Document:

exv10w4

 

Confidential

Exhibit 10.4

***Text Omitted and Filed Separately

with the Securities and Exchange Commission.

Confidential Treatment Requested

Under 17 C.F.R. Sections 200.80(b)(4)

and 240.24b-2.

MASTER PURCHASE AGREEMENT

by and between

Dot Hill Systems, B.V.

with a place of business at

Marssteden 95, 7547 TD Enschede, The Netherlands

and Dot Hill Systems Corp.

with a place of business at

6305 El Camino Real, Carlsbad, CA 92009

as well as all its subsidiaries

(-hereinafter collectively “VENDOR”-)

and

Fujitsu Siemens Computers GmbH

with a place of business at

Domagkstrasse 28, 80807 München, Germany

and RELATED COMPANIES

(-hereinafter “FSC”-)

(FSC and VENDOR are also referred to hereinafter singularly as “Party” or together as “Parties”)

Effective Date: January 13, 2006

Page 1 of 21

 

RECITALS

	(A)	 	Whereas, VENDOR owns and manufactures products defined below as CP in which FSC is
interested to buy for its own use and for SELLING PURPOSES.
	 	 	 
	(B)	 	Whereas, VENDOR is willing to deliver such CP to FSC in accordance with the terms and subject
to the conditions stated herein.
	 	 	 
	(C)	 	Whereas FSC shall be entitled to resell such CP to other parties.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged,

THE PARTIES HEREBY AGREE AS FOLLOWS:

	1.	 	DEFINITIONS
	 
	 	 	“AGREEMENT” shall mean this AGREEMENT and all attached ANNEXES, all documents or
DOCUMENTATION referenced in this AGREEMENT, and all numbered Amendments to this AGREEMENT
that are executed by authorized representatives of the PARTIES in the future.
	 
	 	 	“CONFIRMED DELIVERY DATE” is the date for delivery of CP according to agreed Incoterms that
has been confirmed by VENDOR.
	 
	 	 	“CONFIDENTIAL INFORMATION” shall mean information and data of a confidential nature,
whether in oral, written or electronic form or any other form whatsoever, including but not
limited to business, commercial, research, developmental, manufacturing, operating,
performance, process, product and any other technical information, know how, intellectual
property rights, samples, models, apparatus and all data bearing media containing or
disclosing such information and techniques which are made available pursuant to this
Agreement and includes the provisions of this Agreement and the subject matter relating
thereto.
	 
	 	 	“CP” shall mean the Contractual Product(s) presently named as stated, described and
specified in ANNEX 1 CONTRACTUAL PRODUCTS and ANNEX 2 DOCUMENTATION, including all future
improvements or modifications to same that are made available by VENDOR to FSC under this
AGREEMENT. CP shall mean complete equipment(s), units, FRUs, Spare Parts, and SOFTWARE
incorporated therein -if any.
	 
	 	 	“DOCUMENTATION” shall mean any SYSTEM DOCUMENTATION, USER DOCUMENTATION and other
documentation that is related to the CP as listed in ANNEX 2 DOCUMENTATION.
	 
	 	 	“EMS” (Electronic Manufacturing Service) /”ODM” (Original Design Manufacturer) shall mean
any third party to this agreement who manufactures products for FSC.
	 
	 	 	“EFFECTIVE DATE” shall mean the date stated on the cover page or — if unspecified — the
last-to-occur date of the signing of this AGREEMENT by the PARTIES.

Page 2 of 21

 

	 	 	“EPIDEMIC FAILURE” shall mean defects or malfunctions in the CPs exceeding the failure
rates or percentages detailed in ANNEX 7 QUALITY ASSURANCE.
	 
	 	 	“FRU” or “Field Replaceable Unit” shall mean a subassembly of a CP, or Spare Part, which
can be replaced at the customer site.
	 
	 	 	“INVENTORY” shall mean CPs in stock at the premises of FSC which are in the ownership of
FSC.
	 
	 	 	“ORDERING PROCEDURE” means the procedure specified in section 2 of this AGREEMENT.
	 
	 	 	“REQUESTED DELIVERY DATE” is the date that FSC has requested for the delivery of an order
placed by FSC to VENDOR.
	 
	 	 	“RELATED COMPANIES” shall mean subsidiaries of Fujitsu Siemens Computers (Holding) B.V.,
Netherlands and its subsidiaries. For the purpose of this definition, “subsidiaries” shall
mean companies in which a parent company has the majority of votes and/or stock.
	 
	 	 	“SELLING PURPOSES” in the context of this AGREEMENT shall include the right of FSC to sell
or resell CP on its own or to incorporate CP into other products of FSC.
	 
	 	 	“SOFTWARE” –if any- shall mean any computer software program in machin-readable form made
available by VENDOR to FSC.
	 
	 	 	“SPARE PARTs” shall mean those are listed in the BASIC SPARE PARTS LIST as attached to
ANNEX 6 SPARE PARTS AND REPAIR.
	 
	 	 	“SYSTEM DOCUMENTATION” shall mean the current and updated version(s) of the technical
documentation for the manufacturing, engineering and maintenance of CP as well as packaging
and transportation instructions, as listed in ANNEX 2 DOCUMENTATION.
	 
	 	 	“USER DOCUMENTATION” shall mean all User Manuals and/or Reference Guides for the CP as
described in ANNEX 2 DOCUMENTATION as updated upon notification.
	 
	 	 	“WARRANTY PERIOD” is the period of time, starting at the date of first delivery from VENDOR
to FSC, during which CPs are warranted by VENDOR and which is specified in ANNEX 1
CONTRACTUAL PRODUCTS.
	 
	2.	 	ORDERING PROCEDURE
	 
	2.1	 	Purchase order(s) shall be placed by FSC in accordance with the provisions of this Section 2
of the AGREEMENT.
	 
	2.1.1	 	FSC written or electronic purchase order(s) shall be issued in the scope of this AGREEMENT
and shall then form the basis of VENDOR’s delivery obligations.
	 
	 	 	Each purchase order will include the following particulars:

Page 3 of 21

 

	 	 	Purchase Order number and date

	 	-	 	CP quantity to be delivered
	 
	 	-	 	Specification number and revision level
	 
	 	-	 	Part number and revision level
	 
	 	-	 	Item description
	 
	 	-	 	Unit price
	 
	 	-	 	REQUESTED DELIVERY DATE
	 
	 	-	 	Shipping instructions and delivery place

	 	 	FSC may also issue purchase order(s) under this Agreement for services or Spare Parts that
are to be performed by VENDOR pursuant to the terms and conditions set forth on ANNEX 6.
	 
	 	 	All other terms and conditions on any purchase orders submitted under this Agreement shall
be void and of no effect.
	 
	2.1.2	 	VENDOR shall accept each purchase order in writing or by electronic means [***] or reject
such purchase order within the same time frame, but only if it is not in conformance with the
terms and conditions of this AGREEMENT.
	 
	2.1.3	 	The confirmation of each purchase order will include the following particulars:

	 	-	 	purchase order number and date
	 
	 	-	 	CP quantity to be delivered
	 
	 	-	 	Item description
	 
	 	-	 	VENDOR Part number
	 
	 	-	 	Unit price
	 
	 	-	 	CONFIRMED DELIVERY DATE

	 	 	In the event that the confirmation does not state a CONFIRMED DELIVERY DATE, the REQUESTED
DELIVERY DATE shall be deemed to be the CONFIRMED DELIVERY DATE. All orders will be
governed by this Agreement regardless of whether an order references this Agreement.
	 
	2.1.4	 	If the Purchase Order is neither expressly accepted nor rejected within the period stated in
Section 2.1.2 of this AGREEMENT, it shall be deemed accepted. Acceptance or rejection notices
shall be sent to the respective departments/personnel to be designated by the Parties for this
purpose.
	 
	2.1.5	 	Emergency Orders
	 
	 	 	FSC may purchase [***] on an emergency basis and VENDOR [***]. Deliveries of emergency
orders shall be effected separately according to the Lead Times stated in ANNEX 3 FORECAST,
LEAD TIMES. If VENDOR is the party to arrange for shipping, VENDOR will provide the
dispatch data to FSC after shipment (flight number, AWB-number, Bill of Lading by FAX).
FSC shall be notified by VENDOR when shipments have been delivered to VENDOR’s carrier.
	 
	2.1.6	 	Cancellation or Rescheduling
	 
	 	 	Even after acceptance of a purchase order FSC may cancel or reschedule such purchase order
in writing [***] pursuant to the terms in ANNEX 3. Details, in particular cancellation or
rescheduling charges, if any, are specified in ANNEX 3 FORECAST, LEAD TIMES.

***CONFIDENTIAL TREATMENT REQUESTED

Page 4 of 21

 

	2.1.7	 	Forecast
	 
	 	 	FSC will provide a non-binding rolling forecast regarding its requirement of CP for
VENDOR’s planning purposes only. The details are stated in ANNEX 3 FORECAST, LEADTIMES.
	 
	2.1.8	 	Lead times
	 
	 	 	Lead times for CP are stated in ANNEX 3 FORECAST, LEAD TIMES.
	 
	2.2	 	Drop Shipments
	 
	 	 	Only upon expressly written FSC instruction and upon VENDOR’s mutual agreement shall VENDOR
make direct deliveries to FSC customers. Should drop shipments be requested by FSC, the
procedure for the execution of and agreement upon such shipments is defined in ANNEX 14
DROP SHIPMENT.
	 
	2.3	 	In order to optimize the supply-chain process, the Parties will co-operate in establishing an
e-planning and e-ordering system. Provided the purchasing volume reaches a reasonable level,
the Parties agree to invest the necessary resources and to review each others requirements to
set up the e-planning and e-ordering process, subject to mutual agreement on the necessary
technical infrastructure and, if necessary, commercial terms and conditions.
	 
	3.	 	DELIVERY
	 
	3.1	 	VENDOR shall deliver the CP according to the ORDERING PROCEDURE to the designated delivery
place at the CONFIRMED DELIVERY DATE according to the lead times set out in Annex 3
FORECAST, LEAD TIMES. Delivery shall be affected according to Incoterms as specified in ANNEX
1 CONTRACTUAL PRODUCTS.
	 
	3.2	 	VENDOR shall comply with FSC directions concerning carrier(s) and means of transportation or
routing. If FSC fails to indicate a specific carrier, VENDOR shall itself arrange for
appropriate and agreed transportation.
	 
	3.3	 	In those instances where VENDOR is responsible for arranging for shipment, prior to each
shipment VENDOR shall notify FSC in writing of the dispatch data (e.g. flight number, AWB
number, bill of lading). VENDOR shall notify FSC when a shipment has been delivered to FSC’s
carrier.
	 
	3.4	 	[***], VENDOR shall keep records of the shipment(s) and the related serial numbers and shall
make them available to FSC on request.
	 
	3.5	 	Each shipment shall be accompanied with the appropriate shipping papers. All shipping papers
and related invoices must inter alia state the correct purchase order number, and the FSC
material number. VENDOR’s shipping containers and packing slips shall include the serial
numbers of CPs shipped.

***CONFIDENTIAL TREATMENT REQUESTED

Page 5 of 21

 

	3.6	 	Late Delivery
	 
	 	 	Should circumstances arise and become recognizable to VENDOR which may lead to a late
delivery, VENDOR shall notify FSC [***].
	 
	 	 	If Vendor fails to meet the CONFIRMED DELIVERY DATE for CPs which was not subsequently
rescheduled or reconfigured at the request of FSC, and such failure is not cured [***], FSC
may cancel the shipment.
	 
	 	 	[***] in meeting a respective CONFIRMED DELIVERY DATE, then FSC may elect to [***].
	 
	 	 	If Vendor fails to meet the CONFIRMED DELIVERY DATE for CPs which was not subsequently
rescheduled or reconfigured at the request of FSC, and FSC informs VENDOR [***] about
existing FSC customer orders which would [***], and if FSC is actually required [***], then
VENDOR agrees to [***].
	 
	4.	 	TITLE, RISK OF LOSS
	 
	 	 	If not otherwise agreed, title and risk of loss shall pass per terms and site specified by
the agreed Incoterm.
	 
	5.	 	PRICES
	 
	5.1	 	Prices for CP are set out in in the Price List (ANNEX 1 CONTRACTUAL PRODUCTS), are quoted in
US-$ and are net prices unless specified otherwise. The prices for CP are on basis of the
respective Incoterm agreed in ANNEX 1 CONTRACTUAL PRODUCTS and include appropriate packaging
suitable for airfreight or seafreight, whichever way of transportation has been agreed upon or
is stated in the purchase order. Prices do not include, and [***]. Notwithstanding the
foregoing, [***].
	 
	5.2	 	The prices stated in the Price List shall be updated [***]. In the event that there are
major changes in the market conditions and/or prices for such or similar products or if there
are major changes in the market conditions and/or prices of materials, labor or overhead costs
used by VENDOR or otherwise related to the manufacture of the CP, [***].
	 
	5.3	 	If the PARTIES [***], FSC may [***]. Notwithstanding such [***], VENDOR shall [***]

***CONFIDENTIAL TREATMENT REQUESTED

Page 6 of 21

 

	 	 	[***].
	 
	5.4	 	VENDOR will provide FSC with a price forecast covering [***] in advance, which will be
updated [***]. The applicable price is the price of the day upon which ownership of CP is
being transferred to FSC according to the agreed upon Incoterms.
	 
	5.5	 	Omitted.
	 
	6.	 	PAYMENT
	 
	6.1	 	Payment shall be due [***]. Data bearing material (e.g. tapes, floppies) shall be [***]. If
FSC makes any payment due [***].
	 
	6.2	 	Payment shall not constitute acceptance of the CP by FSC. FSC reserves the right to deduct
any amounts due to FSC.
	 
	6.3	 	Deleted
	 
	6.4	 	Either Party shall be entitled to set off any amounts due from the other under this Agreement
or any other existing contracts.
	 
	6.5	 	Withholding of German tax will be handled according to the Double Taxation Convention if
existing- between VENDOR’s country and Germany. In such case VENDOR may be required to provide
a certificate of tax exemption from the German Tax Authorities with respect to such license
fees required to be paid by FSC to VENDOR in order to avoid the imposition of such German
withholding taxes. Unless such certificate is submitted by VENDOR to FSC, FSC may be obligated
to withhold respective German tax amounts thereon.
	 
	7.	 	TRADENAMES, TRADEMARKS, IDENTIFICATION, DOCUMENTATION
	 
	7.1	 	FSC shall use and market CP under its own trade name, trademarks, symbol, logo and shall not
use VENDOR’s trade names, trademarks, symbols, logos without prior written approval of VENDOR.
	 
	7.2	 	VENDOR grants FSC a limited, personal, non-exclusive, non-transferable license, to use the
SYSTEM DOCUMENTATION for FSC own business purposes according to this AGREEMENT, including
to revise or have revised, to reproduce or have reproduced or to private label the SYSTEM
DOCUMENTATION in unaltered or altered form. Notwithstanding the foregoing, FSC shall obtain
VENDOR’s prior written consent to revise or alter the substance of the SYSTEM DOCUMENTATION,
which consent shall not be unreasonably withheld.
	 
	7.3	 	VENDOR grants FSC a limited, personal, non-exclusive license, to reproduce or have
reproduced, to use or have used or to apply an FSC-brand the USER

***CONFIDENTIAL TREATMENT REQUESTED

Page 7 of 21

 

	7.4	 	DOCUMENTATION in unaltered or altered form and to revise or have revised and to
translate or have translated such USER DOCUMENTATION. FSC shall be entitled to grant its
customers or distributors the non-exclusive, non-transferable right to use the USER
DOCUMENTATION. Notwithstanding the foregoing, FSC shall obtain VENDOR’s prior written
consent to revise or alter the substance of the USER DOCUMENTATION, which consent shall not
be unreasonably withheld.
	 
	7.5	 	VENDOR shall permanently affix its serial number on CP for identification purposes at a
location mutually agreed to.
	 
	8.	 	QUALITY ASSURANCE; TEST REQUIREMENTS; INTELLECTUAL PROPERTY RIGHTS; MARKETING FUNDS
	 
	8.1	 	Each Party agrees to comply with its obligations relating to quality assurance as set out in
ANNEX 2 DOCUMENTATION and ANNEX 7 QUALITY ASSURANCE.
	 
	8.2	 	Each Party agrees to comply with its testing obligations as set out in ANNEX 15 TEST
REQUIREMENTS.
	 
	8.3	 	Each Party agrees to comply with packaging and labeling obligations of CP as set out in ANNEX
16 PACKAGING AND LABELING.
	 
	8.4	 	The Parties agree that the terms and conditions set forth in ANNEX 18 INTELLECTUAL PROPERTY
RIGHTS shall govern ownership and other rights regarding intellectual property created under
this AGREEMENT.
	 
	8.5	 	The Parties agree to be bound by the terms and conditions set forth in ANNEX 19 MARKETING
FUNDS regarding the provision of marketing funds by VENDOR to FSC.
	 
	9.	 	DEAD ON ARRIVAL
	 
	9.1	 	FSC may perform inspection/test at a FSC facility or the place of destination or in FSC
customer field based on random samples.
	 
	9.2	 	In the event that

	 	a)	 	FSC finds out in such inspection/test that CP does not fully conform in all
material respects to the specification stated in ANNEX 1 CONTRACTUAL PRODUCTS, the
standards and criteria stated in ANNEX 7 QUALITY ASSURANCE and VENDOR’s USER
DOCUMENTATION, and VENDOR’s feature description -if any-, attached to or made part of
ANNEX 2 DOCUMENTATION, or
	 
	 	b)	 	CP cannot be put into initial operation within the time frame defined in
Appendix 1 to ANNEX 7 QUALITY ASSURANCE.

	 	 	FSC will notify VENDOR without undue delay, in order to accelerate the correction.
	 
	9.3	 	Furthermore, in a Dead On Arrival situation, FSC may – in addition to its rights under
Section 16 Product Warranty:

Page 8 of 21

 

	 	1)	 	after prior written agreement: [***] or
	 
	 	2)	 	return such CP to VENDOR [***], or
	 
	 	3)	 	request VENDOR to replace affected CP, or
	 
	 	4)	 	If the DOA defect rates exceed the values (dpm) as specified in Appendix 1 to
ANNEX 7 QUALITY ASSURANCE, VENDOR will [***].

	10.	 	SPARE PARTS, REPAIR
	 
	 	 	VENDOR shall deliver SPARE PARTS to FSC and carry out a Repair Service for the CPs and
SPARE PARTS according to the terms and conditions stipulated under ANNEX 6 SPARE PARTS &
REPAIR.
	 
	11.	 	SOFTWARE
	 
	11.1	 	The provisions relating to SOFTWARE as specified in ANNNEX 5 SOFTWARE shall apply.
	 
	11.2	 	VENDOR warrants that none of the SOFTWARE supplied to FSC –if any- is or includes open source
software.
	 
	12.	 	EMERGENCY MANUFACTURING RIGHTS
	 
	 	 	VENDOR agrees to grant FSC Emergency Manufacturing Rights as specified in and according to
the terms and conditions stated in ANNEX 8 EMERGENCY MANUFACTURING RIGHT.
	 
	13.	 	INFRINGEMENT OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS
	 
	13.1	 	VENDOR warrants that VENDOR is the owner of or has the right to license to FSC all rights,
title, and interest in and to the CP listed in ANNEX 1 CONTRACTUAL PRODUCTS and to the
DOCUMENTATION listed in ANNEX 2 DOCUMENTATION and any other documentation provided by VENDOR
under this Agreement, and that there are no infringement claims, disputes, or proceedings
pending or anticipated which may detrimentally affect either the rights granted to FSC
hereunder or the warranties and representation made to FSC under this Section 13.1.
Notwithstanding the foregoing, [***]. The Parties acknowledge and agree that the sole and
exclusive remedy for FSC, and sole and exclusive obligation of VENDOR, with respect to a
breach of this warranty is the infringement indemnification provisions that are set forth
below in Section 13.2.
	 
	13.2	 	VENDOR agrees to defend, indemnify and hold FSC and its RELATED COMPANIES its distributors
and its/their customers harmless from any and all claims, proceedings, cost, expenses,
damages, penalties, and losses (including

***CONFIDENTIAL TREATMENT REQUESTED

Page 9 of 21

 

	 	 	reasonable attorneys’ fees) resulting from any breach of the above warranty in section 13.1,
provided that FSC:

	 	1)	 	notifies VENDOR in writing of all such claims, disputes or and/or proceedings
[***];
	 
	 	2)	 	provides VENDOR with [***]; and
	 
	 	3)	 	[***].

	13.2(a) 	To the extent that VENDOR may do so without violating an obligation of confidentiality or
other similar obligation to a third party, VENDOR shall give FSC prompt written notice of any
and all claims, disputes, proceedings or threats of the same, involving the infringement by
the CPs or Spare Parts of any third party intellectual property rights Without prejudice to
the indemnity obligations of VENDOR as set forth in Section 13.2, the parties will promptly
confer regarding any such claims, disputes, proceedings or threats, and mutually agree upon a
reasonable plan of action with respect to the circumstances.
	 
	13.3	Independent of the foregoing, in the event that VENDOR is enjoined by a court from
distributing or marketing any CP, VENDOR shall use its best reasonable efforts to, at VENDOR’s
option:

	 	1)	 	acquire from such third party a license grant for the intellectual property
right in question at VENDOR’s cost; or
	 
	 	2)	 	replace such infringing CP by non-infringing CP; or
	 
	 	3)	 	take back such enjoined CP and reimburse the related purchase price to FSC
[***].

	13.4	 	VENDOR shall not be responsible for solving any infringement of CP concerning third party’s
intellectual property right(s) caused by or resulting from FSC or FSC customer(s) ́
modification of CP or caused by the combination of the CP with other equipment but only where
the combination of the CP with other equipment renders the CP to be a component of a different
type of equipment and it is the new or different type of the equipment that is infringing.
	 
	14.	 	NECESSARY LICENSE FOR IMPORTATION
	 
	14.1	 	VENDOR warrants that it has all necessary licenses (including without limitation patent,
trademark, logo and any other intellectual property rights of whatsoever nature and however
existing) with the relevant third party licensors required for the import of the CP and
DOCUMENTATION to deliver within the EU (“Necessary Licenses”).
	 
	14.2	 	VENDOR agrees to provide FSC with written proof which is reasonably satisfactory to FSC of
all Necessary Licenses or written confirmation that

***CONFIDENTIAL TREATMENT REQUESTED

Page 10 of 21

 

	 	 	Necessary Licenses are not required [***]. For the avoidance of doubt, failure to provide
such information shall be deemed to be a severe breach of this Agreement under 27.2
allowing FSC to terminate this Agreement pursuant to the provisions as set out in section
27.
	 
	14.3	 	VENDOR agrees to defend, indemnify and hold FSC and its RELATED COMPANIES, its distributors
and its/their customers harmless from any and all claims, proceedings, costs, expenses,
damages, penalties and losses including without limitation reasonable attorney’s fees, costs
arising from disruptions at FSC’s factory sites, additional transportation charges, costs of
securing replacement goods and other losses resulting from a breach of the above warranty in
section 14.1 provided that FSC:

	 	1)	 	notifies VENDOR of any such claim, dispute or proceeding [***]; and
	 
	 	2)	 	[***]

	15.	 	[***]
	 
	15.1	 	VENDOR acknowledges, that FSC is [***]

	a)	 	CP that are [***] and
	 
	b)	 	[***]. 

	15.2	 	VENDOR warrants, that all CPs are [***]. VENDOR shall deliver the related [***]. VENDOR
agrees to indemnify FSC for all damages that result from CP [***].
	 
	16.	 	PRODUCT WARRANTY
	 
	16.1	 	VENDOR warrants that the New CPs (as opposed to refurbished) when first delivered by VENDOR
to FSC are new, that they meet in all material respects all of the specifications and
standards agreed upon by VENDOR and FSC hereunder as set forth in ANNEX 1 CONTRACTUAL
PRODUCTS, ANNEX 2 DOCUMENTATION, ANNEX 7 QUALITY ASSURANCE, ANNEX 9 STANDARDS and
ENVIRONMENTAL PROTECTION and that they are free from defects in design, material and
workmanship.
	 
	16.2	 	FSC will use its reasonable efforts to identify the defects prior to advising VENDOR of the
defects and requiring VENDOR’s technical involvement to correct such defects. In the event any
defect in the CPs is discovered and reported by FSC to VENDOR within the WARRANTY PERIOD,
VENDOR agrees to correct such defects at VENDOR’s costs and expense following receipt of
notice thereof.

***CONFIDENTIAL TREATMENT REQUESTED

Page 11 of 21

 

	 	 	In particular, during the WARRANTY PERIOD, FSC may return

	 	a)	 	defective CP for RMA handling. VENDOR shall choose one of the
following options at its sole discretion, whereas the provisions and processes
described in Attachment 2 to ANNEX 6 shall apply accordingly :

	 	•	 	VENDOR shall repair such defective CP or
	 
	 	•	 	VENDOR shall deliver to FSC an equivalent CP to replace such defective CP or
	 
	 	•	 	VENDOR shall deliver to FSC the FRU(s) or Spare Part(s) necessary to repair
the CP or
	 
	 	•	 	VENDOR shall refund the purchase price FSC paid for the defective CP

	 	 	or

	 	b)	 	defective parts which FSC has removed from warranted CP. VENDOR
shall choose one of the following options at its sole discretion, whereas the
provisions and processes described in Attachment 2 to ANNEX 6 shall apply accordingly:

	 	•	 	repair the defective parts which FSC has removed from warranted CP or
	 
	 	•	 	replace/exchange defective parts or
	 
	 	•	 	refund the purchase price for a respective new parts

	 	 	The Parties understand and agree that when appropriate, VENDOR will require that FSC return
and VENDOR repair or replace a defective Spare Part or FRU as opposed to the return of an
entire CP.
	 
	16.3	 	Replaced or repaired CP and replaced or repaired parts thereof are warranted for [***].
	 
	16.4	 	Warranty handling shall be within the lead times defined in ANNEX 3 FORECAST, LEAD TIMES.
	 
	16.5	 	OMITTED.
	 
	16.6	 	Notwithstanding anything to the contrary, the foregoing warranty does not apply to any CP or
Spare Part that: (i) has been damaged by accident, misuse, negligence or external factors such
as failure or fluctuation of electrical power, fire or flood; (ii) for defects caused by or
resulting from unauthorized modification of CP; or (iii) for defects that are directly caused
by VENDOR’s adherence to specifications provided to VENDOR by FSC.
	 
	16.7	 	Upon written request by FSC VENDOR agrees, when it is legally able, to provide to FSC [***]
as stated in the respective section of ANNEX 6 SPARE PARTS & REPAIR.
	 
	16.8	 	In case a reseller of the CPs supplied under this Agreement is liable to any other reseller
or directly to the end user customer (consumer) because of the CP’s lack

***CONFIDENTIAL TREATMENT REQUESTED

Page 12 of 21

 

	 	 	of conformity to a publicly advertised certification or compatability that VENDOR has agreed to
meet under this AGREEMENT, VENDOR will accept the return of the CPs and refund any amounts
paid to VENDOR for the CPs, provided, however, that VENDOR is notified of the issue [***].
This section is not intended to conflict with or supercede any warranty provisions for
technical issues; this section is meant to cover instances where a CP is technically sound,
but does not comply with published certifications or other similar representations that VENDOR
has agreed upon in its provision of the CPs to FSC under this AGREEMENT. Notwithstanding the
foregoing, this shall not apply where the CP has been modified and the lack of conformity is
based on or arises or results from such modification.
	 
	16.9	 	If FSC makes any warranties to customers or other third parties that are contrary to,
inconsistent with, or greater than the warranties given by VENDOR herein, VENDOR shall not be
bound by such warranties and FSC shall indemnify and hold harmless VENDOR from any claims
brought against VENDOR based on such FSC warranties.
	 
	16.10	 	The foregoing warranties extend to FCS only. [***].
	 
	17.	 	EPIDEMIC FAILURES AND MISLEADING STATEMENTS
	 
	 	 	EACH PARTY SHALL BE RESPONSIBLE TO PERFORM ITS OBLIGATIONS FOR EPIDEMIC FAILURES IN
ACCORDANCE WITH THE TERMS AND SUBJECT TO THE CONDITIONS SET FORTH IN ANNEX 7 QUALITY
ASSURANCE.
	 
	18.	 	MISLEADING PUBLIC STATEMENTS
	 
	 	 	In case of public statements by VENDOR or any of his partners, such as — but not limited to
 — marketing and advertising statements concerning the CPs supplied to FSC, VENDOR shall
indemnify FSC for all damages and liabilities, which customers of FSC are able to recover
against FSC, in the event such public statements turn out to be false or misleading.
	 
	19.	 	PRODUCT LIABILITY INDEMNIFICATION
	 
	19.1	 	Subject to limitations of liability and other terms and conditions set forth herein, VENDOR
agrees to defend, indemnify and hold FSC and its RELATED COMPANIES harmless from any and all
claims, proceedings, cost, expenses, damages and losses (including reasonable attorneys’ fees)
to the extent based upon design or manufacturing defects in the CPs that result in bodily
injury, death or damage to tangible or real property (“Product Liability”).
	 
	19.2	 	VENDOR shall not be liable if, and to the extent, CPs have been improperly installed,
operated, used or maintained by FSC or FSC’s customers or any third party other than VENDOR.

***CONFIDENTIAL TREATMENT REQUESTED

Page 13 of 21

 

	19.3	 	Vendor shall secure and maintain a product liability insurance policy, providing for levels
of coverage that are reasonable and in keeping with those typically provided for in the
industry, for Product Liability exposure to third parties resulting from defective CP supplied
by VENDOR to FSC. At FSC’s request, VENDOR shall provide FSC a copy of the insurance policy.
	 
	20.	 	LIMITATION OF LIABILITY
	 
	20.1	 	THE WARRANTIES OF VENDOR AS EXPRESSED IN THIS AGREEMENT AND ANNEXES ARE IN LIEU OF ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND ALL SERVICES, CPS, SPARE PARTS, OTHER
MATERIALS OR INFORMATION ARE PROVIDED “AS IS.” THE SAME APPLIES MUTATIS MUTANDIS FOR FSC.
	 
	20.2	 	WITH THE EXCLUSION OF WILLFUL OR GROSS NEGLIGENT CONDUCT, PERSONAL INJURY, DEATH, REAL
PROPERTY DAMAGE, LIABILITY THAT IS MANDATORY UNDER APPLICABLE LAW OR INDEMNIFICATION
OBLIGATIONS ACCORDING TO SECTION 13 (INFRINGEMENT OF THIRD PARTY INTELLECTUAL PROPERTY
RIGHTS), VENDOR AND FSC EXCLUDE VIS-à-VIS EACH OTHER ANY AND ALL LIABILITY FOR ALL INDIRECT,
INCIDENTAL, EXEMPLARY AND CONSEQUENTIAL DAMAGES (SUCH AS LOSS OF PROFIT; LOSS OF DATA; LOSS OF
REVENUES; LOSS OF GOOD WILL; AND VALUE ASSOCIATED WITH LOSS OF REPUTATION and; LOSS OF
CONTRACT).
	 
	20.3	 	The Parties acknowledge and agree that the amounts payable under this AGREEMENT have been
established based upon the liability limitations set forth herein, and further agree that these
limitations shall apply notwithstanding any failure of essential purpose or of any limited
remedy.
	 
	21.	 	TECHNICAL AND ENGINEERING CHANGES
	 
	21.1	 	Technical and engineering changes to CP may only be performed by VENDOR in accordance with
the procedures detailed in ANNEX 10 TECHNICAL CHANGES.
	 
	21.2	 	VENDOR must supply quantities of changed CPs necessary for testing or qualification as
mutually agreed upon free of charge to FSC.
	 
	22.	 	NON-DISCLOSURE
	 
	22.1	 	FSC agrees to maintain in confidence any and all CONFIDENTIAL INFORMATION delivered by VENDOR
to FSC. Such information required to be held in confidence shall, if in writing, be marked
“Confidential”. Oral information that is confidential shall be reduced to writing and marked
“Confidential”, and forwarded to FSC [***]. FSC may disclose CONFIDENTIAL INFORMATION to such
employees of FSC or third parties contracting with FSC as may be necessary in the design,
manufacture, service, distribution, and licensing -if any-, of the CP, but only, if they are bound by confidentiality obligations at least as stringent
as stated herein.

***CONFIDENTIAL TREATMENT REQUESTED

Page 14 of 21

 

	22.2	 	The obligations hereunder shall not apply to information which is or becomes public domain;
or is received by FSC from a third party without confidentiality obligation to VENDOR; is
known by FSC without use of VENDOR’s CONFIDENTIAL INFORMATION; is independently developed
by FSC without use of VENDOR’s CONFIDENTIAL INFORMATION; or that must be disclosed by law
so long as FSC gives VENDOR prompt notice of such legal requirement.
	 
	22.3	 	The obligations in SECTION 22.1 shall apply mutatis mutandis to CONFIDENTIAL INFORMATION
delivered or made available by FSC to VENDOR.
	 
	22.4	 	The non-disclosure obligations in SECTIONS 22.1 and 22.2 shall expire [***]. Notwithstanding
the foregoing, any obligations of confidentiality with respect to information disclosed to FSC
pursuant to [***].
	 
	22.5	 	Press releases or other information on the conclusion/content of this AGREEMENT shall only be
made available to third parties/press agencies with the prior written consent of the other
PARTY hereto. Notwithstanding the foregoing, each Party may make disclosures regarding this
AGREEMENT without the prior written consent of the other Party to the extent that such
disclosures are legally required by the party (including any requirements imposed by the
United States Securities and Exchange Commission regarding the disclosure of information) but
only if the disclosing Party has given the other party notice of the requirement and an
opportunity to discuss the circumstances and depth of disclosure with the disclosing Party.
The Parties acknowledge that often such legally required disclosures must be made quickly, and
the time period between notification and the need to disclose may be limited.
	 
	23.	 	TECHNICAL SUPPORT AND TRAINING
	 
	23.1	 	VENDOR agrees to provide training and technical support to FSC according to the provisions of
ANNEX 12 TECHNICAL SUPPORT AND TRAINING.
	 
	23.2	 	Maintenance for CP may be performed by FSC and VENDOR shall give support for REPAIR as stated
in ANNEX 6 SPARE PARTS AND REPAIR. FSC shall be entitled to buy SPARE PARTS according to the
terms and conditions stated in ANNEX 6 SPARE PARTS & REPAIR and resell them to FSC service
partners, e.g. to third party repairers.
	 
	24.	 	GOVERNING LAW AND ARBITRATION
	 
	24.1	 	This AGREEMENT shall be governed by and construed in accordance with the laws of the State of
New York, USA. The United Nations Convention on the International Sale of Goods (CISG) shall
not apply. With regard to the validity and scope of intellectual property rights the law of
the country shall apply, where such intellectual property rights have been originated and/or
registered.
	 
	24.2	 	All disputes arising out of or in connection with the present agreement, including any
questions regarding its existence, validity or termination, shall be finally settled by
binding arbitration under the American Arbitration Association (the “Rules”) by three
arbitrators in accordance with said Rules.

***CONFIDENTIAL TREATMENT REQUESTED

Page 15 of 21

 

	24.3	 	Each Party shall nominate one arbitrator for confirmation by the competent authority under
the applicable Rules (Appointing Authority). The two appointed arbitrators shall agree on the
third arbitrator [***]. Should the two arbitrators fail, within the above time-limit, to reach
agreement on the third arbitrator, he shall be appointed by the Appointing Authority. If there
are two or more defendants, any nomination of an arbitrator by or on behalf of such defendants
must be by joint agreement between them. If such defendants fail, within the time-limit fixed
by the Appointing Authority, to agree on such joint arbitrators the Appointing Authority may
appoint such joint arbitrator. The arbitrators must have sufficient experience in the IT
industry and in international business transactions
	 
	24.4	 	Notwithstanding the Rules (i) each Party shall have no more than 2 days to present its case
and (ii) the arbitrators shall be instructed to render their decision [***] following the
conclusion of each Party’s presentation.
	 
	24.5	 	The arbitrators shall specify the basis for their decision. The arbitrators shall not award
any punitive damages. The decision of the arbitrators shall be considered as a final and
binding resolution of the dispute, shall not be subject of appeal and may be entered as a
judgment in any court of competent jurisdiction.
	 
	24.6	 	The seat of arbitration shall be New York, New York, USA. The procedural law of this place
shall apply where the Rules are silent, however no pre-trial discovery procedure or jury trial
shall be allowed in the arbitration proceedings.
	 
	24.7	 	The language to be used in the arbitration proceedings shall be English. The whole
arbitration procedure shall be executed pursuant to a strict non disclosure agreement signed
by the Parties and the arbitrators agreeing to conduct such proceedings and maintaining in
confidence all confidential information or trade secrets disclosed or produced in the course
thereof. All press releases or public statements regarding the status of such proceedings
shall be prepared jointly and only by the Parties.
	 
	25	 	EXPORT LICENSE, ADMINISTRATION REGULATIONS CONCERNING US-ORIGIN CP
	 
	25.1	 	FSC shall comply fully with all applicable laws, rules and regulations relating to the export
of VENDOR’s hardware and technical data, including, but not limited to, any regulations of the
United States Office of Export Administration and other applicable governmental agencies.
VENDOR agrees to cooperate in providing information requested by FSC as necessary to obtain
any required licenses and approvals.
	 
	25.2	 	VENDOR will provide a written declaration that VENDOR has duly classified hardware in
accordance with the United States Export Administration Act and the United States Export
Administration Regulations. VENDOR’s written declaration shall contain the applicable
CN-Class, Country of Origin, State of Origin, ALNR, Export Control Classification Number
(“ECCN”) in accordance with the Commerce Control List (“CCL”), weight, net weight, dimensions
as well as any and all applicable License Exceptions. VENDOR is obliged to deliver such
declaration as soon as possible but no later than the general availability date of the CPs.
If the scope of the contract is extended at a later date, VENDOR likewise undertakes to

***CONFIDENTIAL TREATMENT REQUESTED

Page 16 of 21

 

	 	 	provide the relevant export control details pertinent to the additional products/services,
subject to these same conditions.”
	 
	26.	 	CONTACTS
	 
	26.1	 	Any notices to be sent hereunder shall be in writing and delivered personally or sent by fax
or mail according to ANNEX 12 CONTACTS.
	 
	26.2	 	Notices sent by fax shall be sent to the respective fax numbers set forth in ANNEX 12
CONTACTS and such notices shall be deemed given as of the date sent by fax if properly
addressed and transmitted. Notices concerning issues important for the contractual
relationship shall be sent either (i) by commercial express mail, or otherwise (ii) by
certified or registered mail or any other means giving sender proof of receipt.
	 
	26.3	 	Notices sent by mail shall be addressed as set forth in ANNEX 12 CONTACTS, postage prepaid,
certified or registered mail, and shall be deemed given at the date of receipt.
	 
	26.4	 	During the term hereof VENDOR and/or FSC may designate other addresses or numbers to which
such notices shall further on be sent or delivered.
	 
	27.	 	TERM AND TERMINATION
	 
	27.1	 	The term of this AGREEMENT shall commence on the EFFECTIVE DATE, continue thereafter for a
period of five (5) years and shall automatically be prolongated in one (1) year increments,
unless one of the Parties notifies the other [***] prior to any prolongation of its intent not
to prolongate.
	 
	27.2	 	Either PARTY may elect to terminate this AGREEMENT for a breach of a material term or
provision of this AGREEMENT by the other PARTY upon delivery of [***] prior written notice to
the other PARTY; provided, however, if such breach is cured by the other PARTY within said
[***], such election and notice shall be of no further force and effect and this AGREEMENT
shall not be terminated thereby.
	 
	27.3	 	Termination of this AGREEMENT shall not affect those provisions of this AGREEMENT that are
intended, by their nature, to survive termination.
	 
	27.4	 	In case either Party merges with another company or is acquired by a third Party being a
competitor of the other Party in the field of information systems or comes otherwise under an
excessive influence of a third party of same nature, either Party will inform the other Party
in writing without delay and either Party is entitled within [***] of receipt of such notice
to terminate this AGREEMENT.
	 
	27.5	 	For a [***], VENDOR shall offer support to FSC in respect to service and maintenance
purposes. In particular, Vendor shall maintain the support for repair and the repair service
described in ANNEX 6 SPARE PARTS AND REAPAIR.

***CONFIDENTIAL TREATMENT REQUESTED

Page 17 of 21

 

	27.6	 	For a [***], and subject to the payment by VENDOR fo all applicable fees and other charges,
VENDOR shall make available to FSC SPARE PARTs. [***] the PARTIES will mutually agree upon any
continuing obligations of VENDOR to deliver SPARE PARTS or provide support beyond the
aforementioned [***] period.
	 
	28.	 	END OF LIFE OR DISCONTINUATION BY VENDOR OF CP
	 
	28.1	 	Should VENDOR request the discontinuation of CP, VENDOR shall so notify FSC in writing
explaining the reasons and the PARTIES shall negotiate in good faith an adequate solution,
which may include i.e. the transfer of the manufacturing rights for CP and SPARE PARTs
according to ANNEX 8 EMERGENCY MANUFACTURING RIGHTS or a last time order of CP.VENDOR shall
not request such discontinuation [***].
	 
	28.2	 	VENDOR agrees to provide a written notice to FSC [***] prior to the effective end of life of
any CP, which notice shall consist of:

	–	 	date of the notice
	 
	–	 	the specific CP affected
	 
	–	 	last possible date for receipt of an order
	 
	–	 	last possible shipment date of the relevant CP(s)

	29.	 	INVENTORY MANAGEMENT
	 
	29.1	 	Due to un-predictable customer decisions, excess inventory held and owned by FSC may occur.
Inventory shall be deemed to be excess inventory if the then current manufacturing plan of FSC
requires a lesser volume of the respective inventory than the current inventory level shows.
	 
	29.2	 	FSC shall be entitled to resell the excess inventory to third parties in compliance with the
requirements specified in ANNEX 14 EXCESS INVENTORY.
	 
	30.	 	SUB-MANUFACTURERS
	 
	30.1	 	VENDOR may require the use of certain sub-manufacturers for whatever task is deemed
necessary. VENDOR shall ensure that sub-manufacturers comply with the FSC standards and
requirements contained in this AGREEMENT.
	 
	30.2	 	VENDOR shall provide FSC with [***] prior written notice of its intent to change its
manufacturing location or transfer of manufacturing plant. Unless FSC approves of the change,
VENDOR will [***]. VENDOR will use best efforts to ensure smooth transition. FSC may not
unreasonably withhold, delay or condition its approval.

***CONFIDENTIAL TREATMENT REQUESTED

Page 18 of 21

 

	31.	 	EMS/ODM
	 
	31.1	 	Subject to each EMS/ODM being credit worthy to order CPS and services from VENDOR under the
provisions of this Agreement, as reasonably determined by VENDOR, VENDOR agrees to supply CPs
and provide services to the EMS/ODM according to the terms and conditions of the AGREEMENT
concluded between FSC and VENDOR for the sole purpose of the incorporation of the CPS supplied
under this AGREEMENT into the products to be manufactured for FSC by the EMS/ODM and based on
the condition, that any deliveries for such purpose shall be governed by a direct business
relationship based on the respective POs between VENDOR and the EMS/ODM.
	 
	31.2	 	As part of the agreement between FSC and the EMS/ODM, FSC shall contractually bind the
EMS/ODM to use the CPS and provided services supplied by VENDOR according to the terms of the
AGREEMENT concluded between FSC and VENDOR exclusively for the manufacture of FSC’s products
and for no other purpose.
	 
	31.3	 	FSC shall be entitled to revoke such supply rights granted by VENDOR to the EMS/ODM in its
own discretion at any time, especially but not limited to in case the EMS/ODM uses the CP and
provided services for other purposes as described in the preceding section. In case FSC
revokes such supply rights, VENDOR shall terminate any deliveries or any support to the
EMS/ODM, coming from the agreement, within [***] following the receipt of a revocation note
provided by FSC.
	 
	32.	 	ETHICAL STANDARDS
	 
	32.1	 	VENDOR agrees to comply with the ethical standards detailed in ANNNEX 17 ETHICAL STANDARDS.
	 
	33.	 	MISCELLANEOUS
	 
	33.1	 	ASSIGNMENT. Neither PARTY may delegate its obligations or assign its rights hereunder without
the prior written consent and approval of the other PARTY which consent will not be
unreasonably withheld; provided, however: i) a Party hereto may assign this AGREEMENT upon
written notice to the other Party, to a successor-in-interest of all or a majority of its
outstanding stock or voting securities or to a purchaser of all or substantially all of its
assets, and; (ii) upon written notice to VENDOR, FSC may assign, delegate or transfer its
obligations and rights hereunder to any RELATED COMPANY which is capable of performing all of
FSC’s obligations under this AGREEMENT (as reasonably demonstrated to VENDOR) without the
prior written consent of VENDOR. Even if the AGREEMENT has not been formally assigned, any
RELATED COMPANY shall be entitled to issue purchase orders according to the terms and
conditions of this AGREEMENT. In this case the RELATED COMPANY and VENDOR shall become direct
contractual partners. If this AGREEMENT is assigned pursuant to section 33.1(i), above, the
other Party shall have the right to terminate the AGREEMENT by giving [***] prior written
notice.
	 
	33.2	 	ANNEXES. The Annexes attached to this AGREEMENT form an integral part hereof. In case of a
contradiction between the AGREEMENT and the Annexes,

***CONFIDENTIAL TREATMENT REQUESTED

Page 19 of 21

 

	 	 	the AGREEMENT shall prevail, unless explicitly specified otherwise in the Annexes.
	 
	33.3	 	AMENDMENT. This AGREEMENT may not be modified or amended except by a written amendment
consecutively numbered and executed by the duly authorized officers of the PARTIES hereto.
This requirement can only be waived in a written document that is executed by the duly
authorized officers of the Parties hereto. In case of any contradiction between the AGREEMENT
wording and the wording of the Annexes, the AGREEMENT shall prevail.
	 
	33.4	 	SEVERABILITY. If a provisions of this AGREEMENT is held invalid, unenforceable or contrary to
law then the validity of the remaining provisions of this Agreement shall remain in full
force. In such instance, the Parties shall use their best efforts to replace the invalid
provision(s) with legally valid provisions approximating to the extent possible the original
intent of the Parties.
	 
	33.5	 	FORCE MAJEURE. Neither PARTY shall be liable to the other for failure or inability to perform
its obligations hereunder to the extent such failure or inability is due to Force Majeure. For
the purpose of this section, “Force Majeure” means all acts of God and Government and general
labor disputes beyond the reasonable control of a PARTY. Should the period of Force Majeure
exceed six months, each PARTY is entitled to terminate this AGREEMENT.
	 
	33.6	 	PARENT RESPONSIBILITY. Dot Hill Systems Corp. hereby agrees to be a Party to this AGREEMENT
and shall be jointly and severally liable together with Dot Hill Systems B.V. for all of the
obligations and liabilities of Dot Hill Systems B.V., and all of Dot Hill’s related companies
and subsidiaries, arising hereunder.

	 	 	 
	Dot Hill Systems, B.V.
	 	Dot Hill Systems Corp.
	 	 	 
	           /s/ PRESTON ROMM
	 	           /s/ DANA W. KAMMERSGARD
	 
	 	 
	signature
	 	signature
	 	 	 
	           Preston Romm
	 	           Dana W. Kammersgard
	 
	 	 
	name
	 	name
	 	 	 
	           Director
	 	           President and CEO
	 
	 	 
	title
	 	title
	 	 	 
	           3/3/06
	 	           3/2/06
	 
	 	 
	date
	 	date
	 	 	 
	Fujitsu Siemens Computers GmbH	 	 
	 	 	 
	           /s/ HARALD ROBATZEK
	 	           /s/ [ILLEGIBLE]
	 
	 	 
	signature
	 	signature
	 	 	 
	           Harald Robatzek
	 	           [ILLEGIBLE]
	 
	 	 
	name
	 	name
	 	 	 
	           Director Golbal Sourcing
	 	           Director Storage Systems
	 
	 	 
	title
	 	title
	 	 	 
	           13.01.2006
	 	           13.01.2006
	 
	 	 
	date
	 	date

Page 20 of 21

 

ANNEX  1 CONTRACTUAL PRODUCTS

ANNEX  2 DOCUMENTATION

ANNEX  3 FORECAST, LEADTIMES

ANNEX  4 OMITTED

ANNEX  5 SOFTWARE

ANNEX  6 SPARE PARTS AND REPAIR

ANNEX  7 QUALITY ASSURANCE

ANNEX  8 EMERGENCY MANUFACTURING RIGHTS

ANNEX  9 STANDARDS, ENVIRONMENTAL REQUIREMENTS

ANNEX 10 TECHNICAL CHANGES

ANNEX 11 TECHNICAL SUPPORT & TRAINING

ANNEX 12 CONTACTS

ANNEX 13 EXCESS INVENTORY

ANNEX 14 DROP SHIPMENT

ANNEX 15 TEST REQUIREMENTS

ANNEX 16 PACKAGING AND LABELING

ANNEX 17 ETHICAL STANDARDS

ANNEX 18 INTELLECTUAL PROPERTY RIGHTS

ANNEX 19 MARKETING FUNDS

Page 21 of 21

 

Confidential

ANNEX 1 CONTRACTUAL PRODUCTS

	1.	 	The following information is contained on the most current version of the price list
(“PRICE LIST”) and product specifications (“SPECIFICATIONS”) that have been formally issued by
VENDOR under this AGREEMENT and accepted by FSC (“ACTIVE PRICE LIST” or “ACTIVE
SPECIFICATION”). Such documents are made a part hereto by reference. Updated PRICE LISTS and
SPECIFICATIONS may be issued, accepted and thereby made a part of this AGREEMENT from time to
time throughout the term of this AGREEMENT without the need to formally amend the AGREEMENT.

	•	 	Contractual Product(s) (CP)
	 
	 	 	To be found on most recent ACTIVE DH PRICE LIST for FSC.

	•	 	Specification of CP(s)
	 
	 	 	To be found on most recent ACTIVE SPECIFICATION

	•	 	Configuration of CP(s)
	 
	 	 	To be found on most recent ACTIVE PRICE LIST
	 
	•	 	Price of CP(s)
	 
	 	 	To be found on most recent ACTIVE PRICE LIST.
	 
	•	 	Package weight and dimensions
	 
	 	 	To be found on most recent ACTIVE SPECIFICATION
	 
	2.	 	Warranty Period for CP(s)
	 
	 	 	[***] commencing on the date that VENDOR first delivers the CP.
	 
	3.	 	Incoterm for CP(s) and for Spare Parts
	 
	 	 	FCA VENDOR’s shipping dock at VENDOR’s designated facility. Title and risk of loss shall
pass to FSC [***].

			
	 	 	 
	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 
	 
	GS 	 1/1

 

 

Confidential

ANNEX 2 DOCUMENTATION

[***]

			
	 	 	 
	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 
	 
	Quality	 1/1

 

 

Confidential

ANNEX 3 FORECAST, LEAD TIMES, ORDER MANAGEMENT, INVENTORY MANAGEMENT

1. FORECAST

FSC shall issue, [***], a rolling [***] forecast in the same form as that set forth at Appendix 1
to this ANNEX 6 (“Forecast”).

The forecast assumes [***], and VENDOR will be obligated to deliver at a certain point in each
month only that amount of CPs or Spare Parts that are equivalent to [***]. For example, if the
[***].

The forecast will be updated [***]. Upon issuing a new forecast, FSC will request that VENDOR
confirm that it can meet the forecast, including the “Upside Flexibility” requirements [***] of the
forecast. The parties will strive to speak on a weekly or bi-weekly basis regarding the forecast
and expected timing of shipments during the month.

FSC will be committed to the Upside Flexibility ranges as first and initially forecasted. In other
words, VENDOR will not be required to deliver, within “in-forecast” lead times, any amount of CPs
or Spare Parts that are greater than the amount of CP or Spare Parts originally (first) forecast by
FSC for that month.

FSC’S FORECAST IS NOT A PURCHASE ORDER FOR THE FORECASTED AMOUNTS AND DOES NOT GUARANTEE FSC WILL
ISSUE PURCHASE ORDERS AS SET FORTH IN THE FORECAST.

2. LEAD TIMES

Lead times shall be as follows. All lead time periods for delivery of orders start from the time
of receipt of the Purchase Order for the applicable CPs or Spare Parts and ends when VENDOR makes
the CPs or Spare Parts available [***].

All lead time periods for warranty handling start from the date upon which VENDOR receives the
returned CP or Spare Part from FSC and ends when VENDOR makes the CPs or Spare Parts available
[***].

   Delivery:

	 	 	 	 	 
	-

	 	CP
	 	for amounts “in-forecast” – [***];
	 
	 	 	 	 
	 

	 	 	 	for amounts greater than forecast –VENDOR to use
commercially reasonable efforts to meet the [***] lead time,
but not greater than [***]
	 
	 	 	 	 
	-

	 	SPARE PARTS
	 	for new Spare Parts (not
refurbished) “in-forecast” – [***]

			
	 	 	 
	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 
	 
	GS	 1/7

 

 

Confidential

	 	 	 	 	 
	 

	 	 	 	for new Spare Parts (not refurbished) greater than
forecast – VENDOR will use commercially reasonable efforts
to meet the [***] lead time, but not greater than [***].
	 
	 	 	 	 
	-

	 	Emergency Orders

([***] units or less)
	 	[***], but such Orders may effect the.
delivery dates of existing Orders

In-Warranty Handling (turn around time):

	 	 	 	 	 
	-

	 	CP
	 	[***]
	 
	 	 	 	 
	-

	 	Spare Parts
	 	new parts (not refurbished) – [***]
	 
	 	 	 	 
	-

	 	Emergency /DOA

([***] units or less
	 	[***], but such Orders may effect the
delivery dates of existing Orders.

Out of Warranty Repair or Replace (turn around time):

	 	 	 	 	 
	-

	 	General
	 	[***]
	 
	 	 	 	 
	-

	 	Emergency
	 	Using commercially reasonable efforts [***] units or less) [***]
	 
	 	 	 	 
	-

	 	Refurbishments of specific
returned unit
	 	[***], although VENDOR will use non-binding best efforts to complete within [***].

unless a shorter period of time has been agreed upon in writing.

3. Cancellation or Rescheduling of Purchase Orders and Returns

Even after acceptance of a Purchase Order FSC is entitled to cancel, reschedule or return such
Order in writing with regard to the total or partial quantity of CP or Spare Parts ordered
according to the following conditions:

a) Rescheduling:

FSC is entitled up to [***] to request a rescheduling [***], to a date within
[***].

FSC is entitled within [***] to request a rescheduling [***] to a date within
[***], but such rescheduling may be [***].

FSC may not reschedule an Order if it has already been [***].

			
	 	 	 
	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 
	 
	GS	 2/7

 

 

Confidential

b) Cancellation:

FSC is entitled up to [***] to cancel respective Purchase Orders [***].

FSC is entitled within [***] to cancel a Purchase Order, but such cancellation may be
[***].

FSC may not cancel an Order if it has already been [***].

c) Returns:

FSC may return CPs or Spare Parts for a credit at the then-current price for said CP or Spare
Parts, but only if all of the following conditions are met:

(i) the CP or Spare Part has not been used and is “as new;”

(ii) the CP or Spare Part is in its original packaging and is unopened;

(iii) the CP or Spare Part is in the same condition as it was when delivered to FSC;

(iv) the CP or Spare Part is at the current revision level;

(v) the CP or Spare Part was delivered to FSC within [***]; and

(v) the amount of CP or Spare Part returned [***]. VENDOR, in its discretion, will
consider returns [***].

No Returns may be made during the [***].

Any CP or Spare Part returned to VENDOR shall be designated within VENDOR as the first CP or Spare
Part of its type to be shipped back to FSC against any new Purchase Order received for that
configuration; this will ensure prompt turnover of all returned product.

Each return shall be [***].

d) [***]

Cancellation, Rescheduling or Return [***].

4. Excess and Obsolete Inventory Unique to FSC

4.1 FSC acknowledges its financial responsibility for the materials purchased by VENDOR that are
unique to FSC-branded Products in order to support the agreed upon lead times for the forecasted
amounts (including Upside Flexibility requirements) (“Chargeable Materials”). Unique materials
are set forth on Appendix 2 to this ANNEX 3. It is assumed that VENDOR’s lead times to purchase
Chargeable Materials is [***] unless VENDOR receives FSC’s approval to purchase Chargeable
Materials with greater lead times.

			
	 	 	 
	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 
	 
	GS	 3/7

 

 

Confidential

4.2 [***] Chargeable Materials. After [***] of remaining in inventory, FSC will [***], but only
those purchased or created in order to support the agreed upon lead times for the forecasted
amounts, [***].

4.3 [***] Chargeable Materials. After [***] of remaining in inventory, FSC will [***], but only
those Chargeable Materials purchased or created in order to support the agreed upon lead times
for the forecasted amounts. [***].

4.4 [***] Chargeable Materials. FSC shall [***], but only those Chargeable Materials purchased
or created in order to support the agreed upon lead times for the forecasted amounts,[***].

4.5 Expiration or Earlier Termination. In the event that FSC terminates the AGREEMENT for
convenience, Dot Hill terminates the AGREEMENT based on FSC’s breach of the AGREEMENT which is
not cured, or the AGREEMENT expires and FSC chooses not to renew, then FSC shall[***], but only
those Chargeable Materials purchased or created in order to support the agreed upon lead times
for the forecasted amounts,[***].

4.6 [***].

4.7 As of the signing of this AGREEMENT, the CPs contain unique materials that are easily
removed from FRUs or CPs. If the nature of the CPs change such that VENDOR is required to
integrate FSC unique materials into FRUs or CPs and such unique materials are more difficult to
strip from the FRUs or CPs, such FRUs or CPs may also be considered Chargeable Materials and
the[***]. The[***]. VENDOR will notify FSC of changes to the CPs that trigger this provision.

			
	 	 	 
	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 
	 
	GS	 4/7

 

 

Confidential

APPENDIX 1 to ANNEX 3. SAMPLE FORECAST

[***]

					
	 	 	 	 	 
	 
	 	 	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	GS	 	 5/7

 

 

Confidential

APPENDIX 2, to ANNEX 3: LIST OF UNIQUE PARTS

[***]

[***]

					
	 	 	 	 	 
	 
	 	 	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	GS	 	 6/7

 

 

Confidential

ANNEX 4
                                                               omitted

GS

 

 

Confidential

ANNEX 5
                                                   SOFTWARE

1. Where the CP contains SOFTWARE that is provided as part of and incorporated into a CP at no
additional charge to FSC, subject to the payment by FSC of applicable charges and fees for the CP,
FSC and its customers shall receive a paid-up perpetual, non-exclusive and non-transferable right
to use the SOFTWARE on the single CP upon which the SOFTWARE was originally incorporated and
loaded, in an unchanged form, and for the sole purpose stated in the accompanying software
documentation.

2. VENDOR warrants to FSC that:

     a) VENDOR has the right to grant the license to SOFTWARE as per Section 1;

     b) SOFTWARE conforms in all material respects to its specifications and is substantially free
in all material respects from programming errors;

     c) SOFTWARE performs on the configuration of the CP with/ for which it was ordered and/or
supplied;

     d) SOFTWARE performs in all material respects the functions and features defined in the
accompanying documentation;

      e) as of the date of delivery, SOFTWARE is the most current, fully-tested release version
offered by VENDOR, and is no ”alpha”, “beta” or equivalent test version (as such terms are commonly
understood in the computer software industry), unless the parties otherwise expressly agree;

     f) SOFTWARE does not contain any lock, clock, timer, counter, copy protection feature or other
device, which, after initial installation of SOFTWARE, prevents FSC or its customers from fully
utilizing SOFTWARE in accordance with this Agreement without intervention by VENDOR.

3. Title to all SOFTWARE supplied to FSC by VENDOR under this Agreement will remain with VENDOR or
its licensor. FSC and its customers obtain no rights to SOFTWARE except for the limited license
rights set forth herein.

4. Except as expressly permitted under applicable law, FSC or its customers shall not reverse
engineer, decode, decompile, modify, translate, disassemble or attempt to reduce to source code
form the CP or SOFTWARE, or cause or help any third party to do the same.

5. SOFTWARE shall be considered the CONFIDENTIAL INFORMATION of VENDOR as that term is defined in
the AGREEMENT, regardless of whether it is marked as such.

GS/L+C

 

 

Confidential

ANNEX 6
                                                  SPARE PARTS AND REPAIR

	1.	 	SUBJECT MATTER OF ANNEX 6
	 
	 	 	The subject matter of this Annex is to define the SPARE PARTS procurement for the Contractual
Product (CP) described in ANNEX 1 to the AGREEMENT and the REPAIR procedure for such SPARE
PARTS as well as for the Contractual Product (CP) described in ANNEX 1 to AGREEMENT.
	 
	 	 	Even if not explicitly referenced, the terms and conditions of the AGREEMENT (including its
ANNEXES) shall apply accordingly. However, provisions of the AGREEMENT shall in no event
supersede provisions of this Annex 6 in case of deviation.
	 
	2.	 	SPARE PARTS

	 	2.1	 	Definitions

[***]

	 	2.2	 	SPARE PARTs Lists

2.2.1 Contents of the SPARE PARTs Lists (for Level 0 and 1)

The SPARE PARTs Lists as following shall contain the following and shall be revised
immediately if any mutually agreed changes occur. The SPARE PARTS list shall only be
compiled with respect to Level 0 and Level 1 SPARE PARTS; they shall not be compiled with
respect to Level 2 SPARE PARTS

a) [***]

			
	 	 	 
	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 
	 
	 	Page 1 of 21

PRS

 

 

Confidential

[***]

b) [***]

c) [***]

2.2.2 Availability of SPARE PARTs information

The BASIC SPARE PARTs List, recommended by VENDOR, shall be made available by VENDOR
latest [***] prior to begin of mass production of the applicable CP. At the same time
VENDOR shall provide FSC with applicable storage guidelines, in case any special or
unusual treatment is necessary.

The Purchase SPARE PARTs List and Planning SPARE PARTS List shall be made available at
the latest [***]. FSC may require additional SPARE PARTs to be added to the SPARE PARTs
Lists.

	3.	 	SPARE PARTS PROCUREMENT PROCEDURE
	 
	 	 	During the term of the AGREEMENT and for the period stated in Clause 27.6 of the AGREEMENT,
VENDOR will accept and carry out all purchase orders for SPARE PARTS placed by FSC in
accordance with the terms of this Annex 6.

	 	3.1	 	Purchase Orders

3.1.1 Ordering

FSC will place purchase orders providing VENDOR with the following information:

§  Purchase Order number and date

§  SPARE PART quantity to be delivered

§  Part number and revision level

§  Item description

§  Unit price

§  Date of delivery

			
	 	 	 
	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 
	 
	PRS	Page 2 of 21

 

 

Confidential

3.1.2 Initial order

VENDOR shall deliver the initial SPARE PARTs to FSC at the latest[***].

FSC will stock approximately [***] of SPARE PARTs at the initial stage.

Initial stock quantities will be determined by either of the following:

[***]

3.1.3 Order Confirmation

Within [***] after receipt of order, VENDOR will send an order confirmation including
delivery date for information purposes to FSC. The holidays of the country from which
confirmation is issued shall be taken into consideration when determining “working day.”

3.1.4 Cancellation procedure

FSC may cancel or reschedule purchase orders for Spare Parts under the same terms and
conditions as those stipulated in ANNEX 3 of the AGREEMENT with respect to CPs.

3.1.5 Lead-time

The lead time for delivery from date of purchase order shall be as stipulated in ANNEX 3
of the AGREEMENT.

VENDOR will confirm the delivery of SPARE PARTs to FSC’s carrier upon Spare Parts leaving
VENDOR’s facility dock.

3.1.6 Terms

Terms of delivery: According to Section 3 of the AGREEMENT

Terms of payment: According to Section 6 of the AGREEMENT

3.1.7 Prices

Prices for the SPARE PARTs Procurement (including prices for accelerated orders) are
stated in Attachment 1 (SPARE PARTS and REPAIR Prices) to this ANNEX 6 and include
appropriate packaging.[***] Section 4 of the AGREEMENT shall apply accordingly. VENDOR
agrees[***].

			
	 	 	 
	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 
	 
	PRS	Page 3 of 21

 

 

 

Confidential

3.2 Discontinuation of SPARE PARTs

3.2.1 Discontinuation

Prior to the EOL of the applicable CP in which a SPARE PART is used, in case of the
discontinuation of a SPARE PART, VENDOR will inform FSC in writing, including the
effective date of discontinuation, and offer a substitute or alternative SPARE PART. If
the substitute or alternative SPARE PART affects the form, fit, function or compatibility
of the CP, then it must be approved by FSC as per ANNEX 10 of the AGREEMENT.

Upon the EOL of a CP, availability of SPARE PARTS for that CP shall be governed by
Section 27.6 of the AGREEMENT.

3.2.2 Tooling

VENDOR shall inform FSC before scrapping or changing any tool that is used to create
Spare Parts that are unique to FSC and FSC reserves the right to buy such FSC-unique
tooling from VENDOR.

3.3 Changes and Upgrades

VENDOR shall notify FSC without undue delay of intended Engineering Changes in SPARE PARTs,
which do not result in a discontinuation of SPARE Parts. All such changes that affect the form,
fit, function or compatibility of the SPARE PARTs are subject to FSC  ́ s approval as per ANNEX
10 of the AGREEMENT.

If any such changes are not Mandatory Changes and are not caused by FSC, the parties will
design a program of backward consumption by which the new SPARE PARTs will be phased-in and/or
the old SPARE PARTs upgraded in a manner that avoids the purging and/or scraping of the old
SPARE PARTs.

In the event that any such changes are Mandatory Changes and are not caused by FSC, VENDOR will
[***]

[***]

For purposes of this section, a Mandatory Change is a change that is required to allow the CP
to function as per its original specification (prior to the change) and in a safe and legal
manner. All other changes are not Mandatory Changes.

VENDOR shall only be required to upgrade to the current revision level those SPARE PARTs that
[***]

			
	 	 	 
	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 
	 
	PRS	Page 4 of 21

 

 

Confidential

For
purposes of this ANNEX 6, the MAL (or Minimum Acceptance Level) is the [***].

3.4 Warranty

3.4.1 Warranty Period

VENDOR warrants that newly purchased SPARE PARTS (as opposed to refurbished SPARE PARTS)
are new, that they meet all specifications agreed upon by VENDOR and FSC hereunder as set
forth in the SPARE PARTS Lists, ANNEX 1, ANNEX 9 (Standards) and ANNEX 7 (Quality
Assurance) to AGREEMENT, and that they are free from defects in design, material and
workmanship for a period of [***] from receipt of SPARE PARTS by FSC. Refurbished SPARE
PARTs are not new, but VENDOR warrants that they otherwise meet the aforementioned
specifications and warranties for a period of [***].

3.4.2 Serial number and warranty validation

VENDOR will operate an online warranty tracking system for validation and RMA procedure
as well as for product safety purposes.

VENDOR shall provide a serial number on each serial number-controlled SPARE PART and a
mechanism of serial number coding online, which allows FSC to determine the beginning of
the applicable warranty period.

3.4.3 DOA (Dead on Arrival)

The DOA period is [***] from date of receipt of new SPARE PARTS by FSC.

FSC will request RMA marked as DOA with respect to New (and not refurbished) Spare Parts,
whereas the process as described under Clause 3.4.4 shall apply accordingly.

The DOA rate as confirmed by VENDOR (and not just based on FSC’s observations) shall not
exceed [***].

3.4.4
In - Warranty Options

In the event a defect is discovered in a SPARE PART and VENDOR is notified of the defect
within the warranty period, VENDOR shall execute one of the following warranty actions,
in VENDOR’s discretion, within the TAT (Turn Around Time) set out in ANNEX 3 from
VENDOR’s receipt of the defect SPARE PART:

			
	 	 	 
	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 
	 
	PRS	Page 5 of 21

 

 

Confidential

a) VENDOR will provide and ship a replacement/exchange SPARE
PART with the same part number or a replacement SPARE PART
which part number is explicitly authorised and approved by FSC or

b) VENDOR will issue a credit note and refund the purchase price that FSC
paid for the defective SPARE PART or

c) VENDOR will repair the SPARE PART, and if the SPARE PART meets the
Minimum Accepted Level, will upgrade the SPARE PART to the latest revision level.

The provisions and processes applicable for In-Warranty Handling are described in
Attachment 2 (In-Warranty Handling Process Description) of this ANNEX 6 in detail.

3.5 Failure to comply with contractual obligations

3.5.1 Shipping / Delivery

If VENDOR exceeds the agreed Lead Times (Clause 3.1.5) as stipulated in ANNEX 3 for
shipping new or refurbished SPARE PARTS to FSC, or if VENDOR exceeds the confirmed
delivery date (Clause 3.1.3), or if VENDOR exceeds the agreed TAT for RMA activity,
Clause 3.6 of the AGREEMENT shall apply accordingly.

3.5.2 Response to RMA requests

If
VENDOR does not respond to FSC‘s RMA request within [***].

3.5.3 Warranty Handling

If VENDOR exceeds the agreed TAT for warranty handling as stipulated in ANNEX 3, VENDOR
shall [***].

3.5.4 DOA Rate

If the DOA Rate measured [***] figure set forth in Section 3.4.3, VENDOR shall [***].

FSC reserves the right to claim further damages resulting from all Dead on Arrivals
occurring. VENDOR’s right to prove that FSC has incurred a lower damage shall remain
unaffected.

3.5.5 General

			
	 	 	 
	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 
	 
	PRS	Page 6 of 21

 

 

Confidential

The claiming of contractual penalties or liquidated damages or compensation for

damages by FSC shall not affect FSC` s rights to demand performance. An
acceptance of VENDOR`s performance by FSC will not affect FSC‘s right to claim
contractual penalty, liquidated damages or compensation for damages, even if no
objection is made upon acceptance of any such performance.

In case of default and/or non–performance by VENDOR, FSC may grant an
appropriate period of grace to enable performance. Once however this period of
grace has expired without VENDOR bringing about the contractually agreed
performance and /or results, FSC is entitled to withdraw from the respective order
and demand damages for default and/or non-performance.

4. SUPPORT FOR REPAIR

4.1 Documentation

During the term of the AGREEMENT and for the period stated in 27.5 of the AGREEMENT), in order
to enable FSC or FSC’s third party repairers to effectively test and screen returns to reduce
“No Trouble Found” rates, VENDOR will, in its reasonable discretion, provide to FSC [***] the
documentation necessary to allow FSC to accomplish such limited screening and testing. VENDOR
may require that FSC or FSC’s third party repairers enter into non-disclosure agreements prior
to being provided access to such information

VENDOR will provide the documentation in the English language.

4.2 Technical assistance

VENDOR shall give FSC Level 4 technical assistance pursuant to the terms and conditions set
forth on ANNEX 11 of the AGREEMENT.

4.3 Third party repairers

FSC reserves the right to select and authorize [***] third party [***]. VENDOR reserves the
right to qualify and approve of the third party repairer. After such approval by VENDOR and
the third party repairer’s entering into appropriate non-disclosure agreement(s) protecting
VENDOR’s information, VENDOR shall provide the above-mentioned repair documentation and
technical assistance directly to third party repairer.

After the third party repairer has entered into the required non-disclosure agreement, FSC
shall be allowed to provide documentation referred to Clause 4.1 to such third party repairers
for purposes of carrying out repairs on the CPs.

To the extent that FSC wishes VENDOR to take direct orders from the third party repairers,
VENDOR may conduct a credit analysis of the third party repairer and impose reasonable credit
limits or payment terms upon the third party repairer.

5. SPARE PARTS AND CP REPAIR SERVICE

5.1 General

			
	 	 	 
	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 
	 
	PRS	Page 7 of 21

 

 

Confidential

During the term of the AGREEMENT and for the period stated in 27.5 of the AGREEMENT, VENDOR
will provide to FSC, upon FSC  ́ s request, Out of Warranty REPAIR service for SPARE PARTS listed
in the SPARE PARTS List as well as for CP at prices mutually agreed upon by the parties.

5.2 Service Deliverables

FSC will issue repair orders (or, in other words, a request for RMA activity) which orders will
include the following particulars:

	 	-	 	Repair Order Number
	 
	 	-	 	Counter Number
	 
	 	-	 	Part Number
	 
	 	-	 	Serial Number for serial controlled items
	 
	 	-	 	Failure Mode (reason for failure)
	 
	 	-	 	An indication if a return is only for an upgrade to current levels
	 
	 	-	 	An indication if the item was DOA
	 
	 	-	 	A Request for failure analysis, if appropriate and desired by FSC.

Within [***] after receipt of order, VENDOR will accept order and send an order confirmation
including delivery date for information purposes to FSC. VENDOR may only reject an order if it
is not in conformance with the terms and conditions of this ANNEX 6 or the AGREEMENT, or it is
beyond the period stated in 27.4 of the AGREEMENT and VENDOR does not choose to accept the
order. [***]

VENDOR shall carry out the REPAIRS according to the principle “first in first out”, unless
requested differently for a specific order by FSC. Furthermore VENDOR is obliged to carry out
REPAIRs due to the latest agreed upon revision level as long as the SPARE PART or CP is at or
above a Minimum Accepted Revision Level (“MAL”).

Details of all processes between FSC and VENDOR, the scope of services, definition of control
processes, definition of technical changes and description of the quality features are defined
in Attachment 3 to ANNEX 6.

5.3 Transportation Charges

With respect to repair orders,[***].

5.4 [***]

[***]

			
	 	 	 
	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 
	 
	PRS	Page 8 of 21

 

 

Confidential

[***]

[***]

5.5 REPAIR Prices

Prices for the REPAIR of CPs and SPARE PARTs (including prices for accelerated orders) are
stated in Attachment 1 (SPARE PARTS and REPAIR Prices) to ANNEX 6 and include appropriate
packaging.[***] Section 4 of the AGREEMENT shall apply accordingly.

5.6 Turn Around Time (TAT)

Turn around Time (TAT) for the REPAIRS of SPARE PARTS/CPs from the date of receipt until the
date of dispatch by VENDOR shall not exceed the period stipulated in ANNEX 3 to AGREEMENT.

For urgent deliveries, FSC may request accelerated REPAIRS to be carried out. In this case, a
special request will be transmitted by FSC to VENDOR by electronic media. In such cases VENDOR
will [***].

5.7 Dead on Arrival

The Dead on Arrival Rate, as verified by VENDOR and not just based on FSC’s observations, for
repaired SPARE PARTs/CPs shall not exceed [***]. All such SPARE PARTs/ CPs shall be qualified
“Dead on Arrival” which are still defective after REPAIR within [***].

5.9 Warranty

VENDOR warrants that the repaired SPARE PARTS/CPs will be free from defects that were
subject of the REPAIR order, for a period of [***].

If VENDOR fails to carry out REPAIR successfully, in particular if a SPARE PART/CP remains
defective even after REPAIR, VENDOR shall [***]

5.10 Quality and Environmental Management

VENDOR guarantees to comply with any applicable environmental laws or regulations that apply to
its performance under this AGREEMENT.

			
	 	 	 
	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 
	 
	PRS	Page 9 of 21

 

 

Confidential

VENDOR guarantees that it will apply — through a recognized certification institution (i.e.
DQS) — for quality and environmental certification for the REPAIRS in question in accordance
with ISO 9001 and ISO 14001. VENDOR is to obtain certification and to maintain this for the
period stated in 27.5 of the AGREEMENT.

VENDOR is responsible for the proper disposal (recycling or removal) for CPs returned under
warranty according to the legal requirements on site of all waste and/or irreparable equipment
and removed parts returned to VENDOR in executing REPAIRs commissioned by FSC. In particular,
all legal requirements regarding waste of electrical and electronic equipment, batteries as
well as other hazardous waste are to be considered.

VENDOR will keep supporting documentation of all disposal processes in accordance with legal
requirements. FSC is entitled to perform audits in order to prove the compliance with the
quality and environmental standards.

To maintain the high quality and reliability of SPARE PARTS/CPs VENDOR shall ensure that it
adopts any and all necessary precautions while handling ESD parts.

5.11 Data protection

VENDOR shall treat customer data or information about the customer in form of stored data on
SPARE PARTs/CPs (DATA), if any, as follows:

DATA will not be copied and will be physically erased completely. The erase procedure is done
in such a way that a recovery of the DATA is not possible according technical state of the art.

If VENDOR has access to DATA, VENDOR will ensure that this information is handled
confidentially for an unlimited duration: VENDOR will ensure that such DATA will neither be
used for business nor for private purposes and that it will not be stored or made accessible to
third parties (including employees).

In case that SPARE PARTs/CPs are handled by subcontractors, VENDOR will ensure that the
subcontractors will comply with the provisions above.

6. MISCELLANEOUS

6.1 Logistics and Operations Specifications

General Logistics and Operations Specifications, applicable for SPARE PARTS
Procurement (Clause 3) as well as for SPARE PARTS/CP REPAIR (Clause 5) are
described in Attachment 4 to Annex 6 (Logistics and Operations Specifications).

6.2
RMA Process/Repairs Processing — Handling by Third Party Service Partner

[***]

			
	 	 	 
	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 
	 
	PRS	Page 10 of 21

 

 

Confidential

[***]

6.3 Quality Manager

Notwithstanding FSC` s further rights under this Annex 6, FSC shall have the same rights set
forth in ANNEX 7 to the AGREEMENT regarding source assessments and audits with respect to SPARE
PARTS as it does for CPs.

6.4 Measurement / Score Card

FSC will measure VENDOR’s performance and quality of service in various categories,
particularly the following:

[***]

The results of these VENDOR’s KPI measurements will be combined and listed on a scorecard and
may be communicated to VENDOR.

6.5 Communication and Interfaces

The responsible interfaces on FSC’s side are named in Attachment 5 to this Annex 6
(Communication List FSC). All invoicing documents and credit notes have to be sent to the
contact as set out in Attachment 5.

7. ATTACHMENTS TO ANNEX 6

Attachment 1 —  SPARE PARTs and REPAIR PRICES

Attachment 2 — IN-WARRANTY HANDLING PROCESS DESCRIPTION

Attachment 3 — REPAIR PROCESS AND SERVICE DESCRIPTION

Attachment 4 — Logistics and Operations Specification

Attachment 5 — Communication List FSC PRS

			
	 	 	 
	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 
	 
	PRS	Page 11 of 21

 

 

Confidential

Attachment
1 — SPARE PARTs and REPAIR PRICES

Has to be attached case by case.

			
	 	 	 
	 	 	 
	 
	PRS	Page 12 of 21

 

 

Confidential

Attachment 2  —  HANDLING PROCESS DESCRIPTION

	1.	 	General Rules Governing REPAIR and RMA
	 
	1.1	 	For purposes of this ANNEX 6, communications through ELECTRONIC MEDIA shall mean VENDOR’s
making available information to FSC through a web-based portal, or through basic email.
	 
	1.2	 	For purposes of this ANNEX 6, where VENDOR is required to confirm an RMA order within
[***], the holidays of the country from which the confirmation is issued shall be take into
consideration. For example, if RMA confirmation is occurring from the United States, United
States holidays shall be taken into consideration.
	 
	1.3	 	When a Failure Analysis is requested, FSC will agree to waive the applicable Turn Around
Time for that REPAIR.
	 
	1.4	 	If VENDOR determines that returned CPs or SPARE PARTS satisfy the applicable
specification and warranties and there is No Trouble Found (“NTF”), VENDOR will return the
item to FSC [***].
	 
	1.5	 	VENDOR shall provide reports to FSC by granting FSC access to a secure, web-based
portal and posting the reports to the portal. FSC may then pull reports from the portal in
its discretion.

2. In-Warranty Process Description

	 	 	 
	Responsibility	 	Action/Process
	FSC

	 	Requests RMA from VENDOR.
	 
	 	 
	VENDOR

	 	Confirms if SPARE PART is within warranty and issues a RMA
number latest the working day following FSC’s request using
the same method of communication.
	 
	 	 
	FSC

	 	Issues a RMA Order and sends it per ELECTRONIC MEDIA.
Returns defective SPARE PARTS to VENDOR.
	 
	 	 
	VENDOR

	 	Acknowledges RMA Order per ELECTRONIC MEDIA for information
purposes. Acknowledgment will include the RMA number which
FSC is to use with respect to that RMA situation, as well
as directions as to where to return the defective SPARE
PART.
	 
	 	 
	 

	 	VENDOR chooses among the following ways to execute RMA
action upon receipt of defective SPARE PART :
	 
	 	 
	 

	 	1. replace/exchange and send
SPARE PART to FSC

or

2. release a Credit Note amounting to the purchase price of
the defective SPARE PART

or

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	PRS
	 	Page 13 of 21

 

 

Confidential

	 	 	 
	Responsibility	 	Action/Process
	 

	 	3. repair and send SPARE PART to FSC

The above described processes can be changed upon mutual agreement of the PARTIES.

	3. Transportation Charges
	 
	 	 	Transportation charges in case of In-Warranty shall be [***]. Transportation charges for
DOA (Dead on Arrival) SPARE PARTS shall be [***]. Transportation charges in case of
Out-Of-Warranty Spare Parts or CPs, or NTF situations, shall be [***].

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	PRS
	 	Page 14 of 21

 

 

Confidential

Attachment 3  —  REPAIR PROCESS AND SERVICE DESCRIPTION

1. Out of Warranty REPAIR— Process Description

     1.1 Out of Warranty Status is clear

	 	 	 
	Responsibility	 	Action/Process
	FSC

	 	Issues a REPAIR Order per ELECTRONIC MEDIA.
	 
	 	 
	VENDOR

	 	Acknowledges REPAIR Order for information purposes,
provides to FSC information regarding the REPAIR price
applicable to such REPAIR ORDER and issues a RMA number for
REPAIR latest the working day following receipt of FSC’ s
order using the same method of communication.
	 
	 	 
	FSC

	 	Sends faulty SPARE PART/CP to VENDOR along with a purchase
order indicating the amount of the repair price.
	 
	 	 
	VENDOR

	 	Repairs and returns SPARE PART/CP to FSC.
	 
	 	 
	 

	 	VENDOR will mark all repaired SPARE PARTs/CPs with a repair
notice (placed on the container of the SPARE PART). VENDOR
sends an invoice to FSC.

     1.2 Out of Warranty Status is unclear

	 	 	 
	Responsibility	 	Action/Process
	FSC

	 	Requests RMA from VENDOR.
	 
	 	 
	VENDOR

	 	Confirms the warranty status. Should SPARE PART/CP be out
of warranty, it will offer a REPAIR, and column O.O.W
should be filled with the REPAIR price applicable to this
SPARE PART/CP, using the same method of communication
	 
	 	 
	FSC

	 	If it decides to repair out of warranty SPARE PART/CP:
	 
	 	 
	 

	 	- Issues a REPAIR Order per ELECTRONIC MEDIA.
	 
	 	 
	 

	 	- Issues a Purchase Order indicating the REPAIR price.
	 
	 	 
	 

	 	- Sends faulty SPARE PART/CP to VENDOR.
	 
	 	 
	VENDOR

	 	Acknowledges REPAIR Order for information purposes and
issues a RMA number for REPAIR latest the working day
following receipt of FSC’ s order using the same method of
communication.
	 
	 	 
	 

	 	- Repairs and returns SPARE PART/CP to FSC.
	 
	 	 
	 

	 	VENDOR will mark all repaired SPARE PARTs/CPs with a repair
notice including the date of REPAIR (placed on the
container of the Spare Part). VENDOR sends an invoice to
FSC.

					
	 	 	 	 	 
	 	 	 	 	 
	 
	 	PRS
	 	Page 15 of 21

 

 

Confidential

	2.	 	INCOMING INSPECTION / Reporting

2.1 Incoming Inspection

VENDOR shall carry out an incoming inspection, in particular a logistic inspection as
well as an optical control on SPARE PARTS/CPs immediately after receipt.

2.2 Wrong Part in Box

If VENDOR receives a SPARE PART/CP that deviates from the declared one, the procedure as
described under Clause 1 of Attachment 4 to this ANNEX 6 shall apply.

2.3 Reporting

VENDOR will provide the following reports as joined in Appendixes 1 to this Attachments 3
(REPORTS):

Service Logistics Reports

[***]

Monthly Service Quality Report

[***]

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	PRS
	 	Page 16 of 21

 

 

Confidential

[***]

	 	 	VENDOR will provide FSC with the above-mentioned reports by ELECTRONIC MEDIA as mentioned
above or upon request. Depending on REPAIR volumes the parties may agree upon a change in the
frequency of reports.
	 
	 	 	[***]
	 
	3.  Service Description (Scope of Services, Control Processes, Technical
Changes and Quality Features)

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	PRS
	 	Page 17 of 21

 

 

Confidential

Appendix 1 to Attachment 3 — REPORTS

1. Service Logistics Reports

[***]

2. Service Quality Report

[***]

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	PRS
	 	Page 18 of 21

 

 

Confidential

Attachment 4  — Logistics and Operations Specifications

1. Wrong part in box

If VENDOR receives a SPARE PART/CP that deviates from the declared one, VENDOR has to inform
FSC by email at time of finding differences.

VENDOR can distinguish between the following possibilities:

  [***]

	2. Packaging specifications for SPARE PARTs delivery, In-warranty handling and OOW-REPAIR
	 
	 	 	SPARE PARTs shall be packed separately from complete CP and shall be specifically
labelled as SPARE PARTs in line with the Basic SPARE PARTs List. Any delivery of SPARE PARTs
and CP shall identify the content of each package and shall indicate the respective revision
level.
	 
	2.1 Definitions
	 
	 	 	Logistic Units Individual package: shall mean the
single carton/box of one single product
original or similar to original package,
identified by one part number.
	 
	 	 	Master carton: shall mean the carton that holds the individual shipping cartons for a same
part number.
	 
	 	 	Bulk-shipping carton: shall mean the carton that holds parts in bulk identified by different
part number.
	 
	 	 	P/N The SPARE PART number consists of the prefix ,,XXX:” followed by the supplier part’s
number as listed in the BASIC SPARE PARTs List.

	 	 	 	 	 
	 

	 	 	 	e.g. ABC:12345678
	 
	 	 	 	 
	 

	 	Description
	 	      The part description on the label has to be identical to that in the BASIC
SPARE PARTs List.
	 
	 	 	 	 
	 

	 	Revision
	 	     If a revision is applicable for a part it should be printed on the label. This is
mainly for M/Bs (motherboards) or similar products.

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	PRS
	 	Page 19 of 21

 

 

Confidential

	 	 	 	 	 
	 

	 	PO Number
	 	FSC ’s Purchase Order Number
	 
	 	 	 	 
	 

	 	RMA Number
	 	Return Material Authorisation Number, issued by VENDOR

	2.2	 	Labelling
	 
	 	 	VENDOR’s SPARE PART number must be printed on every part, except small metal and plastic
parts. Only the small parts, that are bulk packed, can have a label attached to their
packaging. The labels have to be machine printed.

	 	•	 	Individual package must be labelled as follows:
	 
	 	 	 	     P/N, Description, Revision, Serial Number (if serial controlled)
	 
	 	•	 	Master Carton carton must be labelled as follows:
	 
	 	 	 	     P/N, Description, Quantity units inside the box
	 
	 	•	 	Bulk-shipping carton must be labeled in respect of its contents:
	 
	 	 	 	     PO Number or RMA Number
	 
	 	•	 	Pallets must at least be labeled as follows:
	 
	 	 	 	     PO Number or RMA Number
	 
	 	•	 	Delivery note must show the content of the pallet. Each Delivery note (packing slip)
will include the Part Number, Description, Revision, PO Number or RMA Number.

	2.3	 	Seal
	 
	 	 	All packaging is supplied with a seal of originality in order to allow
documented opening of the packaging (e.g. seal, adhesive tape imprint,
wet adhesive tape strengthened with string).

	3.	 	Delivery note
	 
	 	 	The delivery note for return of the handled (in warranty) or repaired SPARE PARTs/CPs
must contain the following specifications for each delivery position:
	 
	 	 	P/N, RMA Number and/or Repair Order Number, Serial Number.

When providing exchange/replacement SPARE PARTs/CPs, VENDOR has to mention the new replacement
serial number on the delivery note.

	4.	 	Packaging constituents after the In-Warranty Handling or OOW REPAIR

	 	•	 	Individual packaging
	 
	 	•	 	Padding material (Bubble Wrap and Foam)
	 
	 	•	 	Delivery note bag
	 
	 	•	 	Delivery note
	 
	 	•	 	Repairer’s package label
	 
	 	•	 	Product label

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	PRS
	 	Page 20 of 21

 

 

Confidential

VENDOR has to return each repaired or exchanged SPARE PART/CP, single packed, in new individual
authorized packaging.

Attachment 5  — Communication List FSC PRS (SE PRS SO MM)

1. Spares Operation Material Management

[***]

2. Invoicing

Please send all invoicing documents and credit notes to:

[***]

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	PRS
	 	Page 21 of 21

 

 

Confidential

ANNEX 7
   QUALITY ASSURANCE

This ANNEX 7 QUALITY ASSURANCE sets forth and defines the processes to be used by
VENDOR in the development and manufacture of Contractual Product(s) (CP) covered by this
AGREEMENT and certain quality requirements pertaining to said CP(s).

	 	 	 	 	 
	Abbreviations and Definitions

	1.1	 	Abbreviations

	 	 	 	 	 
	 

	 	AFR
	 	Annual Failure Rate
	 

	 	AQL
	 	Acceptance Quality Level
	 

	 	ATP
	 	Acceptance Test Procedure
	 

	 	CAR
	 	Corrective Action Report
	 

	 	CP
	 	Contracted Product
	 

	 	DCL
	 	Defect Classification List
	 

	 	DOA
	 	Dead On Arrival
	 

	 	DPM
	 	Defect Per Million
	 

	 	DVT
	 	Design Verification Test
	 

	 	EC
	 	Engineering Change
	 

	 	ECN
	 	Engineering Change Notice
	 

	 	ECR
	 	Engineering Change Request
	 

	 	EF
	 	Epidemic Failure
	 

	 	EOL
	 	End of Life
	 

	 	EVT
	 	Engineering Verification Test
	 

	 	fit
	 	failure in time
	 

	 	FOB
	 	Free On Board
	 

	 	IPC
	 	In Process Control
	 

	 	IQC
	 	Incomming Quality Control
	 

	 	MTBF
	 	Mean Time Between Failure
	 

	 	NDF
	 	No Defect Found
	 

	 	NTF
	 	No Trouble Found
	 

	 	OoBT
	 	Out of Box Test
	 

	 	OQC
	 	Outgoing Quality Control
	 

	 	ORT
	 	Ongoing Reliablity Test
	 

	 	PVT
	 	Production Validation Test
	 

	 	SA
	 	Source Assessment

	1.2	 	Definitions

“Defect(s)” shall mean a defect in a CP that creates hazard, prevents the intended operation
(functionality) of the CP or requires part addition, replacement, repair or adjustment not normally
encountered during installation.

	 	•	 	Critical Defect:
	 
	 	 	 	A Critical Defect is a defect that judgment and experience indicate is likely to result
in hazardous or unsafe conditions (e.g. endanger human health or life, cause fire,..)
for individuals using, maintaining, or depending upon CP.
	 
	 	•	 	Major Defect:
	 
	 	 	 	A Major Defect is a defect that is likely to result in failure, or to reduce the
usability of CP for its intended purpose.

					
	 	 	 	 	 
	 
	 	 
	 	
	 	 	 	 	 
	 
	 	Quality
	 	1/8

 

 

Confidential

	 	•	 	Minor Defect:
	 
	 	 	 	A Minor Defect is a defect that is not likely to reduce the usability of CP for its
intended purpose, or is a deviation from established standards according ANNEX 1
CONTRACTUAL PRODUCTS and ANNEX 2 DOCUMENTATION, having minor influence on the effective
use, operation of CP or appearance.

“DOA” shall mean a CP that does not comply with the applicable product warranty within the [***].

Quality Statement

VENDOR will establish and maintain an effective Quality Assurance system for all processes relating
to the manufacture of CP, including design, material procurement, manufacturing, inspection,
storage, and transportation of CP in order to achieve lower failure rates than specified in
Appendix 1 to ANNEX 7 QUALITY ASSURANCE.

Quality and technical related documents

Prior to the first general availability shipment of CP to FSC, VENDOR shall use best efforts to
submit to FSC in a machine readable format all documents listed in ANNEX 2 DOCUMENTATION and shall
implement respective standards.

General Inspection System

VENDOR shall provide and maintain an inspection system reasonably acceptable to FSC covering CP.
Records of all inspections performed shall be kept complete and be made available for review by FSC
Quality Assurance Representative.

FSC and its subcontractors reserve the right to have access to CP related production facilities at
any time on request prior to one day notice in order to inspect CP and CP production process and
environment.

Design Verification Test

Different portions of CP DVT will be performed by the applicable party based on and in compliance
with the CP design verification test plan mutually agreed upon by the parties. Any obligations of
VENDOR to perform DVT will be contingent upon FSC’s providing to VENDOR any assistance, tools or
equipment as agreed upon and set forth in the DVT test plan.

Design verification test goals:

The calculated mean time between failure (MTBF) of the CP (as specified in the product
specification in ANNEX 1 CONTRACTUAL PRODUCTS and ANNEX 2 DOCUMENTATION) should be confirmed by
VENDOR’s DVT. FSC reserves the right to have access to data generated during DVT.

Product Validation Test

The CP PVT will be performed by VENDOR based on and in compliance with VENDOR’ s standard
reliability and environment test plan.

Product Validation test goals:

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	Quality
	 	2/8

 

 

Confidential

The PVT shall be designed to prove, that the CP fully conforms to the agreed specification, the
drawings, the functionality and the ATP. FSC reserves the right to have access to applicable data
generated during PVT.

Run In / Burn In

Upon the reasonable and mutual agreement of the parties, VENDOR will subject the CPs to a Run In /
Burn In period, at VENDOR’s facility. The parties understand that such Run In/Burn In period may
increase lead times for the CPs or applicable Spare parts.

Manufacturing Process Controls

8.1 Prior to the first general availability shipment of CPs, VENDOR will establish control on
processes according to the requirements of ANNEX 2 DOCUMENTATION.

8.2 VENDOR will continue to provide to FSC for review a written plan covering the major phases of
manufacturing process control including but not limited to the following:

     [***]

8.3 VENDOR shall continue to develop, implement and maintain, as necessary, appropriate procedures
and/or documentation which will define the methods to be used for process control including but not
limited to the following:

     [***]

Mass Production Standard

Mass production has to be done by using common workmanship standards (e.g. ANSI / IPC A-610, Rev C:
Class 2) and according to the general state of the art.

Ongoing Reliability Test (ORT)

10.1 VENDOR shall conduct ongoing Mean Time Between Failure (MTBF) verification testing in
accordance with Vendor’s standard ORT plan. In addition to this, the conformance of the CP to the
ATP (Acceptance Test Procedure) shall be verified ongoing.

10.2 VENDOR will inform FSC of significant changes to the above referenced plan which decrease the
quality and/or quantity of data gathered during this test. [***]

10.3 [***]

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	Quality
	 	3/8

 

 

Confidential

[***]

10.4 [***]

10.5 [***]

Source Assessment

11.1 For the term of the Agreement FSC shall [***]

VENDOR acknowledges and agrees that Source Assessment by FSC will not relieve VENDOR from its
obligation to establish and maintain an effective quality assurance system and from its full and
sole responsibility for the manufacturing and delivery of the CPs in agreed quality.

FSC will notify VENDOR of [***]

11.2 In the event FSC informed VENDOR about [***]

VENDOR shall inform [***]

11.3 Source Assessment includes the following activities:

     [***]

 

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	Quality
	 	4/8

 

 

Confidential

Source Assessment will be conducted in accordance with ATP, Workmanship Standard and the DCL, which
are mutually agreed for each CP. The ATP includes the level of inspection, AQL and/or sampling plan
and the overall testing procedure where applicable.

11.4 Sampling for the Source Assessment will be done according to the following principles
(“Sampling Plan”):

[***]

Unless otherwise defined in the ATP, sampling type shall be “normal” and inspection level shall be
“II”.

11.5 Source Assessment Testing Results

[***]

11.6 For the avoidance of doubt FSC’s [***].

12. Epidemic Failures

12.1 If EPIDEMIC FAILURES occur, VENDOR shall take immediate and appropriate actions to come up
with a strategy for dealing with the EPIDEMIC FAILURE with respect to all affected CPs (and not
just those outside of agreed upon quality levels) in agreement with FSC, and subject to the
provisions below.

12.2 EPIDEMIC FAILURE and periods of applicability are defined as either of the following:

(a) An EPIDEMIC FAILURE shall mean failures of a CP [***] that meet ALL of the following
conditions:

     [***]

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	Quality
	 	5/8

 

 

Confidential

     [***]

OR

(b) An
EPIDEMIC FAILURE shall mean the failure of a type of CP module as set forth on Appendix 1 of
this ANNEX 7 (“Appendix 1”), [***] that meet ALL of the following conditions:

     [***]

[***]

12.4
EPIDEMIC FAILUREs Removal

In the event of an EPIDEMIC FAILURE, VENDOR shall have the discretion to repair or replace the
affected CPs according to a reasonable plan of action designed by VENDOR and reasonably approved by
FSC. VENDOR agrees to [***]

13.
On-Site Audit Requirements

VENDOR shall grant FSC access to VENDOR’s engineering, production and test facilities of CP for on
site audits. FSC may audit the engineering, production and test processes on a scheduled basis and
with reasonable advance notification [***] to VENDOR.

FSC may, for purposes of periodic monitoring or for lot acceptance, select and test samples at its
own expense of completed CP within the area allotted to FSC for such purposes. FSC and

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	Quality
	 	6/8

 

 

 

Confidential

VENDOR will mutually agree to sample selection methods and quantities. On-site audits will occur as
necessary to insure product quality prior to shipment to FSC.

If VENDOR changes the CP manufacturing location, FSC’s quality assurance organization may conduct a
production and process audit.

14.
Traceability

VENDOR shall keep records of manufacturing data (date of manufacture, manufacturing lines, serial
numbers of parts used, and other mutually agreed items required to ensure the ability to trace
defects in quality or errors occurring in the CP, and promptly disclose this data upon request from
FSC for [***]

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	Quality
	 	7/8

 

 

Confidential

Appendix 1 to Annex 7

[***]

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	Quality
	 	8/8

 

 

Confidential

ANNEX 8
   EMERGENCY MANUFACTURING RIGHT

1. If VENDOR is [***], then FSC may send written notice to VENDOR that it wishes to
exercise its manufacturing rights hereunder (“Manufacturing Rights”). If within [***]
of receiving such notice from FSC VENDOR does not begin [***], then VENDOR hereby grants
to FSC [***].

Notwithstanding the foregoing, the right of FSC to exercise such Manufacturing Rights is
subject to the following conditions, exclusions and limitations:

     (i) FSC must manage all such manufacture and any related documentation and
materials in a confidential manner;

     (ii) The CPs and Spare Parts manufactured by FSC must be used, sold, and
distributed to FSC’s customers in FSC’s normal course of business, and not for any other
purpose such as (but not limited to) the purpose of [***];

     (iii) If, in exercising the Emergency Manufacturing Rights, FSC uses the same
contract manufacturer as VENDOR used just prior to the trigger of the Emergency
Manufacturing Rights (and therefore the investment of FSC in exercising the rights is
minimal), then the Manufacturing Rights shall terminate upon the earlier of: [***];

     (iv) If, in exercising the Emergency Manufacturing Rights, FSC uses a different
contract manufacturer as VENDOR used just prior to the trigger of the Emergency
Manufacturing Rights (and therefore the investment of FSC in exercising the rights is
more significant), then the Manufacturing Rights shall terminate upon the earlier of:
[***].

     (v) Upon the termination of the Manufacturing Rights, FSC shall cease manufacture
of CPs and return to VENDOR all documents and materials that were provided to FSC by
VENDOR to enable FSC to exercise its manufacturing rights.

2. Upon FSC’s proper exercise of the manufacturing rights set forth herein, VENDOR
shall:

(i) submit without delay to FSC an updated and reproducible set of the complete
manufacturing and testing documentation in respect of the CP, such documentation
to be in the English language and in the metric system;

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	GS
	 	1/2

 

 

Confidential

(ii) render to FSC in respect of the CP reasonable technical assistance, [***],
by training of FSC’s experts and explanation of the above mentioned
documentation; and

(iii) provide to FSC those [***].

3. FSC may at any time request that VENDOR will deposit one set of the above mentioned
manufacturing and testing documentation with a neutral escrow agent in the United States
of America, to be nominated by VENDOR and reasonably approved by FSC and to keep up to
date such documentation. In such case FSC shall bear all costs associated with the
selection, deposition and maintenance of the deposit.

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	GS
	 	2/2

 

 

Confidential

ANNEX 9
   STANDARDS, ENVIRONMENTAL REQUIREMENTS

[***]

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	Quality
	 	1/1

 

 

Confidential

ANNEX 10
   TECHNICAL CHANGES

1. Forms of Communication and Notification.

The parties will set up a Change Control Board (“CCB”) with representatives of both parties, which
will meet telephonically on a periodic basis to discuss pending changes that are expected to affect
the CPs and Spare Parts. The parties will mutually agree upon the frequency of such CCB meetings.
The parties expect that much of the information to be exchanged between the parties regarding
engineering changes (“EC”) will be exchanged during the CCB meetings. Further, FSC will be granted
access to VENDOR’s AGILE database through which FSC can initiate, track and approve ECs (“Agile”).
Any notification that must be made pursuant to this ANNEX by either party to the other regarding
ECs may be made by regular email, through Agile or verbally during a CCB meeting.

2. ENGINEERING CHANGES TO CP

Vendor shall use best efforts to give FSC prompt notice, but at least [***] notice, prior to each
technical change VENDOR intends to make to the CPs during the term of this Agreement (“EC”). Such
notices shall in particular include the article numbers of the relevant CPs, the date of alteration
and a complete description of the change. At FSC’s request, VENDOR shall furnish FSC with the
information which FSC reasonably considers necessary in connection with these alterations to the
CPs. Notwithstanding the foregoing, FSC understands that in certain emergency situations, VENDOR
may not be able to give FSC [***] notice of an EC.

3. Conditions Governing Changes

	 	a)	 	VENDOR is entitled to execute changes, which do not affect the form, fit or
functionof the applicable CP or Spare Part without the approval of FSC. VENDOR shall use
best efforts to inform FSC of such technical changes [***] prior to delivery of the
changed CP or Spare Part. FSC understands that in certain emergency situations, VENDOR
may not be able to comply with such notice period.
	 
	 	b)	 	VENDOR may execute technical changes which do affect the form, fit, or function, but
only with the prior consent of FSC. FSC shall grant or refuse its consent through [***]
following the receipt of the notification. FSC shall not unreasonably withhold its
consent.
	 
	 	c)	 	Vendor shall use best efforts to give FSC prompt notice but at least [***] prior to
making any other types of changes VENDOR intends to make concerning the CPs or Spare
Parts, e.g. regarding tooling, processes, procedures, locations, and sub-vendors.
Notwithstanding the foregoing, FSC understands that in emergency certain situations,
VENDOR may not be able to give FSC [***] notice of such a change.
	 
	 	d)	 	Even after EOL, VENDOR shall comply with the EC processes stated in this ANNEX 10
TECHNICAL CHANGES.
	 
	 	e)	 	If FSC does not respond to requests for approval of EC orders within the
aforementioned [***], FSC’s consent shall be considered granted to VENDOR.

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	Quality
	 	1/5

 

Confidential

	 	f)	 	If FSC receives CPs or Spare Parts with changes of which it should have been informed
but was not, FSC may refuse acceptance of the CP or Spare Part and VENDOR shall be liable
for all shipping charges with respect to the return of the units.

4. Modifications to the Specifications of CPs

	 	 	 	VENDOR shall use best efforts to provide to FSC with [***] prior notice of VENDOR’s planned
intention to modify the specifications for a CP.
	 
	 	 	 	Modification by VENDOR of a FSC-custom component [***]. Modification by VENDOR of the
specification for a CP which affects the form, fit, or function, may only be made with the
prior consent of FSC. FSC shall grant or refuse its consent within [***]. FSC shall not
unreasonably withhold its consent. If FSC’s consent is required, FSC and VENDOR will agree
on a starting point (e.g. cut in serial number, cut in date etc.) from which the modified
CP will be delivered. Up to this point only unmodified CP may be delivered to FSC.
	 
	 	 	 	Even after the starting point of modification VENDOR is obliged to supply FSC with SPARE
PARTS for a period of [***], corresponding to the earlier specifications, unless the
modified specifications do not affect the use of the modified SPARE PARTS for CP with
earlier specifications. Further VENDOR shall mark CPs affected by such modifications of the
specifications by way of a new part number or other notation.
	 
	 	 	 	Proposals submitted by FSC for modifying the CP specifications shall be given due
consideration by VENDOR. [***] VENDOR shall communicate its opinion of the proposed
modifications to the specifications within [***] following communication of the same by FSC.
If VENDOR agrees to modify the CP according to such specifications it shall inform FSC of
the resultant price adjustments and of the time necessary to carry out the modifications.
Such modifications shall be made only with FSC’s approval.

5. Engineering Change Procedure

	 	 	 	Notification of product modifications shall be done by means of an ECR / ECN (Engineering
Change Request / Notice) reflecting the new revision level and the reason for the
modification according Appendix 1 to ANNEX 10. FSC shall use reasonable efforts to evaluate
an ECR as soon as possible.

The EC process is described in Appendix 1 to ANNEX 10. FSC shall respond to an EC request
[***]. If an EC requires FSC’s approval and FSC rejects an ECR, VENDOR shall not implement
that specific modification.

6. Request for Action due to Technical Issue

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	Quality
	 	2/5

 

Confidential

	 	 	A modification request by FSC due to a technical failure of a CP or other issue that impacts
a CP’s compliance with the applicable specification will be made [***].
	 
	 	 	VENDOR shall notify FSC of its acceptance or rejection of the RFA [***]. VENDOR shall not
unreasonably withhold its consent to an RFA. Mandatory or urgent modifications should be
marked accordingly.
	 
	 	 	Mutually accepted changes may be implemented. The implementation can be notified by an ECN
(Engineering Change Notice). The Cut In Date / Cut in Serial Number shall be mutually agreed
upon in writing.

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	Quality
	 	3/5

 

Confidential

Appendix 1 to ANNEX 10

1. EC Process

[***]

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	Quality
	 	4/5

 

Confidential

[***]

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	Quality
	 	5/5

 

Confidential

 

ANNEX 11
   TECHNICAL SUPPORT, TRAINING

1. Training

Upon FSC’s request, VENDOR shall hold [***] an initial training course, [***], as specified below
to be conducted in the English language on FSC’s premises in Germany in order to instruct employees
of FSC and its designated service partners that are bound by standard non-disclosure agreements
(“Designated Service Providers”) in the operation, maintenance and technical features of CPs.

VENDOR shall provide appropriate training documents which may be in the form of CDs and other
electronic formats.

FSC may reproduce the training documents for FSC’s internal use only (including FSC’s Designated
Service Partners).

For additional training courses which may be requested by FSC, dates and actual costs will be
mutually agreed upon for each such additional course.

2. Technical Support

FSC will be responsible for working directly with FSC’s end users and customers, and VENDOR will
work directly with FSC, as necessary, to provide technical support with respect to CPs during the
Warranty Period. [***] FSC and VENDOR will mutually agree upon terms pursuant to which VENDOR
will provide support on CPs beyond the Warranty Period.

FSC represents and warrants that it (or its agents) is experienced in, capable of, and staffed to
provide Level 1 Level 2 and Level 3 support (as defined below) for its own products and the CPs.
FSC must ensure that its technical support personnel have attended training courses with respect to
the CPs to enable such support, including the initial training described in section 1, above.
VENDOR will accept calls for technical assistance only from FSC Level 3 engineers who have attended
such training.

VENDOR will provide Level 4 support with respect to the CPs during the Warranty Period, as defined
below.

3. Support Level Definitions

	 	(a)	 	Level 1 Support

[***]

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	Quality
	 	1/2

 

Confidential

[***]

	(b)	 	Level 2 Support

[***]

	 	(b)	 	Level 3 Support

[***]

	 	(c)	 	Level 4 Support

[***]

4. On-Site Technical Supp

The parties both understand that VENDOR personnel will be requested to visit end-user customer
sites only in extraordinary circumstances, where resolution of an issue is shown to be impossible
without such a visit. In such instances, [***] When VENDOR personnel are required to make direct
telephone or field contact with FSC’s end-user customer, FSC will designate a customer
representative of FSC to be present for the duration of the customer contact.

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	Quality
	 	2/2

 

Confidential

ANNEX 12
   CONTACTS

Notices and communications to be transmitted according to Section 26 of the AGREEMENT between
VENDOR and FSC shall be given in writing or by fax to the following addresses of the parties or to
such other address as the party concerned may subsequently notify in writing to the other party.

VENDOR:

[***]

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	GS
	 	1/4

 

Confidential

[***]

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	GS
	 	2/4

 

Confidential

FSC:

[***]

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	GS
	 	3/4

 

Confidential

[***]

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	GS
	 	4/4

 

Confidential

ANNEX 13
   EXCESS INVENTORY

FSC has to give notice to VENDOR [***].

During the [***].

The [***]

Should the [***]

Should FSC receive no timely instructions within the [***] period, FSC is [***]

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	GS
	 	1/1

 

Confidential

ANNEX 14
   DROPSHIPMENT

[***]

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	GS
	 	1/1

 

Confidential

ANNEX 15
   TEST REQUIREMENTS

[***]

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	Quality
	 	1/1

 

Confidential

ANNEX 16
   PACKAGING AND LABELING

[***]

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	Quality
	 	1/1

 

Confidential

ANNEX 17
   ETHICAL STANDARDS

	1.	 	FSC is committed to ethical and responsible conduct in its business operations which
respects the rights of the individuals and the environment. At a minimum FSC requires the
VENDOR to comply with the following standards and all applicable laws relating to such
matters. The VENDOR shall:

	 	1.1	 	not use child labour or forced or involuntary labour of any kind;
	 
	 	1.2	 	not discriminate in hiring and employment practices whether based upon race,
religion, age, nationality, social or ethnic origin, sexual orientation, gender,
disability or political opinion;
	 
	 	1.3	 	treat all its employees with dignity and respect and not use corporal
punishment or threats of violence or other physical or mental abuse;
	 
	 	1.4	 	provide its employees with a safe and healthy workplace (and where applicable
any housing provided for employees) in compliance with applicable laws and standards
and ensure reasonable access to drinkable water and sanitary facilities, adequate
lighting and ventilation and fire safety; and
	 
	 	1.5	 	comply with applicable laws and regulations relating to wages, working hours
and environmental matters.

	2.	 	VENDOR shall take adequate measures to ensure that the provisions of this clause are
communicated to its employees.
	 
	3.	 	VENDOR hereby authorises FSC and its designated agents to engage in monitoring activities to
verify compliance with the provisions of this clause including conducting unannounced on-site
inspections and review of books and records relating to the above matters.

					
	 	 	 	 	 
	 
	 	GS
	 	1/1

 

Confidential

ANNEX 18
   INTELLECTUAL PROPERTY RIGHTS

	1.	 	Definitions

	 	1.1	 	“VENDOR Background IP” shall mean any pre-existing Intellectual Property that
VENDOR owns or has the right to license. Unless a certain component or feature is
otherwise specifically indicated, the CP and the Spare Parts are VENDOR Background IP.
	 
	 	1.2	 	“VENDOR Foreground IP” shall mean any Intellectual Property which is developed,
conceived or reduced to practice by the employees or contractors of VENDOR as a result
of the performance of any development activities under the AGREEMENT or with respect to
the CPs or Spare Parts. Except for FSC NEW Ideas that are specifically identified as
Jointly Owned IP as per this ANNEX, VENDOR Foreground IP shall include the Intellectual
Property developed, conceived or reduced to practice by one or more employees or agents
of VENDOR with the aid or contributions of one or more employees or agents of FSC in
connection with development activities taken under the AGREEMENT which relates to the
CP and Spare Parts.
	 
	 	1.3	 	“Jointly Owned IP” shall mean FSC New Ideas, but only those that are
incorporated into a CP or Spare Part and which are identified and agreed in writing by
the Parties. Jointly Owned IP shall not include any underlying or accompanying
Background IP or Foreground IP of either party.
	 
	 	1.4	 	“Intellectual Property” or “IP” shall mean all rights worldwide in Patents,
copyrights, trade secrets, Confidential Information or any other Intellectual Property
rights, but excluding rights in trademarks, service marks, trade names, service names
and Internet domain names and other similar designations.
	 
	 	1.5	 	“FSC Background IP” shall mean any pre-existing Intellectual Property that FSC
owns or has the right to license.
	 
	 	1.6	 	“FSC New Ideas” shall mean new concepts or other forms of Intellectual Property
such as, for example, new features for the CPs, which is conceived of solely by FSC’s
employees or agents without the contribution of VENDOR. FSC must follow the guidelines
regarding the disclosure of FSC New Ideas as set forth below in this ANNEX 18 in order
to take advantage of any applicable exclusive sales period with respect to the FSC New
Idea.
	 
	 	1.7	 	“Patents” shall mean patents, patent applications, design patents and
registrations and utility models, along with any reissues, re-examinations,
continuations, continuations-in-part, divisions and renewals thereof.

	2.	 	FSC and its licensors shall retain title to and all ownership rights and interests in
and to the FSC Background IP.

	3.	 	VENDOR and its licensors shall retain title to and all ownership rights and interests
in and to the VENDOR Background IP and VENDOR Foreground IP.

	4.	 	FSC NEW Ideas

					
	 	 	 	 	 
	 
	 	GS
	 	1/2

 

Confidential

	 	4.1	 	In the event FSC would like to share with VENDOR an FSC New Idea for purposes of
having VENDOR include the FSC New Idea in the CPs or Spare Parts, FSC shall [***].
	 
	 	4.2	 	If, upon disclosing the FSC New Idea to VENDOR, VENDOR [***].
	 
	 	4.3	 	If, upon disclosing the FSC New Idea to VENDOR, VENDOR [***].
	 
	 	4.4	 	FSC New Ideas which are identified and agreed by the Parties in writing will be
Jointly Owned IP, subject to VENDOR’s underlying ownership rights and interests to
VENDOR Background IP and VENDOR Foreground IP and subject to FSC’s rights in Background
IP.

	5.	 	With respect to Jointly Owned IP which has been identified and agreed by the Parties in
writing, neither party will have a duty to [***].

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	GS
	 	2/2

 

Confidential

ANNEX 19
   MARKETING FUNDS

	1.	 	VENDOR shall provide [***].
	 
	2.	 	The MDF is expected to be used to pay for, among other things, [***].
	 
	3.	 	FSC shall be required to provide [***].
	 
	4.	 	For the calendar year 2006, the total amount of the MDF shall be [***].

For the calendar year 2007, the total amount of the MDF shall be [***]

	6.	 	For the year 2008 and beyond, the parties will negotiate the amount of the MDF in good faith.

					
	 	 	 	 	 
	 
	 	 
	 	***CONFIDENTIAL TREATMENT REQUESTED
	 	 	 	 	 
	 
	 	GS
	 	1/1exv10w1

 

EXHIBIT
10.1

FINAL

CONFIDENTIAL TREATMENT REQUESTED

Manufacturing Services Agreement

January 4, 2006

 

 

Table of Contents

	 	 	 	 	 
	ARTICLE 1
	 	 	1	 
	 
	 	 	 	 
	INTERPRETATION
	 	 	1	 
	 
	 	 	 	 
	1.1
Definitions
	 	 	1	 
	1.2 Currency
	 	 	6	 
	1.3 Sections and Headings
	 	 	7	 
	1.4 Singular Terms
	 	 	7	 
	1.5 Schedules
	 	 	7	 
	 
	 	 	 	 
	ARTICLE 2
	 	 	7	 
	 
	 	 	 	 
	PATHEON’S MANUFACTURING RESPONSIBILITIES
	 	 	7	 
	 
	 	 	 	 
	2.1 Manufacturing Services
	 	 	7	 
	2.2 Active Material Yield
	 	 	11	 
	 
	 	 	 	 
	ARTICLE 3
	 	 	13	 
	 
	 	 	 	 
	AVANIR’S OBLIGATIONS
	 	 	13	 
	 
	 	 	 	 
	3.1 Payment
	 	 	13	 
	3.2 Active Materials
	 	 	13	 
	 
	 	 	 	 
	ARTICLE 4
	 	 	13	 
	 
	 	 	 	 
	CONVERSION FEES AND COMPONENT/PACKAGING MATERIAL COSTS
	 	 	13	 
	 
	 	 	 	 
	4.1 First Year Pricing
	 	 	13	 
	4.2 Subsequent Years’ Pricing
	 	 	13	 
	4.3 Adjustments to Pricing
	 	 	15	 
	4.4 Adjustments Due to Technical Changes
	 	 	16	 
	4.5 Multi-Country Packaging Requirements
	 	 	17	 
	 
	 	 	 	 
	ARTICLE 5
	 	 	17	 
	 
	 	 	 	 
	ORDERS, SHIPMENT, INVOICING, PAYMENT
	 	 	17	 
	 
	 	 	 	 
	5.1 Orders and Forecasts
	 	 	17	 
	5.2 Reliance by Patheon
	 	 	18	 
	5.3 Minimum Orders
	 	 	19	 
	5.4 Shipments
	 	 	19	 
	5.5 Scheduled Shipment Dates and Late Shipments
	 	 	20	 
	5.6 Invoices and Payment
	 	 	21	 
	 
	ARTICLE 6
	 	 	21	 

- i -

 

	 	 	 	 	 
	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	 
	6.5 Customer Questions and Complaints
	 	 	24	 
	 
	 	 	 	 
	ARTICLE 7
	 	 	24	 
	 
	 	 	 	 
	7.1 Quarterly Review
	 	 	24	 
	7.2 Governmental Agencies
	 	 	25	 
	7.3 Records and Accounting by Patheon
	 	 	25	 
	7.4 Inspections
	 	 	25	 
	7.5 Access
	 	 	25	 
	7.6 Reports
	 	 	26	 
	7.7 FDA Filings
	 	 	26	 
	7.8 Continuous Improvement
	 	 	27	 
	7.9 Further Actions
	 	 	27	 
	7.10 Disaster Recovery Plan
	 	 	27	 
	 
	 	 	 	 
	ARTICLE 8
	 	 	28	 
	 
	 	 	 	 
	TERM AND TERMINATION
	 	 	28	 
	 
	 	 	 	 
	8.1 Initial Term
	 	 	28	 
	8.2 Termination for Cause
	 	 	28	 
	8.3 Product Discontinuation
	 	 	28	 
	8.4 Obligations on Termination
	 	 	29	 
	8.5 Continuation of Performance
	 	 	30	 
	8.6 Transition Subsequent to Termination
	 	 	30	 
	 
	 	 	 	 
	ARTICLE 9
	 	 	31	 
	 
	 	 	 	 
	REPRESENTATIONS, WARRANTIES AND COVENANTS
	 	 	31	 
	 
	 	 	 	 
	9.1 Authority
	 	 	31	 
	9.2 Avanir Warranties
	 	 	31	 
	9.3 Patheon Warranties
	 	 	32	 
	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 Maximum Liability
	 	 	33	 

- ii -

 

	 	 	 	 	 
	10.3 Patheon
	 	 	34	 
	10.4 Avanir
	 	 	34	 
	10.5 Indemnification Procedure
	 	 	35	 
	10.6 Reasonable Allocation of Risk
	 	 	36	 
	 
	 	 	 	 
	ARTICLE 11
	 	 	36	 
	 
	 	 	 	 
	CONFIDENTIALITY
	 	 	36	 
	 
	 	 	 	 
	11.1 Confidentiality
	 	 	36	 
	11.2 Confidentiality Exceptions
	 	 	37	 
	11.3 Authorized Disclosure
	 	 	37	 
	11.4 Return Of Confidential Information
	 	 	37	 
	11.5 Equitable Relief
	 	 	38	 
	 
	 	 	 	 
	ARTICLE 12
	 	 	38	 
	 
	 	 	 	 
	DISPUTE RESOLUTION
	 	 	38	 
	 
	 	 	 	 
	12.1 Commercial Disputes
	 	 	38	 
	12.2 Technical Dispute Resolution
	 	 	38	 
	12.3 Arbitration
	 	 	39	 
	 
	 	 	 	 
	ARTICLE 13
	 	 	39	 
	 
	 	 	 	 
	MISCELLANEOUS
	 	 	39	 
	 
	 	 	 	 
	13.1 Intellectual Property
	 	 	39	 
	13.2 Inventions
	 	 	40	 
	13.3 Assistance
	 	 	41	 
	13.4 Trademarks and Trade Names
	 	 	41	 
	13.5 Insurance
	 	 	41	 
	13.6 Independent Contractors
	 	 	42	 
	13.7 No Waiver
	 	 	42	 
	13.8 Assignment
	 	 	42	 
	13.9 Force Majeure
	 	 	43	 
	13.10 Additional Product
	 	 	43	 
	13.11 Notices
	 	 	43	 
	13.12 No Publicity
	 	 	44	 
	13.13 Severability
	 	 	45	 
	13.14 Entire Agreement
	 	 	45	 
	13.15 Other Terms
	 	 	45	 
	13.16 No Third Party Benefit or Right
	 	 	45	 
	13.17 Execution in Counterparts
	 	 	45	 
	13.18 Governing Law
	 	 	46	 

- iii -

 

FINAL

MANUFACTURING SERVICES AGREEMENT

     THIS MANUFACTURING SERVICES AGREEMENT (the “Agreement”) made as of the 4th day of
January, 2006.

     B E T W E E N:

PATHEON INC.,

a corporation existing under the laws of Canada,

(hereinafter referred to as “Patheon”),

- and -

AVANIR PHARMACEUTICALS,

a corporation existing under the laws of California,

(hereinafter referred to as “Avanir”).

          WHEREAS, Patheon is a provider of outsourced drug manufacturing services to pharmaceutical and
biotechnology companies;

          WHEREAS, Avanir seeks to retain a contract manufacturer to manufacture and supply commercial
quantities of pharmaceutical product;

          WHEREAS, Patheon possesses substantial resources, experience, and expertise in the manufacture
of pharmaceutical products; and

          WHEREAS, the parties mutually desire to enter into an agreement for the commercial manufacture
and supply of Avanir’s product;

          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 active pharmaceutical ingredients listed on Schedule D hereto.

“Active Material Reimbursement Value” means the value to be attributed to the Active
Materials for the purposes of Section 2.2 of this Agreement, as set forth in Schedule I
hereto.

“Affiliate” means:

	 	(a)	 	a business entity which owns, directly or indirectly, a controlling interest in
a party to this Agreement, by stock ownership or otherwise; or
	 
	 	(b)	 	a business entity which is controlled by a party to this Agreement, either
directly or indirectly, by stock ownership or otherwise; or
	 
	 	(c)	 	a business entity, the controlling interest of which is directly or indirectly
common to the majority ownership of a party to this Agreement.

     For the purposes of this definition, “control” means as to an entity, (a) direct or
indirect ownership of 50% or more of the voting interests or other ownership interests in
the entity in question; (b) direct or indirect ownership of 50% or more of the interest in
the income of the entity in question; or (c) possession, directly or indirectly, of the
power to direct or cause the direction of management or policies of the entity in question
(whether through ownership of securities or other ownership interests, by contract or
otherwise).

“Annual Volume” means the volume of Product to be manufactured in any Year of this Agreement
as set forth in Schedule B hereto.

“Applicable Laws” means all laws, statutes, ordinances, codes, rules, regulations,
guidelines, and procedures enacted or made by an Authority, including, without limitation,
the FDA and any applicable foreign regulatory authority, that are in force during the term
of this Agreement, and in each case only to the extent applicable to the subject matter of,
or the performance by the parties of their respective obligations under, this Agreement,
which shall include, but not be limited to, laws relating to the environment and health and
safety. For purposes of this Agreement, “Applicable Laws” will include, without limitation,
the FFDCA, the regulations promulgated thereunder (including, without limitation, those
regulations currently contained in Title 21 of the Code of Federal Regulations), and other
rules and regulations promulgated under the FFDCA relating to the manufacture of
pharmaceutical products; and equivalent laws, regulations and standards promulgated by an
Authority that may assert jurisdiction over the Product or any applicable Patheon
manufacturing facilities; cGMP, including the FDA’s Guidance for Industry, Manufacturing,
Processing or Holding Active Pharmaceutical Ingredients, March 1998, and any updates
thereto; and the FDA’s regulations for drug establishment registration.

 - 2 -

 

“Authority” means any governmental or regulatory authority, department, body or agency or
any court, tribunal, bureau, commission or other similar body, whether supra-national,
national, regional federal, state, provincial, county or municipal and having jurisdiction
over the Product.

“Batch” means a specific quantity of Product that is manufactured according to a single
manufacturing order.

“Business Day” means a day other than a Saturday, Sunday or a day that is a statutory
holiday in the Province of Ontario, Canada or the state of California, U.S.A.

“Certificates Of Compliance” means (a) the certificate of analysis confirming the identity,
strength, quality and purity of each invoiced Batch of Product to which it pertains
(together with any certificate of analysis pertaining to the Active Materials contained in
such Batch), (b) the certificate of compliance confirming that the each invoiced Batch of
Product was manufactured, tested, stored and supplied by Patheon in compliance with this
Agreement, including without limitation the Specifications, GMP and Applicable Laws, and (c)
such other certificates and confirmations as described in the Quality Agreement, each such
certificate signed by an authorized signatory of Patheon.

“cGMPs” means current good manufacturing practices as applicable in (a) Canada under
Division 2 of Part C of the Food and Drug Regulations (Canada), (b) the European Union under
EC Directive 91/356/EEC or (c) the United States of America as described in: Parts 210 and
211 of Title 21 of the United States Code of Federal Regulations, and the requirements
imposed thereunder by Health Canada, the European Union or the FDA, together with the latest
Health Canada, European Union or FDA guidance and like documents pertaining to manufacturing
and quality control practice, all as updated, amended and revised from time to time.

“Commencement Date” means the first day upon which the Manufacturing Services shall
commence, which shall be on or about January 9, 2006.

“Components” means, collectively, all excipients and inactive ingredients required to be
used in order to produce the Products in accordance with the Specifications, other than the
Active Materials and Packaging Materials.

“Confidential Information” means all non-public, proprietary or confidential disclosures,
know-how, data, and technical, financial and other information of any nature whatsoever (in
any form or media) regarding a party’s technology, intellectual property, inventions,
customers, prospective customers (including lists of customers and prospective customers),
methods of operation, manufacturing, scientific, engineering and clinical methods and
processes, programs and databases, patents and designs, billing rates, billing procedures,
vendors and suppliers, business methods, finances, management, or any other business
information relating to such party (whether constituting a trade secret or

 - 3 -

 

proprietary or otherwise) which has value to such party and is treated by such party as
being confidential.

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

“FDA” means the United States government department known as the Food and Drug
Administration, and any successor thereto.

“FFDCA” means the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. Section 321 et seq., as
amended.

“Firm Orders” has the meaning specified in Section 5.1(b).

“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.

“INDA” means an “Investigational New Drug Application.”

“Intellectual Property” includes, without limitation, rights in patents, patent
applications, formulae, trade-marks, trade-mark applications, trade-names, Inventions,
copyright and industrial designs.

“Invention” means information relating to any innovation, improvement, development,
discovery, computer program, device, trade secret, method, know-how, process, technique or
the like, whether or not written or otherwise fixed in any form or medium, regardless of the
media on which it is contained and whether or not patentable or copyrightable.

“Inventory” means all inventories of Components, Packaging Materials and work-in-process
produced or held by Patheon in connection with the manufacture of the Products but, for
greater certainty, does not include the Active Materials.

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

“Manufacturing Services” means 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, Components and Packaging Materials.

 - 4 -

 

“Manufacturing Site” means the facility owned and operated by Patheon that is located at
*** .

“Minimum Annual Volume” means the minimum Annual Volume for which Product pricing is
provided as shown in Schedule B attached hereto.

“Minimum Run Quantity” means the minimum number of Batches of a Product to be produced
during the same cycle of manufacturing as set forth in Schedule B hereto.

“NDA” means a “New Drug Application” filed with the FDA for marketing approval for a
pharmaceutical product.

“Packaging Materials” means all packaging materials (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.

“Products” means fully-manufactured pharmaceutical products containing Active Materials and
other Components, as more particularly described in the Specifications and on Schedule A
hereto.

“Quality Agreement” means the agreement to be entered into between the parties hereto,
following the Effective Date but reasonably in advance of the Commencement Date, and
relating to the obligations of the parties regarding procedures to assure the identity,
strength, purity and quality of the Products, which agreement shall be substantially in the
form attached hereto as Schedule G.

“Recall” means any action (i) by Avanir 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 Authority to detain or destroy any
of the Products. Recall will also include any action by either party to refrain from
selling or shipping quantities of the Products to Third Parties which would have been
subject to a Recall if sold or shipped.

“Regulatory Approval” means, with respect to a national or multinational jurisdiction, any
approvals, licenses, registrations, or authorizations necessary for the manufacture (where
relevant), marketing and sale of the Product in such nation or jurisdiction.

 

			
	***	 	Certain confidential
portions of this Exhibit were omitted by means of blackout of the
text (the “Mark”). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the
Company’s Application Requesting Confidential Treatment under Rule
24b-2 under the 1934 Act.

 - 5 -

 

“Specifications” means the file, for each Product, which is provided by Avanir 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 protocols, directions and processes specifications, directions
and processes testing methodologies, environmental, health and safety information
relating to the Product including material safety data sheets;
	 
	 	(c)	 	shipping and storage requirements;
	 
	 	(d)	 	all environmental, health and safety information relating to the Product
including material safety data sheets. and
	 
	 	(e)	 	the finished Product specifications and packaging specifications and shipping
requirements for each Product;
	 
	 	(f)	 	all applicable portions of any regulatory filings made by Avanir with the FDA
(including INDA’s and NDA’s) for the Product;

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

“Substantial Efforts” shall mean each Party shall work together with the other Parties in
good faith and a spirit of cooperation in making such reasonably prompt, substantial and
persistent efforts in order to achieve the intent and purposes of this Agreement, but
“Substantial Efforts” does not require any person or entity to take any extraordinary or
unusual actions in the particular circumstances.

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

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

“Third Party” means any individual or entity other than Patheon or Avanir or their
respective Affiliates.

“Third Party Rights” means the Intellectual Property of any Third Party.

“Year” means in the first year of this Agreement the period from the Commencement Date up to
and including December 31, 2006, 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.

 - 6 -

 

   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.

   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:

	 	 	 	 	 
	Schedule A

	 	-
	 	Procedure for Shipment & Acceptance of Product Specifications
	Schedule B

	 	-
	 	Annual Volume, Run Quantity & Fees
	Schedule C

	 	-
	 	Stability Testing
	Schedule D

	 	-
	 	Active Materials
	Schedule E

	 	-
	 	Batch Numbering & Expiration Dates
	Schedule F

	 	-
	 	Technical Dispute Resolution
	Schedule G

	 	-
	 	Quality Agreement
	Schedule H

	 	-
	 	Shipping Logistics Protocol
	Schedule I

	 	-
	 	Active Material Reimbursement Value
	Schedule J

	 	-
	 	Quarterly Active Material Inventory Report
	Schedule K

	 	-
	 	Report of Annual Active Material Inventory Reconciliation and
Calculation of Actual Annual Yield
	Schedule L

	 	-
	 	Form of Work Order

ARTICLE 2

PATHEON’S MANUFACTURING RESPONSIBILITIES

  2.1 Manufacturing Services.

          Patheon shall provide the Manufacturing Services for the Territory for the fees specified in
Schedules B and C in order to produce Products for Avanir. Patheon may change the Manufacturing
Site for the Products only with the prior written consent of Avanir, such consent not to be
unreasonably withheld. If Manufacturing Services have not commenced within

 - 7 -

 

12 months of the date of execution of this Agreement Patheon reserves the right to amend the
fees set out in Schedules B and C. Avanir shall purchase (i) in the first Year, not less than
[ *** ]% of its entire requirement of Products for sale in the Territory from
Patheon pursuant to the terms of this Agreement, (ii) in the second Year, not less than
[***]% of its entire requirement of Products for sale in the Territory and (iii) in the
third Year, and thereafter, not less than [***]% of its entire requirement of Products
for sale in the Territory. Avanir shall give Patheon a minimum of [***] months prior
written notice of any activities intended to shift manufacturing of any Product to Avanir or to a
third party manufacturer. In providing the Manufacturing Services, Patheon shall perform each of
the following services

	 	(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. Each
time Patheon ships Products to Avanir, it shall provide Avanir with a certificate of
analysis that sets out the test results for each Batch of Products, and that certifies
that such Batch has been evaluated by Patheon’s Quality Control/Quality Assurance
department and that the Products comply with the Specifications. Patheon will conduct
all such testing in accordance with the procedures and using the analytical testing
methodologies set forth in the Specifications and the Quality Agreement.
	 
	 	(c)	 	Components & Active Materials. Patheon shall purchase and test all
Components (with the exception of those that are supplied by Avanir) at Patheon’s
expense and the Active Materials at Avanir’s expense, in each such case as specified by
the Specifications.
	 
	 	(d)	 	Stability Testing. Patheon shall conduct stability testing on the
Products in accordance with the protocols set out in the Specifications for the
separate fees specified in Schedule C. Patheon shall not make any changes to these
testing protocols without prior written approval from Avanir. In the event that any
Batch of Products fails stability testing, Patheon and Avanir 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, provided that Patheon
shall not be liable for any such costs unless there has been a failure by it to provide
the Manufacturing Services in accordance with the Specifications,

 

			
	***	 	Certain confidential
portions of this Exhibit were omitted by means of blackout of the
text (the “Mark”). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the
Company’s Application Requesting Confidential Treatment under Rule
24b-2 under the 1934 Act.

 - 8 -

 

	 	 	 	cGMPs and Applicable Laws. Patheon will provide any and all data and results
relating to the stability testing upon request by Avanir.
	 
	 	(e)	 	Packaging. Patheon shall package the Products with labels, product
inserts and other packaging as set out in the Specifications. In addition, 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. Avanir may, in its
sole discretion, make changes to labels, product inserts and other packaging for the
Products, which changes shall be submitted by Avanir to all applicable governmental
agencies and other third parties responsible for the approval of the Products.
Patheon’s name shall not appear on the label or anywhere else on the Products unless:
(i) required by any Laws; or (ii) Patheon expressly consents to such use of its name in
writing.
	 
	 	(f)	 	Active Materials, Components and Packaging Materials Importing.
Patheon and Avanir will cooperate and provide such assistance and information to each
other as may be reasonably necessary to permit the import of the Active Materials,
Components and Packaging Materials into Canada, including, without limitation, the
value of the Active Materials calculated in accordance with Section 46 of the Customs
Act (Canada). Each party shall ensure that the information provided in connection with
this Section 2.1(f) is accurate and shall bear any costs, expenses and damages
(including, without limitation, any fines and penalties) which the other party may
incur as a result of the inaccuracy of such information. Patheon will conduct chemical
identity testing for all Active Materials received at the Manufacturing Site. Patheon
will conduct full release testing of all Active Materials received at the Manufacturing
Site in accordance with the procedures and using the analytical testing methodologies
set forth in the Specifications and the Quality Agreement. Patheon will promptly notify
Avanir in writing of any failure of the Active Materials to conform to the
Specifications for same, and any other problem it may identify with the Active
Materials detected during the inspection and testing process. All testing required
will be managed by Patheon to meet the production schedules and delivery dates as
determined by Patheon’s acceptance of Firm Orders submitted by Avanir.
	 
	 	(g)	 	Bill Back Items. The expenses in respect of all third party supplier
fees for the purchase of columns, standards, tooling, PAPR suits (where applicable) and
other project specific items necessary for Patheon to perform the Manufacturing
Services, and which are not included as Components or Packaging Materials, shall be
charged to Avanir at Patheon’s costs.

 - 9 -

 

	 	(h)	 	Manufacturing Equipment. Except as otherwise agreed to by the parties
in writing, Patheon shall be solely responsible for all costs associated with (a)
purchasing and maintaining the equipment used by Patheon at the Manufacturing Site to
manufacture the Products (the “Manufacturing Equipment”); and (b) hiring personnel to
maintain the Manufacturing Equipment necessary to comply with its obligations under
this Agreement.
	 
	 	(i)	 	Storage. Patheon will store the Active Materials at Patheon’s storage
facility at the Manufacturing Site with due care and attention to the requirements set
forth in the Specifications and in accordance with GMP and Applicable Laws so as to
protect such Active Materials from loss or damage. Patheon shall maintain adequate
storage for the Active Materials while at the Manufacturing Site and Patheon shall not
store finished Products with Active Materials or Components on the same pallet.
Patheon will ensure that, while Active Materials and finished Products are in storage,
they do not become subject to any lien or other security interest securing any
obligation owed or alleged to be owed by Patheon to any person or entity. Subject to
Patheon’s liability for loss of Active Materials as set forth in Section 2.2(d), and
Patheon’s maximum liability set forth in Sections 10.1, 10.2, Patheon shall be
responsible for any loss or damage to the finished Product while stored at the
Manufacturing Site prior to shipment of such Products to Avanir in accordance with
Section 5.4. Patheon will notify Avanir in writing if an amount in excess
***  of Active Materials is damaged, lost or otherwise rendered
unusable at any one time during storage as soon as practicable following such incident.
	 
	 	(j)	 	Manufacturing Site. Patheon will manufacture Product at the
Manufacturing Site. Patheon will not manufacture any Product in any other facility
without first obtaining Avanir’s prior written consent.
	 
	 	(k)	 	Validation Batches.  Patheon shall manufacture validation batches of
Product for Avanir as described and agreed to by the parties in a work order
substantially in the form attached hereto as Schedule L, which shall include the fees
payable by Avanir for such services. Avanir agrees that provided Patheon has
manufactured the validation batches in accordance with the Specifications, cGMPs and
Applicable Laws, (i) Avanir shall have no right to reject any Product from a validation
batch under Section 6.1, and (ii) Avanir shall assume all risk, liability and
responsibility for such Product, including, without limitation, financial and
regulatory liability, and full responsibility for any recall thereof.

 

			
	***	 	Certain confidential
portions of this Exhibit were omitted by means of blackout of the
text (the “Mark”). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the
Company’s Application Requesting Confidential Treatment under Rule
24b-2 under the 1934 Act.

 - 10 -

 

     2.2 Active Material Yield.

          (a) Reporting. Patheon shall provide Avanir with a monthly inventory report for each
Active Material held by Patheon in accordance with the inventory report form annexed hereto as
Schedule J, which shall contain the following information for such quarter:

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

Quantity Dispensed: The total quantity of Active Material dispensed at a Manufacturing Site
during the applicable period. The Quantity Dispensed is calculated by adding the Quantity
Received to the inventory of Active Material that complies with the Specifications and is
held at the beginning of the applicable period, less the inventory of Active Material that
complies with the Specifications and is held at the end of such period. The Quantity
Dispensed shall only include Active Material received and dispensed in connection with
commercial manufacturing of Products and, for certainty, shall not include any 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.

Quantity Converted: The total amount of Active Material contained in the Products produced
with the Quantity Dispensed (including any additional Products produced in accordance with
Section 6.1 or 6.2), 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 Services in accordance with the Specifications, cGMPs and Applicable Laws.
For greater certainty, the Quality Converted shall take into account any potency
calculations which have been done by Patheon to determine the appropriate amount of Active
Material required to manufacture the Products.

Within 60 days after the end of each Year, Patheon shall prepare an annual reconciliation of Active
Materials in accordance with the reconciliation report form annexed hereto as Schedule K including
the calculation of the “Actual Annual Yield” or “AAY” for the Product at the Manufacturing Site
during the Year, which AAY is the percentage of the Quantity Dispensed that was converted to
Products and is calculated as follows:

Quantity Converted during the Year

Quantity Dispensed during the Year

- 11 -

 

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

          [(Target Yield ) – [***]% – AAY] * Active Material Reimbursement Value * Quantity
Dispensed

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

For the purposes of calculating the Shortfall, the “Target Yield” for each Year shall be determined
as follows:

	 	1)	 	For commercial Batches manufactured by Patheon in the first Year of this
Agreement, the Target Yield shall be equal to the average yield of all Batches of
Product manufactured by Patheon in the first Year.
	 
	 	2)	 	For commercial Batches manufactured by Patheon in the second Year and each
Year thereafter, the Target Yield shall be mutually agreed upon by the parties after
Patheon has produced a minimum of twenty-five commercial production Batches of
Product (collectively, the “Target Yield Determination Batches”) pursuant to this
Agreement; provided, however, that the Target Yield Determination Batches shall not
include any batches that, in the parties’ mutual and reasonable judgment, were
produced in production runs that were adversely affected by technical difficulties or
involving an extraordinary loss of Active Material. Thereafter, Patheon shall strive
to maintain Actual Annual Yield levels for each Product above the applicable Target
Yield.

          (c) Reimbursement. Patheon shall reimburse Avanir for any Shortfall in a Year. Each
payment under this Section 2.2 shall be summarized on the reconciliation report prepared in the
form attached hereto as Schedule K and shall be paid within *** calendar days following the end of
each Year.

          (d) Liability for Active Materials and Maximum Reimbursement Value. Under no
circumstances shall Patheon be liable for any loss or damage to the Active Materials for any reason
other than as expressly set forth in this Section 2.2 and Section 2.1(i). Notwithstanding the
foregoing provisions of this Section 2.2, Patheon’s liability for Active Materials calculated in
accordance with this Section 2.2 for any Product in a Year shall be subject to, and shall not
exceed the maximum liability cap agreed to by the parties in Section 10.2.

 

			
	***	 	Certain confidential
portions of this Exhibit were omitted by means of blackout of the
text (the “Mark”). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the
Company’s Application Requesting Confidential Treatment under Rule
24b-2 under the 1934 Act.

- 12 -

 

          (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 the Actual Annual Yield is less that the Target
Yield.

ARTICLE 3

AVANIR’S OBLIGATIONS

     3.1 Payment.

Pursuant to the terms of this Agreement, Avanir shall pay Patheon for the provision of the
Manufacturing Services 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 Active Materials.

               Avanir shall at its sole cost and expense, deliver the Active Materials to Patheon in
sufficient quantities and at such times to facilitate the provision of the Manufacturing Services
by Patheon, which Active Materials shall be held by Patheon on behalf of Avanir on the terms and
subject to the conditions herein contained. The parties acknowledge and agree that title to the
Active Materials shall at all times belong to and remain the property of Avanir. Patheon agrees
that any Active Materials received by it shall only be used by Patheon to provide the Manufacturing
Services.

ARTICLE 4

CONVERSION FEES AND COMPONENT/PACKAGING MATERIAL COSTS

     4.1 First Year Pricing.

               The fees for the Manufacturing Services (which fees include Component or Packaging Material
costs) for the first Year are listed in Schedules B and C and are subject to the adjustments set
forth in Section 4.3.

     4.2 Subsequent Years’ Pricing.

               The fees for the Manufacturing Services provided pursuant to the terms of this Agreement
during any period following the first Year of this Agreement shall be determined in accordance with
the following:

	 	(a)	 	Manufacturing, Component and Packaging Material Costs. On each Yearly
anniversary of this Agreement, Patheon shall be entitled to request an adjustment to
the fees (i) for Manufacturing Services in respect of the Products to reflect inflation
in accordance with the procedures below; and (ii) for Component or Packaging Material
costs to pass on the actual amount of any increase or decrease in such costs.

- 13 -

 

	 	(b)	 	Annual Forecast. To the extent that Patheon reasonably determines that
the projections contained in the rolling forecast provided pursuant to Section 5.1(a)
necessitate that an adjustment be made to the Manufacturing Services fees in respect of
any Product for such Year, Patheon shall be entitled to request an appropriate price
adjustment.
	 
	 	(c)	 	Pricing Basis. Avanir acknowledges that the fee for Manufacturing
Services in respect of a Product in any Year is quoted based upon the Minimum Run
Quantity and Annual Volume per Product specified in Schedule B or thereafter specified
in the forecast provided pursuant to clause (b) of this Section 4.2 for the Year and is
subject to change if the specified Minimum Run Quantity changes or if the Annual Volume
is not met. For greater certainty, if Patheon and Avanir agree that the Minimum Run
Quantity in respect of a Product shall be reduced whether as a result of a decrease in
estimated annual volume or otherwise and, as a result of such reduction, Patheon’s fees
for services relating to such Product on a per unit basis, then Patheon shall be
entitled to an increase in the fee for Manufacturing Services in respect of such
Product by an amount sufficient to absorb such increase.
	 
	 	(d)	 	In connection with a fee adjustment pursuant to clause (a) of this Section 4.2,
Patheon shall deliver to Avanir by not later than October 1st of each Year a
revised Schedule B in draft form and a statement outlining the percentage increase in
the US Producer Price Index for Industry: Pharmaceutical Preparations Series ID:
PCU2834# (N), as published by the U.S. Department of Labor, Bureau of Labor Statistics
at http://www.bls.gov/news.release/ppi upon which such fee adjustment is based;
provided that any fee adjustment will not be more than (1) the increase in the most
recent calendar year Producer Price Index, Industry: Pharmaceutical Preparations or (2)
[ *** ]% per Year. In connection with all fee adjustment requests
pursuant to clauses (b) and (c) of this Section 4.2 and subject to Section 4.3(d),
Patheon shall deliver to Avanir by not later than October 1st of each Year a
revised Schedule B in draft form. Upon delivery of such a request, each of Avanir and
Patheon shall forthwith use all reasonable efforts to agree on a revised fee for the
Manufacturing Services in respect of each affected Product and Schedule B shall be
amended accordingly. Such revised fee shall be effective with respect to any Product
delivered after the end of the then current Year.

 

			
	***	 	Certain confidential
portions of this Exhibit were omitted by means of blackout of the
text (the “Mark”). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the
Company’s Application Requesting Confidential Treatment under Rule
24b-2 under the 1934 Act.

- 14 -

 

     4.3 Adjustments to 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)	 	Volume Reduction & Increases.
	 
	 	 	 	If at any time, and from time to time, Patheon determines (but no more than once per
Year), acting reasonably, and based on the forecasts and Firm Orders received from
Avanir, that the current Minimum Run Quantities (including, without limitation, any
permanent reductions in volumes) relating to a specific Product will constitute less
than the Minimum Annual Volume for that Product specified in Schedule B hereto or,
if applicable, any revised Minimum Annual Volume hereinafter agreed to by the
parties, then Patheon shall be entitled to request an adjustment to the fee for
Manufacturing Services in respect of that Product to reflect the increased costs
that Patheon will incur as a result of the reduced volumes. To the extent that the
fee for Manufacturing Services in respect of a Product has been previously adjusted
pursuant to this clause (a) to reflect reduced 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 Increases in Component or Packaging Material Costs. If at
any time market conditions result in Patheon’s cost of Components or Packaging
Materials being materially greater than normal forecasted increases, then Patheon shall
be entitled to an adjustment to the fee for Manufacturing Services in respect of any
affected Product to compensate it for such increased Component or Packaging Material
costs. For the purposes of this clause (b), changes materially greater than normal
forecasted increases shall be considered to have occurred if: (i) the cost of a
Component or Packaging Material increases by [ *** ]% of the cost
for that Component or Packaging Material upon which the most recent fee quote was
based; or (ii) the aggregate cost for all Components and Packaging Materials required
to manufacture a Product increases by [***]% of the total Component and
Packaging Material costs for such Product upon which the most recent fee quote was
based. To the extent that Component and Packaging Material costs have been previously
adjusted pursuant to Section 4.2 or this clause (b) to reflect an increase in the cost
of one or more Components or Packaging Materials, the adjustments provided for in (i)
and (ii) above shall operate based only on the

 

			
	***	 	Certain confidential
portions of this Exhibit were omitted by means of blackout of the
text (the “Mark”). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the
Company’s Application Requesting Confidential Treatment under Rule
24b-2 under the 1934 Act.

- 15 -

 

	 	 	 	actual materiel costs attributed to such Component(s) or Packaging Material(s) since
the time the last of such adjustments were made.
	 
	 	(c)	 	In connection with a fee adjustment request pursuant to this Section 4.3 and
subject to subsection (d), Patheon shall deliver to Avanir a revised Schedule B. Upon
delivery of such a request, each of Avanir and Patheon shall forthwith use all
Substantial Efforts to agree on a revised fee for the Manufacturing Services in respect
of each affected Product and Schedule B shall be amended accordingly. If the parties
are unable to reach agreement concerning adjustments to the Price, such dispute will be
resolved in accordance with Article 12. Until such time as dispute is resolved the
price per Product will be the most current mutually agreed upon Price.
	 
	 	(d)	 	Patheon shall make available to Avanir such budgetary pricing information or
other supporting documentation reasonably sufficient to demonstrate that a price
adjustment pursuant to Section 4.2(b) or (c) or Section 4.3 is justified. If such
information is subject to confidentiality obligations which prevents disclosure
directly to Avanir, Patheon shall make such information available to Avanir’s external
auditors who shall (i) maintain such information in confidence pursuant to a
confidentiality agreement to be entered into directly with Patheon, and (ii) provided
the auditor’s mandate is limited to providing confirmation of the accuracy of the
information provided by Patheon in support of its requested fee adjustment.

     4.4 Adjustments Due to Technical Changes.

               Amendments to the Specifications or the Quality Agreement requested by Avanir will only be
implemented following a technical and cost review by Patheon and are subject to Avanir and Patheon
reaching agreement 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 requested by Patheon will only be implemented following the approval of Avanir,
such approval not to be unreasonably withheld. If Avanir accepts a proposed fee change, the
proposed change in the Specifications 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. In addition, Avanir agrees to purchase, at Patheon’s cost therefor
(including all costs incurred by Patheon in connection with the purchase and handling of such
Inventory), all Inventory utilized under the “old” Specifications and purchased or maintained by
Patheon in order to fill Firm Orders or in accordance with Section 5.2, to the extent that such
Inventory can no longer be utilized under the revised Specifications. Open purchase orders for
Components and Packaging Materials no longer required under any revised Specifications that were
placed by Patheon with suppliers in order to fill Firm Orders, or in accordance with Section 5.2
shall be cancelled by Patheon, where possible. Patheon shall also use commercially reasonable
efforts to return, where possible, Components and Packaging Materials utilized under the “old”
Specifications and purchased by

- 16 -

 

Patheon in order to fill Firm Orders or in accordance with Section 5.2. Where the
cancellation of an open purchase order or the return of Components or Packaging Materials is
subject to a cancellation penalty or restocking charge, Patheon shall initially pay such
cancellation penalty or restocking charge and be reimbursed for such costs by Avanir.

     4.5 Multi-Country Packaging Requirements. 

               If and when Avanir decides that it wishes to have Patheon manufacture the Product for
countries in addition to the Territory covered by this Agreement, then Avanir shall inform Patheon
of the packaging requirements for each new country and Patheon shall prepare a quotation for
consideration by Avanir of the additional Component and Packaging Material costs, if any, and the
change over fees for the Product destined for 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.

ARTICLE 5

ORDERS, SHIPMENT, INVOICING, PAYMENT

     5.1 Orders and Forecasts.

          (a) Rolling Forecasts. Concurrent with the execution of this Agreement, Avanir shall
provide Patheon with a written non-binding 18 month rolling forecast of the volume of each Product
that Avanir then anticipates will be required to be produced and delivered to Avanir during each
month of that 18 month period. Such forecast will be updated by Avanir monthly on or before the
10th day of each calendar month on a rolling 18 month basis and updated forthwith upon
Avanir determining that the volumes contemplated in the most recent of such forecasts has changed
by more than 20%. The most recent 18 month forecast shall prevail. Such Forecast will be provided
to Patheon for estimation purpose only and will not be construed as Avanir’s commitment to purchase
any part of the Products in such forecast.

          (b) Firm Orders. With the exception of the first purchase order (relating to
validation batches for which Patheon has already purchased Components and Packaging Materials in
accordance with the terms of the letter agreement between the parties dated August 18, 2005),
subsequent purchase orders will be handled as follows: On or before the 10th day of each calendar
month, Avanir shall issue firm written purchase orders (“Firm Orders”) for the Products to be
produced and delivered to Avanir on a date not less than three months from the first day of the
calendar month immediately following the date that the Firm Order is submitted. Such Firm Orders
submitted to Patheon shall specify Avanir’s purchase order number, quantities by Product type,
monthly delivery schedule and any other elements necessary to ensure the timely production and
shipment of the Products. The quantities of Products ordered in such written orders shall be firm
and binding on Avanir and shall not be subject to reduction by Avanir. Subject to Section 5.5,
Patheon will manufacture and supply the Product in the

- 17 -

 

quantities and by the delivery dates set forth in the applicable purchase order accepted by
Patheon.

          (c) Three Year Forecast. On or before the 10th day of October of each
Year, Avanir shall provide Patheon with a written non-binding three-year forecast (broken down by
quarters for the second and third years of the forecast) of the volume of each Product Avanir then
anticipates will be required to be produced and delivered to Avanir during the three-year period.

          (d) Launch Period. For a period of 6 months following the date the Product is
commercially available to the public (the “Launch Period”), Avanir may request an increase in the
volume of Product initially ordered by Avanir. Patheon shall use efforts, comparable to the
efforts it would use for its other clients, to accommodate Avanir’s request for such an increase in
volume during the Launch Period, subject to the availability of Components and Packaging Materials,
and receipt from Avanir of all Active Materials required to manufacture such an increase. For
greater certainty, Patheon shall not be obligated to purchase excess Components or Packaging
Materials in anticipation of Avanir’s request to increase volume as provided in this section,
unless the parties have expressly agreed to Patheon’s purchase of such excess Components or
Packaging Materials in accordance with Section 5.2. 

     5.2 Reliance by Patheon.

          Avanir 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 and Packaging
Materials required to meet such Firm Orders. In addition, Avanir understands that to ensure an
orderly supply of such Components and Packaging Materials, it may be desirable for Patheon to
purchase such Components and Packaging Materials in sufficient volumes to meet the production
requirements for Products during part or all of the forecasted periods referred to in Section
5.1(a) or to meet the production requirements of any longer period agreed to by Patheon and Avanir.
Accordingly, Avanir authorizes Patheon to purchase Components and Packaging Materials in order to
satisfy the production requirements for Products for the first six months contemplated in the most
recent forecast provided by Avanir pursuant to Section 5.1(a) and agrees that Patheon may make such
other purchases of Components and Packaging Materials to meet production requirements during such
longer periods as may be agreed to in writing from time to time by Avanir at the request of Patheon
or Avanir. Patheon shall manage the use of Components and Packaging Materials in accordance with
cGMP “First in-first out” (FIFO) rules. If Components or Packaging Materials ordered by Patheon
pursuant to Firm Orders or this Section 5.2 are not included in finished Products purchased by
Avanir within six months after the forecasted month in respect of which such purchases have been
made (or such longer period as the parties may agree) (“Dated Components and Packaging Materials”)
or if such Components or Packaging Materials have expired during such period (“Expired Components
and Packaging Materials”), then Avanir shall pay to Patheon its costs therefor (including all costs
incurred by Patheon in connection with the purchase and handling of such Dated and Expired
Components and Packaging Materials. Patheon shall use commercially reasonable efforts to return
Dated Components and Packaging Materials or use

- 18 -

 

Dated Components and Packaging Materials for Third Party products manufactured by Patheon. In
the event Dated Components and Packaging Materials are returned to the supplier for which Patheon
receives a credit or refund, Avanir will receive a credit equal to the credit or refund received by
Patheon from its supplier for such returned Dated Components and Packaging Materials and any
restocking penalties or other charges which may apply. In the event Dated Components and Packaging
Materials are incorporated into Products subsequently purchased by Avanir or into Third Party
products manufactured by Patheon and subsequently purchased by a Third Party, Avanir will receive
credit for any costs of such Dated Components and Packaging Materials previously paid to Patheon by
Avanir. Avanir acknowledges and agrees that Patheon’s ability to disclose information regarding a
Component or Packaging Material may be limited by obligations of confidentiality between Patheon
and its supplier(s). In such a case, Patheon shall use commercially reasonable efforts to obtain
its supplier’s consent to disclose such information and Avanir agrees to provide such supplier with
reasonable assurances as may reasonably be requested by the supplier in a confidentiality
agreement, or such other written document intended to protect the confidentiality of supplier’s
sensitive information.

     5.3 Minimum Orders.

                    Avanir may only order Products in volumes no less than the Minimum Run Quantities set out in
Schedule B.

     5.4 Shipments.

	 	(a)	 	Shipments of Products shall be made in accordance with Schedule H unless
otherwise mutually agreed. Risk of loss or of damage to Products shall remain with
Patheon until Products are loaded onto the carrier’s vehicle by Patheon for shipment at
the shipping point at which time risk of loss or damage shall transfer to Avanir.
Patheon shall, in accordance with Avanir’s instructions and as agent for Avanir, (i)
arrange for shipping to be paid by Avanir and (ii) at Avanir’s risk and expense, obtain
any export license or other official authorization necessary to export the Products.
Avanir shall arrange for insurance and shall select the freight carrier used by Patheon
to ship Products and may monitor Patheon’s shipping and freight practices as they
pertain to this Agreement. Products shall be transported in accordance with the
Specifications.
	 
	 	(b)	 	Firm Orders shall specify the requested shipment dates for the Product and
Patheon shall use commercially reasonable efforts to meet those dates and quantities,
subject to Avanir satisfying its obligations in respect of such Firm Orders including,
without limitation, providing the Active Materials. If Patheon learns that there may
be a late shipment, Patheon shall promptly notify Avanir, and Patheon and Avanir shall
cooperate to ensure that such late shipment is completed as soon as possible following
the requested shipment date. Patheon may, at its sole discretion, produce Product up
to, but not beyond sixty (60) days prior to the requested shipment date in order to
accommodate fluctuations in production demands, provided that Patheon shall be
responsible for the

- 19 -

 

	 	 	 	warehousing of such Product until the shipment date specified in the applicable Firm
Order.
	 
	 	(c)	 	Upon completion of manufacturing, packaging and testing of Product pursuant to
each purchase order, Patheon will deliver to Avanir by electronic means quality
documentation for such Product manufactured pursuant to such purchase order as
specified in the Quality Agreement, including without limitation, the Certificates of
Compliance in respect of such purchase order and, if requested by Avanir, completed
Batch production records (collectively, the “Pre-shipping Documentation”). Patheon
acknowledges and agrees that Avanir will be responsible, at all times, for the final
release of the Product, which Avanir shall perform in accordance with the terms and
timelines set out in the Quality Agreement. Patheon will not ship any Product until
Avanir has notified Patheon in writing that it has completed its final release.
Concurrent with the shipment of each purchase order of Product, Patheon will deliver to
Avanir any applicable documentation corresponding to such shipment and such other
documentation and information as may be necessary or desirable for complying with
import, export, and customs laws, regulations and like requirements, as applicable.

     5.5 Scheduled Shipment Dates and Late Shipments.

	 	(a)	 	Patheon shall notify Avanir within five (5) days of receipt of Avanir’s
purchase order for Products if the delivery date stipulated by Avanir in such purchase
order needs to change before it can be accepted by Patheon. The delivery date
ultimately agreed to by the parties (the “Scheduled Shipment Date”) shall be reflected
on the purchase order accepted by Patheon.
	 
	 	(b)	 	If Patheon anticipates that a Batch of Products will not be shipped on its
Scheduled Shipment Date, Patheon shall immediately notify Avanir and the parties shall
confer by telephone, as soon as possible, but no later than ten (10) days after such
notification to discuss the facts surrounding the missed delivery date and any issues
which may need to be addressed to avoid further missed delivery dates.
	 
	 	(c)	 	In the event that Patheon fails to ship ***  shipments of
Products within a *** period on a timely basis in accordance with the Scheduled
Shipment Date (“Late Shipments”), for any reason (other than a force majeure), then
Avanir may, at its option, require that a meeting be immediately scheduled between
Patheon and

 

			
	***	 	Certain confidential
portions of this Exhibit were omitted by means of blackout of the
text (the “Mark”). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the
Company’s Application Requesting Confidential Treatment under Rule
24b-2 under the 1934 Act.

- 20 -

 

	 	 	 	Avanir’s senior operating management to adopt a mutually agreeable plan to prevent
any further Late Shipments. If senior operating management is unable to agree on a
plan within fifteen (15) days from their initial meeting, the matter shall be
escalated to Patheon and Avanir’s senior management for resolution. If the parties
are unable to arrive at a mutually acceptable resolution to the issue of Late
Shipments within a further fifteen (15) day period, Avanir will no longer be bound
by the purchase requirements of Section 2.1.

     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 Avanir in writing from time to time. All invoices will be dated as of the date of the facsimile
or the email as noted in the foregoing sentence and not any earlier date. Patheon shall also
submit to Avanir, with each shipment of Products, a duplicate copy of the invoice covering such
shipment. Patheon shall also provide Avanir with an invoice covering any Inventory, Components or
Packaging Materials which are to be purchased by Patheon pursuant to the terms of this Agreement.
Each such invoice shall, to the extent applicable, identify Avanir purchase order number, Product
numbers, names and quantities, unit price, freight charges and the total amount to be remitted by
Avanir. Avanir shall pay all such invoices within 30 days of the date thereof. Each party shall
make all payments due to the other party under this Agreement in US Dollars by cheque made payable
to the other party or by wire transfer of immediately available funds to such account notified by
the receiving party from time to time to the other party in writing.

ARTICLE 6

PRODUCT CLAIMS AND RECALLS

     6.1 Product Claims.

          (a) Product Claims. Avanir has the right to reject any portion of any shipment of
Products that deviates from the Specifications or cGMPs, without invalidating any remainder of such
shipment. Avanir 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
the Specifications or cGMPs within 30 days after Avanir’s receipt thereof (or, in the case of any
defects not reasonably susceptible to discovery upon receipt of the Product, within 30 days after
discovery thereof by Avanir, but in no event after the expiration date of the Product). Should
Avanir fail to provide Patheon with the Deficiency Notice within the applicable 30–day period, then
the delivery shall be deemed to have been accepted by Avanir on the 30th day after
delivery or discovery, as applicable. Except as set out in Section 6.2, Patheon shall have no
liability for any deviations for which it has not received notice within the applicable 30-day
period.

          (b) Determination of Deficiency. Upon receipt of a Deficiency Notice, Patheon shall
have 10 days to advise Avanir by notice in writing that it disagrees with the contents of such

- 21 -

 

Deficiency Notice. If Avanir and Patheon fail to agree within 10 days after Patheon’s notice
to Avanir as to whether any Products identified in the Deficiency Notice deviate from the
Specifications or cGMPs, then the parties shall mutually select an independent laboratory to
evaluate if the Products deviate from the Specifications or cGMPs. Such evaluation shall be
binding on the parties, and if such evaluation certifies that any Products deviate from the
Specifications or cGMPs, Avanir 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 Avanir
shall be deemed to have accepted delivery of such Products on the 30th day after
delivery (or, in the case of any defects not reasonably susceptible to discovery upon receipt of
the Product, on the 30th day after discovery thereof by Avanir, but in no event after
the expiration date of the Product). The expenses of such testing will be borne by Patheon if the
non-conformity with the Manufacturing Services is confirmed, and otherwise by Avanir.

          (c) Shortages. Patheon shall investigate any claims made by Avanir that the amount of
Products it actually received in respect of a particular shipment is less than the amount of
Product Avanir paid for in respect of such shipment. If Patheon agrees that (i) there was a
shortage of Product in a particular shipment, (ii) the shortage was present at the time of
shipment, and (iii) the Product was invoiced and paid for by Avanir, but never shipped, Patheon
shall give Avanir a credit equal to the price of the Product that was not shipped, and such credit
shall be applied towards Avanir’s future purchases of Products under this Agreement. If the
parties do not agree with respect to clauses (i) through (iii) above, then they agree to meet and
confer and use all good faith efforts to resolve the disagreement.

     6.2 Product Recalls and Returns.

          (a) Records and Notice. Patheon and Avanir shall each maintain such records as may be
necessary to permit a Recall of any Products delivered to Avanir or customers of Avanir. Each
party shall promptly notify the other by telephone (to be confirmed in writing) of any information
which might affect the marketability, safety or effectiveness of the Products and/or which might
result in the Recall or seizure of the Products. Upon receiving any such notice or upon any such
discovery, each party 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 Avanir.

          (b) Recalls. In the event (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) Avanir determines that any Product should be Recalled or that a “dear doctor”
letter is required relating the restrictions on the use of any Product, Patheon will co-operate as
reasonably required by Avanir, having regard to all applicable laws and regulations.

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

- 22 -

 

     6.3 Patheon’s Responsibility for Defective and Recalled Products.

          (a) In the event Avanir rejects Products in accordance with this Section 6.1 and the deviation
is determined to arise from Patheon’s failure to provide the Manufacturing Services in accordance
with the Specifications, cGMPs and Applicable Laws, Patheon will credit Avanir’s account for
Patheon’s invoice price to Avanir for such defective Products. If Avanir shall have previously paid
for such defective Products, Patheon shall promptly, at Avanir’s election, either: (i) refund the
invoice price for such defective Products; (ii) offset such amount against other amounts due to
Patheon hereunder; or (iii) replace such Products with conforming Products without Avanir being
liable for payment therefor under Section 3.1, contingent upon the receipt from Avanir of all
Active Materials required for the manufacture of such replacement Products at Avanir’s cost. For
greater certainty, Patheon’s responsibility for any loss of Active Materials under this Section
6.3(a) shall be captured and calculated in the Active Materials Yield under Section 2.2 of this
Agreement. Further, Patheon will reimburse Avanir for all reasonable shipping, handling and storage
charges incurred in association with such non-conforming Product.

          (b) To the extent that a Recall or return results from, or arises out of, a failure by Patheon
to provide the Manufacturing Services in accordance with the Specifications, cGMPs and Applicable
Laws, Patheon shall be solely responsible for Patheon’s expenses of such Recall and shall reimburse
Avanir’s reasonable and necessary expenses, including without limitation, documented out-of-pocket
expenses, of such Recall or return and shall use Substantial Efforts to replace the Recalled or
returned Products with new Products, provided that Avanir provides Patheon with all Active
Materials required for the manufacture of such replacement Products at Avanir’s cost. For greater
certainty, Patheon’s responsibility for any loss of Active Materials under this Section 6.3(b)
shall be captured and calculated in the Active Materials Yield under Section 2.2 of this Agreement.
In the event that Patheon is unable to replace the Recalled or returned Products (except where
such inability results from a failure to receive the required Active Materials), then Patheon shall
reimburse Avanir for the price that Avanir paid to Patheon for manufacturing the affected Products.
In all other circumstances other than as described in the first sentence of this section (b)
above, Recalls, returns or other corrective actions shall be made at Avanir’s cost and expense.

          (c) Except as provided in Sections 6.3(a) and (b) above, Patheon shall not be liable nor have
any responsibility for any deficiencies in, or other liabilities associated with, any Product
manufactured by it (collectively, “Product Claims”). For greater certainty, Patheon shall have no
obligation for any Product Claims to the extent such Product Claim (i) is caused by deficiencies
with respect to the Specifications, the safety, efficacy or marketability of the Products or any
distribution thereof, (ii) results from a defect in a Component or Packaging Material that is not
reasonably discoverable by Patheon using the test methods set forth in the Specifications, (iii)
results from a defect in the Active Materials, supplied by Avanir that is not reasonably
discoverable by Patheon using the test methods set forth in the Specifications, (iv) is caused by
actions of third parties occurring after such Product is shipped by Patheon pursuant to Section
5.4, (v) is due to packaging or labelling defects or omissions for which Patheon has no

- 23 -

 

responsibility, or (vi) is due to any other breach by Avanir of its obligations under this
Agreement.

     6.4 Disposition of Defective or Recalled Products.

                    Avanir 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 Avanir 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 6.1 or 6.2 hereof. In all
other circumstances, Avanir shall bear the cost of disposition with respect to any damaged,
defective, returned or Recalled Products.

     6.5 Customer Questions and Complaints.

                    Avanir shall have the sole responsibility for responding to questions and complaints from
Avanir’s customers. Questions or complaints received by Patheon from Avanir’s customers shall be
promptly referred to Avanir. Patheon shall co-operate as reasonably required to allow Avanir to
determine the cause of and resolve any customer questions and complaints. Such assistance shall
include follow-up investigations, including testing. In addition, within 30 days from the date of
request, Patheon shall provide Avanir with the test results and a report summarizing the results of
Patheon’s follow-up investigation. In the event the parties agree that an expedited response is
required, Patheon shall complete its investigation and provide a summary report to Avanir within 10
days from the date of Avanir’s request for assistance. Unless it is determined that any customer
complaint resulted from a failure by Patheon to provide the Manufacturing Services in accordance
with the Specifications, cGMPs and Applicable Laws, all costs incurred in respect of this Section
6.4 shall be borne by Avanir.

     6.6 Sole Remedy.

                    Except for the indemnity provided in Section 10.3 and subject to the limitations set forth in
Sections 10.1 and 10.2, the remedies described in this Article 6 shall be Avanir’s sole remedy for
any Product Claims or Recalls.

ARTICLE 7

CO-OPERATION

     7.1 Quarterly Review.

                    Each party shall forthwith upon execution of this Agreement appoint an employee to be a
relationship manager responsible for liaison between the parties. All communications with respect
to the implementation of this Agreement, or a copy thereof, should be directed to such persons.
Each party shall notify the other party in writing of any changes to its liaison. Unless otherwise
agreed to by the parties, the relationship managers shall meet not less than four

- 24 -

 

times per calendar year to review all elements of performance under this Agreement, including,
without limitation, production, deliveries, product quality, supporting equipment and data,
proposed changes, product plans, manufacturing loading, and future schedules. The parties agree
that such meetings may also be conducted by telephone.

     7.2 Governmental Agencies.

                    Subject to Section 7.7, each party may communicate with any governmental agency, including but
not limited to governmental agencies responsible for granting regulatory approval for the Products,
regarding such Products if in the opinion of that party’s counsel, such communication is necessary
to comply with the terms of this Agreement or the requirements of any law, governmental order or
regulation; provided, however, that unless in the reasonable opinion of its counsel there is a
legal prohibition against doing so, such party shall permit the other party to accompany and take
part in any communications with the agency, and to receive copies of all such communications from
the agency.

     7.3 Records and Accounting by Patheon.

                    Patheon will maintain all records necessary to comply with all GMP and Applicable Laws
relating to the manufacture, packaging, quality, testing, storage and shipment of Product. 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 one year following the date of
Product expiry, or longer if required by law after which Patheon may destroy such records or
samples, provided Patheon notifies Avanir prior to any destruction to determine if Avanir wishes to
retain such records or samples. Should Avanir wish to retain such records and samples at its
facilities, Patheon shall ship such records and samples to Avanir at Avanir’s cost. Avanir is
responsible for retaining samples of the Products necessary to comply with the legal/regulatory
requirements applicable to Avanir.

     7.4 Inspections

                    Avanir may inspect Patheon reports and records relating to this Agreement during normal
business hours and with reasonable advance notice, provided a Patheon representative is present
during any such inspection.

     7.5 Access.

                    Patheon shall manufacture the Products at the Manufacturing Site. Patheon will not
manufacture any Product at any other Patheon site without first obtaining Avanir’s prior written
consent. Patheon shall provide Avanir with reasonable access at mutually agreeable times to its
Manufacturing Site in which the Products are manufactured, stored, handled or shipped for the
purposes of (a) making quality assurance audits of the Manufacturing Site, and of the procedures
and processes used by Patheon in manufacturing, packaging, testing, storing and

- 25 -

 

shipping Product, and (b) in order to permit Avanir’s verification of Patheon’s compliance
with the Specifications, cGMPs and Applicable Laws. For greater certainty, the right to inspect
and the right of access provided in Sections 7.4 and 7.5, respectively shall not include a right to
access or inspect Patheon’s financial records other than those related to any claim of Patheon for
price adjustments. Patheon shall notify Avanir of any inspections by any governmental agency
involving the Products as agreed to in the Quality Agreement.

     7.6 Reports.

	 	(a)	 	Patheon will supply on an annual basis all Product data, including release test
results, complaint test results, all investigations (in manufacturing, testing and
storage), and the like, that Avanir reasonably requires in order to complete any filing
under any applicable regulatory regime, including any annual report that Avanir is
required to file with the FDA.
	 
	 	(b)	 	At Avanir’s request and subject to an additional fee to be agreed by the
parties, Patheon may prepare annual product reports on behalf of Avanir and in
accordance with Avanir’s instructions.
	 
	 	(c)	 	Patheon will provide Avanir with electronic work-in-process reports (“WIP
Reports”) on a monthly basis. The WIP Reports will include at a minimum: (i) the type,
quantity and Batch number of Products at each stage of production, (ii) the remaining
number of Products ready for shipment (by purchase order number and invoice) and (iii)
delivery dates. The format of the WIP Reports will be determined in good faith by the
parties.

     7.7 FDA Filings

          (a) FDA Filings. Avanir shall have the sole responsibility for filing all documents
with the FDA and taking any other actions that may be required for the receipt of FDA Approval for
the commercial manufacture of all of the Products. Avanir will control and own all such filings
and approvals. Patheon will supply to Avanir from time to time, all data relating to the Product,
including release test results, complaint test results, all investigations (in manufacturing,
testing and storage), and the like, that Avanir reasonably requires in order to complete any such
filing or approval or to meet its obligations under the Quality Agreement, including any annual
product review report that Avanir is required to file with the FDA.

          (b) Verification of Data. At least 14 days prior to filing any documents with the FDA
that incorporate data generated by Patheon, Avanir shall provide Patheon with a copy of the
documents incorporating such data so as to give Patheon the opportunity to verify the accuracy and
regulatory validity of such documents as they relate to the Patheon generated data.

          (c) Verification of CMC. At least 21 days prior to filing with the FDA the Chemistry
and Manufacturing Controls (“CMC”) of the New Drug Application (“NDA”) or the Abbreviated New Drug
Application (“ANDA”) filing, as the case may be, Avanir shall provide

- 26 -

 

Patheon with a copy of the CMC portion as well as all supporting documents which have been
relied upon to prepare the CMC portion so as to permit Patheon to verify that the CMC portion
accurately describes the work that Patheon has performed and the manufacturing processes that
Patheon will perform pursuant to this Agreement.

          (d) Communications. Each party may communicate with the FDA or any other Authority
regarding the Products if such communication is necessary to comply with the terms of this
Agreement or the requirements of any Applicable Law, governmental order or regulation; provided,
however, in the event such requirement applies to Patheon, Patheon will notify Avanir in writing of
the requirement and pending communication and, unless there is a legal prohibition against doing
so, Patheon will permit Avanir to accompany Patheon and take part in any communications with the
FDA or any other Authority, and to receive copies of all such communications to and from the FDA or
any other Authority.

     7.8 Continuous Improvement.

                    Avanir and Patheon agree to jointly develop a program aimed at achieving continuous
improvement in the quality of a Product, reducing costs, maintaining desired customer service and
technologies used to manufacture and package Product, provided that such program will not involve
capital or other extraordinary costs being incurred by the parties without the prior written
consent of each party. This program will be directed by senior operations managers assigned by the
parties to administer this Agreement. Cost reductions initiated directly by Avanir, such as
refinement of manufacturing processes or procedures; identification of new vendors, volume related
price improvements or changes in the pricing or availability of Third Party materials and services
will accrue 100% to Avanir. All other net savings achieved as a result of the program shall be
allocated as agreed to by the parties. Ownership of all Intellectual Property generated from the
continuous improvement shall be determined pursuant to the provisions of Article 13.2.

     7.9 Further Actions.

          Each party will execute, acknowledge and deliver such further instruments, and to do all such
other acts, as may be necessary or appropriate in order to carry out the purpose and intent of this
Agreement.

     7.10 Disaster Recovery Plan.

          Patheon hereby confirms that is has a disaster recovery plan to recover IT services in the
event of a disaster entitled “IT Business Continuity Planning Guidelines”, a copy of which has been
provided to Avanir.

- 27 -

 

ARTICLE 8

TERM AND TERMINATION

     8.1 Initial Term.

                    This Agreement shall become effective as of the Commencement Date and shall continue until
December 31, 2011 (the “Initial Term”), unless terminated earlier by one of the parties in
accordance herewith. This Agreement shall automatically continue after the Initial Term for (a)
one additional two year term, at Avanir’s option, upon notice to Patheon not later than 12 months
prior to the end of the Initial Term, and (b) successive additional terms of two years each
thereafter, unless either party gives written notice to the other party of its intention not to
renew 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 60 days 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”). The aggrieved party’s right to
terminate this Agreement pursuant to this Section 8.2(a) may only be exercised for a period of 60
days following the expiry of the Remediation Period (in circumstances where the breach has not been
remedied) and if the termination right is not exercised during this period then the aggrieved party
shall be deemed to have waived the breach of the representation, warranty or obligation described
in the Breach Notice.

          (b) Avanir may terminate this Agreement as to any Product upon 30 days’ prior written notice
in the event that any governmental agency takes any action, or raises any objection, that prevents
Avanir from importing, exporting, purchasing or selling such Product.

          (c) Patheon may terminate this Agreement upon twelve months’ prior written notice, for any
reason whatsoever, if, in opinion of Patheon acting reasonably, Avanir assigns any of its rights
under this Agreement to a competitor of Patheon. Patheon shall continue to comply with its
obligations under the terms of this Agreement during such notice period, provided that Patheon have
the right to prohibit such competitor from inspecting Patheon’s reports and records, and from
accessing the Manufacturing Site under Sections 7.4 and 7.5 hereunder.

     8.3 Product Discontinuation.

                    Avanir shall provide at least six months’ advance notice if it intends to no longer order a
Product due to that Product’s discontinuance in the market.

- 28 -

 

     8.4 Obligations on Termination.

                    If this Agreement expires or is terminated in whole or in part for any reason, then (in
addition to any other remedies Patheon may have in the event of default by Avanir):

	 	(a)	 	Avanir shall take delivery of and pay for 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)	 	Avanir shall purchase, at Patheon’s cost (including all costs incurred by
Patheon in connection with the purchase and handling of such Inventory), the Inventory
applicable to the Products which was purchased, produced or maintained by Patheon in
contemplation of filling Firm Orders or in accordance with Section 5.2 prior to notice
of termination being given;
	 
	 	(c)	 	if the termination was for a reason other than for Patheon’s breach, Avanir
shall satisfy the purchase price payable pursuant to Patheon’s orders with suppliers of
Components and Packaging Materials, provided such orders were made by Patheon in
reliance on Firm Orders or in compliance with Section 5.2;
	 
	 	(d)	 	Patheon shall return to Avanir all unused Active Materials (with shipping and
related expenses, if any, to be borne by Avanir);
	 
	 	(e)	 	Patheon will cooperate with Avanir and assist in the transfer to Avanir of all
relevant legal and technical documents concerning the Active Materials and Products,
including master Batch records, validation reports, stability reports and relevant
manufacturer authorizations, existing retention samples and all such other documents
and materials as may be reasonably necessary or useful for Avanir to source Products
from other qualified Third Parties;
	 
	 	(f)	 	Avanir will surrender to Patheon, or, at Patheon’s sole option and expense,
Avanir will destroy and provide Patheon with a certificate signed by a Responsible
Executive of Avanir attesting to the destruction of, all copies of any Confidential
Information of Patheon in its possession) subject to Avanir’s right to maintain copies
of such Confidential Information to the extent required to be maintained by Avanir
pursuant to Applicable Laws or this Agreement; and
	 
	 	(g)	 	Patheon will surrender to Avanir, or, at Avanir’s sole option and expense,
Patheon will destroy and provide Avanir with a certificate signed by a Responsible
Executive of Patheon attesting to the destruction of, all copies of any Confidential
Information provided by Avanir pursuant to this Agreement (except to the extent
required to be maintained by Patheon pursuant to Applicable Laws or this Agreement).

- 29 -

 

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 10, 11 and 12 and Sections 13.1, 13.2, 13.3 and 13.16, all of which survive
any termination.

     8.5 Continuation of Performance.

                    Except where such area of performance is the subject of dispute, each party will continue to
perform its respective obligations under this Agreement while any dispute is being resolved unless
and until such obligations are terminated or expire in accordance with the provisions of this
Agreement.

     8.6 Transition Subsequent to Termination.

                    If Avanir chooses to terminate this Agreement under Section 8.2(a), upon Avanir’s written
request citing this Section 8.6, Patheon will (a) use commercially reasonable efforts to continue
to manufacture and supply to Avanir, on a non-exclusive basis, additional Products for a maximum
period of up to ***  after receiving notice from Avanir of its intention to
terminate this Agreement, provided the terms of this Agreement shall continue to govern the
obligations of the parties during such *** period; (b) render all reasonable assistance to Avanir
and deliver copies of the relevant information needed to enable Avanir to obtain Components and
Packaging Materials directly from Patheon’s suppliers, subject to Patheon’s confidentiality
obligations to such suppliers; (c) cooperate and assist Avanir, as reasonably requested, with
transferring the manufacturing of Products from the Manufacturing Site to Avanir’s or to any third
party’s facility designated by Avanir (provided Patheon shall only be required to work directly
with Avanir and not a third party manufacturer if production is being transferred to the third
party’s facility), including providing all relevant documentation, and consultation services as may
be reasonably required by Avanir to complete such transfer. Avanir shall pay Patheon for any
services Patheon may perform relating to the transfer of Products under this section according to
Patheon’s current fee schedule for such services, except that Patheon shall only be reimbursed for
its “direct costs” for such services and no additional fees shall by payable to Patheon if the
Agreement has been terminated by Avanir for Patheon’s breach under Section 8.2(a).

 

			
	***	 	 Certain confidential
portions of this Exhibit were omitted by means of blackout of the
text (the “Mark”). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the
Company’s Application Requesting Confidential Treatment under Rule
24b-2 under the 1934 Act.

- 30 -

 

ARTICLE 9

REPRESENTATIONS, WARRANTIES AND COVENANTS

     9.1 Authority.

                    Each party covenants, represents and warrants that (i) it is duly organized and validly
existing and in good standing of the laws of its governing jurisdiction; (ii) it has the full
right, power and authority to execute and deliver this Agreement and perform its obligations
hereunder; and (iii) it is not aware of any impediment that would inhibit its ability to perform
its obligations hereunder.

     9.2 Avanir Warranties.

	 	 	 	Avanir covenants, represents and warrants that:
	 
	 	(a)	 	the Specifications for each of the Products are its or its Affiliate’s property
and that Avanir may lawfully disclose the Specifications to Patheon;
	 
	 	(b)	 	any Intellectual Property, other than Patheon Intellectual Property, delivered
by Avanir to be utilized by Patheon in connection with the provision of the
Manufacturing Services according to the Specifications (i) is Avanir’s or its
Affiliate’s unencumbered property, (ii) may, to the best of Avanir’s knowledge, be
lawfully used as permitted and directed by Avanir, and (iii) such use, to the best of
Avanir’s knowledge, does not infringe and will not infringe any Third Party Rights;
	 
	 	(c)	 	the 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 , to the best of
Avanir’s knowledge, infringe any Third Party Rights;
	 
	 	(d)	 	Avanir has received no notice of any actions or other legal proceedings
asserting the infringement of Third Party Rights related to any of the Specifications,
or any of the Active Materials, or the sale, use or other disposition of any Product
made in accordance with the Specifications;
	 
	 	(e)	 	the Specifications for all Products conform to all applicable cGMPs and
Applicable Laws; and
	 
	 	(f)	 	the Products, if labelled and manufactured in accordance with the
Specifications and in compliance with applicable cGMPs, upon receipt of all necessary
Regulatory Approvals, (i) may be lawfully sold and distributed in every jurisdiction in
which Avanir markets such Products, and (ii) will be safe for human consumption.

- 31 -

 

     9.3 Patheon Warranties.

                    Patheon covenants, represents and warrants that:

          (a) it shall perform the Manufacturing Services in accordance with the Specifications, cGMPs
and Applicable Laws, and the terms and conditions of this Agreement and the Quality Agreement;

          (b) title to all Products sold pursuant to this Agreement, upon payment thereof by Avanir as
provided in this Agreement, will pass to Avanir free and clear of any security interest, lien or
other encumbrance;

          (c) any Patheon Intellectual Property utilized by Patheon in connection with the provision of
the Manufacturing Services (i) is Patheon’s or its Affiliate’s unencumbered property, (ii) may, to
the best of Patheon’s knowledge, be lawfully used as permitted and directed by Patheon, and (iii)
to the best of Patheon’s knowledge, such use does not infringe and will not infringe any Third
Party Rights;

          (d) as of the time that the Product is transferred to the carrier at Patheon’s shipping point
it will not be adulterated, or misbranded within the meaning of the FFDCA or other Applicable Laws;

          (e) At all times during the term of this Agreement, all parts of the Manufacturing Site that
are directly associated with the testing and storage of the Active Materials and Components and the
manufacturing, packaging, testing and storage of the Products will remain in compliance with all
Applicable Laws;

          (f) Patheon will obtain and maintain all necessary licenses, permits or approvals required by
Applicable Laws to perform the Manufacturing Services at the Manufacturing Site;

          (g) Throughout the term of this Agreement, Patheon has, and will maintain, sufficient
facilities, resources, and a work force suitably qualified and trained to meet its obligations to
supply the Product to Avanir pursuant to this Agreement;

          (h) Patheon is not aware of any pending or threatened claims against Patheon asserting that
any of the activities of Patheon relating to the manufacture of pharmaceutical products, or the
conduct of the activities contemplated in this Agreement by Avanir, infringe, misappropriate, or
violate the rights of any Third Party;

          (i) Patheon will ensure all employees, consultants, subcontractors and agents performing
services for Patheon pursuant to this Agreement assign in writing to Patheon all of their right,
title and interest in, to and under any and all Inventions;

- 32 -

 

     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 the Generic
Drug Enforcement Act of 1992 (21 U.S.C. ‘301 et seq.). Patheon represents that it does not
currently have, and covenants that it will not hire, as an officer or an employee 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).

     9.5 Permits.

                    Avanir 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.

                    PATHEON MAKES NO WARRANTY OF ANY KIND, EITHER EXPRESSED OR IMPLIED, BY FACT OR LAW, OTHER THAN
THOSE EXPRESSLY SET FORTH IN THIS AGREEMENT. PATHEON MAKES NO WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE OR WARRANTY OF MERCHANTABILITY WITH RESPECT TO THE PRODUCTS.

ARTICLE 10

REMEDIES AND INDEMNITIES

     10.1 Consequential Damages.

                    Under no circumstances whatsoever shall either party be liable to the other in contract, tort,
negligence, breach of statutory duty or otherwise for any indirect or consequential damages,
including, without limiting the generality of the foregoing loss of profits, of revenues, of
anticipated savings, of business or goodwill regardless of any notice of the possibility of such
damages.

     10.2 Maximum Liability.

                    With the exception of Patheon’s indemnification obligations under Section 10.3, Patheon’s
maximum liability to Avanir under this Agreement for any reason whatsoever, shall not exceed the
maximum liability cap shown below based on the aggregate volume of Product produced by Patheon
during the previous 12 months prior to the event giving rise to the liability:

- 33 -

 

	 	 	 
	Volume of  [***] Bulk [***] Capsules	 	Maximum Liability Cap
	0 – [***] million capsules

	 	$[***]
	[***] – [***] million capsules

	 	$[***]
	Over [***] million capsules

	 	$[***]

     10.3 Patheon.

                    Patheon agrees to defend, indemnify and hold Avanir, its 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
of personal injury or property, economic or monetary damage (collectively “Claims”) to the extent
such injury or damage is the result of or arises out of (a) the negligence, recklessness or wilful
misconduct of Patheon, its Affiliates, or their directors, officers, agents, employees or
consultants in the performance of their obligations under this Agreement, (b) a material breach by
Patheon of any provision of this Agreement or the Quality Agreement; (c) a breach of any of
Patheon’s representations, warranties, or covenants set forth in this Agreement or the Quality
Agreement, or (d) any claim of infringement or alleged infringement of Third Party Rights in
respect of Patheon’s Intellectual Property.

     10.4 Avanir.

                    Avanir agrees to defend, indemnify and hold Patheon, its officers, employees and agents
harmless against any and all Claims resulting from or arising out of: (a) the negligence or wilful
misconduct of Avanir, its Affiliates, or their directors, officers, agents, employees or
consultants in the performance of their obligations under this Agreement; (b) a material breach by
Avanir of any material provision of this Agreement or the Quality Agreement; (c) a breach by

 

			
	***	 	Certain confidential
portions of this Exhibit were omitted by means of blackout of the
text (the “Mark”). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the
Company’s Application Requesting Confidential Treatment under Rule
24b-2 under the 1934 Act.

- 34 -

 

Avanir of any of its representations or warranties set forth in this Agreement; or (d) any
claim of infringement or alleged infringement of Third Party Rights in respect of the Products or
Avanir’s Intellectual Property.

     10.5 Indemnification Procedure.

                    Each indemnified party (the “Indemnitee”) will give the indemnifying party (the “Indemnitor”)
prompt written notice of any Claims or discovery of fact upon which the Indemnitee intends to base
a request for indemnification. Notwithstanding the foregoing, the failure to give timely notice to
the Indemnitor will not release the Indemnitor from any liability to the Indemnitee to the extent
the Indemnitor is not materially prejudiced thereby.

	 	(a)	 	The Indemnitee will furnish promptly to the Indemnitor copies of all papers and
official documents in the Indemnitee’s possession or control which relate to any
Claims; provided, however, that if the Indemnitee defends or participates in the
defense of any Claims, then the Indemnitor will also provide such papers and documents
to the Indemnitee. The Indemnitee will reasonably cooperate with the Indemnitor in
defending against any Claims.
	 
	 	(b)	 	The Indemnitor will have the right, by prompt written notice to the Indemnitee,
to assume direction and control of the defense of any Claim, with counsel reasonably
satisfactory to the Indemnitee and at the sole cost of the Indemnitor, so long as (a)
the Indemnitor will promptly notify the Indemnitee in writing (but in no event more
than 30 days after the Indemnitor’s receipt of notice of the Claim) that the Indemnitor
intends to indemnify the Indemnitee pursuant to this Article absent the development of
facts that give the Indemnitor the right to claim indemnification from the Indemnitee,
and (b) the Indemnitor diligently pursues the defense of the Claim.
	 
	 	(c)	 	If the Indemnitor assumes the defense of the Claim as provided in this
Section 10.5, the Indemnitee may participate in such defense with the
Indemnitee’s own counsel who will be retained, at the Indemnitee’s sole cost and
expense; provided, however, that neither the Indemnitee nor the Indemnitor will consent
to the entry of any judgment or enter into any settlement with respect to the Claim
without the prior written consent of the other party, which consent will not be
unreasonably withheld or delayed. If the Indemnitee withholds consent in respect of a
judgment or settlement involving only the payment of money by the Indemnitor and which
would not involve any stipulation or admission of liability or result in the Indemnitee
becoming subject to injunctive relief or other relief, the Indemnitor will have the
right, upon written notice to the Indemnitee within five days after receipt of the
Indemnitee’s written denial of consent, to pay to the Indemnitee, or to a trust for its
or the applicable Third Party’s benefit, such amount established by such judgment or
settlement in addition to all interest, costs or other charges relating thereto,
together with all attorneys’ fees and expenses incurred to such

- 35 -

 

	 	 	 	date for which the Indemnitor is obligated under this Agreement, if any, at which
time the Indemnitor’s rights and obligations with respect to such Claim will cease.
	 
	 	(d)	 	The Indemnitor will not be liable for any settlement or other disposition of a
Claim by the Indemnitee which is reached without the written consent of the Indemnitor.

     10.6 Reasonable Allocation of Risk.

                    The parties acknowledge and agree that 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, and
that Patheon, in its fees for the provision of the Manufacturing Services, has not accepted a
greater degree of the risks arising from the manufacture, distribution and use of the Products,
based on the fact that Avanir has developed and holds the marketing approval for the Products and
requires Patheon to manufacture and label the Products strictly in accordance with the
Specifications, and that Avanir and not Patheon is in a position to inform and advise potential
users of the Products as to the circumstances and manner of use of the Products.

ARTICLE 11

CONFIDENTIALITY

     11.1 Confidentiality.

                    The parties agree that, for the term and for five years thereafter (other than for trade
secrets, for which the confidentiality obligations set forth in this Agreement will last as long as
trade secret law will allow), all Confidential Information, disclosed or submitted, either orally
or in writing (including, without limitation, by electronic means) or through observation, by one
party (the “Disclosing Party”) to the other party (the “Receiving Party”) pursuant to this
Agreement, including, without limitation, the terms of this Agreement, will be received and
maintained by the Receiving Party in strict confidence, will not be used for any purpose other than
the purposes expressly contemplated by this Agreement, and will not be disclosed to any Third Party
(including, without limitation, in connection with any publications, presentations or other
disclosures). Notwithstanding the foregoing, Avanir may disclose on a need-to-know and confidential
basis the existence of this Agreement and the terms of this Agreement to any bona fide potential
acquirers, corporate partners, investors or financial advisors (“Third Party Investors”) provided
such Third Party Investors have signed a confidentiality agreement directly with Avanir which is
reasonably calculated to protect the confidential and proprietary nature of such Confidential
Information and its disclosure in a manner that is no less stringent than what is required from a
“Receiving Party” under the terms of this Agreement. The Receiving Party will promptly notify the
Disclosing Party upon discovery of any unauthorized use or disclosure of the Disclosing Party’s
Confidential Information. Confidential Information belongs to and will remain the property of the
Disclosing Party.

- 36 -

 

     11.2 Confidentiality Exceptions.

                    The provisions of this Article 11 will not apply to any information of the Disclosing Party
which can be shown by competent evidence by the Receiving Party:

	 	(a)	 	To have been known to. or in the possession of the Receiving Party prior to the
date of its actual receipt from the Disclosing Party, other than as a result of the
Receiving Party’s breach of any legal obligation;
	 
	 	(b)	 	To be or to have become readily available to the public other than through any
act or omission of any party in breach of any confidentiality obligations owed to the
Disclosing Party;
	 
	 	(c)	 	To have been disclosed to the Receiving Party, other than under an obligation
of confidentiality, by a Third Party which had no obligation to the Disclosing Party
not to disclose such information to others; or
	 
	 	(d)	 	To have been subsequently independently developed by the Receiving Party
without use of or reference or access to the Disclosing Party’s Confidential
Information as evident from the Receiving Party’s written records.

     11.3 Authorized Disclosure.

                    The Receiving Party may disclose the Disclosing Party’s Confidential Information pursuant to
this Agreement solely to the extent (a) approved by the Disclosing Party; or (b) the Receiving
Party is legally required to disclose such Confidential Information, provided, however, that prior
to any such required disclosure, the Receiving Party will give reasonable advance notice to the
Disclosing Party of such disclosure so that the Disclosing Party may seek a protective order and or
other appropriate remedy or waive compliance with the confidentiality provisions of this Article
11, and will use its reasonable efforts to secure confidential treatment of such Confidential
Information required to be disclosed.

     11.4 Return Of Confidential Information.

                    The Receiving Party will keep the Disclosing Party’s Confidential Information in appropriately
secure locations. Upon the expiration or termination of this Agreement or at any time upon the
Disclosing Party’s request, the Receiving Party will destroy or return to the Disclosing Party, at
the Disclosing Party’s written request, all Confidential Information belonging to the Disclosing
Party possessed by the Receiving Party, or its officers, directors, employees, agents and
consultants; provided however that a Receiving Party may retain a single copy of the Disclosing
Party’s Confidential Information in an appropriately secure location, which by Applicable Laws it
must retain, for so long as such Applicable Laws require such retention, but thereafter, will
dispose of such retained Confidential Information in accordance with Applicable Laws or this
Section 11.4.

- 37 -

 

     11.5 Equitable Relief.

                    The Receiving Party agrees that, due to the unique nature of the Confidential Information, the
unauthorized disclosure or use of the Confidential Information of the Disclosing Party may cause
irreparable harm and significant injury to the Disclosing Party, the extent of which may be
difficult to ascertain and for which there may be no adequate remedy at law. Accordingly, the
Receiving Party agrees that the Disclosing Party, in addition to any other available remedies, will
have the right to seek an immediate injunction and other equitable relief enjoining any breach or
threatened breach of this Agreement. The Receiving Party will notify the Disclosing Party in
writing immediately upon the Receiving Party’s becoming aware of any such breach or threatened
breach.

ARTICLE 12

DISPUTE RESOLUTION

     12.1 Commercial Disputes.

                    In the event of any dispute arising 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 10 Business Days 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 one month from their appointment, or if a party
fails to appoint a representative within the 10 Business Day period set forth above, such dispute
shall immediately be referred to the Chief Operating Officer or Executive Vice President,
Operations (or such other officer as they 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, their dispute will be referred to arbitration in accordance
with Section 12.3

     12.2 Technical Dispute Resolution.

                    In the event of a dispute (other than disputes in relation to the matters set out in Sections
6.1(b) and 12.1) between the parties that is exclusively related to technical aspects of the
manufacturing, packaging, labelling, quality control testing, handling, storage or other activities
under this Agreement (a “Technical Dispute”), the parties 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 10 Business Days 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 30 Business Days of 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

- 38 -

 

a dispute is a Technical Dispute, Section 12.1 shall govern. 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 Services 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.

     12.3 Arbitration.

                    Any dispute, controversy, or claim arising out of this Agreement, or the interpretation,
performance, breach, enforcement or termination thereof, or arising out of the respective rights
and duties of the parties to this Agreement, will be settled by arbitration in accordance with the
Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL), in effect
as of the date hereof. The parties have agreed on this mechanism in order to obtain prompt and
expeditious resolutions of disputes. Unless the parties agree in writing on the appointment of a
single arbitrator, the matter will be referred to three arbitrators; one to be appointed by each
party, and the third, who will act as Chairman, being nominated by the two so selected by the
parties. The award is to be given by a majority decision. The expenses of the proceeding will
initially be borne equally by the parties to the dispute, but the prevailing party in such
proceeding will be entitled to recover, in addition to reasonable attorneys’ fees and all other
expenses, its contribution for the reasonable fees and expenses of the arbitrator as an item of
damage and/or recoverable expenses. The place of arbitration will be in the New York, New York.
The language of such arbitration will be English; all documents and agreements relative to any such
dispute will be read, interpreted and construed from English versions thereof. Judgment on the
award rendered by the arbitrators may be entered in any court of competent jurisdiction, or
application may be made to such court for judicial acceptance of the award and/or an order of
enforcement as the case may be.

ARTICLE 13

MISCELLANEOUS

     13.1 Intellectual Property.

          (a) All Intellectual Property of Avanir shall be owned by Avanir and all Intellectual Property
of Patheon shall be owned by Patheon. Avanir and Patheon hereby acknowledge that neither party
has, nor shall it acquire, any interest in any of the other party’s Intellectual Property except as
expressly agreed to in this Agreement, or as may otherwise agreed to by the parties in writing.
Each party agrees not to use any Intellectual Property of the other party, except as specifically
authorized by the other party in this Agreement or as required to perform its obligations under
this Agreement.

          (b) For the term of this Agreement, Avanir hereby grants to Patheon a non-exclusive, paid-up,
royalty-free, non-transferable license of Avanir’s Intellectual Property only to the

- 39 -

 

limited extent to which Patheon must use such Intellectual Property in order to perform
the Manufacturing Services under this Agreement and exclusively for the benefit of Avanir.

     (c) Subject to subsection (d), (e) and (f) below, Patheon agrees that Avanir owns all right,
title and interest in and to all Intellectual Property relating to Avanir’s Product and the
Specifications therefor.

     (d) All Intellectual Property generated or derived solely by Patheon in the course of
performing the Manufacturing Services, to the extent it is specific to the development,
manufacture, use and sale of Avanir’s Product that is the subject of the Manufacturing Services,
shall be the exclusive property of Avanir.

     (e) Intellectual Property generated or derived jointly by Avanir and by Patheon, pursuant to
this Agreement, will be owned by Avanir, unless the parties have agreed in writing to a different
arrangement in another consulting or services agreement which is more specific to the services
provided by Patheon in connection with such Intellectual Property. Avanir will and hereby does
grant to Patheon and its Affiliates a perpetual, royalty-free, non-exclusive, worldwide,
irrevocable license to use and practice, for internal purposes only, any such jointly-developed but
Avanir-owned manufacturing methods or processes contained within the Intellectual Property, but
without the right to sublicense to any Third Party.

     (f) All Intellectual Property generated or derived solely by Patheon in the course of
performing the Manufacturing Services which is not specific to, or dependent upon, Avanir’s Product
and which has application to manufacturing processes or formulation development of drug products or
drug delivery systems shall be the exclusive property of Patheon (the “Broader Intellectual
Property Rights”). Patheon hereby grants to Avanir, a non-exclusive, paid-up, royalty-free,
sub-licensable, transferable license of Patheon’s Broader Intellectual Property which Avanir may
use for the manufacture of Avanir’s Product.

13.2 Inventions.

          Either party shall give the other party written notice, as promptly as practicable, of all
Inventions which can reasonably be deemed to constitute improvements or other modifications of
the Products, Intellectual Property, or processes or technology owned or otherwise controlled by
the other party. Each party hereby irrevocably transfers, conveys and assigns, and will transfer,
convey and assign, to the other, its successors and assigns, without reservation or additional
consideration, all of its right, title and interest (anywhere in the world) in, to, and under the
Inventions owned by the other party as outlined in Section 13.1 above, whether currently existing
or created or developed later, including, without limitation, all copyrights, trademarks, trade
secrets, patent rights, industrial rights and all other intellectual property and proprietary
rights related thereto, including all rights to protect, enforce (whether for past, present or
future infringement), defend and exploit such Inventions and collect and retain all proceeds
therefrom, effective immediately upon the inception, conception, creation or development thereof.

- 40 -

 

13.3 Assistance.

          Each party will have the first right to file and prosecute patent applications in respect of
those Inventions it owns pursuant to Section 13.1 and such party will be solely responsible for
the costs of filing, prosecution and maintenance of such patents and patent applications. Each
party will cooperate with the other or its designee(s), both during and after the term of this
Agreement, in applying for, obtaining, perfecting, evidencing, sustaining and enforcing the
other’s right, title and interest in and to the Intellectual Property, including, without
limitation, executing such written instruments as may be prepared by the other and doing such
other acts as may be necessary in the opinion of the other to obtain a patent, register a
copyright, or otherwise enforce the other’s rights in such Intellectual Property. Each party
hereby represents, warrants, and covenants that all employees, consultants and agents performing
services for it pursuant to this Agreement have assigned in writing all of their right, title and
interest in, to and under any and all Intellectual Property which may be generated or derived in
connection with the performance of such services to such party. All Intellectual Property and
embodiments thereof will be deemed to be Confidential Information of the party to own such
Intellectual Property pursuant to Section 13.1, and the other party will be subject to the
obligations of non-use and nondisclosure under Article 11 with respect thereto.

13.4 Trademarks and Trade Names.

             The parties hereby acknowledge that neither party has, and will not acquire, any interest in
any of the other party’s trademarks or trade names appearing on the labels or packaging materials
for the Product. Patheon agrees that it will restrict the use of such trademarks to only such
Products as are manufactured by Patheon for sale to Avanir under and pursuant to and in full
compliance with all of the terms of this Agreement. The size, design, position, and appearance
of the Trademarks to be placed on the Products will be as described by Avanir in the
Specifications.

13.5 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 [ *** ] years thereafter, which
insurance shall afford limits of not less than (i) $[***] for each occurrence for personal injury
or property damage liability; and (ii) $[***] in the aggregate per annum with respect to product

 

			
	***	 	Certain confidential
portions of this Exhibit were omitted by means of blackout of the
text (the “Mark”). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the
Company’s Application Requesting Confidential Treatment under Rule
24b-2 under the 1934 Act.

- 41 -

 

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 30 days’ written notice to the insured of a
cancellation of, or material change in, the insurance. If a party is unable to maintain the
insurance policies required under this Agreement through no fault 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.

13.6 Independent Contractors.

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

13.7 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.

13.8 Assignment.

	 	(a)	 	Patheon may not assign this Agreement or any of its rights or obligations
hereunder except with the written consent of Avanir, such consent not to be
unreasonably withheld; provided, however, that upon prior written consent from Avanir,
Patheon may arrange for subcontractors to perform specific testing services for
Products and Components arising under this Agreement; provided that (1) all such
subcontractors will be duly qualified by Patheon under GMP and Applicable Laws to
perform such testing; (2) Patheon will at all times remain fully responsible to Avanir
for the performance of all obligations pursuant to this Agreement related to such
subcontracted testing services; and (3) no subcontractors will be utilized to perform
release testing of the Product.
	 
	 	(b)	 	Subject to Section 8.2(c), Avanir may assign this Agreement or any of its
rights or obligations hereunder without approval from Patheon; provided, however, that
Avanir shall give prior written notice of any assignment to Patheon, any assignee shall
covenant in writing with Patheon to be bound by the terms of this Agreement and Avanir
shall remain liable for its accrued obligations under this Agreement up and until the
effective date of such assignment. Any partial assignment will be subject to a cost
review of the assigned Products by Patheon and is subject to assignee and Patheon
reaching agreement as to revisions, if any,

- 42 -

 

	 	 	 	to the fees, failing such agreement,
Patheon may terminate this Agreement on twelve (12) months’ prior written notice to the
assignee.

	 	(c)	 	Notwithstanding the foregoing provisions of this Section 13.8, either party may
assign this Agreement to any of its Affiliates or to a successor to or purchaser of all
or substantially all of its business, provided that such assignee executes an
agreement with the non-assigning party hereto whereby it agrees to be bound
hereunder.

13.9 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,
Components, Packaging Materials or compliance with any unforeseeable 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 immediately 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. 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.

13.10 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.

13.11 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
to the mailing address, or telecopier or facsimile number set forth below:

- 43 -

 

If to Avanir:

Avanir Pharmaceuticals

11388 Sorrento Valley Road, Suite 200

San Diego, CA 92121

Attention: Vice President Finance & CFO

Telecopier No.: 858-658-7447

If to Patheon:

Patheon Inc.

7070 Mississauga Road, Suite 350

Mississauga, ON L5N 7J8

Attention: President, Patheon U.S.A.

Telecopier No.: 905.812.6705

with a copy to:

Patheon Inc

7070 Mississauga Road, Suite 350

Mississauga, Ontario

L5N 7J8

Attention: General Counsel

Telecopier No.: 905.812.6613

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 or upon receipt, whichever is sooner.

13.12 No Publicity.

          Each party agrees that the existence or terms of this Agreement are confidential and subject
to the parties’ confidentiality obligations under Article 11. The parties must agree upon the text
and the exact timing of any public announcement relating to the transactions contemplated by this
Agreement (such agreement not to be unreasonably withheld by either party). If this Agreement is
required to be filed by either party with the Securities and Exchange Commission or any another
applicable securities regulatory authority, to the extent reasonable, such party will request
confidential treatment for any provisions of this Agreement that the other party believes would
disclose trade secrets, or confidential commercial or financial information

- 44 -

 

that would impair the
value of the contractual rights represented by this Agreement or provide detailed commercial and
financial information to competitors or third parties.

13.13 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.

13.14 Entire Agreement.

          This Agreement, together with the Quality 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 followed
by the Quality Agreement.

13.15 Other Terms.

          The parties agree that no terms, provisions or conditions of any purchase order or other
business form or written authorization used by Avanir 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 Avanir or Patheon to object to such terms, provisions, or conditions unless such
document specifically refers to this Agreement and is signed by both parties. All quotations,
purchase orders, acknowledgments and invoices issued pursuant to this Agreement are issued for
convenience of the parties only and will be subject to the provisions of this Agreement and the
Exhibits hereto.

13.16 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.

13.17 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.

- 45 -

 

13.18 Governing Law.

          This Agreement shall be construed and enforced in accordance with the laws of the State of New
York. The parties expressly agree that the UN Convention on Contracts for the International Sale
of Goods shall not apply to this Agreement.

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

	 	 	 	 	 	 	 
	 	 	PATHEON INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	by
	 	/s/ STEVEN LIBERTY	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	          Steven Liberty	 	 
	 
	 	 	 	 	 	 
	 

	 	by	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	AVANIR PHARMACEUTICALS	 	 
	 
	 	 	 	 	 	 
	 

	 	by
	 	/s/ JAMES. E. BERG	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	           James E. Berg	 	 
	 
	 	 	 	 	 	 
	 

	 	by	 	 	 	 
	 

	 	 	 	 

	 	 

- 46 -

 

FINAL

SCHEDULE A

PROCEDURE FOR PROVISION AND ACCEPTANCE OF PRODUCT SPECIFICATIONS

Prior to the Commencement Date Avanir shall provide Patheon with originally executed copies of the
FDA approved Specifications. If the Specifications provided are subsequently amended, then Avanir
shall provide Patheon with revised and originally executed copies of such revised Specifications.
Upon acceptance of the revised Specifications, Patheon shall provide Avanir with a signed and dated
receipt evidencing such acceptance of the revised Specifications by Patheon.

For the purposes of manufacturing validation batches, if the FDA approved Specifications are not
available, Avanir shall provide Patheon with the most current Avanir-approved Specifications
available for each Product.

 

 

SCHEDULE B

ANNUAL VOLUME, RUN QUANTITY AND FEES

TIERED PRICING SCHEDULE

Product: *** Bulk [***] Capsules

	 	 	 	 	 	 	 
	Annual Volume	 	 	 	Run Quantity	 	Price per Bulk
	(million capsules)	 	Run Quantity (units*)	 	(Batches**)	 	1000’s in USD
	***

	 	***
	 	***
	 	$***
	***

	 	***
	 	***
	 	$***
	***

	 	***
	 	***
	 	$***
	Over [***]

	 	***
	 	***
	 	$***

For the purpose of the above chart one “unit” is equivalent to [***] capsules.

1. Minimum Annual Volume is [***] million capsules or [***] Batches.

2. Bulk price for [***] million to [***] million capsules per year will be $[***].

3. Bulk price for the next [***] million capsules ([***] tier) will be $[***].

4. Bulk price for the next [***] million capsules ([***] tier) will be $[***].

5. Bulk price for incremental volume in excess of [***] million per year will be $[***].

General Assumptions:

	 	a.	 	The estimated Batch size is [***] capsules.
	 
	 	b.	 	Quoted prices include all Components, Packaging Materials, and Manufacturing Services
used to produce Products with the exception of Active Materials or bill-back items as
specified in the Manufacturing Services Agreement between the parties.
	 
	 	c.	 	Post-commercial stability cost is not included in these prices

 

			
	***	 	Certain confidential
portions of this Exhibit were omitted by means of blackout of the
text (the “Mark”). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the
Company’s Application Requesting Confidential Treatment under Rule
24b-2 under the 1934 Act.

- 2 -

 

FINAL

SCHEDULE C

STABILITY TESTING

Patheon and Avanir shall agree in writing on any stability testing to be performed by Patheon in
connection with the Products. Such agreement shall specify the commercial and Product stability
protocols applicable to the stability testing and the fees payable by Avanir in connection with
such testing.

 

 

FINAL

SCHEDULE D

ACTIVE MATERIALS

	 	 	 
	Active Material	 	Supplier
	Dextromethorphan Hydrobromide

	 	Avanir Pharmaceuticals
	 
	 	 
	Quinidine Sulfate

	 	Avanir Pharmaceuticals

 

 

FINAL

SCHEDULE E

BATCH NUMBERING AND EXPIRATION DATES

Each batch of the Product manufactured by Patheon will bear a unique lot number using the Patheon
batch numbering system. This number will appear on all documents relating to the particular batch
of Product.

Patheon will calculate the expiration date for the product for each batch by adding the expiration
period of the Product supplied by Avanir to the date of Manufacture of each batch.

 

 

FINAL

SCHEDULE F

TECHNICAL DISPUTE RESOLUTION

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

1. Appointment of Expert. Within 10 Business Days after a party requests pursuant to
Section 12.2 that an expert be appointed to resolve a Technical Dispute, the parties shall jointly
appoint a mutually acceptable expert with experience and expertise in the subject matter of the
dispute. If the parties are unable to so agree within such 10 Business Day period, or in the event
of disclosure of a conflict by an expert pursuant to paragraph 2 hereof which results in the
parties not confirming the appointment of such expert, then an expert (willing to act in that
capacity hereunder) shall be appointed by an experienced arbitrator.

2. Conflicts of Interest. Any person appointed as an expert shall be entitled to act and
continue to act as such notwithstanding that at the time of his appointment or at any time before
he gives his determination, he has or may have some interest or duty which conflicts or may
conflict with his appointment provided that before accepting such appointment (or as soon as
practicable after he becomes aware of the conflict or potential conflict) he fully discloses any
such interest or duty and the parties shall after such disclosure have confirmed his appointment.

3. Not Arbitrator. No expert shall be deemed to be an arbitrator and the provisions of the
Arbitration Act (Ontario) or of any other applicable statute (foreign or domestic) and the law
relating to arbitration shall not apply to any such expert or the expert’s determination or the
procedure by which the expert reaches his determination to be made pursuant to this Schedule F.

4. Procedure. Where an expert is appointed:

	 	(a)	 	Timing. The expert shall be so appointed on condition that (i) he
promptly fixes a reasonable time and place for receiving representations, submissions
or information from the parties and that he issues such authorizations to the parties
and any relevant Third Party for the proper conduct of his determination and any
hearing and (ii) he renders his decision (with full reasons) within 15 Business Days
(or such other date as the parties and the expert may agree) after receipt of all
information requested by him pursuant to paragraph 4(b) hereof.
	 
	 	(b)	 	Disclosure of Evidence. The parties will provide to any expert all
such evidence and information within their respective possession or control as the
expert may reasonably consider necessary for determining the matter before him which
they shall disclose promptly and in any event within five Business Days of a written
request from the relevant expert to do so.
	 
	 	(c)	 	Advisors. Each party may appoint such counsel, consultants and
advisors as it feels appropriate to assist the expert in his determination and so as to
present their

 

 

	 	 	 	respective cases so that at all times the parties shall co-operate and
seek to narrow and limit the issues to be determined.

	 	(d)	 	Appointment of New Expert. If within the time specified in paragraph
4(a) above the expert shall not have rendered a decision in accordance with his
appointment, a new expert may (at the request of either party) be appointed and the
appointment of the existing expert shall thereupon cease for the purposes of
determining the matter at issue between the parties save that if the existing expert
renders his decision with full reasons prior to the appointment of the new expert, then
such a decision shall have effect and the proposed appointment of the new expert shall
be withdrawn.
	 
	 	(e)	 	Final and Binding. The determination of the expert shall, save in the
event of fraud or manifest error, be final and binding upon the parties.
	 
	 	(f)	 	Costs. Each party shall bear its own costs in connection with any
matter referred to an expert hereunder and, in the absence of express provision in the
Agreement to the contrary, the costs and expenses of the expert shall be shared equally
by the parties.

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 Services.

- 2 -

 

SCHEDULE G

FORM OF QUALITY AGREEMENT

 

 

SCHEDULE H

SHIPPING LOGISTICS PROTOCOL

Shipping shall be carried out under the following terms and conditions:

Exports of Products from Canada to the United States

	1.	 	Export terms shall be FCA (as such term is defined in INCOTERMS 2000), the Manufacturing
Site.
	 
	2.	 	Avanir, as the importer of record into the United States, shall advise Patheon prior to
export of the Products from Canada of Avanir’s designated customs broker and freight forwarder
to enable Patheon to complete all applicable shipping documentation.

 

 

[AVANIR LETTERHEAD]

Form of Logistics Routing Guide

Patheon Inc.

865 York Mills Road

Toronto, Ontario

M3B 1Y5

Attention:                     , A/M

	1.	 	Routine Routing/Shipping Instructions

The following lists the recommended agents and procedures for shipments of [PRODUCT NAME]
from Patheon’s manufacturing site at York Mills Road, Toronto, Ontario, Canada to [INSERT
DESTINATION NAME AND ADDRESS].

     AGENTS:

	 	 	 	 	 	 	 
	§

	 	Freight forwarder
	 	Contact:
	 	PH: ( )
	§

	 	Customs broker
	 	Contact:
	 	PH: ( )

Questions concerning transport logistics should be directed to [AVANIR CONTACT INFO].

The following documents must be provided to the carrier for transport and customs purposes:

	 	§	 	Pro forma Invoice
	 
	 	§	 	Bill of Lading (“B/L”)
	 
	 	§	 	Applicable Permits/Declarations
	 
	 	§	 	Packing List
	 
	 	§	 	If eligible, NAFTA Certificate of Origin will be provided in blanket form yearly to
Avanir Pharmaceuticals or Avanir Pharmaceuticals’s broker.

Upon shipment departure from Patheon, a full set of documents must also be faxed to the
following individuals:

	 	§	 	[INSERT AVANIR CONTACT FAX OR EMAIL]

Freight is shipped to:

     [INSERT DESTINATION NAME AND ADDRESS]

 

 

      Information to be provided on Pro forma Invoice.

	 	§	 	Net Quantity
	 
	 	§	 	Patheon Code & Batch Number
	 
	 	§	 	Avanir Batch Number/ Purchase Order (“PO”)Number
	 
	 	§	 	$ / Unit Including Assist Value (Active Materials Usage) & Toll Manufacturing Charge
	 
	 	§	 	HTS (Harmonize Tariff Schedule)#
	 
	 	§	 	NDC/IND/ANDA
	 
	 	§	 	FDA Product Code
	 
	 	§	 	Ship Date
	 
	 	§	 	Patheon Bill of Lading Number
	 
	 	§	 	Gross Weight
	 
	 	§	 	Number of Pallets

     Assist Values:

	 	§	 	[INSERT ACTIVE MATERIALS NAME] $/kg.

     Note: Avanir Pharmaceuticals will provide updated values during the first month of each
calendar year. If a change occurs throughout the year, Patheon will be notified within 30
days. Method of valuation for API will be provided in writing to Patheon Inc.

     Information to be provided on Bill of Lading:

	 	§	 	B/L Number
	 
	 	§	 	Carrier
	 
	 	§	 	Origin Point
	 
	 	§	 	Shipper Information
	 
	 	§	 	Consignee
	 
	 	§	 	Consignee Address
	 
	 	§	 	Ship Date
	 
	 	§	 	Number of Pallets
	 
	 	§	 	Gross Weight
	 
	 	§	 	PO Number for each Product/Batch
	 
	 	§	 	Description of Goods Indication PC, Batch Number Quantity
	 
	 	§	 	Seal Number
	 
	 	§	 	Freight Terms (EXW or FCA)
	 
	 	§	 	Carrier Signature

     Information to be provided on Packing List:

	 	§	 	Ship date

 

 

	 	§	 	Bill of Lading Number
	 
	 	§	 	Number of Pallets
	 
	 	§	 	Weight
	 
	 	§	 	Product Description
	 
	 	§	 	Patheon Code Number, if applicable
	 
	 	§	 	Patheon Batch Number, if applicable
	 
	 	§	 	Number of Full Cartons (drums if bulk) x Quantity Per Carton
	 
	 	§	 	Number of Partial Cartons (drums if bulk) x Quantity Per Carton
	 
	 	§	 	Total Number of Cartons with Total Quantity Shipped

2. Non-Routine Routing/Shipping Instructions

As non-standard shipments are unique, the specific situations are to be discussed and
agreed to by both Patheon and Avanir Pharmaceuticals prior to shipment. Examples of
non-standard shipments are shipping study samples, clinical/development Batches, etc.

Yours truly,

AVANIR PHARMACEUTICALS

	 	 	 
	 

AUTHORIZED SIGNATORY

	 	 

 

 

SCHEDULE I

ACTIVE MATERIAL REIMBURSEMENT VALUE

For the purposes of the Agreement, the parties agree that the Active Material Reimbursement Value
shall be as follows:

	 	 	 	 	 
	 	 	 	 	ACTIVE MATERIAL
	 	 	 	 	REIMBURSEMENT VALUE
	PRODUCT	 	ACTIVE MATERIAL	 	($USD)*
	*** Bulk [***]

	 	Dextromethorphan

Hydrobromide
	 	$[***] per kilogram
	 
	 	 	 	 
	 

	 	Quinidine Sulfate
	 	$[***] per kilogram

 

			
	*	 	These prices are subject to change. The parties shall amend this Schedule I to reflect any
change in the price of the Active Materials charged by Avanir’s suppliers, provided satisfactory
documentation of such change is provided to and accepted by Patheon.
	 
	***	 	Certain confidential
portions of this Exhibit were omitted by means of blackout of the
text (the “Mark”). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the
Company’s Application Requesting Confidential Treatment under Rule
24b-2 under the 1934 Act.

 

 

SCHEDULE J

QUARTERLY ACTIVE MATERIALS INVENTORY REPORT

	 	 	 
	TO:

	 	AVANIR PHARMACEUTICALS
	 
	 	 
	FROM:

	 	PATHEON INC.
	 
	 	 
	RE:

	 	Active Materials quarterly inventory report pursuant to Section
2.2(a) of the Manufacturing Services Agreement dated as of
December 16, 2005 (the “Agreement”)

	 	 	 	 	 
	Reporting quarter:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	Active Materials on hand
at beginning of quarter:

	 	 	 	kg     (A)
	 

	 	 

	 	 
	 
	 	 	 	 
	Active Materials on hand
at end of quarter:

	 	 	 	kg     (B)
	 

	 	 

	 	 
	 
	 	 	 	 
	Quantity Received during quarter:

	 	 	 	kg     (C)
	 

	 	 

	 	 
	 
	 	 	 	 
	Quantity Dispensed1 during quarter:
(A + C — B)

	 	 	 	kg
	 

	 	 

	 	 
	Quantity Converted during quarter:

	 	 	 	kg 
	(total Active Materials in Products produced)
	 	 

	 	 

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

	 	 	 	 	 
	DATE:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	PATHEON INC.	 	 
	 
	 	 	 	 
	Per:
	 	 	 	 
	 

	 	 

	 	 
	Name:
	 	 	 	 
	Title:
	 	 	 	 

 

			
	1	 	Excludes any Active Material received or
consumed in connection with technical transfer activities or development
activities, including, without limitation, any regulatory, stability,
validation or test batches manufactured during the month.

 

 

FINAL

SCHEDULE K

REPORT OF ANNUAL ACTIVE MATERIAL INVENTORY RECONCILIATION AND CALCULATION OF ACTUAL ANNUAL YIELD

	 	 	 
	TO:

	 	AVANIR PHARMACEUTICALS
	FROM:

	 	PATHEON INC.
	RE:

	 	Active Materials annual inventory reconciliation report and
calculation of Actual Annual Yield pursuant to Section 2.2(a) of
the Manufacturing Services Agreement dated as of December 16,
2005 (the “Agreement”)

	 	 	 	 	 	 	 
	Reporting Year ending:

	 	                                        	 	 	 	 
	 
	 	 	 	 	 	 
	Active Materials on hand
at beginning of Year:

	 	                                        kg
	 	(A)	 	 
	 
	 	 	 	 	 	 
	Active Materials on hand
at end of Year:

	 	                                        kg
	 	(B)	 	 
	 
	 	 	 	 	 	 
	Quantity Received during Year:

	 	                                        kg
	 	(C)	 	 
	 
	 	 	 	 	 	 
	Quantity Dispensed2 during Year:
(A + C — B)

	 	                                        kg
	 	(D)	 	 
	 
	 	 	 	 	 	 
	Quantity Converted during Year:

(total Active Materials in Products produced)

	 	                                        kg
	 	(E)	 	 
	 
	 	 	 	 	 	 
	Active Materials Reimbursement Value:

	 	$                                        / kg
	 	(F)	 	 
	 
	 	 	 	 	 	 
	Target Yield:

	 	                                        %
	 	(G)	 	 
	 
	 	 	 	 	 	 
	Actual Annual Yield:

(( E / D) * 100)

	 	                                        %
	 	(H)	 	 
	 
	 	 	 	 	 	 
	Allowable Loss Factor

	 	                                        %
	 	(I)	 	 
	 
	 	 	 	 	 	 
	Shortfall:
(((G — I - H) / 100) * F * D)

	 	$                                         

(if a negative number,
	 	(J)	 	 
	 

	 	insert zero)	 	 	 	 

 

			
	2	 	Excludes any Active Material received or
consumed in connection with technical transfer activities or development
activities, including, without limitation, any regulatory, stability,
validation or test Batches manufactured during the Year.

 

 

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

     DATE:                                        

	 	 	 	 	 
	PATHEON INC.	 	 
	 
	 	 	 	 
	Per:
	 	 	 	 
	 

	 	 

	 	 
	Name:
	 	 	 	 
	Title:
	 	 	 	 

 

 

FINAL

SCHEDULE L

FORM OF WORK ORDER

WORK ORDER

UNDER

MANUFACTURING SERVICES AGREEMENT

DATED AS OF DECEMBER 16, 2005

WORK ORDER # •

	 	 	 
	1. Parties:

	 	Patheon Inc. & Avanir Pharmaceuticals
	 
	 	 
	2. Product:

	 	•
	 
	 	 
	3. Contract:

	 	This Work Order is governed by the terms of the
Manufacturing Services Agreement between the parties dated
December 16, 2005.
	 
	 	 
	4. Description of Services:

	 	See Project Scope (Part A).
	 
	 	 
	5. Payment and Currency:

	 	See Budget Summary (Part B).
	 
	 	 
	6. Additional Schedules:
	 	 
	 
	 	 
	7. Effective Date:

	 	•, 200•
	 
	 	 
	8. Term of Work Order:
	 	 

	 	 	 	 	 	 	 	 	 
	Patheon Inc.	 	 	 	Avanir Pharmaceuticals
	 
	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 	 	 
	Name:

	 	 	 	 	 	Name:	 	 
	 

	 	 
	 	 	 	 	 	 
	Title:

	 	 	 	 	 	Title:	 	 
	 

	 	 
	 	 	 	 	 	 

 

 

Part A: Project Scope

[Project Scope for Work Order to be inserted here]

 

 

Part B: Budget Summary

[Budget Summary for Work Order to be inserted here]

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00103-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00103-of-00352.parquet"}]]