or enter into any settlement with respect to the claim without the
prior written consent of the other party, which consent will not be unreasonably
withheld or delayed.  If the Indemnitee withholds consent in respect of a
judgment or settlement involving only the payment of money by the Indemnitor and
which would not involve any stipulation or admission of liability or result in
the Indemnitee becoming subject to injunctive relief or other relief, the
Indemnitor will have the right, upon written notice to the Indemnitee within
five days after receipt of the Indemnitee’s written denial of consent, to pay to
the Indemnitee, or to a trust for its or the applicable third party’s benefit,
such amount established by such judgment or settlement in addition to all
interest, costs or other charges relating thereto, together with all attorneys’
fees and expenses incurred to such date for which the Indemnitor is obligated
under this Agreement, if any, at which time the Indemnitor’s rights and
obligations with respect to such claim will cease.  The Indemnitor will not be
liable for any settlement or other disposition of a claim by the Indemnitee
which is reached without the written consent of the Indemnitor.

10.6Reasonable 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, cGMPs and Applicable Law, 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

11.1Confidential Information.

“Confidential Information” means any information disclosed by the Disclosing
Party to the Recipient (whether disclosed in oral, written, electronic or visual
form) that is non-public, confidential or proprietary including, without
limitation, information relating to the Disclosing Party’s patent and trademark
applications, process designs, process models, drawings, plans, designs, data,
databases and extracts therefrom, formulae, methods, know-how and other
intellectual property, its clients or client confidential information, finances,
marketing, products and processes and all price quotations, manufacturing or
professional services proposals, information relating to composition,
proprietary technology, and all other information relating to manufacturing
capabilities and operations.  In addition, all analyses, compilations, studies,
reports or other documents prepared by any party's Representatives containing
the Confidential Information will be considered Confidential Information.
Samples or materials provided hereunder as well as any and all information
derived from the approved analysis of the samples or materials will also
constitute Confidential Information. For the purposes of this ARTICLE 11, a
party or its Representative receiving Confidential Information under this
Agreement is a “Recipient,” and a party or its Representative disclosing
Confidential Information under this Agreement is the “Disclosing Party.”

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11.2Use of Confidential Information.

The Recipient will use the Confidential Information solely for the purpose of
meeting its obligations under this Agreement.  The Recipient will keep the
Confidential Information strictly confidential and will not disclose the
Confidential Information in any manner whatsoever, in whole or in part, other
than to those of its Representatives who (i) have a need to know the
Confidential Information for the purpose of this Agreement; (ii) have been
advised of the confidential nature of the Confidential Information and (iii)
have obligations of confidentiality and non-use to the Recipient no less
restrictive than those of this Agreement.  Recipient will protect the
Confidential Information disclosed to it by using all reasonable precautions to
prevent the unauthorized disclosure, dissemination or use of the Confidential
Information, which precautions will in no event be less than those exercised by
Recipient with respect to its own confidential or proprietary Confidential
Information of a similar nature.

11.3Exclusions.

The obligations of confidentiality will not apply to the extent that the
information:  

(a)is or becomes publicly known through no breach of this Agreement or fault of
the Recipient or its Representatives;

(b)is in the Recipient's possession at the time of disclosure by the Disclosing
Party other than as a result of the Recipient's breach of any legal obligation;

(c)is or becomes known to the Recipient on a non-confidential basis through
disclosure by sources, other than the Disclosing Party, having the legal right
to disclose the Confidential Information, provided that the other source is not
known by the Recipient to be bound by any obligations (contractual, legal,
fiduciary, or otherwise) of confidentiality to the Disclosing Party with respect
to the Confidential Information;

(d)is independently developed by the Recipient without use of or reference to
the Disclosing Party's Confidential Information as evidenced by Recipient’s
written records; or

(e)is expressly authorized for release by the written authorization of the
Disclosing Party.

Any combination of information which comprises part of the Confidential
Information are  not exempt from the obligations of confidentiality merely
because individual parts of that Confidential Information were publicly known,
in the Recipient’s possession, or received by the Recipient, unless the
combination itself was publicly known, in the Recipient’s possession, or
received by the Recipient.

11.4Photographs and Recordings.

Neither party will take any photographs or videos of the other party’s
facilities, equipment or processes, nor use any other audio or visual recording
equipment (such as camera phones) while at the other party’s facilities, without
that party’s express written consent.

11.5Permitted Disclosure.

Notwithstanding any other provision of this Agreement, the Recipient may
disclose Confidential Information of the Disclosing Party to the extent
required, as advised by counsel, in response to a valid order of a court or
other governmental body or as required by law, regulation or stock exchange
rule. But the Recipient will advise the Disclosing Party in advance of the
disclosure to the extent practicable

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and permissible by the order, law, regulation or stock exchange rule and any
other applicable law, will reasonably cooperate with the Disclosing Party, if
required, in seeking an appropriate protective order or other remedy, and will
otherwise continue to perform its obligations of confidentiality set out
herein.  If any public disclosure is required by law, the parties will consult
concerning the form of announcement prior to the public disclosure being made.

11.6Marking.

The Disclosing Party agrees to use reasonable efforts to summarize in writing
the content of any oral disclosure or other non-tangible disclosure of
Confidential Information to the Recipient within [***] of the disclosure, but
failure to provide this summary will not affect the nature of the Confidential
Information disclosed to the Recipient if the Confidential Information was
identified as confidential or proprietary when disclosed orally or in any other
non-tangible form.

11.7Return of Confidential Information.

Upon the written request of the Disclosing Party, the Recipient will promptly
return the Confidential Information to the Disclosing Party or, if the
Disclosing Party directs, destroy all Confidential Information disclosed in or
reduced to tangible form including any copies thereof and any summaries,
compilations, analyses or other notes derived from the Confidential Information
except for one copy which may be maintained by the Recipient for its
records.  The retained copy will remain subject to all confidentiality
provisions contained in this Agreement.

11.8Remedies.

The parties acknowledge that monetary damages may not be sufficient to remedy a
breach by either party of this Agreement and agree that the non-breaching party
will be entitled to seek specific performance, injunctive and/or other equitable
relief to prevent breaches of this Agreement and to specifically enforce the
provisions hereof in addition to any other remedies available at law or in
equity. These remedies will not be the exclusive remedies for breach of this
Agreement but will be in addition to any and all other remedies available at law
or in equity.

ARTICLE 12

DISPUTE RESOLUTION

12.1Commercial 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 [***] from receipt of the notice
of dispute, a single representative having full power and authority to resolve
the dispute.  The representatives will meet as necessary in order to resolve the
dispute.  If the representatives fail to resolve the matter within [***] from
their appointment, or if a party fails to appoint a representative within the
[***] 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

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dispute amicably.  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 13.17.

12.2Technical 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 possible and in any event no later than [***] 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 [***] 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

13.1Inventions.

(a)All Inventions and 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 or Active Materials
that are the subject of the Manufacturing Services, including, but not limited
to, any new use, new formulation or any change in the method of producing,
testing or storing the Product in each case that are specific to the Product
(“Product Inventions”), will be the exclusive Intellectual Property of
Client.  Patheon shall and hereby does assign to Client all right title and
interest in and to the Product Inventions.  Patheon will execute such
instruments as will be required to evidence or effectuate the Client’s ownership
of Product Inventions, and will cooperate upon reasonable request in the
prosecution of patents and other Intellectual Property rights related thereto at
Client’s cost.  

(b)Inventorship of all Inventions and Intellectual Property generated or derived
by either party pursuant to this agreement shall be determined in accordance
with United States patent law, regardless of where the applicable activities
occurred.  

(c)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
generated, derived, owned or otherwise controlled by the party during the term
of this Agreement.  

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Manufacturing Services Agreement

13.2Intellectual Property.

(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.

(b)Patheon hereby grants to Client a perpetual, irrevocable, non-exclusive,
paid-up, royalty-free, transferable license (with the right to sublicense) to
use the Patheon Intellectual Property used by Patheon to perform the
Manufacturing Services to enable Client to manufacture or have manufactured the
Product(s).

(c)Subject to Section 13.1, all Client Intellectual Property, including Product
Inventions, will be the exclusive property of Client, and all Patheon
Intellectual Property will be the exclusive property of Patheon.  

(d)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.

(e)Each party hereby acknowledges that it does not have, and will not acquire
any interest in any of the other party’s trademarks or trade names unless
otherwise expressly agreed.  Each party agrees not to use any trademarks or
trade names of the other party, except as specifically authorized by the other
party in writing both as to the names or marks which may be used and as to the
manner and prominence of use. All goodwill in any trademarks will inure to the
benefit of the trademark owner. Client, in its sole discretion, will determine
the trademarks and trade names owned or licensed by Client to be used in
connection with the Products, including without limitation, the trademarks and
trade names which will appear on the labels, packaging, and any promotional or
other materials related to the Products. Patheon will use those trademarks and
trade names notified by Client to Patheon for use in the labelling and packaging
of the Products, and Patheon will use only such notified trademarks and trade
names for such purpose. Upon expiration or termination of this Agreement,
Patheon will immediately cease using all of Client’s trademarks and trade names.

(f)Each party will be solely responsible for the costs of filing, prosecution,
and maintenance of its own Intellectual Property, including trademarks and
trademark applications and patents and patent applications.

13.3Insurance.

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
[***] 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.  

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Manufacturing Services Agreement

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.

13.4Independent 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.

13.5No 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 of this
Agreement.

13.6Assignment.

 

(a)

Patheon may not assign this Agreement or any of its associated rights or
obligations without the written consent of Client, this consent not to be
unreasonably withheld.  But Patheon may arrange for subcontractors to perform
specific testing services arising under this Agreement without the consent of
Client; provided, however, the Patheon will provide advance notice of the name
and function of any such subcontractor. Further it is specifically agreed that
Patheon may subcontract any part of the Manufacturing Services under this
Agreement to any of its Affiliates.  Patheon will remain solely liable to Client
for its obligations under this Agreement, and for the obligations of the
applicable Affiliate of Patheon under the Quality Agreement, if the
Manufacturing Services are subcontracted.

 

(b)

Subject to Section 8.2(d), Client may assign this Agreement or any of its
associated rights or obligations without approval from Patheon.  But Client will
give Patheon prior written notice of any assignment (where and to the extent
possible), any assignee will covenant in writing with Patheon to be bound by the
terms of this Agreement, and Client will remain liable hereunder.  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 [***]
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.

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Manufacturing Services Agreement

13.7Force 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, defective equipment, 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.

13.8Additional 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 executed amendments to
Schedules A, B, C, and D as applicable.

13.9Notices.

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:

Evoke Pharma, Inc.

420 Stevens Ave, Suite 370
Solana Beach, California 92075  USA

 

Attention:  Matt D’Onofrio

Email address:MDOnofrio@EvokePharma.com

 

If to Patheon:

Patheon UK Limited

Kingfisher Drive

Covingham

Swindon Wiltshire SN3 5BZ

England

 

Attention: Legal Director

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Manufacturing Services Agreement

Facsimile No: [***]

Email address: [***]

 

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.

13.10Severability.

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, because each provision is separate,
severable, and distinct.

13.11Entire Agreement.

This Agreement, together with the Quality 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.  In
case of conflict, the prevailing order of documents will be this Agreement and
the Quality Agreement.  

13.12Other 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.

13.13No 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.

13.14Execution in Counterparts.

This Agreement may be executed in two or more counterparts, by original,
facsimile or “pdf” signature, each of which will be deemed an original, but all
of which together will constitute one and the same instrument.

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Manufacturing Services Agreement

13.15Use 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. Client will have right to
disclose name of Patheon as manufacturing partner to regulatory, financial and
public investors.

13.16Taxes.

 

(a)

The Client will bear all taxes, duties, levies and similar charges (and any
related interest and penalties) ("Tax" or "Taxes"), however designated, imposed
as a result of the provision by the Patheon of Services under this Agreement,
except:

 

(i)

any Tax based on net income or gross income that is imposed on Patheon by its
jurisdiction of formation or incorporation ("Resident Jurisdiction");

 

(ii)

any Tax based on net income or gross income that is imposed on Patheon by
jurisdictions other than its Resident Jurisdiction if this tax is based on a
permanent establishment of Patheon; and

 

(iii)

any Tax that is recoverable by Patheon in the ordinary course of business for
purchases made by Patheon in the course of providing its Services, such as Value
Added Tax (as more fully defined in subparagraph (d) below), Goods & Services
Tax ("GST") and similar taxes.

 

(b)

If the Client is required to bear a tax, duty, levy or similar charge under this
Agreement by any state, federal, provincial or foreign government, including,
but not limited to, Value Added Tax, the Client will pay the tax, duty, levy or
similar charge and any additional amounts to the appropriate taxing authority as
are necessary to ensure that the net amounts received by Patheon hereunder after
all such payments or withholdings equal the amounts to which Patheon is
otherwise entitled under this Agreement as if the tax, duty, levy or similar
charge did not exist.

 

(c)

Patheon will not collect an otherwise applicable tax if the Client's purchase is
exempt from Patheon's collection of the tax and a valid tax exemption
certificate is furnished by the Client to Patheon.

 

(d)

If Section 13.16 (a)(iii) does not apply, any payment due under this Agreement
for the provision of Services to the Client by Patheon is exclusive of value
added taxes, turnover taxes, sales taxes or similar taxes, including any related
interest and penalties (hereinafter all referred to as "VAT"). If any VAT is
payable on a Service supplied by Patheon to the Client under this Agreement,
this VAT will be added to the invoice amount and will be for the account of (and
reimbursable to Patheon by) the Client. If VAT on the supplies of Patheon is
payable by the Client under a reverse charge procedure (i.e., shifting of
liability, accounting or payment requirement to recipient of supplies), the
Client will ensure that Patheon will not effectively be held liable for this VAT
by the relevant taxing authorities or other parties. Where applicable, Patheon
will use its reasonable commercial efforts to ensure that its invoices to the
Client are issued in such a way that these invoices meet

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Manufacturing Services Agreement

 

the requirements for deduction of input VAT by the Client, if the Client is
permitted by law to do so.

 

(e)

Any Tax that Client pays, or is required to pay, but which Client believes
should properly be paid by Patheon pursuant hereto may not be offset against
sums due by Client to Patheon whether due pursuant to this Agreement or
otherwise.

13.17Governing Law.

This Agreement will be construed and enforced in accordance with the laws of the
State of New York, New York, U.S.A. without regard to the application of
principles of conflicts of law. In relation to such matters, both Parties shall
submit to the exclusive jurisdiction of the state and federal courts located in
the State of New York, New York. THE PARTIES EXPRESSLY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL IN RESPECT OF ANY MATTER RELATING TO THIS AGREEMENT OR
ITS FORMATION.  Notwithstanding the foregoing, Patheon and Client agree that
either party will be entitled to seek interim relief (injunctive or otherwise)
from any court of competent jurisdiction if there is a breach of this
Agreement.  The UN Convention on Contracts for the International Sale of Goods
will not apply to this Agreement.

 

[Signature page to follow]

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Manufacturing Services Agreement

IN WITNESS WHEREOF, the duly authorized representatives of the parties have
executed this Agreement as of the Effective Date.

 

PATHEON UK LIMITED

By:   /s/ Mark Newton

Name:  Mark Newton

Title:  Sr. Dir. G.C.S.

 

EVOKE PHARMA, INC.

By:  /s/ David A. Gonyer

Name: David A. Gonyer

Title:  President and CEO

 

- 43 -

 

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

Exhibit 10.21

Manufacturing Services Agreement  

CERTAIN MATERIAL (INDICATED BY ASTERISKS) HAS BEEN OMITTED FROM THIS DOCUMENT
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

SCHEDULE A

PRODUCT AND SPECIFICATIONS

Product

[***]  

Specifications

[***]

 

 

 

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

Exhibit 10.21

Manufacturing Services Agreement  

CERTAIN MATERIAL (INDICATED BY ASTERISKS) HAS BEEN OMITTED FROM THIS DOCUMENT
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

SCHEDULE B

ANNUAL VOLUME

 

[***]

 

MINIMUM ORDER QUANTITY AND PRICE

[***]

 

 

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

Manufacturing Services Agreement

The following cost items are included in the Price for the Products:

[***]

- 2 -

 

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

Manufacturing Services Agreement

The following cost items are not included in the Price for the Products:

[***]

 

Manufacturing Parameters

[***]

 

Packaging Parameters

[***]

Testing Conditions

[***]

- 3 -

 

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

Manufacturing Services Agreement

SCHEDULE C

ANNUAL STABILITY TESTING [and VALIDATION ACTIVITIES (if applicable)]

[***]

 

 

•

- 4 -

 

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

Exhibit 10.21

Manufacturing Services Agreement  

CERTAIN MATERIAL (INDICATED BY ASTERISKS) HAS BEEN OMITTED FROM THIS DOCUMENT
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

SCHEDULE D

ACTIVE MATERIALS

 

Active Materials

Supplier

[***]

 

[***]

 

ACTIVE MATERIALS CREDIT VALUE

The Active Materials Credit Value will be as follows:

PRODUCT

ACTIVE MATERIALS

ACTIVE MATERIALS

CREDIT  VALUE

[***]

[***]

[***]

 

MAXIMUM CREDIT VALUE

Patheon's liability for Active Materials calculated in accordance with Section
2.2 of the Agreement in a Year will not exceed, in the aggregate, the maximum
credit value set forth below:

PRODUCT

MAXIMUM CREDIT VALUE

[***]

[***]

 

 

 

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

Exhibit 10.21

Manufacturing Services Agreement  

CERTAIN MATERIAL (INDICATED BY ASTERISKS) HAS BEEN OMITTED FROM THIS DOCUMENT
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL 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 of the Agreement will be resolved in the following manner:

1.Appointment of Expert. Within [***] after a party requests under Section 12.2
of the Agreement 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 [***] period, or if there is a 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
[***] (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
[***] of a written request from the relevant expert to do so.

 

 

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

Manufacturing Services Agreement

 

(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.

 

(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 except 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.

 

- 2 -

 

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

Exhibit 10.21

Manufacturing Services Agreement  

CERTAIN MATERIAL (INDICATED BY ASTERISKS) HAS BEEN OMITTED FROM THIS DOCUMENT
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

SCHEDULE F

QUARTERLY ACTIVE MATERIALS INVENTORY REPORT

 

TO:EVOKE PHARMA, INC.

 

FROM:PATHEON UK LIMITED [or applicable Patheon Affiliate]

 

RE:

Active Materials quarterly inventory report under Section 2.2(a) of the
Manufacturing Services Agreement dated • (the "Agreement")

 

 

Reporting quarter:

 

Active Materials on hand

at beginning of quarter:

kg (A)

 

Active Materials on hand

at end of quarter:

kg (B)

 

Quantity Received during quarter:

kg (C)

 

Quantity Dispensed during quarter:

1 kg

[***]

 

Quantity Converted during quarter:

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 UK LIMITEDDATE:

[or applicable Patheon Affiliate]

 

Per:

Name:

Title:

 

 

1

[***]

 

 

 

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

Exhibit 10.21

Manufacturing Services Agreement  

CERTAIN MATERIAL (INDICATED BY ASTERISKS) HAS BEEN OMITTED FROM THIS DOCUMENT
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

SCHEDULE G

REPORT OF ANNUAL ACTIVE MATERIALS INVENTORY RECONCILIATION

AND CALCULATION OF ACTUAL ANNUAL YIELD

 

TO:EVOKE PHARMA, INC.

 

FROM: PATHEON UK LIMITED [or applicable Patheon Affiliate]

 

RE:

Active Materials annual inventory reconciliation report and calculation of
Actual Annual Yield under Section 2.2(a) of the Manufacturing Services Agreement
dated 31 October, 2017 (the "Agreement")

 

 

 

Reporting Year ending:

 

Active Materials on hand

at beginning of Year:

kg (A)

 

Active Materials on hand

at end of Year:

kg (B)

 

 

Quantity Received during Year:

kg (C)

 

 

Quantity Dispensed during Year:

2 kg (D)

[***]

 

Quantity Converted during Year:

kg (E)

(total Active Materials in Products produced

and not rejected, recalled or returned)

 

Active Materials Credit Value:

EUR / kg(F)

 

 

 

2

[***]

 

 

 

 

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

Manufacturing Services Agreement

Target Yield:

%(G)

 

 

Actual Annual Yield:

%(H)

[***]

 

 

Shortfall:

EUR(I)

[***]

(if a negative number, insert zero)

 

 

Based on the foregoing reimbursement calculation Patheon will reimburse Client
the amount of EUR.

 

Surplus Credit:

EUR(J)

[***]

 

Based on the foregoing reimbursement calculation Patheon may carry forward one
Year a Surplus Credit in the amount of EUR.

 

 

Capitalized terms used in this report have the meanings given to the terms in
the Agreement.

 

 

DATE:

 

 

PATHEON UK LIMITED

[or applicable Patheon Affiliate]

 

Per:

Name:

Title:

 

 

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