EXHIBIT 10.53

CONFIDENTIAL TREATMENT REQUESTED

 

 

Manufacturing Agreement

January 24, 2014

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CONFIDENTIAL TREATMENT REQUESTED

Table of Contents

 

ARTICLE 1      1    INTERPRETATION      1      1.1   DEFINITIONS.      1     
1.2   CURRENCY.      6      1.3   SECTIONS AND HEADINGS.      6      1.4  
SINGULAR TERMS.      6      1.5   SCHEDULES.      6    ARTICLE 2      7   
PATHEON’S MANUFACTURING      7      2.1   MANUFACTURING.      7      2.2  
ACTIVE MATERIAL YIELD.      10    ARTICLE 3      12    CLIENT’S OBLIGATIONS     
12      3.1   PAYMENT.      12      3.2   SUPPLY OF ACTIVE MATERIALS.      12   
ARTICLE 4      13    CONVERSION FEES AND COMPONENT COSTS      13      4.1  
PRICING.      13      4.2   PRICE ADJUSTMENTS - SUBSEQUENT YEARS’ PRICING.     
13      4.3   PRICE ADJUSTMENTS – CURRENT YEAR PRICING.      15      4.4  
ADJUSTMENTS DUE TO TECHNICAL CHANGES.      16      4.5   MULTI-COUNTRY PACKAGING
REQUIREMENTS.      17      4.6   IMPROVEMENT OF MANUFACTURING EFFICIENCY.     
17   

ARTICLE 5

     18    ORDERS, SHIPMENT, INVOICING, PAYMENT      18      5.1   ORDERS AND
FORECASTS.      18      5.2   RELIANCE BY PATHEON.      19      5.3   MINIMUM
ORDERS.      19      5.4   SHIPMENTS.      20      5.5   ON TIME DELIVERY.     
20      5.6   INVOICES AND PAYMENT.      21    ARTICLE 6      21    PRODUCT
CLAIMS AND RECALLS      21      6.1   PRODUCT CLAIMS.      21      6.2   PRODUCT
RECALLS AND RETURNS.      22      6.3   PATHEON’S RESPONSIBILITY FOR DEFECTIVE
AND RECALLED PRODUCTS.      23      6.4   DISPOSITION OF DEFECTIVE OR RECALLED
PRODUCTS.      24   

 

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  6.5   CUSTOMER QUESTIONS AND COMPLAINTS.    24   6.6   ****.    24 ARTICLE 7
   25 CO-OPERATION    25   7.1   QUARTERLY REVIEW.    25   7.2   GOVERNMENTAL
AGENCIES.    25   7.3   RECORDS AND ACCOUNTING BY PATHEON.    25   7.4  
INSPECTION.    25   7.5   ACCESS.    26   7.6   NOTIFICATION OF REGULATORY
INSPECTIONS.    26   7.7   REPORTS.    26   7.8   FDA FILINGS.    27 ARTICLE 8
   28 TERM AND TERMINATION    28   8.1   INITIAL TERM.    28   8.2   TERMINATION
FOR CAUSE.    28   8.3   OBLIGATIONS ON TERMINATION.    29 ARTICLE 9    31
REPRESENTATIONS, WARRANTIES AND COVENANTS    31   9.1   AUTHORITY.    31   9.2  
CLIENT WARRANTIES.    31   9.4   DEBARRED PERSONS.    33   9.5   PERMITS.    33
  9.6   NO WARRANTY.    33 ARTICLE 10    33 REMEDIES AND INDEMNITIES    33  
10.1   CONSEQUENTIAL DAMAGES.    33   10.2   LIMITATION OF LIABILITY.    34  
10.3   PATHEON.    34   10.4   CLIENT.    34   10.5   REASONABLE ALLOCATION OF
RISK.    35 ARTICLE 11    35 CONFIDENTIALITY    35   11.1   CONFIDENTIALITY.   
35 ARTICLE 12    37 DISPUTE RESOLUTION    37   12.1   COMMERCIAL DISPUTES.    37
  12.2   TECHNICAL DISPUTE RESOLUTION.    37

****CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

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12.3

  ARBITRATION.      38     

12.4

  DISPUTE AND TERMINATION FOR BREACH.      38   

ARTICLE 13

     38   

MISCELLANEOUS

     38     

13.1

  INVENTIONS.      38     

13.2

  INTELLECTUAL PROPERTY.      39     

13.3

  INSURANCE.      40     

13.4

  INDEPENDENT CONTRACTORS.      40     

13.5

  NO WAIVER.      40     

13.6

  ASSIGNMENT.      40     

13.7

  FORCE MAJEURE.      41     

13.8

  ADDITIONAL PRODUCT.      41     

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

  GOVERNING LAW.      43   

SCHEDULE A

     45   

SCHEDULE B

     46   

SCHEDULE C

     50   

SCHEDULE D

     51   

SCHEDULE E

     52   

SCHEDULE F

     53   

SCHEDULE G

     55   

SCHEDULE H

     56   

SCHEDULE I

     57   

 

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EXHIBIT 10.53

CONFIDENTIAL TREATMENT REQUESTED

 

 

MANUFACTURING AGREEMENT

THIS MANUFACTURING AGREEMENT (the “Agreement”) is made as of January 24, 2014
(the “Effective Date”)

B E T W E E N:

PATHEON PHARMACEUTICALS INC.,

a corporation existing under the laws of

the State of Delaware in the United States of America,

(hereinafter referred to as “Patheon”),

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VANDA PHARMACEUTICALS INC.,

a corporation existing under the laws of the State of

Delaware in the United States of America,

(hereinafter referred to as the “Client”).

THIS AGREEMENT WITNESSES THAT in consideration of the rights conferred and the
obligations assumed herein, and for other good and valuable consideration (the
receipt and sufficiency of which are acknowledged by each party), and intending
to be legally bound the parties agree as follows:

ARTICLE 1

INTERPRETATION

 

1.1 Definitions.

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

“Active Materials” means the materials listed on Schedule D hereto;

“Active Materials Credit Value” means the value to be attributed to the Active
Materials for certain purposes of this Agreement, as set forth on Schedule D;

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

“Affiliate” means:

 

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  (a) a business entity which owns, directly or indirectly, a controlling
interest in a party to this Agreement, by stock ownership or otherwise, only for
so long as such ownership continues to exist; or

 

  (b) a business entity which is controlled by a party to this Agreement, either
directly or indirectly, by stock ownership or otherwise, only for so long as
such control continues to exist; 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, only
for so long as such controlling interest continues to exist;

For the purposes of this definition, “control” means the ownership of shares
carrying at least a majority of the votes in respect of the election of the
directors of a corporation.

“Agreement” has the meaning specified in the preamble;

“Annual Report” means the annual report to the FDA prepared by Client as
described in Title 21 of the United States Code of Federal Regulations,
Section 314.81(b)(2);

“Annual Product Review Report” means the annual product review report as
described in Title 21 of the United States Code of Federal Regulations, Section
211.180(e);

“Annual Volume” means the minimum volume of Product estimated to be manufactured
in any Year of this Agreement as set forth in Schedule B hereto, which shall be
prorated for the first Year of this Agreement;

“Applicable Laws” means (i) with respect to Patheon, the Laws of the State of
Ohio and the United States, being the jurisdiction where the Manufacturing Site
is located; and (ii) with respect to Client, the applicable Laws of all
jurisdictions where the Products are manufactured, distributed and marketed;

“Authority” means any governmental or regulatory authority, department, body or
agency or any court, tribunal, bureau, commission or other similar body, whether
federal, state, provincial, county or municipal;

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

“Breach Notice” has the meaning specified in Section 8.2(a);

 

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“Broader Intellectual Property Rights” has the meaning specified in
Section 13.1(c);

“Business Day” means a day other than a Saturday, Sunday or a day that is a
statutory holiday in the State of Ohio (with respect to Patheon only) or a day
that is a statutory holiday in Washington, D.C. (with respect to Client only);

“cGMPs” means current good manufacturing practices, regulations and guidelines
as described in:

 

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

 

  (b) Parts 210 and 211 of Title 21 of the United States’ Code of Federal
Regulations; and

 

  (c) EC Directive 2003/94/EC,

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;

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

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

“Components” means, collectively, all packaging components, raw materials and
ingredients (including labels, product inserts and other labelling for the
Products), required to be used in order to produce the Products in accordance
with the Specifications, other than the Active Materials;

“Confidentiality Agreement” means the agreement relating to the non-disclosure
of confidential information between Patheon and the Client dated February 28,
2006 as amended September 28, 2009 and February 7, 2013.

“Conforming” with respect to Product, means Product manufactured, packaged and
stored by Patheon in accordance with the Specifications, cGMPs, Applicable Laws,
the Quality Agreement and this Agreement.

“Deficiencies” has the meaning specified in Section 7.8(d);

“Deficiency Notice” shall have the meaning ascribed thereto in Section 6.1(a);

“Delivery Date” has the meaning specified in Section 5.1(b);

“Disclosure Obligations” has the meaning set forth in Section 11.1;

“Effective Date” has the meaning specified in the preamble;

“EMA” means the European Medicines Agency;

 

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“FDA” means the United States government department known as the Food and Drug
Administration;

“Firm Order(s)” has the meaning specified in Section 5.1(b);

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

“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;

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

“Intellectual Property” includes, without limitation, rights in patents, patent
applications, formulae, trade-marks, trade-mark applications, trade-names,
Inventions, copyright and industrial designs and all other intellectual and
industrial property rights of any sort throughout the world now known or
hereafter recognized;

“Invention” means any idea, concept, innovation, improvement, development,
discovery, technology, computer program, device, trade secret, work of
authorship, formula, compound, 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, that is conceived or reduced to practice by one or more person(s)
in the course of the performance of this Agreement;

“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;

“JAMS” means Judicial Arbitration and Mediation Services, Inc.;

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

“Manufacture or Manufacturing” means any one of more of the manufacturing,
quality control, quality assurance and stability testing, packaging and related
services, as contemplated in this Agreement, required to produce Products from
Active Materials and Components;

“Manufacturing Site” means the facility owned and operated by Patheon that is
located at 2110 E Galbraith Rd, Cincinnati, OH 45237;

“Maximum Credit Value” means the maximum value of Active Materials that may be
credited by Patheon pursuant to this Agreement, as set forth on Schedule D;

“Minimum Order Quantity” means the minimum number of units of a Product to be
ordered in order to obtain the Price as set forth in Schedule B hereto.

 

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“MSDS” has the meaning specified in Section 5.2;

“Order Countries” means, collectively, all countries in the Territory for which
Client places Orders hereunder;

“Patheon Requirement” has the meaning specified in 2.1(h);

“Packaged Product(s)” means Product(s) packaged into primary and (where
applicable) secondary packaging Components, including printed packaging
Components where specified;

“PPI” has the meaning specified in Section 4.2(a);

“Product(s)” means the products listed on Schedule A hereto;

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

“Quality Agreement” means the agreement dated August 22, 2013 between the
parties hereto setting out the quality assurance standards to be applicable to
the Manufacturing performed by Patheon, which agreement is attached hereto as
Schedule G;

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

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

“Remediation Period” has the meaning specified in Section 8.2(a);

“SEC” has the meaning set forth in Section 11.1;

“Specifications” means the file, for each Product, which is provided by the
Client to Patheon in accordance with the procedures listed in Schedule A hereto
and which contains documents relating to such 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 relating to the Product
including material safety data sheets; and

 

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

 

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CONFIDENTIAL TREATMENT REQUESTED

 

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

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

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

“Technical Dispute” has the meaning specified in Section 12.2;

“Territory” means in the geographic area of the United States of America;

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

“Wind-Down Period” has the meaning specified in Section 8.3(d);

“Year” means in the first year of this Agreement the period from the Effective
Date up to and including December 31 of the same calendar year, and thereafter
shall mean a calendar year.

 

1.2 Currency.

Unless otherwise indicated, all monetary amounts are expressed in this Agreement
in the lawful currency of the United States of America.

 

1.3 Sections and Headings.

The division of this Agreement into Articles, sections, subsections and
Schedules and the insertion of headings are for convenience of reference only
and shall not affect the interpretation of this Agreement. Unless otherwise
indicated, any reference in this Agreement to a Section or Schedule refers to
the specified Section or Schedule to this Agreement. In this Agreement, the
terms “this Agreement”, “hereof”, “herein”, “hereunder” and similar expressions
refer to this Agreement and not to any particular part, Section, Schedule or the
provision hereof, and unless the context of this Agreement otherwise requires,
“include”, “includes” and “including” are not limiting.

 

1.4 Singular Terms.

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

 

1.5 Schedules.

The following Schedules are attached to, incorporated in and form part of this
Agreement:

 

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Schedule A

      Product List

Schedule B

      Commercial Pricing

Schedule C

      Stability Testing

Schedule D

      Active Materials, Active Materials Credit Value & Maximum Credit Value

Schedule E

      Batch Numbering & Expiration Dates

Schedule F

   -    Technical Dispute Resolution

Schedule G

   -    Quality Agreement

Schedule H

   -    Quarterly Active Materials Inventory Report

Schedule I

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

ARTICLE 2

PATHEON’S MANUFACTURING

 

2.1 Manufacturing.

In accordance with Client’s Firm Orders, Patheon shall perform Manufacturing for
the Territory at the Manufacturing Site for the fees specified in Schedules B
and C in order to produce Products for the Client. Patheon may change the
Manufacturing Site for the Products ****. In providing the Manufacturing,
Patheon and the Client agree that:

 

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

 

  (b) Quality Control and Quality Assurance. Patheon shall perform the quality
control and quality assurance testing specified in the Quality Agreement. Batch
review and release to the Client shall be the responsibility of Patheon’s
quality assurance group. Patheon shall perform its batch review and release
responsibilities in accordance with Patheon’s standard operating procedures.
Upon the Client’s request, Client may review Patheon’s standard operating
procedures at Patheon’s facility. Each time Patheon ships Products to the
Client, it shall provide the Client, in English, a certificate of analysis and
certificate of compliance including a statement that the batch has been
manufactured and tested in accordance with Specifications and cGMPs. The Client
will have sole responsibility for the release of Products to the market.

 

  (c) Components. Patheon shall purchase all Components (with the exception of
those that are supplied by the Client, which for certainty excludes Active
Materials), in accordance with the Specifications. Patheon shall test all
Components and Active Materials in accordance with the Specifications.

 

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****CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

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CONFIDENTIAL TREATMENT REQUESTED

 

  (d) Stability Testing. Patheon shall conduct stability testing on the Products
in accordance with the protocols set out in Schedule C for the separate fees
specified in Schedule C. Patheon shall not make any changes to these testing
protocols without prior written approval from the Client. In the event of a
confirmed stability test failure, Patheon will notify the Client within ****,
after which Patheon and the Client shall jointly determine the proceedings and
methods to be undertaken to investigate the causes of such failure, including
which party shall bear the cost of such investigation; ****. Patheon will
promptly provide any and all data and results relating to the stability testing
upon request by the Client.

 

  (e) Packaging. Patheon shall package the Products as set out in the
Specifications. The Client shall be responsible for the cost of artwork
development. Patheon shall make arrangements for and implement the imprinting of
batch numbers and expiration dates for each Product shipped. Such batch numbers
and expiration dates shall be affixed on the Products and on the shipping carton
of each Product as outlined in the Specifications and as required by cGMPs. The
system used by Patheon for batch numbering and expiration dates is detailed in
Schedule E hereto. The Client may, in its sole discretion, make changes to
labels, product inserts and other packaging for the Products, which changes
shall be submitted by the Client to all applicable governmental agencies and
other third parties responsible for the approval of the Products. The Client
shall be responsible for the cost of labelling obsolescence when changes occur,
as contemplated in Section 4.4. Patheon’s name shall not appear on the label or
anywhere else on the Products unless: (i) required by any applicable Laws; or
(ii) Patheon expressly consents to such use of its name in writing.

 

  (f)

Active Materials and Client Supplied Components. Client will **** deliver the
Active Materials and any Client-supplied Components to the Manufacturing Site
DDP (Incoterms 2010) at least **** before the scheduled production date, at no
cost to Patheon, 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 at least
**** before the scheduled production date, Patheon will make commercially
reasonable efforts to expedite analytical testing at the Client’s expense to
maintain the scheduled production date. If the Active Materials and/or
Client-supplied Components are not received at least **** before the scheduled
production date and expedited release cannot be accomplished to maintain the
scheduled production date (after use of commercially reasonable efforts by
Patheon), Patheon may ****

 

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****CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

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CONFIDENTIAL TREATMENT REQUESTED

 

  ****. ****. All shipments of Active Materials will be accompanied by
certificate(s) of analysis from the Active Materials manufacturer and the
Client, confirming the identity and purity of the Active Materials and its
compliance with the Active Materials specifications.

 

  (g) Bill Back Items. The expenses in respect of all third party supplier fees
for the purchase of those items specifically identified in Schedule B that are
necessary for Patheon to perform the Manufacturing (or which are not included as
Components or part of the Manufacturing fees in Schedule B), shall be charged to
the Client ****. Any invoices for such items shall include reasonable
documentation of the costs of such items. Any and all orders in excess of ****
for any such items require the prior written approval of the Client.

 

  (h) Requirements. Client hereby agrees to order **** of its total Yearly
requirement in the Order Countries for new units of Products **** (the “Patheon
Requirement”) from Patheon. However, Client may order the Patheon Requirement,
in whole or in part, from a third party supplier if Patheon ****. In addition,
****. Notwithstanding the foregoing, Patheon acknowledges and agrees that ****
shall not be counted in determining Client’s “total Yearly requirement in the
Order Countries for new units of Products” (i.e., Client may ****). For the sake
of clarity, during those Years in which Client orders Product from a third party
supplier in accordance with the terms in this subsection, then in no event shall
Client be deemed to be in breach of this Section 2.1(h) if it does not purchase
**** of its total Yearly requirement for new units of Products in the Order
Countries from Patheon.

 

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****CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

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  (i) Product Rejection for Finished Product Specification Failure. Patheon
shall manufacture Product in accordance with agreed upon Specifications,
including Specifications for Patheon’s internal process. If Patheon manufactures
Product in accordance with the such Specifications, the batch production record,
Patheon’s standard operating procedures for manufacturing (including, without
limitation, for cleaning and calibration), all applicable laws, this Agreement
and the Quality Agreement, and **** Client will pay Patheon ****. The API in the
non-conforming Product will ****.

 

  (j) Patheon shall maintain and service all equipment that Client has
authorized Patheon to purchase on Client’s behalf, such equipment to be returned
promptly by Patheon to Client in good working order, reasonable wear and tear
excepted, following the termination or expiration of this Agreement. Unless
otherwise agreed in a separate written equipment agreement, Patheon shall not
use all or any part of such equipment for any purpose other than supplying
Product to Client under this Agreement.

 

2.2 Active Material Yield.

(a) Reporting. Patheon shall provide the Client with a quarterly inventory
report of the Active Materials supplied by Client (if applicable) and held by
Patheon in accordance with the inventory report form annexed hereto as Schedule
H, which shall contain the following information for such quarter:

Quantity Received: The total quantity of Active Materials that complies with the
Specifications and is received at the Manufacturing Site during the applicable
period.

Quantity Dispensed: The total quantity of Active Materials dispensed at the
Manufacturing Site during the applicable period. The Quantity Dispensed is
calculated by adding the Quantity Received to the inventory of Active Materials
that complies with the Specifications and is held at the beginning of the
applicable period, less the inventory of Active Materials that complies with the
Specifications and is held at the end of such period. The Quantity Dispensed
shall only include Active Materials received and dispensed in connection with
commercial manufacturing of any Products and, for certainty, shall not include
any (i) Active Materials that must be retained by Patheon as samples,
(ii) Active Materials contained in any Product that must be retained as samples,
(iii) Active Materials used in connection with testing (if applicable) and
(iv) Active Materials received or dispensed in connection with 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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****CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

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Quantity Converted: The total amount of Active Materials contained in the
Products produced with the Quantity Dispensed (including any additional Products
produced in accordance with Section 6.1 or 6.2 or 6.3), delivered by Patheon,
and not rejected, recalled or returned in accordance with Section 6.1 or 6.2 as
a result of a failure by Patheon to provide Manufacturing in accordance with
Specifications, cGMPs, Applicable Laws, the Quality Agreement or this Agreement.

Patheon will target within ****, but within no more than **** after the **** of
each ****, Patheon shall prepare an annual reconciliation of Active Materials in
accordance with the reconciliation report form annexed hereto as Schedule I
including the calculation of the “Actual Annual Yield” or “AAY” for the Products
(including all strengths) 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

   x    100% Quantity Dispensed during the Year      

After ****, the Parties will mutually agree on the target yield in respect of
the Products at the Manufacturing Site (a “Target Yield”); provided, however,
that ****. Thereafter, Patheon shall strive to maintain Actual Annual Yield
levels for the Products equal to or above the Target Yield. For the sake of
clarity, if applicable, the AAY and the Target Yield are each calculated for
****.

(b) Shortfall Calculation. If the Actual Annual Yield falls **** below the
respective Target Yield in a Year, then the shortfall for such Year (the
“Shortfall”) shall be determined based on the following calculation:

Shortfall = ****

The Shortfall shall be disclosed by Patheon on the reconciliation report
prepared in the form annexed hereto as Schedule I.

(c) Credit. If there is a Shortfall for the Products in a Year, then Patheon
shall credit the Client’s account for the value of any such Shortfall, as
determined using the following formula, not later than **** after the end of
each Year.

 

 

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****CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

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CONFIDENTIAL TREATMENT REQUESTED

 

****

Patheon acknowledges that such credit is a liquidated damage reflecting a
reasonable measure of actual damages and is not a penalty. Each credit under
this Section 2.2 shall be summarized on the reconciliation report prepared in
the form annexed hereto as Schedule I and shall be made not later than ****
after the end of each Year. Upon expiration or termination of this Agreement any
remaining credit amount owing under this Section 2.2 (or other Section under
this Agreement) shall be reimbursed to the Client by payment thereof to the
Client.

(d) ****. Notwithstanding the foregoing provisions of this Section 2.2,
Patheon’s liability for Active Materials calculated in accordance with
Section 2.2(c) for the Products in a Year ****.

(e) No Material Breach. It shall not constitute a material breach of this
Agreement by Patheon, for the purposes of
Section 8.2(a), if ****.

ARTICLE 3

CLIENT’S OBLIGATIONS

 

3.1 Payment.

Pursuant to the terms of this Agreement, the Client shall pay Patheon for the
provision of the Manufacturing according to the fees specified in Schedules B
and C hereto (such fees being subject to adjustment in accordance with the terms
hereof).

 

3.2 Supply of Active Materials.

Client shall, at its sole cost and expense, deliver the Active Materials to
Patheon (in accordance with Section 2.1(f)) in sufficient quantities and at such
times as mutually agreed upon by the parties to facilitate the provision of the
Manufacturing by Patheon. 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 shall be held and stored by Patheon on behalf of the Client on the
terms and subject to the conditions herein contained, the Specifications, cGMPs
and any written instructions provided by the Client to Patheon from time to
time. Title to the Active Materials shall at all times belong to and remain the
property of the Client. Any Active Materials received by Patheon shall only be
used by Patheon to provide the Manufacturing. Patheon will not chemically or
biologically modify the Active Materials except in accordance with the
Specifications. Patheon’s liability with respect to any lost or damaged Active
Materials shall be as set forth in Section 10.2(a).

 

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If Client asks Patheon to qualify an additional source for the Active Material
or any Component, Patheon will evaluate the Active Material or Component to be
supplied by the additional source to determine if it is suitable for use in the
Product. The parties will agree on the scope of work to be performed by Patheon
at Client’s cost. For an Active Material, this work at a minimum will include:

 

  (a) laboratory testing to confirm the Active Material meets existing
specifications;

 

  (b) manufacture of an experimental batch of Product that will be placed on
**** accelerated stability; and

 

  (c) manufacture of **** full-scale validation batches that will be placed on
concurrent stability (one batch may be the registration batch if manufactured at
full scale).

Section 2.1(i) will apply to all Product manufactured using the newly approved
Active Material or Component because of the limited material characterization
that is performed on additional sources of supply.

ARTICLE 4

CONVERSION FEES AND COMPONENT COSTS

 

4.1 Pricing.

The fees for the Manufacturing through **** are listed in Schedules B and C and
are subject to the adjustments set forth in Section 4.3.

 

4.2 Price Adjustments - Subsequent Years’ Pricing.

The fees for the Manufacturing during any period following the **** shall be
determined in accordance with the following:

(a) Manufacturing and Component Costs. On each **** of this Agreement, Patheon
and the Client shall be entitled to an adjustment to the fees (i) for
Manufacturing in respect of the Products to reflect inflation, which adjustment
shall be solely based on ****, unless the parties otherwise agree in writing and
(ii) for Component costs ****.

 

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  (b) Annual Quantity.

The Client acknowledges that the fee for Manufacturing in respect of a Product
in any Year is quoted based upon the Annual Volume and Minimum Order Quantity
per Product specified in Schedule B and is subject to change following good
faith discussions by the parties if the specified Annual Volume or Minimum Order
Quantity increases or decreases. For greater certainty, if Patheon and the
Client agree that the Annual Volume or Minimum Order Quantity in respect of a
Product shall be reduced beyond the range of such values provided in the tables
in Schedule B, whether as a result of a decrease in estimated annual volume or
otherwise, and, as a result of such reduction, Patheon’s costs for services
relating to such Product increase on a per unit basis, then Patheon shall be
entitled to an increase in the fee for Manufacturing in respect of such Product.
In addition, for greater certainty, if Patheon and the Client agree that the
Annual Volume or Minimum Order Quantity in respect of a Product shall be
increased beyond the range of such values provided in the tables in Schedule B,
and, as a result of such increase, Patheon’s costs for services relating to such
Product decrease on a per unit basis, then the Client shall be entitled to a
decrease in the fee for Manufacturing in respect of such Product.

In connection with all fee adjustments requests pursuant to this Section 4.2,
Patheon shall deliver to the Client by not later than **** of each **** a
revised Schedule B in draft form and such budgetary pricing information or other
documentation reasonably sufficient to demonstrate that an increase or decrease
in the fee adjustment is justified (and/or upon the reasonable request of
Client, such budgetary pricing information or other documentation reasonably
sufficient to demonstrate to Client that a decrease in the fee adjustment is not
justified), provided that to the extent such documents are subject to
obligations of confidentiality between Patheon and its suppliers, Patheon shall
make such documents available, subject to the confidentiality obligations
provided in this Agreement, to a third party designated by Client and approved
by Patheon (such approval not to be unreasonably withheld or delayed) at
Patheon’s facility for the purpose of allowing such third party to confirm that
the fee adjustments proposed by Patheon are justified. Upon delivery of such a
fee adjustment request pursuant to this Section, each of the Client and Patheon
shall forthwith use reasonable efforts to agree on a revised fee for the
Manufacturing in respect of each affected Product, if any, and Schedule B shall
be amended accordingly. If the parties are unable to agree on a revised fee for
the Manufacturing in respect of each affected Product within **** after receipt
by Client of Patheon’s fee adjustment request, then ****. The revised fee shall
be effective with respect to any Product ordered after the end of the then
current ****.

 

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4.3 Price Adjustments – Current Year Pricing.

During any Year of this Agreement, the fees set out in Schedule B shall be
subject to adjustment in accordance with the following:

(a) Annual Quantity. If at any time and from time to time Patheon or Client
determines, acting reasonably and based on the forecasts and Firm Orders
received from the Client, that the current Annual Volume or Minimum Order
Quantity listed in Schedule B for each specific Product strength will either not
be met or will be exceeded (i.e., the actual Minimum Order Quantity and/or the
actual Annual Volume, and the costs of such variations, exceed the range of such
value(s) provided in the tables in Schedule B), then Patheon or Client shall be
entitled to request an adjustment to the fee for Manufacturing in respect of
that Product to reflect the increased or decreased costs that Patheon will incur
as a result of the increased or reduced volumes beyond the range of such values
provided in the tables in Schedule B. To the extent that the fee for
Manufacturing in respect of a Product has been previously adjusted pursuant to
this clause (a) to reflect reduced volumes or increased volumes, the adjustment
provided in this clause (a) shall operate based on the fees attributed to such
Product at the time the last of such adjustments were made.

(b) Extraordinary Increase in Component Costs. If at any time market conditions
result in Patheon’s cost of Components being **** greater than normal forecasted
increases, then Patheon shall be entitled to an adjustment to the fee for
Manufacturing in respect of any affected Product solely to compensate it for
such increased Component costs that may be justified by reasonable
documentation, provided that to the extent such documents are subject to
obligations of confidentiality between Patheon and its suppliers, Patheon shall
make such documents available, subject to the confidentiality obligations
provided in this Agreement, to a third party designated by Client and approved
by Patheon (such approval not to be unreasonably withheld or delayed) at
Patheon’s facility for the purpose of allowing such third party to confirm that
the fee adjustments proposed by Patheon are justified. For the purposes of this
clause (b), changes materially greater than normal forecasted increases shall be
considered to have occurred only if ****. To the extent that Component costs
have been previously adjusted pursuant to clause (a) of Section 4.2 or this
clause (b) to reflect an increase in the cost of one or more Components, the
adjustments provided for in (i) and (ii) above shall operate based on the costs
attributed to such Component (or Components) at the time the last of such
adjustments were made.

In connection with a fee adjustment request pursuant to this Section 4.3,
Patheon shall deliver to the Client a revised Schedule B and such budgetary
pricing information, adjusted Component costs or other documentation reasonably
sufficient to demonstrate that an increase or decrease in fee adjustment is
justified

 

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(and/or upon the reasonable request of Client, such budgetary pricing
information or other documentation reasonably sufficient to demonstrate to
Client that a decrease in the fee adjustment is not justified), provided that to
the extent such documents are subject to obligations of confidentiality between
Patheon and its suppliers, Patheon shall make such documents available, subject
to the confidentiality obligations provided in this Agreement, to a third party
designated by Client and approved by Patheon (such approval not to be
unreasonably withheld or delayed) at Patheon’s facility for the purpose of
allowing such third party to confirm that the fee adjustments proposed by
Patheon are justified. Upon delivery of such a request, each of the Client and
Patheon shall forthwith use all reasonable efforts to agree on a revised fee for
the Manufacturing in respect of each affected Product and Schedule B shall be
amended accordingly. If the parties are unable to agree on a revised fee for the
Manufacturing in respect of each affected Product within **** after receipt by
Client of Patheon’s fee adjustment request, then ****.

Patheon will use commercially reasonable efforts to ensure that the increases in
cost of Components will not be materially greater than normal forecasted
increases.

 

4.4 Adjustments Due to Technical Changes.

Amendments to the Specifications or the Quality Agreement requested by the
Client will only be implemented following a good faith technical and cost review
by Patheon and are subject to the Client and Patheon reaching agreement in
writing as to revisions, if any, to the fees specified in Schedules B or C
necessitated by any such amendment. Amendments to the Specifications, the
Quality Agreement or the Manufacturing Site or any material deviations from the
assumptions specified in Schedule B requested by Patheon will only be
implemented following the written approval of Client, such approval not to be
unreasonably withheld. If the Client accepts the proposed fee change (if any),
the proposed change in the Specifications or the Quality Agreement requested by
Client shall be implemented, and the fee change shall become effective only with
respect to those orders of Products that are manufactured in accordance with the
revised Specifications or Quality Agreement. In addition, the Client agrees
****. Open purchase orders for Components no longer required under

 

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any revised Specifications or Quality Agreement that were placed by Patheon with
suppliers in order to fill Firm Orders or in accordance with Section 5.2 shall
be cancelled or used in connection with other Patheon services where possible,
and where such orders are not subject to cancellation without penalty or cannot
be used in connection with other Patheon services, Client shall pay to Patheon
****.

 

4.5 Multi-Country Packaging Requirements.

Prices in Schedule B are for Packaged Product(s) for the specific markets in the
Territory requested by Client. Should Client wish to have Patheon provide
Manufacturing in respect of the Product for countries in addition to those
countries listed in Schedule B, then the Client shall inform Patheon of the
packaging requirements for each new country and Patheon shall, in good faith,
prepare a quotation for consideration by the Client of the additional Component
costs, if any, and the change over fees for the Product destined for each such
new country. The agreed additional packaging requirements and related packaging
costs and change over fees shall be set out in a written amendment to this
Agreement mutually agreed upon by the parties.

 

4.6 Improvement of Manufacturing Efficiency.

Each of Patheon and the Client shall use its reasonable efforts to improve
Product manufacturing efficiency, when and where possible, during the term of
this Agreement. Any cost savings resulting in whole or in part from
contributions by the Client shall be ****.

 

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ARTICLE 5

ORDERS, SHIPMENT, INVOICING, PAYMENT

 

5.1 Orders and Forecasts.

(a) Rolling Forecasts. Concurrent with the execution of this Agreement, the
Client shall provide Patheon with a written **** forecast of the volume of each
Product that the Client then anticipates will be required to be produced and
delivered to the Client during ****. Such forecast will be updated by the Client
**** on or before the **** of each **** on a ****, and the Client shall use
commercially reasonable efforts to update such forecast forthwith if the Client
determines that the volumes contemplated in the most recent of such forecasts
for the next **** have changed by more than ****. The most recent **** forecast
shall prevail.

(b) Firm Orders. On or before the **** of each ****, the Client shall issue a
firm written order (“Firm Order”) for Manufacturing in respect of the Products
to be produced and delivered to the Client on one or more dates not less
than**** from the first day of the calendar month immediately following the date
that the Firm Order is submitted (each, a “Delivery Date”). Such Firm Orders
submitted to Patheon shall specify the Client’s Manufacturing purchase order
number, quantities by Product type, monthly delivery schedule, shipment location
and any other elements necessary to ensure the timely production and shipment of
the Products. The quantities of Products ordered in such Firm Orders shall be
****. If Client cancels any or part of a Firm Order, Client shall be responsible
for **** of such cancelled part of a Firm Order, provided that if Client informs
Patheon at any time during the **** of this Agreement, at **** prior to the
Delivery Date of any Firm Order, that it would like to cancel any or part of
such Firm Order, then ****. ****. Patheon shall indicate its acceptance of Firm
Orders for the Product by promptly acknowledging acceptance of each Firm Order
in writing within **** of its receipt; each such acceptance shall include,
subject to Client confirmation, the Delivery Date for the Product ordered. The
agreed upon Delivery Date may be amended from time to time by written agreement
of the parties, with the newly agreed upon date becoming the new Delivery Date.
For the avoidance of doubt, Patheon will accept all Firm Orders submitted by the
Client for Product so long as ****. ****

 

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****. All Firm Orders will be deemed to incorporate all of the terms and
conditions in this Agreement.

(c) **** Forecast. On or before the **** of **** of each ****, the Client shall
provide Patheon with a written **** forecast (broken down by ****) of the volume
of each Product the Client then anticipates will be required to be produced and
delivered to the Client during the ****.

 

5.2 Reliance by Patheon.

The Client understands and acknowledges that Patheon will rely on the Firm
Orders and rolling forecasts submitted pursuant to Sections 5.1(a) and (b) in
ordering the Components required to meet such Firm Orders. In addition, the
Client understands that to ensure an orderly supply of such Components and/or to
achieve economies of scale in costs, it may be necessary for Patheon to purchase
such Components in sufficient volumes to meet the production requirements for
Products during part of the forecasted periods referred to in Section 5.1(a) or
to meet the production requirements of any longer period agreed to in writing by
Patheon and the Client. Accordingly, the Client authorizes Patheon to purchase
Components in order to satisfy the Manufacturing requirements for Products for
the **** contemplated in the most recent forecast provided by the Client
pursuant to Section 5.1(a) and agrees that Patheon may make such other purchases
of Components to meet Manufacturing requirements during such longer periods as
may be agreed to in writing from time to time by the Client at the request of
Patheon or the Client. If Components of the Product unique to the Client (e.g.,
packaging labels), ordered by Patheon pursuant to Firm Orders or this
Section 5.2 are not included in finished Products manufactured for the Client
within **** after the forecasted month in respect of which such purchases have
been made (or such longer period as the parties may agree) or if such unique
Components have expired during such period, then the Client shall pay to Patheon
****. Patheon shall be responsible for obtaining material safety data sheets
(“MSDS”) of all Components purchased by Patheon pursuant to this Agreement. The
MSDS will be used to establish conformance of the Components to the
Specifications and to advise Patheon as to any safety or special handling
requirements related to the Components.

 

5.3 Minimum Orders.

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

 

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5.4 Shipments.

Shipments of Products shall be made ****, unless otherwise mutually agreed in
writing. Risk of loss or of damage to Products shall remain with **** at which
time risk of loss or damage (and title to such Products) shall transfer to ****.
**** shall, in accordance with ****, (i) arrange for shipping to be paid by ****
and (ii) at **** risk and expense, obtain any export license or other official
authorization necessary to export the Products. **** shall arrange for insurance
and shall select the freight carrier to be used by **** to ship Products and may
monitor **** shipping and freight practices as they pertain to this Agreement.
Products shall be packaged for transport and transported in accordance with the
Specifications.

 

5.5 On Time Delivery.

(a) Patheon shall ****. Patheon and the Client understand that there may be
uncertainties and necessary adjustments associated with any initial
manufacturing period and the parties agree that they will work together closely
to expedite deliveries and manage the scheduling of the initial Product launch.

(b) If subsequent to the creation of a delivery plan, Patheon is unable to
supply the Client with the quantity of Product ordered pursuant to the Firm
Order by **** following the Delivery Date ****, then that inability to supply
will constitute a late delivery of Product (“Late Delivery”), and the Client
****. If the parties mutually agree in writing to change the Delivery Date for
any reason, then that new date becomes the Delivery Date.

****. In no event shall the Late Delivery ****. Patheon acknowledges that ****.
No credit for Late Delivery will occur if the Late Delivery is caused by a Force
Majeure Event (as defined below) or by other events outside of Patheon’s
reasonable control, including, but not limited to, delays in: ****

 

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****. Additionally, on time delivery credits provided for in this Section are
only available to Client if ****.

 

5.6 Invoices and Payment.

Invoices shall be sent by fax or email to such fax number or email address as
may be provided by the Client in writing from time to time. Such invoices for
Products may only be sent **** (with respect to which such invoices apply) in
accordance with the Quality Agreement, and such invoices shall reflect any
outstanding credit amounts owed under this Agreement by Patheon to Client.
Patheon shall also submit to the Client, with each shipment of Products, a
duplicate copy of the invoice covering such shipment. Patheon shall also provide
the Client with an invoice covering any Inventory or Components which are to be
purchased by Patheon pursuant to the terms of this Agreement. Each such invoice
shall, to the extent applicable, identify the Client’s Manufacturing purchase
order number, Product numbers, names and quantities, unit price, freight charges
and the total amount to be remitted by the Client (after taking into account any
outstanding credit amounts owed under this Agreement by Patheon to Client). The
Client shall pay all such undisputed invoices within **** of the date thereof,
provided, however, that payment will only be for ****. ****. ****. Patheon shall
fax or email a copy of the invoice to fax number or email address provided by
Client on the date of invoice

ARTICLE 6

PRODUCT CLAIMS AND RECALLS

 

6.1 Product Claims.

(a) Product Claims. The Client has the right to reject any portion of any
shipment of Products that deviates from **** without invalidating any remainder
of such shipment. The Client shall inspect the Products manufactured by Patheon
upon receipt thereof and shall give Patheon written notice (a “Deficiency
Notice”) of all claims for Products that deviate from **** within **** after the
Client’s receipt thereof (or, in the case of any defects not reasonably
susceptible to discovery upon receipt of the Product, within **** after
discovery thereof by the Client, but in no event after the expiration date of
the Product). Should the Client fail to provide Patheon with the Deficiency
Notice within the applicable period, then the delivery shall be deemed to have
been accepted by the Client on the **** after delivery or **** after discovery,
as applicable. Except as otherwise provided in this Agreement, Patheon shall
have no

 

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liability for any deviations for which it has not received notice within the
applicable period. For the sake of clarity, if the Client does not provide a
Deficiency Notice within **** after Client’s receipt of the applicable Product,
but instead provides a Deficiency Notice within **** after discovery of a defect
not reasonably susceptible to discovery upon receipt of the Product, then Client
retains its rights and remedies with respect to the defective Product.

(b) Determination of Deficiency. Upon receipt of a Deficiency Notice, Patheon
shall have **** to advise the Client by notice in writing that it disagrees with
the contents of such Deficiency Notice. If the Client and Patheon fail, after
good faith discussions, to agree within **** after Patheon’s notice to the
Client as to whether any Products identified in the Deficiency Notice deviate
from ****, then the parties shall mutually select an independent laboratory to
evaluate if the Products deviate from ****. Such evaluation shall be binding on
the parties, and if such evaluation certifies that any Products deviate from
****, the Client may reject those Products in the manner contemplated in this
Section 6.1. If such evaluation does not so certify in respect of any such
Products, then the Client shall be deemed to have accepted delivery of such
Products on the **** after delivery (or, in the case of any defects not
reasonably susceptible to discovery upon receipt of the Product, on the ****
after discovery thereof by the Client, but in no event after the expiration date
of the Product). The decision of the laboratory shall be binding on the parties,
and the party that the decision disfavours shall bear the costs charged by such
laboratory in connection with its decision.

(c) Shortages. Claims for shortages in the amount of Products shipped by Patheon
shall be dealt with as may reasonably be agreed to by the parties.

 

6.2 Product Recalls and Returns.

(a) Records and Notice. **** shall each maintain such records as may be
necessary to permit a Recall (as defined below) of any Products delivered to the
Client or customers of the Client. **** shall promptly notify **** by telephone
(to be confirmed in writing) of any information which is reasonably likely to
adversely affect the marketability, safety or effectiveness of the Products in a
material manner and/or which might result in the Recall or seizure of the
Products. Upon receiving any such notice or upon any such discovery, **** shall
cease and desist from further shipments of such Products in its possession or
control until a decision has been made whether a Recall or some other corrective
action is necessary. The decision to initiate a Recall or to take some other
corrective action, if any, shall be made and implemented by ****. “Recall” shall
mean any action (i) by the Client to recover title to or possession of
quantities of the Products sold or shipped to third parties (including, without
limitation, the voluntary withdrawal of Products from the market); or (ii) by
any regulatory authorities to detain or destroy any of the Products. Recall
shall also include any action by either party to refrain from selling or
shipping quantities of the Products to third parties which would have been
subject to a Recall if sold or shipped.

 

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(b) Recalls. If: (i) any governmental or regulatory authority issues a
directive, order or, following the issuance of a safety warning or alert with
respect to a Product, a written request that any Product be Recalled, (ii) a
court of competent jurisdiction orders such a Recall, or (iii) **** determines
that any Product should be Recalled or that a “dear doctor” letter is required
relating to the restrictions on the use of any Product, **** will co-operate as
reasonably required by ****, having regard to all applicable laws and
regulations.

(c) Product Returns. **** shall have the responsibility for handling customer
returns of the Products. **** shall provide **** with such assistance as ****
may reasonably require to handle such returns.

 

6.3 Patheon’s Responsibility for Defective and Recalled Products.

(a) Defective Product. If the Client rejects Products in accordance with
Section 6.1 and the deviation is determined to have arisen from Patheon’s
failure to provide the Manufacturing in accordance with ****, Patheon shall
promptly, ****. For greater certainty, Patheon’s responsibility for ****.

(b) Recalled Product. To the extent that a Recall results from, or arises out
of, a failure by Patheon to provide the Manufacturing in accordance with ****,
Patheon shall be responsible for ****. For greater certainty, Patheon’s
responsibility for ****. If Patheon is unable to replace the Recalled Products,
then the Client may request Patheon to ****. In all other circumstances, Recalls
shall be made at the Client’s cost and expense.

(c) Patheon shall have no obligation for any deficiencies in, or other
liabilities associated with, any Product manufactured by it (collectively,
“Product Claims”) to the extent such Product Claim ****

 

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****.

 

6.4 Disposition of Defective or Recalled Products.

The Client shall not dispose of any damaged, defective, returned or Recalled
Products in relation to which it intends to assert a claim against Patheon
without Patheon’s prior written authorization to do so. Alternatively, Patheon
may instruct the Client to return such Products to Patheon. Patheon shall bear
the cost of disposition with respect to any damaged, defective, returned or
Recalled Products in relation to which it bears responsibility under Section 6.3
hereof. In all other circumstances, the Client shall bear the cost of
disposition, including all applicable fees for Manufacturing, with respect to
any damaged, defective, returned or Recalled Products.

 

6.5 Customer Questions and Complaints.

The Client shall have the sole responsibility for responding to questions and
complaints from the Client’s customers. Questions or complaints received by
Patheon from the Client’s customers shall be promptly referred to the Client.
Patheon shall cooperate as reasonably required to allow the Client to determine
the cause of and resolve any customer questions and complaints. Such assistance
shall include follow-up investigations, including testing. In addition, Patheon
shall promptly provide the Client with all mutually agreed upon information that
will enable the Client to respond properly to questions or complaints relating
to the Products as provided in the Quality Agreement. Unless it is determined
that the cause of any customer complaint resulted from a failure by Patheon to
provide the Manufacturing in accordance with ****.

 

6.6 ****.

****.

 

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ARTICLE 7

CO-OPERATION

 

7.1 Quarterly Review.

Each party shall forthwith upon execution of this Agreement appoint one of its
employees to be a relationship manager responsible for liaison between the
parties. The relationship managers shall meet not less than **** to review the
current status of the business relationship and manage any issues that have
arisen. Each party may replace its relationship manager at any time and will
fill a vacancy for its relationship manager as soon as reasonably practicable.
Each party shall promptly notify the other party of any substitution of another
person as its relationship manager. Each party’s relationship manager shall be
available throughout the term of this Agreement to answer any reasonable
questions from the other party’s relationship manager.

 

7.2 Governmental Agencies.

Client may communicate with any governmental agency, including but not limited
to governmental agencies responsible for granting regulatory approval for the
Products, regarding Product specific issues. Subject to Section 7.8, Patheon may
communicate with any governmental agency, including but not limited to
governmental agencies responsible for granting regulatory approval for the
Products, regarding Product specific issues, if ****.

 

7.3 Records and Accounting by Patheon.

Patheon shall keep records of the Manufacture, testing and shipping of the
Products, and retain samples of such Products as are necessary to comply with
manufacturing regulatory requirements applicable to Patheon, as well as to
assist with resolving Product complaints and other similar investigations.
Copies of such records and samples shall be retained for a period of ****
following the date of Product expiry, or longer if required by law, at which
time the Client will be contacted in writing concerning the delivery and
destruction of such documents and/or Products, ****. The Client is responsible
for retaining samples of the Products necessary to comply with the
legal/regulatory requirements applicable to the Client.

 

7.4 Inspection.

During the term of this Agreement and for **** thereafter, or alternatively the
period of time less than **** in which Patheon is required to keep reports and
records pursuant to Section 7.3, the Client may inspect Patheon reports and
records relating to

 

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this Agreement, including without limitation relating to the invoices issued
hereunder, during normal business hours and with reasonable advance notice,
provided a Patheon representative is present during any such inspection.

 

7.5 Access.

Patheon shall provide the Client with reasonable access at mutually agreeable
times (as discussed in good faith) to the areas of the Manufacturing Site in
which the Products are manufactured, stored, handled or shipped in order to
permit the Client’s verification of the performance of the Manufacturing in
accordance with the Specifications, cGMPs, Applicable Laws, the Quality
Agreement and this Agreement. For greater certainty, the right of access
provided in this Section 7.5 shall not include a right to access or inspect
Patheon’s financial records.

 

7.6 Notification of Regulatory Inspections.

In accordance with applicable laws and regulations governing regulatory
inspections, and without waiving any rights and protections afforded Patheon
under such laws and regulations, Patheon shall permit authorized representatives
of relevant regulatory authorities, including the FDA, to inspect any plant and
production facilities (including the Manufacturing Site) relating to or used in
connection with the Manufacturing and/or the Product. Patheon shall notify the
Client within **** of any inspections by any governmental agency that may bear
directly on the Products. ****.

 

7.7 Reports.

Patheon will supply on an annual basis the Annual Product Review Report. Patheon
will also supply on an annual basis or as requested by Client at any other time
all Product data in its control, including release test results, complaint test
results, and all investigations (in manufacturing, testing and storage), that
the Client reasonably requires in order to complete any filing under any
applicable regulatory regime, including any Annual Report that the Client is
required to file with the FDA. Any additional reports requested by Client beyond
the scope of cGMPs and customary FDA requirements will be subject to an
additional fee to be agreed upon in writing. All rights, title and interest in
any and all data related to Product that is generated or derived by Patheon in
the course of performing the Manufacturing shall be the exclusive property of
**** (and the confidential information of ****). **** hereby makes, and agrees
to make, any and all assignments necessary to effect, exclusively and throughout
the world, the ownership by **** of such data. **** shall, and shall cause its
employees and contractors to, fully cooperate with and sign any documents
reasonably requested by **** to

 

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evidence, perfect or take any other action with respect to such assignments or
to obtain protection, maintain or take any other action regarding such assigned
data.

 

7.8 FDA Filings.

(a) Regulatory Authority. The Client shall have the sole responsibility for
filing all documents with all Regulatory Authorities and taking any other
actions that may be required for the receipt and/or maintenance of Regulatory
Authority approval for the commercial manufacture of the Products. Patheon shall
assist the Client, as is reasonable, to obtain Regulatory Authority approval for
the commercial Manufacture of all Products as quickly as reasonably possible.

(b) Verification of Data. At least **** prior to filing any documents with any
Regulatory Authority that incorporate data generated by Patheon, the Client
shall ****.

(c) Verification of CMC. At least **** prior to filing with any Regulatory
Authority any documentation which is or is equivalent to the FDA’s Chemistry and
Manufacturing Controls (“CMC”) related to any Marketing Authorization, such as a
New Drug Application or Abbreviated New Drug Application, the Client shall ****.

(d) Deficiencies. If in Patheon’s sole discretion, acting reasonably, Patheon
determines that any of the information provided by the Client in accordance with
paragraphs (b) and (c) above is inaccurate or deficient in any manner
whatsoever, and Patheon reasonably believes that Patheon’s standing with
regulatory authorities may be jeopardized thereby (the “Deficiencies”), Patheon
shall notify the Client in writing of such Deficiencies promptly but in no event
less than **** prior to Client’s applicable scheduled filing with the Regulatory
Authority. The parties shall work together in good faith to have such
Deficiencies resolved prior to any pre-approval inspection.

(e) Client Responsibility. For clarity, the parties agree that ****. Subject to
the foregoing, Patheon will not assume any responsibility for the accuracy of
any application for receipt of an approval by a Regulatory Authority. The Client
is solely responsibility for the preparation and filing of the application for
approval by the Regulatory Authority and any relevant costs will be borne by the
Client.

 

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(f) Inspection by Regulatory Authorities. If Client does not ****.

ARTICLE 8

TERM AND TERMINATION

 

8.1 Initial Term.

This Agreement shall become effective as of the Effective Date and shall
continue for five years following the Effective Date (the “Initial Term”),
unless terminated earlier by one of the parties in accordance herewith. This
Agreement shall automatically continue after the Initial Term for successive
terms of one year each unless either party gives written notice to the other
party of its intention to terminate this Agreement at least 12 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 upon written
notice in circumstances where the other party has failed to remedy a material
breach of any of its representations, warranties or other obligations under this
Agreement within **** following receipt of a written notice (the “Remediation
Period”) of said breach that expressly states that it is a notice under this
Section 8.2(a) (a “Breach Notice”).

(b) Either party at its sole option may immediately terminate this Agreement
upon written notice, but without prior advance notice, to the other party in the
event that: (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 such other party; or (iii) this Agreement is
assigned by such other party for the benefit of creditors.

(c) The Client may terminate this Agreement as to any Product upon **** prior
written notice if any governmental agency takes any action, or raises any
objection, that prevents the Client from importing, exporting, purchasing or
selling such Product. In addition, the Client may terminate this Agreement ****
written notice to Patheon in the event that any governmental agency in the
Territory makes a decision not to grant marketing authorization to the Client
with respect to Product.

(d) Patheon may terminate this Agreement upon **** prior written notice if the
Client assigns pursuant to Section 13.6 any of its rights under this Agreement
to an assignee that, in the opinion of Patheon acting reasonably, is: (i) not a
credit worthy substitute for the Client; or (ii) a competitor of Patheon, where
a “competitor of Patheon” means a corporation which (a) specializes in the
business of manufacturing

 

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pharmaceutical products for third parties and (b) does not directly or
indirectly own or market pharmaceutical products in its own name.

(e) A party may terminate this Agreement when permitted pursuant to
Section 13.7.

(f) The Client may terminate this Agreement due to Client’s discontinuation of
the development of Product manufactured at the Manufacturing Site, upon written
notice delivered at least **** prior to such discontinuation.

(g) The Client may, upon the completion of **** of this Agreement, terminate
this Agreement at any time, for any or no reason, upon not less than **** notice
to Patheon, provided that ****. The Client may, upon the completion of **** of
this Agreement, terminate this Agreement at any time, for any or no reason, upon
not less than **** notice to Patheon, provided that ****. ****.

 

8.3 Obligations on Termination.

If this Agreement expires or is terminated in whole or in part for any reason,
then following the expiration or termination of this Agreement, or the end of
the Wind-Down Period, if applicable (in addition to any other remedies either
party may have in the event of default by the other party):

 

  (a) the Client shall take delivery of and pay for (in accordance with
Section 5.6) all undelivered Products that are manufactured and/or packaged
pursuant to a Firm Order, at the price in effect at the time the Firm Order was
placed.

 

  (b) the Client shall purchase, at Patheon’s cost ****, (i) the remaining
Components applicable to the Products which were purchased by Patheon in
contemplation of filling Firm Orders or in accordance with Section 5.2 prior to
notice of termination being given to the extent that such Components cannot be
returned or used to produce product for another client; and (ii) all remaining
work-in-process produced by Patheon in contemplation of filling Firm Orders
prior to notice of termination being given.

 

  (c) the Client acknowledges that no competitor of Patheon (as defined in
Section 8.2(d)) shall be permitted access to the Manufacturing Site.

 

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  (d) Client will make commercially reasonable efforts, at its own expense but
with Patheon’s reasonable cooperation, to remove from Patheon site(s), within
****, all of Client’s Components, Inventory and supplies, undelivered Product,
chattels, equipment or other moveable property owned by Client, related to the
Agreement and located at a Patheon site or that is otherwise under Patheon’s
care and control (“Client Property”). If Client fails to remove the Client
Property within **** following the termination or expiration of the Agreement
(or following the end of the Wind-Down Period, if applicable), Client will pay
Patheon **** per pallet, per month, one pallet minimum (**** per pallet, per
month, one pallet minimum, for any of the Client Property that contains
controlled substances or requires refrigeration) thereafter for storing the
Client Property and will assume any third party storage charges invoiced to
Patheon regarding the Client Property. Patheon will invoice Client for the
storage charges as set forth in Section 5.6 of this Agreement.

If this Agreement expires or is terminated in whole or in part for any reason,
then (in addition to any other remedies the Client may have in the event of
default by Patheon), Patheon shall return to the Client promptly all unused
Active Materials and provide to the Client all Inventory purchased by the Client
(with shipping and related expenses, if any, to be borne by the Client),
following such expiration or termination or the end of the Wind-Down Period, if
applicable.

In addition, for a period of **** after the termination or expiration of this
Agreement (the “Wind-Down Period”), Client may continue to order Manufacturing,
and Patheon shall continue to provide Manufacturing in accordance with such
orders from Client (if any), in each case subject to the terms and conditions of
this Agreement. In the event of termination by Patheon pursuant to
Section 8.2(a) due to Client’s failure to pay undisputed amounts, Patheon may
require that Client pay such amounts before filling any Firm Orders and may
require that Client pre-pay for any Manufacturing Services provided during the
Wind-Down Period. Furthermore, upon reasonable request by Client, Patheon will
use commercially reasonable and good faith efforts to discuss with Client and
come to an agreement with Client with respect to the terms for the performance
of other transition services that are reasonably requested by Client.

Any termination or expiration of this Agreement shall not affect any outstanding
obligations or payments due hereunder prior to such termination or expiration,
nor shall it prejudice any other remedies that the parties may have under this
Agreement. For greater certainty, termination of this Agreement for any reason
shall not affect the obligations and responsibilities of the parties pursuant to
Articles 6, 8, 9, 10, 11, 12 and 13 and Sections 1.1, 7.3, 7.4, 7.5, 7.6 and
7.7, all of which survive any termination.

 

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ARTICLE 9

REPRESENTATIONS, WARRANTIES AND COVENANTS

 

9.1 Authority.

Each party covenants, represents and warrants that (i) 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
and (ii) it is a corporation duly organized, validly existing and in good
standing under the laws of its incorporating jurisdiction and has all requisite
power and authority to enter into this Agreement.

 

9.2 Client Warranties.

The Client covenants, represents and warrants that, to the Client’s knowledge as
of the Effective Date:

 

  (a) the provision of the Manufacturing by Patheon solely in respect of any
Product pursuant to this Agreement as directed in the new drug application for
the Product that was approved by the U.S. Food and Drug Administration or use or
other disposition of any Product by Patheon as may be required to perform its
obligations under this Agreement does not and will not infringe any Third Party
Rights;

 

  (b) there are no actions or other legal proceedings in the Territory, the
subject of which is the infringement of Third Party Rights related to any of the
Specifications, or the Product or any of the Active Materials and the Components
provided by the Client to Patheon, or the sale, use or other disposition of any
Product Manufactured in accordance with the Specifications; and

 

  (c) the Products, if labelled and Manufactured in accordance with the
Specifications and in compliance with applicable cGMPs, Applicable Laws, the
Quality Agreement and this Agreement (i) may be lawfully sold and distributed in
every jurisdiction in which the Client has Regulatory Authority approval to
market such Products, (ii) ****, and (iii) will be safe for human consumption as
directed on the approved labelling for such Products.

In addition, Client covenants, represents and warrants that:

 

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

 

  (ii)

to the Client’s knowledge as of the Effective Date, any Intellectual Property
provided by the Client to Patheon in connection with the provision of the
Manufacturing according to the Specifications (i) is the

 

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  Client’s or its Affiliate’s unencumbered property or is licensed to the
Client, (ii) may be lawfully used as directed by the Client, and (iii) ****; and

 

  (iii) the Specifications for all Products, as provided by the Client to
Patheon, conform to all applicable cGMPs and Applicable Laws.

 

9.3 Patheon Warranties.

Patheon covenants, represents and warrants that to Patheon’s knowledge as of the
Effective Date:

 

  (a) any Intellectual Property owned by Patheon and utilized by Patheon in
connection with the provision of the Manufacturing which has not been provided
by Client or used at the direction of Client, (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;

 

  (b) it and its Manufacturing Site are in compliance with all laws and
regulations applicable to their operations, including, without limitation, cGMPs
and Applicable Laws;

 

  (c) all Patheon personnel are fully qualified (by education, training and
experience) to properly perform their tasks under this Agreement.

In addition, Patheon covenants, represents and warrants that:

 

  (i) it shall perform the Manufacturing in accordance with the Specifications,
cGMPs, Applicable Laws, the Quality Agreement and this Agreement;

 

  (ii) it will convey good title to the Product, free of all liens of any kind
whatsoever; and

 

  (iii) the Products, when delivered to Client, will be Manufactured according
to the Specifications. For the sake of clarity, if Patheon performs any
additional steps not specified in the Specifications in Manufacturing Products
(e.g., by adding one or more additional components to the Products that are not
specified in the Specifications), then Patheon will be deemed to have failed to
Manufacture such Products in accordance with the Specifications.

The warranties provided in (i), (ii) and (iii) above shall survive inspection,
test, acceptance and use of the Product.

 

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9.4 Debarred Persons.

Patheon covenants that it will not in the performance of its obligations under
this Agreement use the services of any person debarred or suspended under 21
U.S.C. §335(a) or (b) or by Health Canada or any comparable European regulatory
authority. Patheon represents that it does not currently have, and covenants
that it will not hire, as an officer, an employee or an independent contractor
in connection with the Manufacturing any person who has been convicted of a
felony under the laws of the United States for conduct relating to the
regulation of any drug product under the Federal Food, Drug, and Cosmetic Act
(United States) or any comparable Canadian or European law. If Patheon becomes
aware of any breaches of the Section, it will promptly notify the Client.

 

9.5 Permits.

Patheon shall maintain at all relevant times all governmental permits, licenses,
approvals, and authorities to the extent required to enable it lawfully to
properly perform the Manufacturing. The Client shall be solely responsible for
obtaining or maintaining, on a timely basis, any permits or other regulatory
approvals in respect of the Products or the Specifications, including, without
limitation, all marketing and post-marketing approvals.

 

9.6 No Warranty.

EXCEPT AS OTHERWISE PROVIDED HEREIN, NEITHER PATHEON NOR CLIENT MAKES ANY
WARRANTY OF ANY KIND, EITHER EXPRESSED OR IMPLIED, BY FACT OR LAW, OTHER THAN
THOSE EXPRESSLY SET FORTH IN THIS AGREEMENT. PATHEON MAKES NO IMPLIED WARRANTY
OF FITNESS FOR A PARTICULAR PURPOSE OR WARRANTY OF MERCHANTABILITY WITH RESPECT
TO THE PRODUCTS. THE CLIENT MAKES NO WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE OR WARRANTY OF MERCHANTABILITY WITH RESPECT TO THE ACTIVE MATERIALS OR
COMPONENTS PROVIDED BY THE CLIENT TO PATHEON.

ARTICLE 10

REMEDIES AND INDEMNITIES

 

10.1 Consequential Damages.

To the maximum extent permitted by applicable law, except with respect to ****,
under no circumstances whatsoever shall **** be liable to the other hereunder in
contract, tort, negligence, breach of statutory duty or otherwise for any
indirect, punitive, incidental, reliance, special, exemplary or consequential
damages, including without limitation direct or indirect loss of profits, of
production, of anticipated savings, of business or goodwill, regardless of any
notice of the possibility of such damages.

 

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10.2 Limitation of Liability.

(a) Active Materials. Except as expressly set forth in Section 2.2 hereof and
this Section 10.2, under no circumstances whatsoever shall Patheon be
responsible for any loss or damage to the Active Materials. ****.

(b) Maximum Liability. To the maximum extent permitted by applicable law, except
with respect to ****, **** maximum liability per Year under this Agreement for
any reason whatsoever, including, without limitation, any liability resulting
from a breach of its representations, warranties or other obligations under this
Agreement, shall not exceed **** of the total fees paid under this Agreement by
Client to Patheon in such Year, up to a maximum value **** in the aggregate.

 

10.3 Patheon.

Patheon agrees to defend, indemnify and hold the Client, its Affiliates and
their respective officers, employees and agents harmless against any and 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
****.

If a claim occurs, the Client shall: (a) promptly notify Patheon of any such
claim; (b) use commercially reasonable efforts to mitigate the effects of such
claim; (c) reasonably cooperate with Patheon in the defence of such claim; and
(d) permit Patheon to control the defence and settlement of such claim, each at
Patheon’s cost and expense, provided that any settlement of such claim that does
not contain an unconditional release of an indemnitee will require the prior
written consent of such indemnitee, which such consent will not be unreasonably
withheld.

 

10.4 Client.

The Client agrees to defend, indemnify and hold Patheon, its Affiliates and
their respective officers, employees and agents harmless against any and all
losses, damages, costs, claims, demands, judgments and liability to, from and in
favour of third parties (other than Affiliates) resulting from, or relating to
any claim ****

 

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****.

If a claim occurs, Patheon shall: (a) promptly notify the Client of any such
claims; (b) use commercially reasonable efforts to mitigate the effects of such
claim; (c) reasonably cooperate with the Client in the defence of such claim;
(d) permit the Client to control the defence and settlement of such claim, each
at the Client’s cost and expense, provided that any settlement of such claim
that does not contain an unconditional release of an indemnitee will require the
prior written consent of such indemnitee, which such consent will not be
unreasonably withheld.

 

10.5 Reasonable Allocation of Risk.

The provisions of this Agreement (including, without limitation, this Article
10) are reasonable and create a reasonable allocation of risk having regard to
the relative profits the parties respectively expect to derive from the
Products.

ARTICLE 11

CONFIDENTIALITY

 

11.1 Confidentiality.

The provisions of the Confidentiality Agreement shall apply to all confidential
information of the parties under this Agreement, which agreement remains in
effect in accordance with its terms; provided, however, that the terms of the
Confidentiality Agreement shall continue to govern the parties’ obligations of
confidentiality with respect to any confidential or proprietary information of
the parties, for the term of this Agreement and for a period of five years
following termination or expiration of this Agreement, except that the parties’
obligations of confidentiality with respect to any confidential or proprietary
information of the parties that is a trade secret under applicable law shall
survive and continue in effect thereafter, in each case as though such agreement
remained in full force and effect. For the sake of clarity, the Product
manufacturing process, including without limitation the Product formulation
process, and the analytical methods specific to the Product are all deemed to be
the trade secrets of Client for the purposes of this Section 11.1. Promptly
following any expiration or termination of this Agreement, each party shall
return to the other party all originals and copies of the other party’s
confidential information and destroy all information, records

 

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and materials developed there from, unless otherwise expressly provided herein
(e.g., under Section 7.3 (Records and Accounting by Patheon)).

Notwithstanding the foregoing, the parties acknowledge that Client will be
permitted, and may be required pursuant to the rules and regulations promulgated
under the Securities Exchange Act of 1934, as amended, to file a Current Report
on Form 8-K disclosing the entry into this Agreement by Client and a brief
description of the terms and conditions hereof that are material to Client. To
the extent that either party reasonably determines that it is required to make a
filing or any other public disclosure (other than as set forth in the preceding
sentence) with respect to this Agreement or the terms or existence hereof to
comply with the requirements, rules, laws or regulations of any applicable stock
exchange, Nasdaq or any governmental or regulatory authority or body, including
without limitation the U.S. Securities and Exchange Commission (the “SEC”)
(collectively, the “Disclosure Obligations”), such party shall promptly inform
the other party thereof and shall use reasonable efforts to maintain the
confidentiality of the other party’s confidential information in any such filing
or disclosure. To the extent that either party reasonably determines that it is
required to file a copy of this Agreement to comply with the Disclosure
Obligations, such party shall promptly inform the other party thereof. Prior to
making any such filing of a copy of this Agreement, the parties shall mutually
agree on the provisions of this Agreement for which the parties shall seek
confidential treatment, it being understood that if one party determines to seek
confidential treatment for a provision for which the other party does not, then
the parties will use reasonable efforts in connection with such filing to seek
the confidential treatment of any such provision. The parties shall cooperate,
each at its own expense, in such filing, including without limitation such
confidential treatment request, and shall execute all documents reasonably
required in connection therewith. In furtherance of the foregoing, the parties
will agree as promptly as practicable after the Effective Date on the
confidential treatment request to be filed with the SEC and the redacted form of
this Agreement related thereto. In furtherance thereof, any redaction reasonably
requested by either party shall be included in such filing. The parties will
reasonably cooperate in responding promptly to any comments received from the
SEC with respect to such filing in an effort to achieve confidential treatment
of such redacted form; provided, however, that a party shall be relieved of such
obligation to seek confidential treatment for a provision requested by the other
party if such treatment is not achieved after the second round of responses to
comments from the SEC. This paragraph shall apply with respect to the filing of
a copy of this Agreement or any public disclosure relating to this Agreement to
comply with the Disclosure Obligations, notwithstanding the provisions of the
Confidentiality Agreement.

 

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ARTICLE 12

DISPUTE RESOLUTION

 

12.1 Commercial Disputes.

If any dispute arises out of or in connection with this Agreement (other than a
dispute determined in accordance with Section 6.1(b) or a Technical Dispute),
the parties shall first try to solve it amicably. In this regard, any party may
send a notice of dispute to the other, and each party shall appoint, within ****
from receipt of such notice of dispute, a single representative having full
power and authority to solve the dispute. The representatives so designated
shall meet as necessary in order to solve such dispute. If these representatives
fail to solve the matter within **** from their appointment, or if a party fails
to appoint a representative within the **** period set forth above, such dispute
shall immediately be referred to the Chief Operating Officer (or such other
officer as he/she may designate) of each party who will meet and discuss as
necessary in order to try to solve the dispute amicably. Should the parties fail
to reach a resolution under this Section 12.1, either party may refer the
dispute to arbitration in accordance with Section 12.3. Notwithstanding the
foregoing, neither party shall be prohibited from seeking injunctive or other
equitable relief in any court of competent jurisdiction (including without
limitation, in any case where issues involving the protection or unauthorized
use or disclosure of a party’s confidential information, trade secrets or
intellectual property are involved).

 

12.2 Technical Dispute Resolution.

If a dispute (other than disputes in relation to the matters set out in Sections
6.1(b) and 12.1) arises 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 shall make all reasonable efforts to resolve
the dispute by amicable negotiations. In this regard, senior representatives of
each party shall, as soon as practicable and in any event no later than ****
after a written request from either party to the other, meet in good faith to
resolve any Technical Dispute. If, despite such meeting, the parties are unable
to resolve a Technical Dispute within a reasonable time, and in any event within
**** after such written request, the Technical Dispute shall, at the request of
either party, be referred for determination to an expert in accordance with the
provisions of Schedule F. In the event that the parties cannot agree whether a
dispute is a Technical Dispute, Section 12.1 shall prevail. For greater
certainty, the parties agree that the release of the Products for sale or
distribution pursuant to the applicable marketing approval for such Products
shall not by itself indicate compliance by Patheon with its obligations in
respect of the Manufacturing and further that nothing in this Agreement
(including Schedule F) shall 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. Notwithstanding the
foregoing, neither party shall be prohibited from seeking injunctive or other
equitable relief in any court of competent jurisdiction (including without
limitation, in any case where issues involving the protection or

 

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unauthorized use or disclosure of a party’s confidential information, trade
secrets or intellectual property are involved).

 

12.3 Arbitration.

If any dispute cannot be resolved in accordance with Section 12.1, such dispute
shall be finally settled by arbitration in **** using the English language in
accordance with the Arbitration Rules and Procedures of Judicial Arbitration and
Mediation Services, Inc. (“JAMS”) then in effect, by one or more commercial
arbitrator(s) with substantial experience in resolving complex commercial
contract disputes, who may or may not be selected from the appropriate list of
JAMS arbitrators. If the parties cannot agree upon the number and identity of
the arbitrators within **** following the date on which a party referred the
applicable dispute to arbitration, then a single arbitrator shall be selected on
an expedited basis in accordance with the Arbitration Rules and Procedures of
JAMS. Any arbitrator so selected shall have substantial experience in the
pharmaceutical industry. The arbitrator(s) shall have the authority to grant
specific performance and to allocate between the parties the costs of
arbitration allocate between the parties the costs of arbitration (including
service fees, arbitrator fees and all other fees related to the arbitration) in
such equitable manner as the arbitrator(s) may determine. The prevailing party
in the arbitration shall be entitled to receive reimbursement of its reasonable
expenses (including reasonable lawyers’ fees, expert witness fees and all other
expenses) incurred in connection therewith. Judgment upon the award so rendered
may be entered in a court having jurisdiction or application may be made to such
court for judicial acceptance of any award and an order of enforcement, as the
case may be. Notwithstanding the foregoing, each party shall have the right to
institute an action in a court of proper jurisdiction for preliminary injunctive
relief pending a final decision by the arbitrator(s), provided that a permanent
injunction and damages shall only be awarded by the arbitrator(s).

 

12.4 Dispute and Termination for Breach.

Notwithstanding any statement to the contrary in this Agreement, a non-breaching
party shall not be entitled to terminate this Agreement pursuant to
Section 8.2(a) on account of a disputed breach until the dispute is resolved by
mutual agreement or arbitration pursuant to Section 12.3 confirming the
existence of the breach.

ARTICLE 13

MISCELLANEOUS

 

13.1 Inventions.

(a) For the term of this Agreement, Client hereby grants to Patheon a
non-exclusive, paid-up, royalty-free, non-sublicensable, non-transferable
license of Client’s Intellectual Property, including without limitation that
assigned to the Client pursuant to Section 13.1(b) below, which Patheon must use
in order to perform the Manufacturing, solely to perform the Manufacturing.
Without limitation, Patheon agrees that it shall not

 

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use any such Client Intellectual Property or Client confidential information to
enable itself or any third party to develop, make, have made, offer, sell or
exploit the Products.

(b) All Inventions (including any and all Intellectual Property Rights therein)
conceived, generated, derived or reduced to practice by Patheon in the course of
performing the Manufacturing, to the extent it is related to the development,
Manufacture, packaging, use or sale of the Client’s Product that is the subject
of the Manufacturing or contains the Client’s confidential information, shall be
the exclusive property of Client. Patheon shall give the Client written notice,
as promptly as practicable, of all such Inventions, and all such Inventions
shall be deemed to be the confidential information of Client. Patheon hereby
makes, and agrees to make, any and all assignments necessary to effect,
exclusively and throughout the world, the ownership by the Client of Inventions
under Section 13.1(b). Patheon shall, and shall cause its employees and
contractors to, fully cooperate with and sign any documents reasonably requested
by the Client to evidence, perfect or take any other action with respect to such
assignments or to obtain protection, maintain or take any other action regarding
such assigned Inventions.

(c) All Intellectual Property generated or derived by Patheon in the course of
performing the Manufacturing to the extent it (i) is not related to the
development, Manufacture, packaging, use or sale of the Client’s Product that is
the subject of the Manufacturing and (ii) does not contain the Client’s
confidential information, shall be the exclusive property of Patheon (the
“Broader Intellectual Property Rights”). Patheon hereby grants and agrees to
grant to the Client a nonexclusive, transferable, perpetual, irrevocable, paid
up, royalty-free, worldwide right and license (including the right to
sublicense) to practice and use all Broader Intellectual Property Rights solely
in connection with ****

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

 

13.2 Intellectual Property.

Subject to Section 13.1, all Intellectual Property of the Client, including
without limitation any Intellectual Property that the Client owns prior to the
Effective Date, shall be owned by the Client and all Intellectual Property of
Patheon, including without limitation any Intellectual Property that Patheon
owns prior to the Effective Date, shall be owned by Patheon. Neither party has,
nor shall it acquire, any interest in any of the other party’s Intellectual
Property unless otherwise expressly agreed to in writing. Neither party shall
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. Except as expressly set forth in Section 13.1,
no licenses are granted by either party, whether by implication, estoppel or
otherwise, and all other rights are reserved.

 

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13.3 Insurance.

Each party shall maintain commercial general liability insurance, including
blanket contractual liability insurance covering the obligations of that party
under this Agreement through the term of this Agreement and for a period of ****
thereafter, which insurance shall afford limits of not less than (i) **** for
each occurrence for personal injury, bodily injury or property damage liability;
and (ii) **** in the aggregate per annum with respect to product and completed
operations liability. If requested each party will provide the other with 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 shall further provide for a
minimum of **** 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 on the part of such
party, then such party shall forthwith notify the other party in writing and the
parties shall in good faith negotiate appropriate amendments to the insurance
provision of this Agreement in order to provide adequate assurances, provided
that in no event shall such party terminate its insurance policies until such
amendments to the insurance provision of this Agreement that are mutually agreed
upon by the parties in writing are enacted.

 

13.4 Independent Contractors.

The parties are independent contractors and this Agreement shall not be
construed to create between Patheon and the 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 hereto.

 

13.5 No Waiver.

Either party’s failure to require the other party to comply with any provision
of this Agreement shall not be deemed a waiver of such provision or any other
provision of this Agreement. No waiver of any provision of this Agreement shall
bind either party unless in writing and signed by the party against which
enforcement is sought.

 

13.6 Assignment.

 

  (a) Patheon may not assign, transfer, delegate or subcontract this Agreement
or any of its rights or obligations hereunder except with the written consent of
the Client, such consent not to be unreasonably withheld; provided, however,
that Patheon may arrange for subcontractors solely to perform specific testing
services arising under this Agreement without the consent of the Client. Patheon
shall be responsible and liable for any breaches of this Agreement by its
subcontractors.

 

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  (b) Subject to Section 8.2(d), the Client may assign this Agreement or any of
its rights or obligations hereunder without approval from Patheon; provided,
however, that the Client shall give prior written notice of any assignment to
Patheon, and any assignee shall covenant in writing with Patheon to be bound by
the terms of this Agreement. ****.

 

  (c) Notwithstanding the foregoing provisions of this Section 13.6, either
party may assign this Agreement, without the consent of the other party, to any
of its Affiliates or to a successor to or purchaser of all or substantially all
of its business to which the subject matter of this Agreement relates, provided
that such party provides prior written notice of such assignment to the other
party and the assignee executes an agreement with the non-assigning party hereto
whereby it agrees to be bound hereunder.

 

13.7 Force Majeure.

Neither party shall be liable for the failure to perform its obligations under
this Agreement if such failure is occasioned by a cause or contingency beyond
such party’s reasonable control, including, but not limited to, strikes or other
labour 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 shall
promptly notify the other party in writing of the extent of its inability to
perform, which notice shall specify the occurrence beyond its reasonable control
that prevents such performance, and shall use commercially reasonable efforts to
overcome the Force Majeure Event. Notwithstanding the foregoing, if either party
is prevented or delayed in performing its obligations under this Agreement on
more than (i) **** or (ii) **** in the aggregate during any ****, then the party
not so affected may terminate this Agreement upon written notice to the affected
party. Neither party shall be entitled to rely on a Force Majeure Event to
relieve it from an obligation to pay money (including any interest for delayed
payment) which would otherwise be due and payable under this Agreement.

 

13.8 Additional Product.

Additional products may be added to this Agreement and such additional products
shall be governed by the general conditions hereof with any special terms
(including, without limitation, price) governed by an addendum hereto.

 

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13.9 Notices.

Any notice, approval, instruction or other written communication required or
permitted hereunder shall be sufficient if made or given to the other party by
personal delivery, by telecopier or facsimile communication or by sending the
same by first class mail, postage prepaid, return receipt requested to the
mailing address, or telecopier or facsimile number set forth below:

If to the Client:

Vanda Pharmaceuticals Inc.

2200 Pennsylvania Ave NW, Suite 300E

Washington, DC 20037

U.S.A.

Attention: Chief Financial Officer

Telecopier No.: ****

If to Patheon:

Patheon Pharmaceuticals Inc.

2110 East Galbraith Road

Cincinnati, OH 45237-1625

Attention: Director of Legal Services

Telecopier No.: ****

Email address: ****

With a copy to:

Patheon Inc.

4721 Emperor Boulevard

Research Triangle Park,

NC 27703

Attention: General Counsel

Telecopier No.: ****

Email address: ****

or to such other addresses or telecopier or facsimile numbers provided 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 by telecopier or
facsimile shall 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 or Canadian mail, postage prepaid, return receipt requested or
upon receipt, whichever is sooner.

 

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13.10 Severability.

If any provision of this Agreement is determined by a court of competent
jurisdiction to be invalid, illegal or unenforceable in any respect, such
determination shall not impair or affect the validity, legality or
enforceability of the remaining provisions hereof, and each provision is hereby
declared to be separate, severable and distinct.

 

13.11 Entire Agreement.

This Agreement, together with the Schedules, the Quality Agreement and the
Confidentiality Agreement, constitutes the full, complete, final and integrated
agreement between the parties hereto relating to the subject matter hereof and
supersedes all previous written or oral negotiations, commitments, agreements,
transactions or understandings with respect to the subject matter hereof. Any
modification, amendment or supplement to this Agreement must be in writing and
signed by authorized representatives of both parties. In case of conflict, the
prevailing order of documents shall be this Agreement, the Quality Agreement and
the Confidentiality Agreement.

 

13.12 Other Terms.

No terms, provisions or conditions of any purchase order or other business form
or written authorization used by the Client or Patheon will have any effect on
the rights, duties or obligations of the parties under or otherwise modify this
Agreement, regardless of any failure of the Client or Patheon to object to such
terms, provisions, or conditions. For greater certainty, the Client’s purchase
order is only effective as its unqualified commitment to obtain and pay for the
Manufacturing upon the terms (and only the terms) set forth herein.

 

13.13 No Third Party Benefit or Right.

For greater certainty, nothing in this Agreement shall confer or be construed as
conferring on any third party any benefit or the right to enforce any express or
implied term of this Agreement.

 

13.14 Execution in Counterparts.

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

 

13.15 Governing Law.

This Agreement shall be construed and enforced in accordance with the laws of
the State of ****, without regard to its conflicts of law provisions. The UN
Convention on Contracts for the International Sale of Goods shall not apply to
this Agreement. Unless expressly provided otherwise, each right and remedy in
this Agreement is in addition to any other right or remedy, at law or in equity,
and the exercise of one right or remedy will not be deemed a waiver of any other
right or remedy.

 

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

PATHEON PHARMACEUTICALS INC.

 

By  

    /s/ Dean Wilson

 

Name:   Dean Wilson   Title:   VP corporate controller   1/24/2014

VANDA PHARMACEUTICALS INC.

By

 

    /s/ M. H. Polymeropoulos, M.D.

 

Name:

  M. H. Polymeropoulos, M.D.  

Title:

  CEO  

 

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SCHEDULE A

PRODUCT LIST

Products

Hetlioz™ 20 mg Capsules in ****

Specifications

Prior to the commencement of commercial manufacturing of Product under this
Agreement, the Client shall provide Patheon with copies of the FDA approved NDA
Specifications. If the Specifications provided are subsequently amended, then
the Client shall provide Patheon with revised copies of such revised
Specifications. Upon acceptance of the revised Specifications pursuant to
Section 4.4, Patheon shall provide the Client with a signed and dated receipt
evidencing such acceptance of the revised Specifications by Patheon.

 

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SCHEDULE B

COMMERCIAL PRICING

****

 

              

****

****

  

****

  

****

  

****

  

****

  

****

****

   ****    ****    ****    ****    ****

****

   ****    ****    ****    ****    ****

****

   ****    ****    ****    ****    ****

****

 

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****

 

****

  

****

  

****

  

****

****

   ****    ****   

****

   ****    ****            

****

      ****   

****

         ****

****

 

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****

  

****

****

   ****

****

   ****

****

   ****

    ****

 

                ****   

****

                   

                ****

   ****            

                ****

   ****            

                ****

   ****            

                ****

   ****            

    ****

 

                ****   

****

                   

                ****

   ****            

                ****

   ****            

                ****

   ****            

                ****

   ****            

****

 

                                             ****   

****

  

****

  

****

****

   ****    ****    ****

****

   ****    ****    ****

****

   ****    ****    ****

 

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****

 

****

   

****

   

****

 

****

 

****

 

****

 

****

 

****

 

****

 

****

 

****

 

****

 

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SCHEDULE C

STABILITY TESTING

****

 

****    **** ****    **** ****   

 

****

  ****   ****   ****   ****   ****   ****   **** ****   ****   ****   ****  
****   ****   ****   **** ****   ****   ****   ****   ****   ****   ****   ****
****   ****   ****   ****   ****   ****   ****   **** ****   ****   ****   ****
  ****   ****   ****   **** ****   ****   ****   ****   ****   ****   ****  
**** ****   ****   ****   ****   ****   ****   ****   **** ****   ****   ****  
****   ****   ****   ****   **** ****   ****   ****   ****   ****   ****   ****
  **** ****   ****   ****   ****   ****   ****   ****   **** ****   ****   ****
  ****   ****   ****   ****   **** ****   ****   ****   ****   ****   ****  
****   **** ****   ****   ****   ****   ****   ****   ****   **** ****   ****  
****   ****   ****   ****   ****   ****

 

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SCHEDULE D

 

                            ****                                **** ****   
****

****

 

  

****

  

****

****    **** ****   

 

****                                                                            
****

 

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SCHEDULE E

BATCH NUMBERING & EXPIRATION DATES

****

 

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SCHEDULE F

TECHNICAL DISPUTE RESOLUTION

****

 

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****

 

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SCHEDULE G

QUALITY AGREEMENT

 

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SCHEDULE H

QUARTERLY ACTIVE MATERIALS INVENTORY REPORT

****

 

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SCHEDULE I

REPORT OF ANNUAL ACTIVE MATERIALS INVENTORY RECONCILIATION AND

CALCULATION OF ACTUAL ANNUAL YIELD

****

 

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****

 

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