Exhibit 10.3

Execution Version

 

[***] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

Master Manufacturing Services Agreement

Master Manufacturing Services Agreement

14 JULY 2017

        

 

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Table of Contents

ARTICLE 1

5

 

 

Structure of Agreement and Interpretation

5

 

 

 

1.1

Master Agreement.

5

1.2

Product Agreements.

5

1.3

Definitions.

6

1.4

Currency.

11

1.5

Sections and Headings.

11

1.6

Singular Terms.

11

1.7

Appendix 1, Schedules and Exhibits.

11

 

 

PATHEON'S MANUFACTURING services

12

 

 

 

2.1

Manufacturing Services.

12

2.2

Active Material Yield.

14

2.3

Secondary Manufacturer.

16

 

 

ARTICLE 3

17

 

 

CLIENT'S OBLIGATIONS

17

 

 

 

3.1

Payment.

17

3.2

Active Materials and Qualification of Additional Sources of Supply.

17

 

 

ARTICLE 4

18

 

 

CONVERSION fees AND COMPONENT COSTS

18

 

 

 

4.1

First Year Pricing.

18

4.2

Price Adjustments – Subsequent Years’ Pricing.

18

4.3

Price Adjustments – Current Year Pricing.

20

4.4

Adjustments Due to Technical Changes or Regulatory Authority Requirements.

20

4.5

Multi-Country Packaging Requirements.

21

 

 

ARTICLE 5

21

 

 

ORDERS, SHIPMENT, INVOICING, PAYMENT

21

 

 

 

5.1

Orders and Forecasts.

21

5.2

Reliance by Patheon.

23

5.3

Minimum Orders.

23

5.4

Delivery and Shipping.

23

5.5

Invoices and Payment.

24

 

 

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ARTICLE 6

24

 

 

PRODUCT CLAIMS AND RECALLS

24

 

 

 

6.1

Product Claims.

24

6.2

Product Recalls and Returns.

25

6.3

Patheon’s Responsibility for Defective and Recalled Products.

25

6.4

Disposition of Defective or Recalled Products.

26

6.5

Healthcare Provider or Patient Questions and Complaints.

27

6.6

Sole Remedy.

27

 

 

ARTICLE 7

27

 

 

CO-OPERATION

27

 

 

 

7.1

Quarterly Review.

27

7.2

Governmental Agencies.

27

7.3

Records and Accounting by Patheon.

28

7.4

Inspection.

28

7.5

Access.

28

7.6

Notification of Regulatory Inspections.

28

7.7

Reports.

28

7.8

Regulatory Filings.

29

 

 

ARTICLE 8

30

 

 

TERM AND TERMINATION

30

 

 

 

8.1

Initial Term.

30

8.2

Termination for Cause.

30

8.3

Obligations on Termination.

31

 

 

ARTICLE 9

33

 

 

REPRESENTATIONS, WARRANTIES AND COVENANTS

33

 

 

 

9.1

Authority.

33

9.2

Client Warranties.

33

9.3

Patheon Warranties.

33

9.4

Permits.

34

9.5

No Warranty.

34

 

 

ARTICLE 10

35

 

 

REMEDIES AND INDEMNITIES

35

 

 

 

10.1

Consequential and Other Damages.

35

10.2

Limitation of Liability.

35

10.3

Patheon Indemnity.

36

10.4

Client Indemnity.

36

 

 

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ARTICLE 11

36

 

 

CONFIDENTIALITY

36

 

 

 

11.1

Confidential Information.

36

11.2

Use of Confidential Information.

37

11.3

Exclusions.

37

11.4

Photographs and Recordings.

38

11.5

Permitted Disclosure.

38

11.6

Marking.

38

11.7

Return of Confidential Information.

38

11.8

Remedies.

38

 

 

ARTICLE 12

39

 

 

DISPUTE RESOLUTION

39

 

 

 

12.1

Commercial Disputes.

39

12.2

Technical Dispute Resolution.

39

 

 

ARTICLE 13

39

 

 

MISCELLANEOUS

39

 

 

 

13.1

Inventions.

39

13.2

Intellectual Property.

40

13.3

Insurance.

40

13.4

Independent Contractors.

41

13.5

No Waiver.

41

13.6

Assignment and Subcontracting.

41

13.7

Force Majeure.

41

13.8

Additional Product.

42

13.9

Notices.

42

13.10

Severability.

43

13.11

Entire Agreement.

43

13.12

Other Terms.

43

13.13

No Third Party Benefit or Right.

43

13.14

Execution in Counterparts.

43

13.15

Use of Client Name.

43

13.16

Taxes.

44

13.17

Governing Law.

45

 

 

 

 

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MASTER MANUFACTURING SERVICES AGREEMENT

THIS MASTER MANUFACTURING SERVICES AGREEMENT (the "Agreement") is made as of 14
July 2017 (the “Effective Date”)

B E T W E E N:

PATHEON UK LIMITED,

a corporation existing under the laws of England;

("Patheon"),

- and -

RECRO IRELAND LIMITED,

a private limited company incorporated in Ireland

("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

1.1

Master Agreement.

This Agreement establishes the general terms and conditions under which Patheon
or any Affiliate of Patheon may perform Manufacturing Services for Client or any
Affiliate of Client, at the manufacturing site where the Affiliate of Patheon
resides. This “master” form of agreement is intended to allow the parties, or
any of their Affiliates, to contract for the manufacture of multiple Products
through Patheon’s global network of manufacturing sites through the issuance of
site specific Product Agreements without having to re-negotiate the basic terms
and conditions contained herein.

1.2

Product Agreements.

This Agreement is structured so that a Product Agreement may be entered into by
the parties for the manufacture of a particular Product or multiple Products at
a Patheon manufacturing site. Each Product Agreement will be governed by the
terms and conditions of this Agreement unless the parties to

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the  Product  Agreement  expressly  modify  the terms  and conditions  of  this
Agreement in the Product Agreement. Unless otherwise agreed by the parties, each
Product Agreement will be in the general form and contain the information set
forth in Appendix 1 hereto.      

1.3

Definitions.

The following terms will, unless the context otherwise requires, have the
respective meanings set out below and grammatical variations of these terms will
have corresponding meanings:

"Active Materials", “Active Pharmaceutical Ingredients” or “API” means the
materials listed in a Product Agreement on Schedule D;

"Active Materials Credit Value" means the value of the Active Materials for
certain purposes of this Agreement, as set forth in a Product Agreement on
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

 

(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 which is required to be
prepared and filed 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 of a Product Agreement;

"Applicable Laws" means all Laws that apply to the Manufacturing Services,
Manufacturing Sites, Products and other activities specified in this Agreement,
respectively, including any Product Agreement entered into hereunder. Applicable
Laws include, without limitation, the Federal Food, Drug and Cosmetic Act and
applicable analogous Laws in any other jurisdiction;

"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;

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“Breach Notice” has the meaning specified in Section 0;

"Business Day" means a day other than a Saturday, Sunday or a day that is a
statutory holiday in the United Kingdom, the jurisdiction where the
Manufacturing Site is located or Philadelphia, Pennsylvania, United States of
America;

“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 under a particular Product Agreement;

"cGMP" means, as applicable, current good manufacturing practice 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, and analogous applicable requirements of
a Regulatory Authority in any other jurisdiction in the Territory;

“Client Intellectual Property” means Intellectual Property (a) controlled,
generated or derived by Client before entering into or during the term of this
Agreement, or (b) generated or derived by Patheon while performing any
Manufacturing Services, or otherwise generated or derived by Patheon in its
business, which Intellectual Property is [***];

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

“Client-Supplied Components” means those Components to be supplied by Client or
that have been supplied by Client as set forth in a Product Agreement;

"Components" means, collectively, all packaging components, raw materials,
ingredients, 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
[***];  

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

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“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" has 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);

"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 Product Term” has the meaning specified in Section 8.1;

“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 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;

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

"Manufacturing Services" means the services set forth in this Agreement and a
Product Agreement required to manufacture Product or Products using the Active
Materials and Components, including, without limitation and as applicable,
manufacturing, quality control, quality assurance, stability testing, packaging,
and related services;

"Manufacturing Site" means the facility owned and operated by Patheon or an
Affiliate of Patheon where the Manufacturing Services will be performed as
identified in a Product Agreement;

“Materials” means all Components 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 in a Product Agreement on
Schedule D;

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

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

“Patheon Competitor” means [***];  

“Patheon Intellectual Property” means Intellectual Property generated or derived
by Patheon before performing any Manufacturing Services, developed by Patheon
while performing the Manufacturing Services, or otherwise generated or derived
by Patheon in its business which Intellectual Property is [***];

“Price” means the fees to be charged by Patheon for performing the Manufacturing
Services, [***];

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

“Product Agreement” means the agreement between Patheon and Client issued under
this Agreement in the form set forth in Appendix 1 (including Schedules A to D)
under which Patheon will perform Manufacturing Services at a particular
Manufacturing Site for a particular Territory or Territories;

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

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"Quality Agreement" means the agreement between the parties entering into a
Product Agreement, or between the applicable Affiliate of Patheon and Client if
the Manufacturing Services are subcontracted to such Affiliate by Patheon, that
sets out the quality control and quality assurance standards for the
Manufacturing Services to be performed by Patheon for Client;

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

“Recipient” has the meaning specified in Section 11.1;

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

"Regulatory Authority" means, as applicable, the FDA, EMA, and Health Canada and
any analogous regulatory agencies competent to grant Regulatory Approvals for
pharmaceutical products, including the Products in the Territory;

“Remediation Period” has the meaning specified in Section 0;

“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 each Product, which is given by Client to
Patheon in accordance with the procedures listed in a Product Agreement on
Schedule A and which contains documents relating to each Product, including,
without limitation:

 

(a)

specifications for Active Materials and Components;

 

(b)

manufacturing specifications, directions, and processes;

 

(c)

storage requirements;

 

(d)

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

 

(e)

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

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

“Supply Failure” means (a) a Force Majeure Event affecting Patheon’s ability to
supply Product in accordance with this Agreement and the applicable Product
Agreement for a period of [***], or (b) a material breach by Patheon of its
supply obligations under this Agreement, which breach is not cured within the
Remediation Period;

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“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 the geographic area described in a Product Agreement where
Products manufactured by Patheon will be distributed by Client;

"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 or in the first year of a
Product 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).

1.4

Currency.  

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

1.5

Sections and Headings.  

The division of this Agreement into Articles, Sections, Subsections, an
Appendix, Schedules and Exhibits 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, Appendix, Schedule or Exhibit refers to the specified Section,
Appendix, Schedule or Exhibit to this Agreement.  In this Agreement, the terms
"this Agreement", "hereof", "herein", "hereunder" and similar expressions refer
to this Agreement as a whole and not to any particular part, Section, Appendix,
Schedule or Exhibit of this Agreement.

1.6

Singular Terms.

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

1.7

Appendix 1, Schedules and Exhibits.

Appendix 1 (including the Schedules thereto) and the following Exhibits are
attached to, incorporated in, and form part of this Agreement:

 

Appendix 1

-

Form of Product Agreement (Including Schedules A to D)

Exhibit A

-

Technical Dispute Resolution

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Exhibit B

-

Quarterly Active Materials Inventory Report

Exhibit C

-

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

 

ARTICLE 2

PATHEON'S MANUFACTURING services

2.1

Manufacturing Services.

Patheon will perform the Manufacturing Services for the Territory for the Price
specified in a Product Agreement in Schedules B and C to manufacture Products
for Client.  Schedule B to a Product Agreement sets forth a list of cost items
that are included in the Price for Products; all cost items that are not
included in the Price are subject to additional fees to be paid by Client,
provided, that all such additional fees are subject to Client’s prior written
consent.  Patheon may amend the fees set out in Schedules B and C to a Product
Agreement as set forth in Article 4. Patheon may change the Manufacturing Site
for the Products only with the prior written consent of Client, this consent not
to be unreasonably withheld, and subject to any necessary approvals by
Regulatory Authorities. Unless otherwise agreed in a Product Agreement and
subject to Section 2.3 below, during the term of any Product Agreement, Client
will purchase from Patheon [***] of its requirements for the Product in the
Territory set forth in the applicable Product Agreement. In performing the
Manufacturing Services, Patheon and Client agree that, unless otherwise set
forth in a Product Agreement:

 

(a)

Conversion of Active Materials and Components.  Patheon will convert Active
Materials and Components into Product.

 

(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; provided that Patheon
shall provide Client notice of any material changes to Patheon’s standard
operating procedures that are applicable to the batch review and release of a
Product in accordance with the terms of the Quality Agreement.  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 cGMP.  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 and test all Components (with the exception
of Client-Supplied Components) [***] and as required by the Specifications.  

 

(d)

Stability Testing. If applicable, 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 to a Product
Agreement.  Patheon will not make any changes to these testing protocols without
prior written approval from Client.  If a confirmed stability test failure
occurs, Patheon will notify Client within one Business Day, after which Patheon
and Client will jointly, reasonably and in good faith, determine

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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 withthe Specifications and cGMP.  Patheon
will retain all stability test data and will provide such data to Client at
Client’s request.  

 

(e)

Packaging and Artwork.  Patheon will package the Products in accordance with the
Specifications. If applicable, Client will be responsible for the cost of
artwork development.  Patheon will determine and imprint the batch numbers and
expiration dates for each Product shipped.  The batch numbers and expiration
dates will be affixed to the Products on each Product’s label and on the
shipping carton of each Product as outlined in the Specifications and as
required by cGMP.  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; provided, that Patheon has promptly implemented any
changes to labels, product inserts and other packaging for Products requested by
Client.  Patheon's name will not appear on the label or anywhere else on the
Products unless: (i) required by any Applicable Laws; or (ii) Patheon consents
in writing to the use of its name. At least 120 days 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.  At least 45 days 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 45 days 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.  If Patheon is unable to
manufacture Product to meet this new shipment date due to prior third party
production commitments, shipment may be delayed until a later date as agreed to
by the parties; provided, that Patheon has used commercially reasonable efforts
to reschedule the shipment date as close as possible to the original shipment
date.  All shipments of Active Material will be accompanied by certificate(s) of
analysis from the Active Material manufacturer and 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”).

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(g)

Validation Activities (if applicable).  Patheon may assist in the development
and approval of the validation protocols for analytical methods and
manufacturing procedures (including packaging procedures) for the Products.  The
fees for this service are not included in the Price, and if Client requests such
service, the parties will negotiate in good faith any applicable fees at
reasonable rates, which fees will be set out separately in Schedule C to a
Product Agreement.

 

(i)

Additional Services. If Client requests services other than those expressly set
forth herein or in any Product Agreement (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.

2.2

Active Material Yield.

 

(a)

Reporting.  Patheon will give Client a quarterly inventory report, within
twenty-four (24) hours of the end of the quarter, of the Active Materials held
by Patheon using the inventory report form set out in Exhibit B, 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.  Unless demonstrated otherwise by the results of agreed
testing, and to the extent it was reasonable to identify defects using that
testing, it is assumed that all Active Materials received at the Manufacturing
Site during the applicable period complied with the Specifications.

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, including Active Materials lost in the warehouse prior to and during
dispensing, and for clarity will not include any (i) Active Materials that must
be retained by Patheon as samples, (ii) Active Materials contained in Product
that must be retained as samples, (iii) Active Materials used in testing (if
applicable), and (iv) Active Materials received or dispensed in technical
transfer activities or development activities during the applicable period,
including without limitation, any regulatory, stability, validation or test
batches manufactured during the applicable period.

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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 0 or 6.3(b)), delivered by Patheon,
and not rejected, recalled or returned in accordance with Section 6.1or 6.2
because of Patheon’s failure to perform the Manufacturing Services in accordance
with Specifications, cGMP, and Applicable Laws.  

Within 60 days after the end of each Year, Patheon will prepare an annual
reconciliation of Active Materials on the reconciliation report form set forth
in Exhibit C 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 Year        x100%

Quantity Dispensed during the Year

After Patheon has produced [***] commercial production batches of Product and
has produced commercial production batches for [***] at the Manufacturing Site
(collectively, the "Target Yield Determination Batches"), the parties will
reasonably and in good faith agree on the target yield for the Product at the
Manufacturing Site (each, a "Target Yield"). The Target Yield will be revised
annually if [***] have been manufactured during the prior year, to reflect the
actual manufacturing experience as agreed to reasonably and in good faith by the
parties.

 

(b)

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

[***]

 

(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:

[***]

(d)Credits

 

(i)

Shortfall Credit.  If there is a Shortfall for a Product in a Year, then Patheon
will credit Client’s account for the amount of the Shortfall not later than 60
days after the end of such Year.

 

(ii)

Surplus Credit.  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.    

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Each credit under this Section 2.2 will be summarized on the reconciliation
report prepared in the form set forth in Exhibit C.  Upon expiration or
termination of a Product Agreement, any remaining Shortfall credit amount owing
under this Section 2.2 will be paid to Client, it being understood that the
amount of the Shortfall credit for the Year during which the Product Agreement
expires or terminates shall be calculated pro-rata based on the portion of the
Year occurring prior to such expiration or termination.

 

(e)

Maximum Credit.  Patheon's liability for Active Materials calculated in
accordance with this Section 2.2 for any Product in a Year will not exceed, in
the aggregate, the Maximum Credit Value set forth in Schedule D to a Product
Agreement.

 

(f)

No Material Breach.  It will not be a material breach of this Agreement by
Patheon under Section 0 if the Actual Annual Yield is less than the Target
Yield; provided, that this Section 2.2(f) shall not preclude a claim by Client
for material breach of this Agreement with respect to any acts or omissions of
Patheon (which are themselves material breaches) resulting in the Actual Annual
Yield being less than the Target Yield.

2.3

Secondary Manufacturer.

Patheon recognizes that Client may wish to qualify and use an additional
manufacturer to manufacture Product in order to, among other things, reduce or
spread Client’s business risk.  Client shall be permitted to order from such
additional manufacturer [***].

2.4Records [***].  Patheon shall keep accurate and complete books and records of
accounting pertaining to the API Yield performed (including the calculation of
the Active Material Yield pursuant to Section 2.2), in sufficient detail to
permit Client to confirm the accuracy of the invoices and reports submitted
hereunder.  [***].

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ARTICLE 3

CLIENT'S OBLIGATIONS

3.1

Payment.

Client will pay Patheon for performing the Manufacturing Services according to
the Prices specified in Schedules B and C in a Product Agreement. These Prices
may be subject to adjustment under other parts of this Agreement.  

3.2

Active 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 0. If applicable, Patheon and 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 and
Client-Supplied Components will be held by Patheon on behalf of Client as set
forth in this Agreement and (subject to Section 2.2) the risk of loss for the
Active Materials and the Client-Supplied Components shall transfer to Patheon
during any time when the Active Materials and the Client-Supplied Components are
held by Patheon under this Agreement.  Title to the Active Materials and
Client-Supplied Components will at all times remain the property of Client.  Any
Active Materials and Client-Supplied Components 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.

 

(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 negotiate in good faith to agree in writing on
the scope of work to be performed by Patheon at Client’s cost. For an Active
Material, unless otherwise agreed by the parties, 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 three months accelerated stability; and (iii) manufacture of three
full-scale validation batches that will be placed on concurrent stability (one
batch may be the registration batch if manufactured at full scale). Section
6.1(d) will apply to all Products manufactured using the newly approved Active
Material or Component because of the limited material characterization that is
performed on additional sources of supply.

 

(c)

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. 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

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provide Patheon with copies of these annual certifications. If Patheon agrees to
certify a Client designated additional source of supply on behalf of Client, it
will do so at Client’s expense, subject to prior written agreement of the
parties.        

ARTICLE 4

CONVERSION fees AND COMPONENT COSTS

4.1

First Year Pricing.

The Price for the first Year will be listed in Schedules B and C in a Product
Agreement and will be subject to the adjustments set forth in Sections 4.2 and
4.3. If there are changes to the underlying manufacturing, packaging or testing
assumptions set forth in Schedule B of the Product Agreement that result in an
increase or decrease in the cost of performing the Manufacturing Services, the
parties shall negotiate in good faith an amendment to the Product Agreement
adjusting the Price to account for such increase or decrease.

4.2

Price Adjustments – Subsequent Years’ Pricing.

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

 

(a)

Manufacturing and Stability Testing Costs. Patheon may adjust the Conversion Fee
component of the Price and the annual stability testing costs for inflation,
based upon the preliminary number for any increase in the inflation index stated
in the Product Agreement in June of the preceding Year compared to the final
number for the same month of the Year prior to that (based on the average of the
monthly changes over the 12-month period), unless the parties otherwise agree in
writing.  [***].  On or before November 1 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 (other than
Client-Supplied Component) costs during the Year, it may increase the Price for
the next Year to pass through the additional Component costs at Patheon’s cost;
provided, that such increased Component costs are still in effect during the
next Year.  On or before November 1 of each Year, Patheon will give Client any
information reasonably requested by Client about the increase in Component costs
which will be applied to the calculation of the Price for the next Year to
reasonably demonstrate that the Price increase is justified.  

 

(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 to
a Product Agreement.  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, [***]

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[***].

 

(d)

Tier Pricing (if applicable). The pricing in Schedule B of a Product Agreement
is set forth in Annual Volume tiers based upon Client’s volume forecasts under
Section 5.1.  Client will be invoiced during the Year for the unit price set
forth in the Annual Volume tier based on the 18 month forecast provided in
September of the previous Year.  Within 30 days 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 Client during the Year with the pricing
tiers.  If Client has overpaid during the Year, Patheon will issue a credit to
Client for the amount of the overpayment within 60 days after the end of the
Year or will issue payment to Client for the overpayment within 60 days after
the termination of the Agreement.  If Client has underpaid during the Year,
Patheon will issue an invoice to Client under Section 5.5 for the amount of the
underpayment within 60 days 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 30 days, the matter will be handled under
Section 12.1.        

 

(e)

For all Price adjustments under this Section 4.2, Patheon will deliver to Client
on or about November 1 of each Year (or, if November 1 is not a Business Day, on
the next Business Day following November 1) a revised Schedule B to the Product
Agreement to be effective for Product delivered on or after the first day of the
next Year.  

 

4.2.1

Capacity Reservation Fee due to Volume Changes from Yearly Forecast Volumes for
Sterile Products.

On the execution of a Product Agreement, Client will give to Patheon a forecast
of the volume of Product required from Patheon for the [***] Years of the
Product Agreement (the “Yearly Forecast Volume” or “YFV”) that will become part
of the Product Agreement. If at the end of the first Year the aggregate actual
volume of Product ordered by Client and invoiced by Patheon under Section 5.5
(“Actual Yearly Volume” or “AYV”) during the Year is less than [***], then
Client will pay Patheon the Conversion Fee for the Product during the Year in an
amount to be determined as follows:

[***]

On or before June 10 of each Year, the parties will agree on the YFV [***] Years
of the Product Agreement on a rolling forward basis.  The forecast of the volume
of

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Product for [***] Year may not vary by more than [***] from the original YFV for
the [***] Year.  Once agreed, the YFV for the next Year will become binding on
the parties and any amount due to Patheon will be determined as set forth above.

4.3

Price Adjustments – Current Year Pricing.

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

Extraordinary Increases in Component Costs.  If, at any time, market conditions
result in Patheon's cost of Components (other than Client-Supplied Components)
being materially greater than normal forecasted increases, then the parties will
negotiate in good faith an amendment to the Product Agreement 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 a 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
proposed revised Schedule B to the Product Agreement and budgetary pricing
information, adjusted Component costs or other documents reasonably sufficient
to demonstrate that a Price adjustment is justified.  Patheon will have no
obligation to deliver any supporting documents that are subject to obligations
of confidentiality between Patheon and its suppliers.  The revised Price will be
effective for any Product delivered on or after the first day of the month
following the parties’ execution of an amendment to the Product
Agreement.  [***].

4.4

Adjustments 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, and subject to
any necessary approvals by Regulatory Authorities.  If Client accepts a proposed
Price change, 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 Patheon’s cost (including all costs incurred by
Patheon for the purchase and handling of the Inventory), all Inventory held
under the previous 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.  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

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Section 5.2 will be cancelled where possible and as soon as possible, but if the
orders may not be cancelled without penalty, they 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 Regulatory Authority requirements which apply to portions of the
Manufacturing Services that are specific to Products, with such additional
payments or price increases to be implemented only upon written consent of
Client, which shall not be unreasonably withheld.

4.5

Multi-Country Packaging Requirements.

If Client decides to have Patheon perform Manufacturing Services for the Product
for countries outside the Territory, then Client will inform Patheon of the
packaging requirements for each new country and Patheon will prepare a quotation
for consideration by Client of any additional 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
the applicable Product Agreement.

ARTICLE 5

ORDERS, SHIPMENT, INVOICING, PAYMENT

5.1

Orders and Forecasts.  

 

(a)

Long Term Forecast.  When each Product Agreement is executed, Client will give
Patheon a non-binding [***] year forecast of Client’s volume requirements for
the Product for each Year during the term of the Product Agreement (the “Long
Term Forecast”).  The Long Term Forecast will thereafter be updated every six
months (as of June 1 and December 1) during the Initial Product Term.  If
Patheon becomes aware at any time that it will be unable to timely accommodate
any portion of the Long Term Forecast, it will notify Client as soon as
practicable, in any event within thirty (30) days of becoming aware of its
inability to timely accommodate such portion of the Long Term Forecast.

 

(b)

Rolling 18 Month Forecast.  When each Product Agreement is executed, Client will
give Patheon a non-binding 18 month forecast of the volume of Product that
Client expects to order in the first 18 months 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 18 month forecast will
prevail.

 

(c)

Firm Orders.  Unless otherwise agreed in the Product Agreement, the first [***]
months of this updated forecast will be considered binding firm
orders.  Concurrent with the 18 month forecast, Client will issue a new firm
written order for the binding portion of such forecast 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 [***] days from the first day
of the month 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

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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.

 

(d)

Acceptance of Firm Order. Patheon will accept Firm Orders by sending an
acknowledgement to Client within ten Business Days of its receipt of the Firm
Order.  The acknowledgement will include, subject to confirmation from Client,
the Delivery Date for the Product ordered, which Delivery Date shall be within
[***] Business Days of the delivery date requested by Client in the Firm Order,
unless otherwise mutually agreed by the parties. The Delivery Date may be
amended by agreement of the parties or as set forth in Section 2.1(e). If
Patheon fails to acknowledge receipt of a Firm Order within the ten Business Day
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 [***].  [***].  

 

(f)

Zero Volume Forecast. If Client forecasts zero volume for a period of nine
successive months during the term of a Product Agreement (the “Zero Forecast
Period”), then Patheon will have the option, at its sole discretion, to provide
a 30 day notice to Client of Patheon’s intention to terminate the Product
Agreement on a stated day after the expiration of such 30 day period.  Client
thereafter will have 30 days to withdraw the zero forecast and re-submit an
updated 18 month forecast other than a zero volume forecast.  In the
alternative, upon request by Client, Client and Patheon shall negotiate in good
faith other commercially reasonable terms and conditions on which the Product
Agreement will remain in effect. If Client has not submitted an updated 18 month
forecast or submitted a request for negotiations to Patheon within such 30 day
period, then Patheon will have the right to terminate the Product Agreement at
the end of the 30 day notice period.

 

(g)

Controlled Substance Quota Requirements (if applicable).  Client will give
Patheon the information set forth below for obtaining any required DEA or
equivalent agency quotas needed to perform the Manufacturing Services.  Patheon
will be responsible  for routine management of DEA quota information in
accordance with DEA regulations. Patheon and Client will cooperate to
communicate the information and to assist each other in DEA information
requirements related to the Product as follows: (i) as of April 1 of each Year
for the applicable Product, Client will provide to Patheon the next Year’s
annual quota requirements for the Product; (ii) as of August 1 of each Year,
Client will provide to Patheon any changes to the next Year’s quota
requirements; (iii) Client will pro-actively communicate any changes to the
quota requirements for the then-current Year in sufficient time to allow Patheon
to file and finalize DEA filings supporting the changes; (iv) upon Patheon
receiving the necessary forecast information from Client in order to request
additional quota, Patheon will submit to the DEA, on a timely basis, all filings
necessary to obtain DEA or equivalent agency quotas for Active Materials and
will use commercially reasonable efforts to secure sufficient quota from the DEA
so as to achieve Delivery Dates for Product as set forth in applicable purchase
orders and forecasts submitted to Patheon by Client or its designee; and (v)
Patheon will not be responsible for DEA’s

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refusal or failure to grant sufficient quota for reasons beyond the reasonable
control of Patheon.

5.2

Reliance by Patheon.

(a)Client understands and acknowledges that Patheon will rely on the Firm Orders
and rolling forecasts submitted under Sections 5.1(a), and (b) in ordering the
Components (other than Client-Supplied Components) required to meet the Firm
Orders.  Patheon shall purchase and maintain at its cost and expense (subject to
Section 5.2(b) below) a quantity of Components sufficient to satisfy the
Manufacturing Services requirements for Products for [***].  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 and that have expired or are rendered obsolete
due to changes in artwork or applicable regulations during the period
(collectively, “Obsolete Stock”). [***]. 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.

(c)If Client fails to take possession or arrange for delivery of conforming
finished Product not accepted by Client within [***] of batch release, Client
will pay Patheon [***] for storing the Components or finished Product.  Storage
fees for Components or Product which contain controlled substances or require
refrigeration will be charged at [***].  Patheon may ship finished Product held
by it longer than one month to Client at Client’s expense on 14 days’ written
notice to Client.

5.3

Minimum Orders.

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

5.4

Delivery and Shipping.

The Product will be delivered to Client after it has been manufactured by
Patheon and released to Client by Patheon.  Delivery of Products will be made
EXW (Incoterms 2010) Patheon’s shipping point unless otherwise agreed in a
Product Agreement.  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, arrange for shipping to be paid by Client. Client will
arrange for insurance and will select the freight carrier used by Patheon to
ship Products and may monitor Patheon’s shipping and freight practices as they
pertain to this Agreement.  Products will be transported in accordance with the
Specifications.

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5.5

Invoices and Payment.

Invoices will be sent by email to Accounts Payable – [***], or to such other
email address given by Client to Patheon in writing from time to time.  Invoices
will be issued when the manufactured Product is released by Patheon.  Patheon
will also submit to Client, with each shipment of Products, a duplicate copy of
the proposed invoice covering the shipment to be issued once the shipment is
released by Patheon. Patheon will also give Client an invoice covering any
Inventory or Components which are to be purchased by Client under Section 5.2 of
this Agreement.  Each invoice will, to the extent applicable, identify Client’s
Manufacturing Services purchase order number, Product numbers, names and
quantities, unit price, freight charges, and the total amount to be paid by
Client.  Client will pay all undisputed invoiced amounts within [***] of the
date of invoice.  Patheon shall transmit the invoice on the date of issue to the
email address specified above.  If any portion of an invoice is disputed, 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 [***].

ARTICLE 6

PRODUCT CLAIMS AND RECALLS

6.1

Product Claims.

(a)Product Claims.  Client has the right to reject any portion of any shipment
of Product that was not manufactured in accordance with or deviate from (except
for properly documented and approved deviations) the Specifications, cGMP, or
Applicable Laws, without invalidating any remainder of the shipment. Unless
otherwise agreed in the applicable Quality Agreement, Client will inspect the
Product manufactured by Patheon promptly upon receipt and will give Patheon
written notice (a "Deficiency Notice") of all claims for Product that was not
manufactured in accordance with or deviates from (except for properly documented
and approved deviations) the Specifications, cGMP, or Applicable Laws, within
[***] days after Client’s receipt thereof (or, in the case of any defects not
reasonably susceptible to discovery upon receipt of the Product, within [***]
days after discovery by Client, but not after the expiration date of the
Product).  If Client fails to give Patheon the Deficiency Notice within the
applicable [***] day period, then the delivery will be deemed to have been
accepted by Client on the [***] day after delivery or discovery, as
applicable.  Except as otherwise set forth in this Agreement, Patheon will have
no liability for any deficiency for which it has not received notice within the
applicable [***] day period.

(b)Determination of Deficiency.  Upon receipt of a Deficiency Notice, Patheon
will have [***] days to advise Client by notice in writing that it disagrees
with the contents of the Deficiency Notice.  If Client and Patheon fail to agree
within [***] days after Patheon's notice to Client as to whether any Product
identified in the Deficiency Notice was not manufactured in accordance with or
deviates from (except for properly documented and approved deviations) the
Specifications, cGMP, or Applicable Laws, then the parties will select an
independent laboratory of reputable standing reasonably acceptable to each party
to evaluate the Product.  This evaluation will be binding on the parties in
respect of this Section 6 in the absence of manifest bias or error.  If the
evaluation certifies that any Product was not manufactured in accordance with or
deviates from (except for properly documented and approved deviations) the
Specifications, cGMPs or Applicable Laws, then such Product shall be deemed to
be rejected by Client and Patheon will be responsible for the cost of the
evaluation.  If the evaluation does not so certify, then Client will be deemed
to have accepted delivery of the Product on the [***] day after delivery (or, in
the case of any defects not reasonably susceptible to discovery upon receipt of
the Product, on the [***] day

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after discovery thereof by Client, but not after the expiration date of the
Product), and Client will be responsible for the cost of the evaluation.

(c)Shortages and Price Disputes.  Claims for shortages in the amount of Product
shipped by Patheon or other deviations from the applicable Firm Order, or a
Price dispute, will be dealt with by reasonable and good faith agreement of the
parties. Any claim for a shortage or other deviation from the applicable Firm
Order or a Price dispute will be deemed waived if it has not been presented
within [***] days of the date of invoice.

(d)Product Rejection for Finished Product Specification Failure. Internal
process specifications will be defined and agreed upon.  If after a full
investigation as set forth in Section 6.1(b), it is determined that Patheon
manufactured Product in accordance with the agreed upon process specifications,
the batch production record, and Patheon’s standard operating procedures for
manufacturing, and a batch or portion of batch of Product does not meet a
finished Product specification, Client will pay Patheon the applicable fee per
unit for the non-conforming Product. The API in the non-conforming Product will
be included in the “Quantity Converted” for purposes of calculating the “Actual
Annual Yield” under Section 2.2(a).

6.2

Product Recalls and Returns.

(a)Records and Notice.  Patheon and Client will each maintain records necessary
to permit a Recall of any Product 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 Product or which might result in the Recall or seizure of
the Product.  Upon receiving this notice or upon this discovery, each party will
stop making any further shipments of any applicable Product 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 Product sold or shipped to third parties (including, without
limitation, the voluntary withdrawal of Product from the market); or (ii) by any
Regulatory Authorities to detain or destroy any of the Product.  Recall will
also include any action by either party to refrain from selling or shipping
quantities of the Product to third parties which would be subject to a Recall if
sold or shipped.

(b)Cooperation for Recalls.  If (i) any Regulatory Authority issues a directive,
order or 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 for any Product, Patheon
will co-operate as reasonably required by Client and pursuant to all Applicable
Laws.

(c)Product Returns.  Client will have the responsibility for handling customer
returns of the Product.  Patheon will give Client any assistance that Client may
reasonably require to handle the returns.

6.3

Patheon’s Responsibility for Defective and Recalled Products.

(a)Defective Product.  If Client rejects Product under Section 6.1 and the
deficiency is determined to have arisen from Patheon’s failure to provide the
Manufacturing Services in accordance with the Specifications, cGMP or Applicable
Laws, Patheon will credit Client’s account for Patheon’s invoice price for the
defective Product.  If Client previously paid for the defective Product, Patheon
will promptly, at Client’s election, either: (i) refund the invoice price for
the defective Product; (ii) offset the

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amount paid against other amounts due to Patheon hereunder; or (iii) replace the
Product with conforming Product (if Patheon is able to manufacture the
replacement Product at the same Manufacturing Site as that of the rejected
Product), without Client being liable for payment therefor under Section 3.1,
and contingent upon the receipt from Client of all Active Materials and
Client-Supplied Components required for the manufacture of the replacement
Product.  For greater certainty, Patheon’s responsibility for any loss of Active
Materials in defective Product will be captured and calculated in the Active
Materials Yield under Section 2.2.

(b)Recalled or Returned Product.  To the extent that a Recall or return results
from, or arises out of, a failure by Patheon to perform the Manufacturing
Services in accordance with the Specifications, cGMP, or Applicable Laws,
Patheon will be responsible for Client’s documented expenses of the Recall or
return and Patheon will promptly, at Client’s election, either: (i) refund the
invoice price for the Recalled or returned Product; (ii) offset the amount paid
against other amounts due to Patheon hereunder; or (iii) replace the Product
with conforming Product (if Patheon is able to manufacture the replacement
Product at the same Manufacturing Site as that of the rejected Product), without
Client being liable for payment therefor under Section 3.1, and contingent upon
the receipt from Client of all Active Materials and Client-Supplied Components
required for the manufacture of the replacement Product.  For greater certainty,
Patheon’s responsibility for any loss of Active Materials in Recalled Product
will be captured and calculated in the Active Materials Yield under Section
2.2.  In all other circumstances, Recalls, returns, or other corrective actions
will be made at Client's cost and expense. If Client and Patheon fail to agree
whether Patheon failed to perform the Manufacturing Services in accordance with
the Specifications, cGMP, or Applicable Laws, with respect to any Recall, such
disagreement shall be considered a technical dispute subject to Section 12.2 and
Exhibit A. For clarity, any appointed expert will determine questions relating
only to compliance with technical aspects of Patheon’s obligations within the
expert’s field of expertise. 

(c)Except as set forth in Sections 6.3(a) and (b) above, Sections 6.4 and 6.5
below or Section 10.3 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 but not limitation, 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 Product 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 prior to use of the applicable Component in the
performance of the Manufacturing Services, (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 5.4, (v) is due to packaging design or labelling defects
or omissions for which Patheon has no responsibility, (vi) is due to any
unascertainable reason despite Patheon having performed the Manufacturing
Services in accordance with the Specifications, cGMP, and Applicable Laws, or
(vii) is due to any other breach by Client of its obligations under this
Agreement.

(d)Notwithstanding anything to the contrary in this Agreement, Patheon will only
be required to replace or refund any batch or portion of a batch of recalled
Product and will only be liable for Active Material contained therein to the
extent the Product is unsold, returned, destroyed or otherwise disposed of by
Client in accordance with the terms of this Agreement.  The quantity of API
contained in this Product will be included in the Quantity Dispensed but not in
the Quantity Converted for purposes of calculating the Shortfall in Section
2.2(b).

6.4

Disposition of Defective or Recalled Products.

Client will not dispose of any damaged, defective, returned, or Recalled
Products for which it intends to assert a claim against Patheon without
Patheon’s prior written authorization to do so.  Alternatively, Patheon may
instruct Client to return the Products to Patheon.  Patheon will bear the cost
of

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disposition for any damaged, defective, returned or Recalled Products for which
it bears responsibility under Section 6.3.  In all other circumstances, Client
will bear the cost of disposition, including all applicable fees for
Manufacturing Services, for any damaged, defective, returned, or Recalled
Products.

6.5

Healthcare Provider or Patient Questions and Complaints.

Client will have the sole responsibility for responding to questions and
complaints from its customers.  Questions or complaints received by Patheon from
Client's customers, healthcare providers or patients will be promptly referred
to Client.  Patheon will co-operate as reasonably required to allow Client to
determine the cause of and resolve any questions and complaints.  This
assistance will include follow-up investigations, including testing.  In
addition, Patheon will give Client all agreed upon information that will enable
Client to respond properly to questions or complaints about the Product as set
forth in the Quality Agreement.  Unless it is determined that the cause of the
complaint resulted from a failure by Patheon to perform the Manufacturing
Services in accordance with the Specifications, cGMP, and Applicable Laws, all
costs incurred under this Section 6.5 will be borne by Client.

6.6

Sole Remedy.

Except for the indemnity set forth in Section 10.3 and subject to the
limitations set forth in Sections 10.1 and 10.2, the remedies described in this
Article 6 will be Client’s sole remedy in contract, tort, equity or otherwise
for any failure by Patheon to provide the Manufacturing Services in accordance
with the Specifications, cGMP, Applicable Laws or the applicable Firm Order.

ARTICLE 7

CO-OPERATION

7.1

Quarterly Review.

The relationship manager for Recro shall be Client’s Sr. Director of
Manufacturing & Supply Chain and the relationship manager for Patheon shall be
Patheon’s Technical Business Manager. Either party may change its relationship
manager upon written notice to the other party. The relationship managers shall
be responsible for liaison between the parties.  The relationship managers will
meet not less than quarterly to review the current status of the business
relationship and manage any issues that have arisen.

7.2

Governmental Agencies.

Subject to Section 7.8, each party may communicate with any governmental agency
regarding the Products, including but not limited to governmental agencies
responsible for granting Regulatory Approval for the Products, if, in the
reasonable opinion of that party's counsel, the communication is necessary to
comply with the terms of this Agreement or Applicable Laws; provided, however,
that Patheon will not communicate with governmental agencies responsible for
granting Regulatory Approval of the Products without first notifying Client
(where permitted by Applicable Laws).

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Each party shall promptly notify the other party of such communications
regarding the Products, and upon request, shall provide copies to the other
party of any such written communications with government agencies (to the extent
related to a Product).

7.3

Records and Accounting by Patheon.

Patheon will keep records of the manufacture, testing, and shipping of the
Products, and retain samples of the Products as are necessary to comply with
cGMPs, the Specifications, the Quality Agreement and other requirements
applicable to Patheon, as well as to assist with resolving Product complaints
and other similar investigations.  Unless otherwise agreed to in the Quality
Agreement, copies of the records and samples will be retained for one year
following the date of Product expiry, or longer if required by Applicable Laws,
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 30 days of receipt of notice from
Patheon.  Client is responsible for retaining samples of the Products necessary
to comply with Applicable Laws.

7.4

Inspection.

Client may inspect Patheon reports, records, standard operating procedures and
other documentation relating to the Manufacturing Services and this Agreement
during normal business hours and with reasonable advance notice, but a Patheon
representative must be present during the inspection.

7.5

Access.

Patheon will give Client reasonable access at agreed times to the areas of the
Manufacturing Site in which the Active Materials and Components are held, and in
which the Products are manufactured, packaged, 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.  With the
exception of “for-cause” audits, Client will be limited  each  Year to
[***].  Client may request additional 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, except that these additional fees shall not apply in the event of a
for-cause audit by Client.  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 first Pre- Approval Inspection (“PAI”) of the
FDA or equivalent regulatory inspection for other jurisdictions (where
applicable) and provide a copy of the resulting report to Client [***].  [***].

7.6

Notification of Regulatory Inspections.

The parties’ rights and obligations with respect to any inspections by and
Authority shall be defined by the provisions of the Quality Agreement and this
Article 7. Patheon will notify Client within one Business Day of any inspections
by any Authority specifically involving the Products.  Patheon will also notify
Client of receipt of any FDA Form 483s, Establishment Inspection Reports,
warning letters or any other inspectional findings that relate to the
Products.  Patheon shall promptly provide copies of such inspection-related
documents (to the extent related to a Product, and redacted to remove third
party confidential information) to Client and grant Client a reasonable
opportunity to review and comment on Patheon’s proposed responses to the same.

7.7

Reports.

Upon request, 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

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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.  Any additional data or report requested by
Client beyond the scope of cGMP and customary FDA and EMA requirements,
including Continuous Process Verification data, will be subject to an additional
fee to be agreed upon between Patheon and Client.

7.8

Regulatory Filings.

(a)Regulatory Approval.  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”).  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 all Products as quickly as reasonably possible.

 

(b)Verification of Data.  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 validity of those documents as they relate to Patheon
generated data. Patheon generally requires 21 days to perform this review but
the parties may agree to a shorter time for the review as needed.

 

(c)Verification of CTD.  Prior to filing with any Regulatory Authority any
documentation which is or is equivalent to the Quality Module (Drug Product
Section) of the Common Technical Document (all such documentation herein
referred to as “CTD”) related to any Regulatory Approval, such as a New Drug
Application, Abbreviated New Drug Application or Biologics Licence Application
in the U.S.,  or  Marketing Authorisation  Application  in  the E.U.,
Client  will give  Patheon  a copy  of  relevant portions of the CTD as well as
all supporting documents which have been relied upon to prepare relevant
portions of the CTD.  This disclosure will permit Patheon to verify that the
relevant portions of the CTD accurately describe the validation or scale-up work
that Patheon has performed and the manufacturing processes that Patheon will
perform under this Agreement.  Patheon generally requires 21 days to perform
this review but the parties may agree to a shorter time for the review as
needed. Client will give Patheon copies at the time of submission of CTD
information that is relevant to the Manufacturing Services for the Product.

 

(d)Deficiencies.  If Patheon reasonably 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.

 

(e)Client Responsibility.  The parties agree that, in reviewing the documents
referred to in clauses (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

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responsibility for the accuracy of any application for receipt of an approval by
a Regulatory Authority.  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 Client.

 

(f)Inspection by Regulatory Authorities.  If Client does not give Patheon the
documents requested under subsections (b) and (c) above within the time
specified and if Patheon reasonably believes that Patheon’s standing with a
Regulatory Authority may be jeopardized as a result, Patheon may delay or
postpone any inspection by the Regulatory Authority until Patheon has reviewed
the requested documents and is satisfied with their contents; provided, that
Patheon shall perform such review within 21 days of receipt of the requested
documents.

 

(g)Pharmacovigilance.  Client will be responsible, at its expense, for all
pharmacovigilance obligations for the Products pursuant to Applicable Laws.  To
the extent Patheon receives information regarding an adverse event related to a
Product, Patheon shall collect and promptly forward this adverse event
information to Client. At Client’s cost, Patheon will cooperate as reasonably
required to allow Client to follow up on any such adverse events in order to
fulfill Client’s obligations under Applicable Laws.

 

(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

8.1

Initial Term.

This Agreement will become effective as of the Effective Date and will continue
until December 31, 2020 (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 two Years each if there is a
Product Agreement in effect, 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 then current term. In any event, the legal terms and
conditions of this Agreement will continue to govern any Product Agreement in
effect as provided in Section 1.2. Each Product Agreement will have an initial
term from the Effective Date of the Product Agreement until December 31 of the
Year agreed to by the parties in the Product Agreement (each, an “Initial
Product Term”). Product Agreements will automatically renew after the Initial
Product Term for successive terms of two Years each unless either party gives
written notice to the other party of its intention to terminate the Product
Agreement at least 18 months prior to the end of the then current term.  

8.2

Termination for Cause.

(a)Either party at its sole option may terminate this Agreement or a Product
Agreement upon written notice where the other party has failed to remedy a
material breach of any of its

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representations, warranties, or other obligations under this Agreement or the
Product Agreement within [***] days following receipt of a written notice (the
"Remediation Period") of the breach from the aggrieved party that expressly
states that it is a notice under this Section 8.2(a) (a "Breach Notice"). The
aggrieved party's right to terminate under this Section 8.2(a) may only be
exercised for a period of [***] days following the expiry of the Remediation
Period (where the breach has not been remedied) and if the termination right is
not exercised during this period then the aggrieved party will be deemed to have
waived the breach of the representation, warranty, or obligation described in
the Breach Notice. The termination of a Product Agreement under this Section
8.2(a) will not affect any other Product Agreements where there has been no
material breach of the other Product Agreements.  

(b)Either party at its sole option may immediately terminate this Agreement or a
Product 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
or a Product Agreement is assigned by the other party for the benefit of
creditors.

(c)Client may terminate a Product Agreement upon 30 days' prior written notice
if any Authority takes any action, or raises any objection, that prevents Client
from importing, exporting, purchasing, or selling the Product.  But if this
occurs, Client must still fulfill all of its obligations under Section 8.3 below
and under any Capital Equipment Agreement regarding the Product.

(d)Client may terminate a Product Agreement upon three months' prior written
notice if it intends to no longer order Manufacturing Services for a Product due
to the Product's discontinuance in the market.

(e)Patheon may terminate this Agreement or a Product Agreement upon six months'
prior written  notice if  Client  assigns under  Section 13.6  any of its
rights  under this Agreement or a Product Agreement to an assignee that, in the
opinion of Patheon acting reasonably, is: (i) not a credit worthy substitute for
Client; or (ii) a Patheon Competitor.

(f)Client may terminate this Agreement or a Product Agreement in the event that
Patheon fails to timely deliver batches of Product from three consecutive
manufacturing campaigns.

8.3

Obligations on Termination.

 

(a)

If a Product Agreement is completed, expires, is terminated by Patheon in
accordance with Section 8.2(a), (b) or (e), or is terminated by Client in
accordance with Section 8.2(c), 8.2(d) or 8.2(f), in whole or in part for any
reason, then:

 

(i)

Client will take delivery of and pay for all undelivered Products that are
manufactured and/or packaged in accordance with this Agreement under a Firm
Order, at the Price in effect at the time the Firm Order was placed;

 

(ii)

Client will purchase, at Patheon's cost (including all third party costs
incurred by Patheon for the purchase and handling of the Inventory), the
Inventory applicable to the Products which was purchased, maintained or produced
by Patheon in contemplation of filling Firm Orders or in accordance with Section
5.2;

 

(iii)

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Client will satisfy the purchase price payable under Patheon's orders with
suppliers of Components, if the orders were made by Patheon in reliance on Firm
Orders or in accordance with Section 5.2;

 

(iv)

Client acknowledges that no Patheon Competitor will be permitted access to the
Manufacturing Site; and

 

(v)

Client will make commercially reasonable efforts, at its own expense, to remove
from Patheon site(s), within [***] days, all unused Active 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 Client Property within [***] days
following the completion, termination, or expiration of the Product Agreement,
Client will pay Patheon [***] for storing Client Property and will assume any
third party storage charges invoiced to Patheon regarding Client
Property.  Patheon will invoice Client for the storage charges as set forth in
Section 5.5 of this Agreement. If Client asks Patheon to destroy any Client
Property, Client will be responsible for the cost of destruction.

 

(b)

If a Product Agreement is terminated by Client in accordance with Section 8.2(a)
because Patheon has delivered Product that does not conform to the
Specifications, cGMPs or Applicable Laws, then (i) Section 8.3(a)(i) shall apply
but only to the extent that the Product conforms to the Specifications, cGMPs or
Applicable Laws, (ii) Section 8.3(a)(iv) shall apply, and (iii) Section
8.4(a)(v) shall apply but only with respect to all Client Property other than
Inventory and Materials (but including Client-Supplied Components).

 

(c)

Any completion, termination or expiration of this Agreement or a Product
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 a Product Agreement
or any related Capital Equipment Agreement.  For greater certainty, completion,
termination or expiration of this Agreement or of a Product Agreement for any
reason will not affect the obligations and responsibilities of the parties under
Articles 6, 10, 11 and 13 and Sections 2.2, 5.4, 5.5, 7.3 and 7.7 and this
Section 8.4 and any other provisions of this Agreement which by their terms are
expressed to survive any completion, termination or expiration, all of which
survive any completion, termination or expiration.

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ARTICLE 9

REPRESENTATIONS, WARRANTIES AND COVENANTS

9.1

Authority.

Each party covenants, represents, and warrants that it has the full right and
authority to enter into this Agreement and that it is not aware of any
impediment that would inhibit its ability to perform its obligations hereunder.

9.2

Client Warranties.

Client represents and warrants to Patheon that, as of the date of the execution
of a Product Agreement and solely with respect to the Product and the Client
Intellectual Property (as applicable) relating to or covering the Product that
is the subject of that Product Agreement:

 

(a)

Non-Infringement.

 

(i)

Client has the right to disclose the Specifications to Patheon;

 

(ii)

(A) Client owns or controls any Client Intellectual Property used by Patheon in
performing the Manufacturing Services according to the Specifications, and (B)
the Client Intellectual Property may be lawfully used as directed by Client, and
(C) the use of the Client Intellectual Property to perform the Manufacturing
Services in accordance with this Agreement and the relevant Product Agreement
does not misappropriate any Third Party Rights;

 

(iii)

to Client’s knowledge, there are no actions or other legal proceedings involving
Client that concerns the infringement of Third Party Rights related to the
Active Materials, processes covered by Client Intellectual Property, or the
sale, use, or other disposition of the Product made in accordance with the
Specifications;

 

(b)

Quality and Compliance.

 

(i)

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

 

(ii)

the Product, if labelled and manufactured in accordance with the Specifications
and  in  compliance  with  applicable  cGMP and  Applicable  Laws  (A)  may  be
lawfully sold and distributed in the Territory, (B) will be fit for the purpose
intended, and (C) will be safe for human consumption;

 

(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.

9.3

Patheon Warranties.

Patheon covenants, represents, and warrants that:

 

(a)

it will perform the Manufacturing Services in accordance with the
Specifications, cGMP, the Quality Agreement, the applicable Firm Order and
Applicable Laws;

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(b)

when manufactured and released by Patheon, the released Products will have been
shown to conform to the Specifications and cGMP, as agreed in the applicable
release Specifications;

 

(c)

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;

 

(d)

it will not in the performance of its obligations under this Agreement use the
services of any person who is, or who to Patheon’s knowledge is under
consideration to be, debarred under 21 U.S.C. §335A, or excluded, suspended or
declared ineligible under other Applicable Laws;

 

(e)

it does not currently employ, and it will not hire, as an officer or an
employee, or retain as an agent or contractor, any person who has been convicted
of a felony under the laws of the United States for conduct relating to the
regulation of any drug product under the United States Federal Food, Drug, and
Cosmetic Act; and

 

(f)

it has the expertise and the facilities to perform the Manufacturing Services.

9.4

Permits.

 

(a)

Patheon currently has, and will maintain at all relevant times, all governmental
permits, licenses, approvals and authorities required to enable it to lawfully
and properly perform the Manufacturing Services.

9.5

No Warranty.

 

PATHEON MAKES NO WARRANTY OR CONDITION OF ANY KIND, EITHER EXPRESSED OR IMPLIED,
BY FACT OR LAW, OTHER THAN THOSE EXPRESSLY SET FORTH IN THIS AGREEMENT. EXCEPT
AS EXPRESSLY AGREED 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.

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ARTICLE 10

REMEDIES AND INDEMNITIES

10.1

Consequential 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) any reliance damages, including but not limited to
costs or expenditures incurred to evaluate the viability of entering into this
Agreement or to prepare for performance under this Agreement or (iii) for any
other liability, damage, costs, penalty, or expense of any kind incurred by the
other party of an indirect or consequential nature, regardless of any notice of
the possibility of these damages.

10.2

Limitation of Liability.

(a) 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 Products under Section 6.3(b),
will not exceed [***].  [***].

(b)Active Materials.  Except as expressly set forth in Section 2.2, under no
circumstances will Patheon be responsible for any loss or damage to the Active
Materials.  Patheon’s maximum responsibility for loss or damage to the Active
Materials will not exceed the Maximum Credit Value set forth in Schedule D of a
Product Agreement.

(c)Maximum Liability.  Subject to Section 10.2(d) below, Patheon’s maximum
aggregate liability to Client in any Year under this Agreement or any Product
Agreement for any reason whatsoever (except Section 10.3, 10.2(a) and 10.2(d)),
including, without limitation, any liability arising under Section 2.2 hereof or
resulting from any and all breaches of its representations, warranties and other
obligations under this Agreement or any Product Agreement, will not exceed
[***].  

(d)Death, Personal Injury and Fraudulent Misrepresentation.  Nothing contained
in this Agreement (including the limitations set forth in Section 10.1 and 10.2)
shall act to exclude or limit either party’s liability for personal injury or
death caused by the negligence of either party, fraudulent misrepresentation
[***].

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10.3

Patheon Indemnity.

(a)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 (i) any claim of infringement or alleged
infringement  of  any  Third  Party  Rights  by  Patheon  Intellectual  Property  used  in  the  Manufacturing
Services, or (ii) any claim of personal injury or property damage to the extent
that the injury or damage is the result of: (A) a failure by Patheon to perform
the Manufacturing Services in accordance with this Agreement, the
Specifications, cGMP, and Applicable Laws, (B) breach of this Agreement by
Patheon, or (C) Patheon’s negligence or willful misconduct in the performance of
its obligations under this Agreement, except to the extent that the losses,
damages, costs, claims, demands, judgments, and liability are caused by the
Client’s breach, negligence or wilful misconduct or subject to indemnification
by Client under Section 10.4.

(b)If a claim occurs, Client will: (a) promptly notify Patheon of the claim; (b)
use commercially reasonable efforts to mitigate the effects of the claim; (c)
reasonably cooperate with Patheon in the defense of the claim; and (d) permit
Patheon to control the defense and settlement of the claim, all at Patheon's
cost and expense; provided, that Patheon shall not settle any such claim without
Client’s prior written consent, such consent not to be unreasonably withheld,
conditioned or delayed.

10.4

Client Indemnity.

(a)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 (i) any claim of infringement or alleged
infringement of any Third Party Rights by the Products or  in the Client
Intellectual Property (or Patheon’s or its Affiliates’ use of them); or (ii) any
claim of personal injury or property damage to the extent that the injury or
damage is the result of: (A) the breach of this Agreement by Client, including,
without limitation, any representation or warranty contained herein; or (B)
Client’s negligence or willful misconduct in the performance of its obligations
under this Agreement,

except to the extent that the losses, damages, costs, claims, demands,
judgments, and liability are caused by the Patheon’s breach, negligence or
wilful misconduct, or subject to indemnification by Patheon under Section 10.3.

(b)If a claim occurs, Patheon will: (a) promptly notify Client of the claim; (b)
use commercially reasonable efforts to mitigate the effects of the claim; (c)
reasonably cooperate with Client in the defense of the claim; and (d) permit
Client to control the defense and settlement of the claim, all at Client's cost
and expense; provided, that Client shall not settle any such claim without
Patheon’s prior written consent, such consent not to be unreasonably withheld,
conditioned or delayed.

ARTICLE 11

CONFIDENTIALITY

11.1

Confidential 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,

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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.”

11.2

Use 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.

11.3

Exclusions.

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

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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.

11.4

Photographs 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.

11.5

Permitted Disclosure.

Notwithstanding any other provision of this Agreement, the Recipient may
disclose Confidential Information of the Disclosing Party, including this
Agreement (redacted as permitted by law and requested by 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 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.

11.6

Marking.

The Disclosing Party will use reasonable efforts to summarize in writing the
content of any oral disclosure or other non-tangible disclosure of Confidential
Information within 30 days of the disclosure, but failure to provide this
summary will not affect the nature of the Confidential Information disclosed if
the Confidential Information was identified as confidential or proprietary when
disclosed orally or in any other non-tangible form or is of a nature generally
understood to be confidential or proprietary.

11.7

Return of Confidential Information.

Upon the written request of the Disclosing Party and upon termination of this
Agreement, 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.

11.8

Remedies.

The parties acknowledge that monetary damages may not be sufficient to remedy a
breach by either party of this Article 11 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 Article 11 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
Article 11 but will be in addition to any and all other remedies available at
law or in equity.

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ARTICLE 12

DISPUTE RESOLUTION

12.1

Commercial Disputes.

If any dispute arises out of this Agreement or any Product 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’s relationship manager and
one additional senior management member from each party (each of whom shall have
full power and authority to resolve the dispute), will meet promptly as
necessary in order to resolve  the  dispute.   If  the  
representatives  fail  to  resolve  the  matter  within  one  month  from  their
appointment, or if a party fails to appoint a representative within the ten
Business Day period set forth above, the dispute will immediately be referred to
the Chief Operating Officer (or another officer as he/she may designate) of each
party who will meet and discuss as necessary to try to resolve the dispute
amicably.  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.

12.2

Technical Dispute Resolution.

If a dispute arises (other than disputes under Section 12.1 or Section 6.1(b))
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 ten Business Days after a
written request from either party to the other, meet in good faith to resolve
any Technical Dispute.  If, despite this meeting, the parties are unable to
resolve a Technical Dispute within a reasonable time, and in any event within 30
Business Days of the written request, the Technical Dispute will, at the request
of either party, be referred for determination to an expert in accordance with
Exhibit A.  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 Regulatory
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 Exhibit A) will remove or limit the authority of the
relevant qualified person (as specified by the Quality Agreement) to determine
whether the Products are to be released for sale or distribution.

ARTICLE 13

MISCELLANEOUS

13.1

Inventions.

(a)For the term of the relevant Product Agreement, Client hereby grants to
Patheon a non-exclusive, paid-up, royalty-free, non-transferable license of
Client’s Intellectual Property and Client-Owned Inventions which Patheon must
use in order to perform the Manufacturing Services under such Product Agreement.

(b)All Client Intellectual Property will be the exclusive property of Client.

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(c)All Patheon Intellectual Property will be the exclusive property of Patheon.
Patheon hereby grants to Client a perpetual, irrevocable, non-exclusive,
paid-up, royalty-free, transferable license to use the Patheon Intellectual
Property and Patheon-Owned Inventions used by Patheon to perform the
Manufacturing Services to enable Client to manufacture the Product(s).

(d)Each party will be solely responsible for the costs of filing, prosecution,
and maintenance of patents and patent applications on its own Inventions.

(e)Client shall own any Inventions generated or derived by Patheon while
performing any Manufacturing Services, or otherwise generated or derived by
Patheon in its business, and any Intellectual Property Rights therein, which
[***] (“Client-Owned Inventions”).  Patheon shall own all other Inventions
generated or derived by Patheon while performing any Manufacturing Services, or
otherwise generated or derived by Patheon in its business, and any Intellectual
Property rights therein (“Patheon-Owned Inventions”).  Each party will be solely
responsible for the costs of filing, prosecution and maintenance of patents and
patent applications owned by such party in accordance with this Section 13.1.

(f)Patheon will give Client written notice, as promptly as practicable, of all
significant Inventions which are in Patheon’s reasonable opinion owned by Client
in accordance with this Section 13.1.  Patheon shall assign, and hereby assigns,
to Client all ownership rights in any Client-Owned Inventions.  Patheon hereby
agrees to reasonably cooperate with Client, at Client’s expense, to execute all
lawful papers and instruments, including obtaining and executing necessary
powers of attorney and assignments by the named inventors, to make all rightful
oaths and declarations, and to provide consultation and assistance as may be
reasonably necessary in the assignment of Inventions in a manner consistent with
this Section 13.1.

13.2

Intellectual Property.

Except as set forth in Section 13.1 above, neither party has, nor will it
acquire, any interest in any of the other party’s Intellectual Property unless
otherwise expressly agreed to in writing.  Neither party will use any
Intellectual Property of the other party, except as specifically authorized by
the other party or as required for the performance of its obligations under this
Agreement.

13.3

Insurance.

Each party will maintain commercial general liability insurance, including
blanket contractual liability insurance covering the obligations of that party
under this Agreement through the term of this Agreement and for a period of
[***] years thereafter.  This insurance will have policy limits of not less than
(i) [***] for each occurrence for personal injury or property damage liability;
and (ii) [***] in the aggregate per annum for product and completed operations
liability.  If requested each party will give the other a certificate of
insurance evidencing the above and showing the name of the issuing company, the
policy number, the effective date, the expiration date, and the limits of
liability.  The insurance certificate will further provide for a minimum of 30
days' written notice to the insured of a cancellation of, or material change in,
the insurance.  If a party is unable to maintain the insurance policies required
under this Agreement through no fault of its own, then the party will forthwith
notify the other party in writing and the parties will in good

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faith negotiate appropriate amendments to the insurance provision of this
Agreement in order to provide adequate assurances. Either Party may request that
the other increase the insurance coverage set forth in this paragraph in the
event that such coverage is no longer deemed to be sufficient, in which case the
parties shall in good faith negotiate appropriate amendments to the insurance
provision of this Agreement in order to provide adequate coverage.  

13.4

Independent Contractors.

The parties are independent contractors and this Agreement and any Product
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.

13.5

No Waiver.

Neither party's failure to require the other party to comply with any provision
of this Agreement or any Product Agreement will be deemed a waiver of the
provision or any other provision of this Agreement or any  Product Agreement,
with the exception of Sections 6.1 and 8.2 of this Agreement.

13.6

Assignment and Subcontracting.

 

(a)

Patheon may not assign this Agreement or any Product Agreement or any of its
associated rights or obligations without the written consent of Client, this
consent not to be unreasonably withheld.  Any assignee consented to by Client
will covenant in writing with Client to be bound by the terms of this Agreement
or the Product Agreement, and Patheon will remain liable hereunder. Patheon may
arrange for subcontractors to perform specific testing services arising under
any Product Agreement without the consent of Client if such subcontractors are
set forth in the applicable Product Agreement or Quality Agreement. Further it
is specifically agreed that Patheon may subcontract any part of the
Manufacturing Services under a Product Agreement to any of its
Affiliates.  Patheon will remain solely liable to Client for its obligations
under this Agreement and each Product Agreement and Quality Agreement.

 

(b)

Subject to Section 8.2(e), Client may assign this Agreement or any Product
Agreement or any of its associated rights or obligations without approval from
Patheon.  But Client will give Patheon prior written notice of any assignment,
any assignee will covenant in writing with Patheon to be bound by the terms of
this Agreement or the Product 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 Product
Agreement or any assigned part thereof, on 12 months’ prior written notice to
Client and the assignee if good faith discussions do not lead to agreement on
amended Manufacturing Service fees within a reasonable time.

 

(c)

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

13.7

Force Majeure.

Neither party will be liable for the failure to perform its obligations under
this Agreement or any Product Agreement if the failure is caused by an event
beyond that party's reasonable control,

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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, and shall use
commercially reasonable efforts to recommence performance as soon as
possible.  Either party may terminate this Agreement under Section 8.2(a) for a
Force Majeure Event that has not resolved within 180 days.  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 or any Product Agreement.

13.8

Additional Product.

Additional Products may be added to, or existing Products deleted from, any
Product Agreement by amendments to the Product Agreement including Schedules A,
B, C, and D as applicable.

13.9

Notices.

Unless otherwise agreed in a Product Agreement, 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 or
confirmed receipt email or by sending the same by first class mail, postage
prepaid to the respective addresses or electronic mail addresses set forth
below:

If to Client:

Recro Ireland Limited

Block 2, Harbour Square

Crofton Rd.

Dun Laoghaire, Co Dublin

Email address: To be confirmed in writing promptly

 

If to Patheon:

Patheon UK Limited

Kingfisher Drive

Covingham

Swindon

SN3 6BZ

United Kingdom

Attention:  Legal Director

Email address: [***]

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or to any other addresses 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, 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.

13.10

Severability.

If any provision of this Agreement or any Product Agreement or Quality 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.

13.11

Entire Agreement.

This Agreement, together with the applicable Product Agreement and 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 or any Product 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, the Product
Agreement, and the Quality Agreement.  

13.12

Other Terms.

No terms, provisions or conditions of any purchase order or other business form
or written authorization used by Client or Patheon will have any effect on the
rights, duties, or obligations of the parties under or otherwise modify this
Agreement or any Product 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 or the applicable Product Agreement and is
signed by both parties.

13.13

No Third Party Benefit or Right.

For greater certainty, nothing in this Agreement or any Product 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 or any Product
Agreement.

13.14

Execution in Counterparts.

This Agreement and any Product Agreement or Quality 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.

13.15

Use of Client Name.

Patheon will not make any use of Client’s name, trademarks or logo or any
variations thereof, alone or with any other word or words, without the prior
written consent of Client, which consent will not be unreasonably withheld. 
Despite this, Client agrees that Patheon may include Client’s name

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and logo in customer lists or related marketing and promotional material for the
purpose of identifying users of Patheon’s Manufacturing Services.

13.16

Taxes.

(a)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 or other taxable presence 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 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, 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 Client's purchase is
exempt from Patheon's collection of the tax and a valid tax exemption
certificate is furnished by 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 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 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) Client. If VAT on the supplies of Patheon is payable
by Client under a reverse charge procedure (i.e., shifting of liability,
accounting or payment requirement to recipient of supplies), 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 ensure that
its invoices to Client are issued in such a way that these invoices meet the
requirements for deduction of input VAT by Client, if Client is permitted by law
to do so. Where the Manufacturing Services are cancelled or the value of the
Manufacturing Services under this Agreement is adjusted Patheon shall issue to
Client an adjustment note or other such document in accordance with the local
tax law.

(e)Unless consented to by Patheon, 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. Further, for any Tax

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remitted by Client but as to which Patheon is liable hereunder, if so requested
by Client, Patheon shall promptly reimburse Client for such amounts paid on
Patheon’s behalf.

13.17

Governing Law.

This Agreement and any Product Agreement, unless otherwise agreed by the parties
in the Product Agreement and then only for purposes of that Product Agreement,
will be construed and enforced in accordance with the laws of England and
subject to the exclusive jurisdiction of the courts thereof.  The UN Convention
on Contracts for the International Sale of Goods will not apply to this
Agreement.

[Signature page to follow]

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

 

PATHEON UK LIMITED

By:  _/s/ Andrew Robinson_____________

Name:  ___Andrew Robinson__________

Title:  ___Director ___________________

Date: ___17 July 2017________________

 

RECRO IRELAND LIMITED

By:  __/s/ Brian Harrison______________

Name:  __Brian Harrison______________

Title:  ___Director____________________

Date: ___14-July 2017 ________________

 

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APPENDIX 1

FORM OF PRODUCT AGREEMENT

(Includes Schedules A to D)

 

PRODUCT AGREEMENT

This Product Agreement (this “Product Agreement”) is issued under the Master
Manufacturing Services Agreement dated 14 July 2017 between Patheon UK Limited
and Recro Ireland Limited (the “Master Agreement”), and is entered into [insert
effective date] (the “Effective Date”), between Patheon UK Limited, a
corporation existing under the laws of England [or applicable founding
jurisdiction for Patheon Affiliate], having a principal place of business at
Kingfisher Drive, Covingham, Swindon, SN3 5BZ, England (“Patheon”) and [insert
Client name, legal entity, founding jurisdiction and address] (“Client”).

The terms and conditions of the Master Agreement are incorporated herein except
to the extent this Product Agreement expressly references the specific provision
in the Master Agreement to be modified by this Product Agreement.  All
capitalized terms that are used but not defined in this Product Agreement will
have the respective meanings given to them in the Master Agreement.

The Schedules to this Product Agreement are incorporated into and will be
construed in accordance with the terms of this Product Agreement.

 

 

1.

Product List and Specifications (See Schedule A attached hereto)

 

2.

Minimum Order Quantity, Annual Volume, and Price (See Schedule B attached
hereto)

 

3.

Annual Stability Testing and Validation Activities (if applicable) (See Schedule
C attached hereto)

 

4.

Active Materials, Active Materials Credit Value, and Maximum Credit Value (See
Schedule D attached hereto)

 

5.

Yearly Forecasted Volume: (insert for sterile products if applicable under
Section 4.2.1 of the Master Agreement)

 

6.

Territory: (insert the description of the Territory here)

 

7.

Manufacturing Site: (insert address of Patheon Manufacturing Site where the
Manufacturing Services will be performed)

 

8.

 

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Inflation Index: pursuant to Section 4.2(a) of the Master Agreement, the
inflation index is [     ]   [***]

 

9.

Currency: (if applicable under Section 1.4 of the Master Agreement)

 

10.

Initial Set Exchange Rate: (if applicable if Currency included above)

 

11.

Initial Product Term: (per Section 8.1 of the Master Agreement) from the
Effective Date until December 31, 20__

 

12.

Notices: (if applicable under Section 13.9 of the Master Agreement)

 

13.

Other Modifications to the Master Agreement: (if applicable under Section 1.2 of
the Master Agreement)

 

________________________________________

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

 

PATHEON UK LIMITED

By:  _____________________________

Name:  ___________________________

Title:  _____________________________

Date: ______________________________

 

RECRO IRELAND LIMITED

By:  _____________________________

Name:  ___________________________

Title:  _____________________________

Date: _____________________________

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SCHEDULE A

PRODUCT LIST AND SPECIFICATIONS

Product List

[insert product list]

 

Specifications

Prior to the start of commercial manufacturing of Product under this Agreement
Client will give Patheon the copies of originally executed copies of the
Specifications as approved by the applicable Regulatory Authority.  If the
Specifications received are subsequently amended, then Client will give Patheon
copies of the revised executed copies of the revised Specifications.  Upon
acceptance of the revised Specifications, Patheon will give Client a signed and
dated receipt indicating Patheon’s acceptance of the revised Specifications.

 

 

 

-3-

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

 

 

 

 

 

 

SCHEDULE B

MINIMUM ORDER QUANTITY, ANNUAL VOLUME, AND PRICE

 

[Insert Price Table]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Manufacturing Assumptions:

 

Packaging Assumptions:

 

Testing Assumptions:

 

[Drafting Note: ensure that the costs included/not included are consistent with
the quote]

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

[***]

 

-2-

 

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

[***]

 

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

[***]

- 2 -

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

[***]

 

- 3 -

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

 

 

 

 

 

 

SCHEDULE C

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

Patheon and Client will agree in writing on any stability testing to be
performed by Patheon on the Products.  This agreement will specify the
commercial and Product stability protocols applicable to the stability testing
and the fees payable by Client for this testing including the Price for the
Product withdrawn for the stability testing.

[NTD: Schedule C should clearly indicate when and/or under what conditions
Patheon’s responsibility to perform stability testing will end]

 

 

 

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

 

 

 

 

 

 

SCHEDULE D

ACTIVE MATERIALS

 

Active Materials

Supplier

l

l

 

ACTIVE MATERIALS CREDIT VALUE

The Active Materials Credit Value will be as follows:

PRODUCT

ACTIVE MATERIALS

ACTIVE MATERIALS

CREDIT  VALUE

 

 

Client’s actual cost for Active Materials not to exceed EUR_____per kilogram

 

MAXIMUM CREDIT VALUE

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

PRODUCT

MAXIMUM CREDIT VALUE

 

[***]

 

[End of Product Agreement]

 

 

          

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

 

 

 

 

 

 

EXHIBIT A

TECHNICAL DISPUTE RESOLUTION

Technical Disputes which cannot be resolved by negotiation as provided in
Section 12.2 will be resolved in the following manner:

1.Appointment of Expert. Within ten Business Days after a party requests under
Section 12.2 that an expert be appointed to resolve a Technical Dispute, the
parties will jointly appoint a mutually acceptable expert with experience and
expertise in the subject matter of the dispute.  If the parties are unable to so
agree within the ten Business Day period, or 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 Exhibit A.

4.Procedure.  Where an expert is appointed:

 

(a)

Timing.  The expert will be so appointed on condition that (i) he promptly fixes
a reasonable time and place for receiving representations, submissions or
information from the parties and that he issues the authorizations to the
parties and any relevant third party for the proper conduct of his determination
and any hearing and (ii) he renders his decision (with full reasons) within 15
Business Days (or another date as the parties and the expert may agree) after
receipt of all information requested by him under Paragraph 4(b) hereof.

 

(b)

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

 

(c)

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

          

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

 

(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 Exhibit A)
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 B

QUARTERLY ACTIVE MATERIALS INVENTORY REPORT

 

TO:

 

[name of Client]

 

 

 

 

 

FROM:

 

PATHEON UK LIMITED [or applicable Patheon Affiliate]

 

 

 

 

 

RE:

 

Active Materials quarterly inventory report under Section 2.2(a) of the Master
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 Dispensed1 during quarter:

 

kg

 

(A + C – B)

 

 

 

 

 

 

 

Quantity Converted during quarter:

 

kg

 

(total Active Materials in Products produced

and not rejected, recalled or returned or in work-in-process)

 

 

 

 

 

 

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

 

PATHEON UK LIMITED

 

DATE:

 

[or applicable Patheon Affiliate]

 

 

 

 

Per:                                        

Name:

Title:

 

 

 

1 

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

 

          

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

 

 

 

EXHIBIT C

REPORT OF ANNUAL ACTIVE MATERIALS INVENTORY RECONCILIATION

AND CALCULATION OF ACTUAL ANNUAL YIELD

 

TO:

 

[name of Client]

 

 

 

 

 

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 Master Manufacturing Services
Agreement dated • (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 Dispensed2 during Year:

 

kg

(D)

(A + C - B)

 

 

 

 

 

 

 

Quantity Converted during Year:

 

kg

(E)

(total Active Materials in Products produced and not rejected, recalled or
returned or in work-in-process)

 

 

 

 

 

 

 

 

 

 

Active Materials Credit Value:

EUR

 

/ kg

(F)

 

 

 

 

Target Yield:

 

%

(G)

 

 

 

 

Actual Annual Yield:

 

%

(H)

((E ∕ D) * 100)

 

 

 

 

 

 

 

Shortfall Credit:

EUR

 

 

(I)

[***]

(if a negative number, insert zero)

 

 

 

 

 

 

 

 

 

 

 

2 

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

 

 

 

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

 

 

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: