Document:

Exhibit 10.13

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

TABLETS MARKETING RIGHTS AGREEMENT

 

This TABLETS MARKETING RIGHTS AGREEMENT (the “Agreement”) is dated March 10, 2010 (the “Effective Date” as that term is defined in Section 1.6 below), by and between Argent Development Group, LLC, a California limited liability company with mailing address of P.O. Box 4531, Mountain View, CA 94040 (“Argent”), and Vertical Pharmaceuticals, Inc., a New Jersey corporation with offices at 2400 Main Street Extension, Suite 6, Sayreville, New Jersey 08872 (“Vertical”).

 

WITNESSETH

 

WHEREAS, Argent, among other things, has obtained, from the Contract Manufacturer (as defined in Section 1.5 below), the exclusive worldwide distribution and commercialization rights for the following pharmaceutical products: Chlorzoxazone 375mg tablets (the “375 Product”) and Chlorzoxazone 750mg (the “750 Product”) (collectively, the “Products”); and

 

WHEREAS, a Suitability Petition (Docket No. 2005P-0044) was filed with the FDA (as that term is defined in Section 1.7 below) for the 375 Product and approved on April 8, 2005 and Suitability Petition (Docket No. 1991P-0153) was filed with the FDA for the 750 Product and approved on June 3, 1992 (the “Petitions”) requesting permission from the FDA to file one or more ANDAs (as that term is defined in Section 1.3 below) for the Products; and

 

WHEREAS, Mikart, Inc. (the Contract Manufacturer as defined in Section 1.5 below, and thus hereinafter will be called “Mikart”) has completed the development for the Products and has filed one AND A (No. 40-861) covering both Products on February 20, 2007 with the FDA; and

 

WHEREAS, Vertical has experience and capability in the marketing and distribution of pharmaceutical products in the Territory (as that term is defined in Section 1.15 below) and desires to distribute the Products (as that term is defined above and in Section 1.13 below) in the Territory; and

 

WHEREAS, Argent and Mikart entered into a Master Product Development Agreement dated June 7, 2005 (the “Product Development Agreement”) pertaining to, among other things, the development and commercialization of the Products, wherein it was agreed that Mikart would be the owner of the ANDA pertaining to the Products and Mikart granted Argent an exclusive right to market and distribute the Products throughout the world under Mikart’s Approval (as that term is defined in Section 1.3 below) for the Products, including the right to transfer such exclusive rights to one or more marketing companies; and

 

WHEREAS, Argent and Vertical wish to enter into an agreement for the exclusive marketing and commercialization of the Products in the Territory under the terms and conditions set forth in this Agreement.

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

NOW, THEREFORE, for good and valuable consideration, and the covenants, conditions, and undertakings hereinafter set forth, the receipt, adequacy and sufficiency of which are hereby acknowledged, it is agreed by the parties hereto as follows:

 

1.                                      Definitions. In addition to various terms defined throughout this Agreement, the following capitalized terms shall have the meanings set forth below:

 

1.1                               “Act” means the Food, Drug and Cosmetic Act (21 U.S.C. §§ 301 et seq.), as amended from time to time, and the regulations promulgated thereunder.

 

1.2                               “Affiliate” means any entity directly or indirectly controlled by, controlling or under common control with a party hereto. “Control” for the purposes hereof shall mean the ownership or holding of Fifty Percent (50%) or more of the voting stock or other voting interests in such entity or such other relationship as, in fact, constitutes actual control.

 

1.3                               “Approval” means FDA approval of the Products pursuant to the FDA’s abbreviated new drug application (“ANDA”) process for the ANDA filed by the Contract Manufacturer for the Products.

 

1.4                               “Approval Date” means the date that the FDA permits the initial sale of the Products in the Territory pursuant to the Approval of the ANDA filed by the Contract Manufacturer for the Products.

 

1.5                               “Contract Manufacturer” means one or more third party(ies) that may be engaged by Argent and/or Vertical to manufacture the Products, as provided for in Section 4 of this Agreement, specifically, as of the Effective Date hereof, Mikart, Inc., with offices at 1750 Chattahoochee Ave, Atlanta, Georgia 30318.

 

1.6                               “Effective Date” means the date, following Argent’s execution of this Agreement, that Vertical executes this Agreement.

 

1.7                               “FDA” means the United States Food and Drug Administration or any successor agency.

 

1.8                               “First Position Commitment” means the requirement for the Vertical sales representatives to deliver personal sales presentations, in support of the promotion of the Products to target physicians in the Territory, as a first product detail on each such call during the First Position Commitment Period (as that term is defined below in Section 1.9). For the avoidance of doubt, a first product detail means the first product discussion that takes place on a sales presentation call by a Vertical sales representative with a target physician for any products (including, without limitation, the Products) in the Territory.

 

1.9                               First Position Commitment Period” means the [***] period commencing upon the Launch Date.

 

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

1.10                        “Gross Sales” means, for Products, whether brand or generic, sold hereunder by Vertical or any Affiliate of Vertical to non-Affiliated third parties (individually, a “Customer” and collectively, the “Customers”), the total invoiced sales prices for the Products.

 

1.11                        “Launch” means commencement of personal sales presentations to target physicians in the Territory for the Products by Vertical, and the first date on which such presentations are made by Vertical shall be the “Launch Date”.

 

1.12                        “Net Sales” means an amount equal to the total Gross Sales of the Products sold hereunder by Vertical or any Affiliate of Vertical to Customers, after deduction of the following items:

 

(a)                                 transportation and insurance charges related to the delivery of the Products to Customers;

 

(b)                                 payment term discounts actually allowed and taken by Customers to the extent customary in the trade;

 

(c)                                  any service fees actually paid to Customers as a requirement for the stocking and subsequent re-distribution of the Products;

 

(d)                                 credits or allowances given or made to Customers for rejection or return of the Products to Vertical by Customers;

 

(e)                                  any tax or other governmental charge levied directly on the sale, transportation or delivery of the Products to Customers and borne by Vertical; and

 

(f)                                   chargebacks and rebates actually allowed and taken to the extent customary in the trade to managed care health organizations, federal and state government agencies, and/or other purchasers and/or reimbursers of the Products, including, for example, without limitation, group purchasing organization administration fees;

 

all such deductions being supported by written documentation provided by Vertical in the royalty reports to be submitted to Argent pursuant to Section 8.4 below. For the avoidance of doubt, the deductions provided for in this Section 1.12 must consist of actual allowances, fees, payments, credits, rebates, chargebacks and/or discounts directly taken and attributable to a Customer during the reportable royalty period as specified in Section 8.6 hereof. Accounting accruals or payments, rebates, reimbursements or other consideration of any type whatsoever to non-Customers, without regard for Vertical’s normal financial reporting procedures, are not considered allowable deductions under this Section 1.12.

 

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

Exhibit A attached hereto sets forth in chart format the deductions from Gross Sales that are permitted hereby as set forth above in this Section 1.12 to arrive at a determination of Net Sales upon which the royalty as set forth in Section 8.3.1 will be calculated.

 

Product will be considered sold when a shipment thereof is invoiced by Vertical to its Customer, if such invoice is made within ten (10) business days after any Product is shipped to such Customer; if not, then when the shipment is received by such Customer. The distribution of reasonable quantities of free promotional samples of the Products (in amounts agreed upon in writing by Argent and Vertical) shall not be considered a sale of the Products for royalty purposes.

 

1.13                        “Products” means collectively the 375 Product and the 750 Product, labeled as brand or generic.

 

1.14                        “Proprietary Information” means all financial information, marketing information, both historic and prospective information, sales information, customer information, including customer lists, raw materials, know-how, drawings, compositions, manufacturing and other specifications, analytical procedures, flow sheets, reports, market studies, preclinical and clinical test results, FDA and other regulatory submissions, software and other medical, research, technical, and marketing information disclosed, directly or indirectly, by either party to the other party, information designated “Confidential,” “Proprietary” or the like, or information that by its nature is information normally intended to be held in confidence. Proprietary will not include information (a) in the public domain at the time of disclosure, (b) published or otherwise part of the public domain after disclosure other than by breach of this Agreement by the receiving party, (c) already known by the receiving party at the time of disclosure and not acquired, directly or indirectly, from the disclosing party or anyone on behalf of the disclosing party, provided that the source of such information was not known by the receiving party or any of its representatives to be bound by a confidentiality agreement with respect to such information, and such prior knowledge is properly demonstrated by the receiving party’s written records, or (d) lawfully provided to the receiving party by a third party who did not require the receiving party to hold the same in confidence and who did not acquire such information, directly or indirectly, from the disclosing party or anyone on behalf of the disclosing party as demonstrated by the receiving party’s written records.

 

1.15                        “Territory” means the United States of America and all its territories and possessions.

 

2.                                      Development and Regulatory Approval.

 

2.1                               Development. Argent represents to Vertical (and this information can and should be verified by Vertical with Mikart) that the development for the Products has been sufficiently completed to enable Mikart to file the ANDA with the FDA.

 

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

Vertical acknowledges that there can be no guarantee that the FDA will not require Mikart to conduct additional development work before it issues its Approval, and no commitment should be made by Vertical to any third party that is inconsistent with this acknowledgment.

 

2.2                               Regulatory Approval. Argent and Vertical acknowledge and agree that: (a) the Contract Manufacturer shall be the holder of the ANDA for the Products; (b) the Contract Manufacturer has filed the ANDA for the Products with the FDA; (c) the Contract Manufacturer and Argent are responsible for the Approval of the Products in the United States; and (d) the Contract Manufacturer shall maintain the approved ANDA in full compliance with all relevant provisions of the Act. The regulatory responsibilities of the Contract Manufacturer, as it relates to the Products, will be more fully delineated in the Supply Agreement (as that term is defined in Section 4 below) that will be executed by Vertical and the Contract Manufacturer for the Products. Vertical acknowledges there are risks inherent in the regulatory processes for the Products and that there can be no guarantee that the Contract Manufacturer will be able to obtain or maintain the Approval, and no commitment should be made by Vertical to any third party that is inconsistent with this acknowledgment.

 

2.3                               Reporting. Argent shall immediately notify Vertical in writing if it receives any information in writing from the Contract Manufacturer specifically naming the Products that the Approval, when obtained for the Products, may be thereafter withdrawn by the FDA.

 

3.                                      Distribution of Product.

 

3.1                               Grant. Subject to the terms and conditions set forth in this Agreement, Argent hereby grants to Vertical an exclusive and perpetual marketing right under Mikart’s Approval to offer for sale, sell, market, promote, distribute, and otherwise transfer, dispose, provide, and place (“sell”) the Products in the Territory. Vertical shall have the right, in its sole discretion, to distribute the Products directly or through one or more sub-distributors. It is expressly understood by Vertical that the marketing rights granted under this Section 3.1 by Argent to Vertical do not give Vertical the right to grant additional marketing rights nor enter into any co-promotion or co-marketing agreements for the Products with any non-Affiliated third party, unless the parties hereto agree otherwise in writing. Moreover, Vertical’s marketing rights do not give Vertical the right to transfer its marketing rights to any non-Affiliated third party without the prior written consent of Argent as set forth in Section 12.7 below. The word “perpetual” as used above in this Section 3.1 and in Sections 8.3.1 and 11.1 below is subject to the understanding that the initial term of the Product Development Agreement between Mikart and Argent is fifteen (15) years from its effective date of June 7, 2005 and that such Product Development Agreement is stated to be automatically renewed for five (5)-year renewal terms unless terminated upon at least two (2) years written notice from one party to the other, and that for so long

 

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

as such Product Development Agreement remains in full force and effect with respect to the Product, Vertical’s marketing rights hereunder, unless terminated pursuant to Section 11 below, will be “perpetual”.

 

3.2                               Performance Criteria. Vertical shall be responsible, at its sole cost and expense, for all manufacturing of the Products, pursuant to the provisions of Section 4 ‘ hereof, any costs related to additional process-validation activities, if any, the annual stability study activities related to the Products after the FDA has approved the AND A, regulatory matters related to the commercial sale of the Products, and all promotion and distribution related to the commercialization of the Products in the Territory. Upon the Launch of the Products by Vertical, and continuing for a period of [***] following Launch, Vertical shall, in good faith and without undue delay, have a minimum of at least [***] sales representatives assigned to actively detail the Products in accordance with the First Position Commitment, as defined in Section 1.8 hereof. Commencing with the [***] following the Launch of the Products, Vertical shall have a minimum of [***] sales representatives assigned to actively detail the Products in accordance with the First Position Commitment and shall maintain at least that number of sales representatives throughout the Term (as that term is defined in Section 11.1 below) hereof (except as set forth below) (the “Minimum Promotion Commitment”). Vertical’s Launch shall comprise efforts no less rigorous than those efforts that Vertical customarily expends to commercialize its other products similar to the Products. Vertical shall Launch the Products as soon as possible following the Approval Date of the ANDA pertaining to the Products, but in no case later than sixty (60) days after such Approval Date, subject to its ability to obtain sufficient quantities of the Product(s) from the Contract Manufacturer to allow a Launch subject to the terms of this Section 3.2. The Minimum Promotion Commitment (including the First Position Commitment for the First Position Commitment Period) shall be maintained until the commercial sale of a Generic Equivalent Product in the Territory by a non-Affiliated third party. For the avoidance of doubt, a “Generic Equivalent Product” is defined to be a product that must be approved by the FDA pursuant to the FDA’s ANDA process and that must carry a generic equivalency rating of “AA” to the Products. If a Generic Equivalent Product is sold commercially in the Territory and then subsequently withdrawn, with no other Generic Equivalent Product being sold commercially in the Territory, then Vertical will, in good faith and without undue delay, once again comply with the foregoing Minimum Promotion Commitment as soon as is it practical to do so. If the First Position Commitment is interrupted for any reason permitted hereunder (e.g., a Product supply interruption as set forth in Section 4.2 below or an event of Force Majeure as set forth in Section 12.11 below) before Vertical has complied therewith in full for the entire First Position Commitment Period, then that obligation shall be reinstated as soon as possible after such interruption until Vertical has complied in full with such obligation for an aggregate of the [***] of the First Position Commitment Period.

 

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

3.3                               Generic Versions of the Products by Vertical. Argent understands that Vertical, or Vertical’s Affiliate, Trigen Laboratories, Inc., may wish to market its own generic versions of the Products, which initially will be marketed by Vertical solely as branded versions. Vertical agrees to do so only when Vertical believes in good faith, based upon credible market information, that a Generic Equivalent Product is on, or is expected to shortly come into, the market in the Territory. At such time, Argent understands that Vertical could have both branded and generic sales of the Products in the Territory.

 

4.                                      Product Manufacturing.

 

4.1                               Supply Agreement. The Product Development Agreement requires that, as a condition of entering into a marketing agreement with any marketing company, Argent require the marketing company to enter into an exclusive manufacturing agreement with the Contract Manufacturer, once again, in this case, Mikart. Accordingly, Argent hereby acknowledges and agrees that Vertical’s duties and obligations hereunder are dependent upon Vertical’s ability to obtain and maintain an adequate supply of the Products from the Contract Manufacturer. Accordingly, Argent shall cooperate with Vertical to ensure that a long-term supply agreement is executed between Vertical and the Contract Manufacturer with respect to the Products (“Supply Agreement”), provided, however, that the Products shall only be delivered to Vertical or its Customers (or Vertical’s sub-distributors) and not to or on behalf of Argent. The terms and conditions governing Vertical’s responsibilities related to the supply of the Products to Vertical by the Contract Manufacturer shall be more fully delineated in the Supply Agreement between Vertical and the Contract Manufacturer. Argent shall not be obligated to enter into this Agreement until both Vertical and Mikart have notified Argent in writing that they are each prepared to, and will, enter into the Supply Agreement at the same time that Argent and Vertical will be entering into this Agreement.

 

4.2                               Transfer of Supply Agreement. Argent and Mikart have agreed in the Product Development Agreement that, should Mikart be unable or unwilling to continue to fulfill its obligations to manufacture and supply the Products, Mikart will cooperate with Argent and/or Argent’s transferee(s) to effect an orderly transfer of the manufacturing for the Products to an alternate third-party contract manufacturer mutually acceptable to the parties. Any such transfer will be undertaken in a manner that attempts to minimize the potential for supply disruption for the Products, and the Supply Agreement between Mikart and Vertical shall state specifically that all costs incurred in such transfer shall be paid by Mikart and Vertical shall not be responsible for same (nor shall Argent). As all of the manufacturing information pertaining to the Products has been developed by Mikart and has been incorporated in (or will be incorporated in) its regulatory filings, such information is considered under the confidentiality provisions of the Product Development Agreement to be the confidential information of Mikart. However, as set forth in Section 8.3.4 below, in the event that supply of the Products from the Contract Manufacturer ceases or is disrupted for more than

 

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

ninety (90) days or in a manner that significantly affects Vertical’s sales of the Products, then Vertical’s obligations under this Agreement (other than the submission of royalty reports and payments under Section 8.4 below) shall be suspended until there is a resumption of supply (or sufficient supply) by the Contract Manufacturer or there is a transfer of the manufacturing duties for the Products to an alternate third-party contract manufacturer mutually acceptable to the parties, and Vertical’s other obligations under this Agreement shall be extended for a period of time equal to any period of suspension. For the avoidance of doubt, a condition precedent to Mikart’s obligation to transfer the manufacturing for the Products to an alternate third-party contract manufacturer mutually acceptable to the parties shall be the existence of a Supply Agreement for the Products between Vertical and Mikart in which Vertical is not in material breach of the provisions thereof.

 

5.                                      Marketing and Support Activities.

 

5.1                               Marketing Meetings; Reports. Following the Launch of the Products by Vertical, representatives of Argent and Vertical shall meet at least quarterly to discuss Vertical’s marketing plans and other information concerning the ongoing commercialization of the Products. Vertical shall provide information available to it about the Products and its ability to compete with other products for related uses and to meet customer needs. Vertical shall provide Argent information regarding sales of the Products, including but not limited to such information as pricing trends on a national basis.

 

5.2                               Packaging, Tooling and Labeling. Vertical, at Vertical’s sole expense, and in conjunction with the Contract Manufacturer, shall develop all packaging, tooling, labeling, and package inserts for the Products. All such packaging, tooling, labeling, and package inserts shall comply with applicable FDA requirements.

 

5.3                               Trademarks. Vertical agrees to file all applications necessary to register its brand name(s) for the Products for trademark protection (the “Trademarks(s)”) with the United States Patent and Trademark Office not later than sixty (60) days prior to the date of first commercial sale by Vertical of the Products in the Territory. Vertical shall be the sole and exclusive owner of all right, title and interest in and to such Trademark(s) for the Product. Vertical further agrees, at its sole expense, to prosecute and/or defend any claim of infringement that may arise as a result of the use of the Trademark(s) in accordance with this Agreement and to hold Argent harmless with respect thereto. In accordance with the provisions of Section 11 of this Agreement, as they relate to the Trademark(s) used by Vertical for the Products, Vertical agrees to promptly execute any documents that Argent asserts are needed to transfer all rights in the Trademark(s) to Argent in consideration of Argent’s agreement to pay the Trademark Royalty (as that term is defined in Section 11.5 below) for such Trademark(s).

 

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

6.                                      Compliance. Vertical shall maintain, or cause to be maintained, all complaint files and other records required to be maintained by the FDA and other regulatory agencies with respect to the Products supplied to Vertical by the Contract Manufacturer. Vertical and the Contract Manufacturer shall be responsible for compliance with all necessary regulatory reporting requirements for the Products. Specific reporting obligations of Vertical and the Contract Manufacturer shall be more fully delineated in the Supply Agreement.

 

7.                                      Product Warranty and Limitation of Liability.

 

7.1                               No Warranty. ARGENT GRANTS NO WARRANTIES FOR THE PRODUCTS, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, AND ARGENT SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OF QUALITY, WARRANTY OF MERCHANTABILITY, WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE OR WARRANTY OF NON-INFRINGEMENT.

 

7.2                               Limitation of Liability. EXCEPT AS PROVIDED FOR IN SECTION 10.3 BELOW, IN NO EVENT SHALL ARGENT BE LIABLE TO VERTICAL FOR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING BUT NOT LIMITED TO LOSS OF PROFITS) ARISING OUT OF ANY PERFORMANCE OF THIS AGREEMENT OR IN FURTHERANCE OF THE PROVISIONS OR OBJECTIVES OF THIS AGREEMENT, REGARDLESS OF WHETHER SUCH DAMAGES ARE BASED ON TORT, WARRANTY, CONTRACT OR ANY OTHER LEGAL THEORY, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THE AGGREGATE LIABILITY OF ARGENT FOR DAMAGES UNDER THIS AGREEMENT, REGARDLESS OF THE FORM OF THE ACTION AND/OR THE LEGAL THEORY ALLEGED, SHALL BE LIMITED TO [***].

 

8.                                      Consideration for Grant of Marketing Rights.

 

8.1                               Fixed Payments. As consideration for the marketing rights granted to Vertical hereunder, Vertical shall pay to Argent certain fixed payments as follows.

 

8.1.1                                   a signing payment of Three Hundred Thousand Dollars ($300,000) due on the Effective Date; and

 

8.1.2                                   the sum of Nine Hundred Thousand Dollars ($900,000) to be paid in fifteen (15) equal monthly payments of Sixty Thousand Dollars ($60,000) each month commencing on the first day of the first month following the Approval Date for the Products.

 

8.2                               Prompt Ordering of Product. Vertical shall, not later than ten (10) business days after the Approval Date, submit binding purchase orders to the Contract Manufacturer for such quantities of the Products as are needed to commercialize the Products in the Territory. However, Vertical shall, at a minimum, submit binding purchase orders to the Contract Manufacturer in quantities sufficient to

 

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

cover the required three (3) commercial validation batches for each of the Products.

 

8.3                               Royalties.

 

8.3.1                                   Subject to Sections 8.3.2 and 8.4, below, as additional consideration for the marketing rights granted hereunder, Vertical shall pay to Argent a perpetual royalty payment equal to [***] of annual Net Sales of the Products, whether brand or generic, for the first [***] in annual Net Sales and [***] of annual Net Sales in excess of [***] (the “Actual Royalty Payment”).

 

8.3.2                                   Subject to Section 8.3.3 below, in the event that the Actual Royalty Payment does not equal [***] (the “Minimum Annual Royalty”) for each twelve (12) month period beginning with the first day of the sixteenth (16th) month following the Approval Date, Vertical shall pay to Argent, in addition to the Actual Royalty Payments made during each such period, the difference between [***] and the aggregate Actual Royalty Payments paid for each such twelve (12) month period (each such payment made pursuant to this Section 8.3.2 shall be referred to as a “Supplemental Royalty Payment”).

 

8.3.3                                   (a)  The Minimum Annual Royalty outlined in Section 8.3.2 above shall be reduced to [***] for the Products beginning with the Is day of the calendar month immediately following the commercial sale of one or more Generic Equivalent Products in the Territory (as such products are defined in Section 3.2 above). The Minimum Annual Royalty shall be prorated for the then-current twelve (12) month period consistent with the reduction thereof as set forth in this Section 8.3.3(a). (b) If one or more Generic Equivalent Products launched in the Territory are subsequently withdrawn with no other Generic Equivalent Products remaining on the market in the Territory, the Minimum Annual Royalty will increase to [***] for the Products beginning with the 1st day of the calendar month immediately following the withdrawal from commercial sale of the last of the Generic Equivalent Products in the Territory and the Minimum Annual Royalty shall be prorated for the then- current twelve (12) month period consistent with the increase thereof as set forth in this Section 8.3.3(b).

 

8.3.4                                   In the event that supply of the Products from the Contract Manufacturer ceases or is disrupted for more than one hundred twenty (120) days or in a manner that significantly affects Vertical’s sales of the Products, through no fault of Vertical (whether by act or omission), then Vertical’s obligations under this Agreement shall be suspended (other than the submission of royalty reports and payments under Section 8.4 below) until there is a resumption of supply (or sufficient supply) by the Contract

 

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

Manufacturer or there is a transfer of the manufacturing duties for the Products to an alternate third-party contract manufacturer mutually acceptable to the parties, and Vertical’s other obligations under this Section 8.3 shall be extended for a period of time equal to any period of such suspension.

 

8.4                               Royalty Reports and Payments Due. The royalty payments described in Section 8.3 hereof shall be paid by Vertical to Argent on a calendar quarter basis as follows:

 

8.4.1                                   Vertical shall pay each Actual Royalty Payment not later than forty-five (45) days following the close of each calendar quarter during the Term hereof.  For the avoidance of doubt, the first Actual Royalty Payment for the Products will be due and payable not later than forty-five (45) days following the close of the calendar quarter during which the date of first commercial sale for any of the Products to a Customer occurs in the Territory. The first royalty report shall include all Products sold up to, and including, the last day of the calendar quarter for which the royalty report is being given. Each royalty report shall include all written documentation supporting Vertical’s determination of Net Sales upon which the royalty of Section 8.3.1 above has been calculated.

 

8.4.2                                   In the event that Vertical is obligated to pay Argent a Supplemental Royalty Payment hereunder, then Vertical shall pay the required Supplemental Royalty Payment not later than forty-five (45) days following the close of the twelve (12) month period for which a Minimum Annual Royalty is applicable and owed to Argent hereunder.

 

8.5                               Acquisition Payment. In the event that Vertical is acquired or merged into anew, non-Affiliated company (for the purposes hereof, such company is hereby arbitrarily named “NEWCO”) within the First Position Commitment Period, NEWCO (and/or Vertical if Vertical remains as a operating entity) shall be responsible for carrying out all of the responsibilities of Vertical as set forth herein, however, NEWCO shall have the option to either (a) adhere to the First Position Commitment requirements as specified herein or (b) opt out of the First Position Commitment by making a one-time payment to Argent according to the schedule outlined in Sections 8.5.1, 8.5.2 or 8.5.3 below, all subject to Section 8.5.4 below.

 

8.5.1                                   If NEWCO elects to exercise the option outlined in Section 8.5(b) above within the first twelve  months of the First Position Commitment Period, NEWCO shall make a one-time payment to Argent in the amount of Seven Hundred Fifty Thousand Dollars ($750,000).  The exercise of the option in Section 8.5(b), and the payment of the consideration outlined in this Section 8.5.1, shall only relieve NEWCO of the requirements under the First Position Commitment. All

 

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

other requirements set forth in this Agreement, including, without limitation, the Minimum Promotion Commitment, remain unchanged.

 

8.5.2                                   If NEWCO elects to exercise the option outlined in Section 8.5(b) above within months thirteen (13) to twenty four (24) of the First Position Commitment Period, NEWCO shall make a one-time payment to Argent in the amount of Seven Hundred Fifty Thousand Dollars ($750,000). The exercise of the option in Section 8.5(b), and the payment of the consideration outlined in this Section 8.5.2, shall only relieve NEWCO of the requirements under the First Position Commitment. All other requirements set forth in this Agreement, including, without limitation, the Minimum Promotion Commitment, remain unchanged.

 

8.5.3                                   If NEWCO elects to exercise the option outlined in Section 8.5(b) above within months twenty-five (25) to thirty-six (36) of the First Position Commitment Period, NEWCO shall make a one-time payment to Argent in the amount of Five Hundred Thousand Dollars ($500,000). The exercise of the option in Section 8.5(b), and the payment of the consideration outlined in this Section 8.5.3, shall only relieve NEWCO of the requirements under the First Position Commitment. All other requirements set forth in this Agreement, including, without limitation, the Minimum Promotion Commitment, remain unchanged.

 

8.5.4                                   If the First Position Commitment is interrupted for any reason permitted hereunder (e.g., a Product supply interruption as set forth in Section 4.2 below or an event of Force Majeure as set forth in Section 12.11 below) before Vertical has complied therewith in full for the entire First Position Commitment Period, then that obligation as set forth in Section 3.2 above shall be reinstated as soon as possible after such interruption until Vertical has complied in full with such obligation for an aggregate of the thirty-six (36) months  of the First Position Commitment Period and the twelve (12) months  periods thereof as set forth in Sections 8.5.1, 8.5.2 and 8.5.3 above shall be determined not with respect to the initial start date of the First Position Commitment Period, but with respect to the reinstated dates as may be applicable with respect thereto.

 

8.6                               Sales Activity Reporting. After the date of first commercial sale for the Products by Vertical, Vertical shall make quarterly written reports to Argent within forty- five (45) days after the first day of each January, April, July, and October during the Term hereof and, as of such dates, stating in each such report a) the number, description, and aggregate sales of the Products sold during the preceding three (3) calendar months and upon which amounts are payable as provided in Sections 8.3 and 8.4 above, b) the number of Vertical sales representatives actively assigned to detail the Products to target physicians at the end of the quarterly period, c) the total number of first position details for the Products given to target physicians by Vertical sales representatives during the quarter and d) the total number of details for the Products given to target physicians by Vertical sales

 

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

representatives during the quarter. The first such report shall include all Products sold and all sales representatives’ activity up to, and including, the last day of the calendar quarter for which the sales report is being given.

 

8.7                               Accounting and Records. Vertical shall keep complete, true and accurate books of account and records for the purpose of showing the derivation of all amounts payable to Argent under this Agreement. Such books and records shall be kept at Vertical’s principal place of business for at least three (3) years following the end of the calendar quarter to which they pertain, and shall be available for inspection by a representative of Argent, not more than once per calendar year during the Term hereof and during normal business hours of Vertical, for the sole purpose of verifying Vertical’s royalty statements. The representatives of Argent shall be obliged to treat all such books and records as Proprietary Information of Vertical, except as required by law. Any such inspections shall be at the sole expense of Argent, unless a variation or error in excess of [***] of the royalties actually paid is discovered in the course of any such inspection, whereupon all costs relating thereto shall be paid by Vertical, subject to the verification procedure described herein. Vertical shall pay to Argent within thirty (30) days of receiving notice from Argent the full amount of any underpayment, together with interest thereon at the lower of the rate of [***] per month or the maximum rate permitted under applicable law. If Vertical disagrees with the determination by Argent that an underpayment has been made by Vertical, Vertical shall within ten (10) days after receipt of the notice from Argent of the underpayment so inform Argent and the matter shall promptly and in good faith be referred by both parties to a mutually acceptable certified public accountant for an independent verification of which party’s view is correct, which referral shall take place no later than twenty (20) days after the date of Vertical’s notification to Argent that Vertical believes that Argent’s determination is in error. The compensation for such certified public accountant shall be paid by the party whose view is not verified or upheld by the certified public accountant.

 

8.8                               Interest. Any payment required under this Section 8 that is not received by Argent on the date due shall accrue interest at a rate of [***] per month, or the maximum rate allowed by law, whichever is less.

 

9.                                      Confidentiality.

 

9.1                               Non-Disclosure. During the Term hereof and for [***] thereafter, neither party shall disclose to third parties, or use for its benefit or the benefit of any third party, in whole or in part, any Proprietary Information received from the other party, except to the extent required to perform its obligations under this Agreement or comply with the Act or other laws. Each party shall take all reasonable steps to minimize the risk of disclosure of Proprietary Information, including, without limitation:

 

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(a)                                 ensuring that only its employees, agents and consultants whose duties require them to possess such Proprietary Information have access thereto;

 

(b)                                 ensuring that such employees, agents and consultants are contractually bound to maintain the confidentiality of such Proprietary Information on terms no less stringent than those of this Agreement; and

 

(c)                                  exercising at least the same degree of care with respect to Proprietary Information received from another party that it uses for its own Proprietary Information, which degree of care shall be no less than reasonable.

 

Notwithstanding the provisions related to confidentiality contained within this Agreement, Argent and Vertical acknowledge and agree that the Mutual Nondisclosure Agreement (the “CDA”) executed between the parties with an effective date of April 23, 2007, remains in lull force and effect. Argent and Vertical further agree that, in the event that any term of this Agreement related to confidentiality is inconsistent with the CDA, the provisions in the CDA shall govern.

 

9.2                               Duties Upon Termination. Except as otherwise permitted under this Agreement, upon request by the disclosing party after expiration or termination of this Agreement, the receiving party shall either return all of such disclosing party’s Proprietary Information (including data, memoranda, drawings and other writings and tapes and all copies thereof) received or prepared by it or destroy the same (with written confirmation thereof from an authorized officer of the destroying party), and, in any event, shall make no further use of such Proprietary Information provided, however, that counsel for the receiving party may keep one (1) copy of the Proprietary Information in a secure location for purposes of ascertaining the receiving party’s obligations pursuant to this Section 9.

 

9.3                               Use of Proprietary Information. During the Term hereof and thereafter, neither party shall use the other party’s Proprietary Information for any purposes, except to perform its obligations hereunder.

 

9.4                               Injunctive Relief. Each party acknowledges that the other party might not have an adequate remedy at law for breach of any of the covenants contained in this Section 9, and hereby consents to the other party seeking to enforce the same by means of temporary or permanent injunction issued by any court having jurisdiction thereof and further agrees that the other party shall be entitled to assert any claim it may have for damages resulting from the breach of such covenants in addition to seeking injunctive or other relief.

 

10.                               Indemnification.

 

10.1                        Indemnification by Vertical. Subject to Argent’s compliance with its obligations set forth in Section 10.2, below, Vertical shall indemnify, defend and hold Argent

 

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and its respective shareholders, directors, officers, employees and agents harmless from and against any and all losses, damages, liabilities, claims, demands, judgments, settlements, costs and expenses (including, without limitation, reasonable attorneys’ fees actually incurred and other costs of defense) attributable to, or arising out of, (a) a breach by Vertical of any of its representations, warranties, covenants or obligations hereunder (including, without limitation, those set forth in Section 12.13 below), (b) any claim, lawsuit or other action by a third party for breach of contract, personal injury, death or property damage to the extent caused by the negligence, fraud or intentional conduct by Vertical in the furtherance of this Agreement, or (c) connected with the use or sale of the Products to the extent directly caused by Vertical’s negligence, fraud, intentional conduct or breach of any of its obligations hereunder concerning the use or sale of the Products.

 

10.2                        Notice and Assistance. If Argent intends to claim indemnification under Section of this Agreement, Argent shall promptly notify Vertical in writing of any action, claim or other matter in respect of which Argent or any of its respective shareholders, directors, officers, employees and agents intend to claim such indemnification. Argent shall permit, and shall cause its employees and agents to permit, Vertical, at its discretion, to settle any such action, claim or other matter and agrees to the complete control of such defense or settlement by Vertical; provided, however, that such settlement does not adversely affect Argent’s rights hereunder or impose any obligations on Argent in addition to those set forth herein in order for it to exercise such rights. No such action, claim or other matter shall be settled without the prior written consent of Vertical and Vertical shall not be responsible for any legal fees or other costs incurred other than as provided herein. At the expense of Vertical, Argent shall render all assistance reasonably necessary in defending against such claim, suit, or action. Argent shall have the right, at its expense, to retain separate counsel to act in an advisory capacity in connection with any matter involving a claim for indemnity and Vertical will cooperate with such counsel.

 

10.3                        Indemnification by Argent. Subject to Vertical’s compliance with its obligations set forth in Section 10.4 below, Argent shall indemnify, defend and hold Vertical and its respective shareholders, directors, officers, employees and agents harmless from and against any and all losses, damages, liabilities, claims, demands, judgments, settlements, costs and expenses (including, without limitation, reasonable attorneys’ fees actually incurred and other costs of defense) attributable to, or arising out of, (a) a breach by Argent of any of its representations, warranties, covenants or obligations hereunder (including, without limitation, those set forth in Section 12.13 below), or (b) any other breach of any of the terms of this Agreement.

 

10.4                        Notice and Assistance to Argent. If Vertical intends to claim indemnification under Section 10.3 of this Agreement, Vertical shall promptly notify Argent in writing of any action, claim or other matter in respect of which Vertical or any of

 

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its respective shareholders, directors, officers, employees and agents intend to claim such indemnification. Vertical shall permit, and shall cause its employees and agents to permit, Argent, at its discretion, to settle any such action, claim or other matter and agrees to the complete control of such defense or settlement by Argent; provided, however, that such settlement does not adversely affect Vertical’s rights hereunder or impose any obligations on Vertical in addition to those set forth herein in order for it to exercise such rights. No such action, claim or other matter shall be settled without the prior written consent of Argent and Argent shall not be responsible for any legal fees or other costs incurred other than as provided herein. At the expense of Argent, Vertical shall render all assistance reasonably necessary in defending against such claim, suit, or action. Vertical shall have the right, at its expense, to retain separate counsel to act in an advisory capacity in connection with any matter involving a claim for indemnity and Argent will cooperate with such counsel.

 

11.                               Term; Termination.

 

11.1                        Term. Subject to the provisions of this Section 11, the term of this Agreement and the marketing rights granted herein by Argent to Vertical shall be perpetual (as the word “perpetual” is qualified in Section 3.1 above) (“Term”).

 

11.2                        Termination for Cause - Argent. Without prejudice to any other rights it may have hereunder or at law or in equity, Argent may terminate this Agreement by written notice to Vertical upon a breach by Vertical of the Supply Agreement that causes the Contract Manufacturer to terminate the Supply Agreement.

 

11.3                        Termination for Cause - Either Party. Without prejudice to any other rights it may have hereunder or at law or in equity, either party may terminate this Agreement by written notice to the other party upon the occurrence of any of the following:

 

(a)                                 the other party becomes insolvent, an order for relief is entered against the other party under any bankruptcy or insolvency laws or laws of similar import;

 

(b)                                 the other party makes an assignment for the benefit of its creditors or a receiver or custodian is appointed for it or its business is placed under attachment, garnishment or other process involving a significant portion of its business; or

 

(c)                                  after thirty (30) days written notice from the terminating party without cure by the breaching party of any material breach of this Agreement, including a failure to make any payment pursuant to the provisions of Section 8 of this Agreement on a timely basis.

 

11.4                        Rights and Duties Upon Termination. Upon the termination of this Agreement, all rights granted by Argent to Vertical pursuant to Section 3.1 hereof shall revert to Argent and Argent shall have the right to receive any payments outlined in

 

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Sections 8.1, 8.3 and 8.5 that have accrued as of the date of termination (or thereafter if Vertical sells any remaining inventory of the Products after the date of termination). In addition, in exchange for and in consideration of future payment of the Trademark Royalty described in Section 11.5 below, Vertical shall immediately assign to Argent (or Argent’s designee), on a fully paid-up basis (in the sense that there are no obligations other than payment over time of such Trademark Royalty), all rights in and to any Trademark(s) for the Products. Vertical further agrees to promptly execute any documents necessary to perfect such trademark rights in Argent (or Argent’s designee). In no event shall a termination of this Agreement be deemed a waiver of Argent’s right to receive any payment or other consideration that has accrued as of the date of termination and is owed to Argent by Vertical pursuant to Section 8 above. Sections of this Agreement that relate to confidentiality, indemnification, choice of law and jurisdiction, and dispute resolution, including, without limitation, Sections 9, 10, 11.4, 11.5, 11.6, 12.1 and 12.2, or that otherwise by their nature cannot be accomplished or fulfilled prior to termination or that relate to obligations of the parties accrued prior to termination, shall survive any termination of this Agreement.

 

11.5                        Trademark Royalty. Argent shall pay Vertical a yearly royalty in the amount of [***] of its Net Sales of the Products in the Territory for the use of any Trademark(s) transferred pursuant Section 11.4 above on any of the Products (“Trademark Royalty”) and this shall be the only compensation, if applicable, that is to be paid by Argent to Vertical (or Optionee as defined in Section 11.6 below) with respect to the Products subsequent to the termination hereof. This obligation shall also apply to the Net Sales by any third party that has obtained rights from Argent to market the Products in the Territory and uses any of such Trademark(s) on any of the Products. For the avoidance of doubt, if such Trademark(s) are not used on the Products by Argent or any such third party, then no Trademark Royalty will be due Vertical hereunder.

 

11.6                        Acquisition or Merger Termination Option - Vertical. In the event that Vertical is acquired or merged into NEWCO (as that term is defined in Section 8.5 above), NEWCO (and/or Vertical if Vertical remains as a operating entity) (NEWCO and/or Vertical are hereinafter for the purposes of this Section 11.6 referred to individually or collectively as the “Optionee”, unless Vertical is specifically referred to individually) shall have the option, but not the obligation, to return all rights in and to the Products that have been granted to Vertical under Section 3.1 hereof according to the following conditions:

 

11.6.1                            NEWCO’s right to terminate under this Section 11.6 will only become operative if the prescription sales of the Products, as determined by Wolters Kluwer’s Source Pharmaceutical Monthly Retail Audit, have exceeded Three Million Dollars ($3,000,000) for the twelve (12) month period immediately preceding the first day of the month in which NEWCO elects to exercise the option described in this Section 11.6.

 

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11.6.2                            If the condition of Section 11.6.1 above is satisfied, and if Optionee elects to exercise its option to terminate this Agreement under the terms of this Section 11.6, and if Optionee confirms to Argent that the Supply Agreement for the Products has been terminated or will be terminated concurrently with the termination of this Agreement, then Argent agrees to allow Optionee to terminate this Agreement upon sixty (60) days written notice from Optionee.

 

11.6.3                            If Optionee exercises its right to terminate this Agreement under the provisions of this Section 11.6, then upon such termination hereof Argent will have reacquired all of the marketing rights to the Products that it granted to Vertical pursuant hereto, and thus Argent will be free to commercialize the Products in the Territory itself or to enter into one or more new marketing rights agreements with third parties to commercialize the Products in the Territory and Optionee shall have no further residual rights of any kind or nature in and to the Products from that point forward, except the right to receive any Trademark Royalty as may be applicable under Section 11.5 above or the payment for any inventory of unsold Products that is purchased pursuant to Section 11.6.5 below.

 

11.6.4                            If Optionee exercises its right to terminate this Agreement under the provisions of this Section 11.6, Optionee shall continue to be responsible for any product returns of Products sold by Optionee, any governmental discounts, rebates and chargebacks or other claims that may be related to the Products sold in the Territory by Optionee, including, but not limited to, Product liability claims, for example, pursuant to the indemnifications pertaining thereto as set forth in Section 10 above.

 

11.6.5                            If Optionee exercises its right to terminate this Agreement under the provisions of this Section 11.6, Argent shall have the right, in Argent’s sole discretion, but not the obligation, to purchase any amount of the inventories of unsold Products owned and held by Optionee. Any such inventory of the Products that Argent may decide to purchase from Optionee shall be sold to Argent at a price not greater than the price paid by Optionee for the Products under the Supply Agreement and shall only be shipped to Argent (or Argent’s designee) as is directed by Argent in writing.

 

11.6.6                            If Optionee exercises its right to terminate this Agreement under the provisions of this Section 11.6, Optionee agrees to transfer, sell and otherwise convey to Argent (or Argent’s designee) all rights in and to the Trademark(s) for the Products as set forth in Section 11.5 above.

 

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11.6.7                            If Optionee exercises its right to terminate this Agreement under the provisions of this Section 11.6, any payment obligation under Section 8 of this Agreement, incurred by Optionee up to, and including, the date of termination hereof, shall be promptly paid as of the date of termination. Failing that, Argent shall have the right, but not the obligation, to invalidate the termination of this Agreement under this Section 11.6. For the avoidance of doubt, Optionee will then remain liable for any royalties as set forth in Section 8 above, including, without limitation, any Minimum Annual Royalty as specified in Sections 8.3.2 and 8.3.3 above. This remedy shall be in addition to any other remedies that Argent may have at law or in equity with respect to the Optionee’s failure to comply with its obligations set forth in this Section 11.6.

 

12.                               Miscellaneous.

 

12.1                        Choice of Law; Jurisdiction. This Agreement shall be governed and interpreted, and all rights and obligations of the parties shall be determined, in accordance with the laws of the [***], without regard to its or any other jurisdiction’s conflict of laws rules. All disputes with respect to this Agreement shall be brought and heard either in the [***] state courts or the United States’ federal district court for the [***] located in [***].  The parties to this Agreement each consent to the in personam jurisdiction and venue of such courts. The parties agree that service of process upon them in any such action may be made if delivered in person, by courier service, by facsimile or by first class mail, and shall be deemed effectively given upon receipt.

 

12.2                        Dispute Resolution.

 

12.2.1                            Each party shall use commercially reasonable efforts to resolve, in good faith and as soon as practicable, any disputes arising under this Agreement. If a dispute cannot be resolved to the reasonable satisfaction of the parties within ten (10) business days after such dispute arose, either party may elect to have the dispute decided by the representative executive of each party (“Representative Executive”) acting in consultation with each other. Argent’s Representative Executive shall be [***] and Vertical’s Representative Executive shall be [***]. The parties’ Representative Executives shall use commercially reasonable efforts to resolve a dispute referred to them as soon as practicable, but in any event within thirty (30) days of the date such dispute was first referred to them.

 

12.2.2                            If such Representative Executives cannot resolve such dispute to their mutual satisfaction within thirty (30) days, or such other period of time as mutually agreed upon by such Representative Executives, then the parties may then elect to submit the dispute to mediation. A dispute submitted for mediation shall be administered by a trained mediator

 

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selected by the American Arbitration Association (“AAA”) in accordance with the Commercial Arbitration Rules and Mediation Procedures of the AAA. Such mediation shall be held in [***], at a place therein mutually agreed upon by the parties, within thirty (30) days of the date such dispute was first referred to mediation. The arbitrator may determine how the costs and expenses of the arbitration shall be allocated between the parties. Each party shall bear its own attorney’s fees.

 

12.2.3                            If a dispute cannot be resolved through mediation, then either party may elect then to submit the dispute to arbitration. A dispute submitted for arbitration shall be administered by the AAA in accordance with its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator shall be entered in any court having jurisdiction thereof. A party seeking arbitration of a dispute shall give the other party written notice of its desire to submit the dispute to arbitration. Arbitration hereunder shall be conducted by one neutral arbitrator, unknown to either of the parties, selected and appointed by the AAA as a person having experience with and knowledge of the marketing of pharmaceutical products in the Territory and the pharmaceutical industry in the Territory. Such arbitration proceedings will occur in [***], at a place therein mutually agreed upon by the parties. Prior to the commencement of hearings, the arbitrator appointed shall swear to an oath or undertaking of impartiality. The arbitrator may determine how the costs and expenses of the arbitration shall be allocated between the parties, and the prevailing party shall be entitled to an award of reasonable attorney’s fees or shared in an equitable manner if neither party’s view is verified).

 

12.2.4                            Nothing contained in this Section shall be construed as a waiver by either party of any claims or rights that it may have at law or in equity or prohibit or prevent a party from seeking relief at law or in equity (including, without limitation, injunctive relief). Notwithstanding the foregoing, no proceeding regarding a dispute may be brought in a court of law without first exhausting the Representative Executive dispute resolution procedure set forth in Section 12.2.1, the mediation procedure set forth in Section 12.2.2, and the arbitration procedure set forth in Section 12.2.3, in that order.

 

12.3                        Notices. All notices, approvals or other communications required hereunder shall be in writing and shall be deemed to have been duly given if delivered personally to such party or sent to such party by facsimile transmission (confirmed in writing by other permitted means), air courier or by certified mail, postage prepaid, to the following addresses:

 

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To Vertical:                                                                                Vertical Pharmaceuticals, Inc.
 2400 Main Street Extension, Suite 6
 Sayreville, NJ 08872
 Attn: President
 E-mail: 
 Fax: 

 

with a copy to:                                                               Andrew Bayne, Esq.
 116 Village Boulevard, Suite 200
 P.O. Box 3036
 Princeton, New Jersey 08540
 E-mail: 
 Fax: 

 

To Argent:                                                                                      Argent Development Group, LLC
 P.O. Box 4531
 Mountain View, CA 94040
 Attn: President
 E-mail: 
 Fax: 

 

with a copy to:                                                               Joseph I. Hirsch, Esq.
 4149 Georgia Avenue
 Palo Alto, California 94306-3813
 E-mail: 
 Fax: 

 

or to such other address as the addressee may have specified in notice duly given to the sender as provided herein. Such notice, approval or other communications will be deemed to have been given as of the date so delivered or received as shown by the written records of the sending party.

 

12.4                        Severability. If any provision of this Agreement shall be found in any jurisdiction to be in violation of public policy or illegal or unenforceable in law or equity, such finding shall in no event invalidate any other provision of this Agreement in that jurisdiction, and this Agreement shall be deemed amended to the minimum extent required to comply with the law of such jurisdiction.

 

12.5                        Entire Agreement. This Agreement states the entire agreement between the parties hereto about the transactions contemplated hereby and supersedes any and all prior agreements, commitments, negotiations, representations, statements, understandings and writings, and may not be amended or modified except by written instrument duly executed and delivered by both of the parties hereto.

 

12.6                        No Waiver. The failure of any party hereto to enforce at any time, or for any period of time, any provision of this Agreement shall not be construed as a waiver

 

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of such provision or of the right of such party thereafter to enforce each and every provision.

 

12.7                        Assignment. Binding Effect. Vertical may not assign its rights in and to this Agreement to any third party without the prior written consent of Argent, which may be granted or denied in Argent’s sole discretion. Argent may not assign its rights in and to this Agreement to any third party prior to the Approval of the ANDA pertaining to the Products without the prior written consent of Vertical, which may be granted or denied in Vertical’s sole discretion. Following such Approval, Argent may assign its rights in and to this Agreement to any third party, subject to providing thirty (30) days prior written notice to Vertical. Any assignee or transferee of this Agreement and/or the rights or obligations hereunder shall expressly assume in writing all obligations of the assignor/transferor pursuant and/or related to this Agreement.

 

12.8                        Independent Contractor. Argent and Vertical agree that they are, and shall remain at all times, independent contractors. Neither party shall be the legal agent of the other party for any purpose whatsoever and therefore has no right or authority to make or underwrite any promise, warranty or representation, to execute any contract or otherwise to assume any obligation or responsibility in the name of or in behalf of the other party, except to the extent specifically authorized in writing by such other party. Neither of the parties hereto shall be bound by or liable to any third persons for any act or for any obligation or debt incurred by the other toward such third party, except to the extent specifically agreed to in writing by the party so to be bound.

 

12.9                        Headings. All section headings contained in this Agreement are for convenience of reference only, do not form a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement.

 

12.10                 Counterparts. This Agreement may be executed in two (2) counterparts and either party hereto may execute any such counterpart, each of which when executed and delivered shall be deemed to be an original and to which both counterparts, when fully executed by both parties, taken together shall constitute but one and the same instrument. It shall not be necessary in making proof of this Agreement or either counterpart hereof to account for the other counterpart.

 

12.11                 Force Majeure. No party shall be deemed to be in default for failure or delay in performance to the extent such causes for default were reasonably unforeseeable or, if foreseeable, reasonably irremediable in spite of diligent efforts to effect a reasonable remedy, and which are caused by act or omission of any governmental authority or of the other party, compliance with new governmental regulations, insurrection, terrorism, riot, embargo, delays or shortages in transportation or inability to obtain necessary materials, and Acts of God or Nature.

 

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12.12                 Insurance. Vertical shall at all times maintain insurance, including but not limited to product liability insurance, in commercially reasonable amounts for its respective obligations and potential liabilities hereunder, provided however that Vertical shall at all times maintain a minimum level of insurance of not less than [***] if an occurrence policy or for the Term hereof and any applicable statute of limitations if a claims-made policy. Vertical shall, at the request of Argent, provide such evidence of such insurance as requested, including a certificate of insurance.

 

12.13                 Mutual Representations and Warranties by Each Party. Each party hereby makes the following representations and warranties:

 

12.13.1                     that it is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has full authority and power to enter into this Agreement and to carry out the terms and conditions hereof;

 

12.13.2                     that it has taken all actions necessary to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder and is not obligated or required to undertake any further actions to enter into this Agreement;

 

12.13.3                     that this Agreement has been duly executed by such party and constitutes a valid and legally binding obligation of such party enforceable in accordance with the terms and conditions thereof;

 

12.13.4                     that it has not entered into any agreement, or made any commitment, or taken any action of failed to take any action that would contravene any provision of this Agreement; and

 

12.13.5                     that the execution and delivery of this Agreement, and the performance by such party of its obligations hereunder does not conflict with the rights of any third party or breach any obligation owed to any third party.

 

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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered to be effective as of the Effective Date.

 

	
 
    	
ARGENT   DEVELOPMENT GROUP, LLC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Kenneth R. Greathouse
    
	
 
    	
 
    	
Kenneth   R. Greathouse
    
	
 
    	
 
    	
President
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
VERTICAL   PHARMACEUTICALS, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   David Purdy
    
	
 
    	
 
    	
David   Purdy
    
	
 
    	
 
    	
Vice   President
    

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

Exhibit A

 

to the Argent-Vertical Tablets Marketing Rights Agreement

 

This Exhibit A sets forth the allowable deductions from Gross Sales used to arrive at Net Sales, in a charted format, as provided for in Section 1.10 and Section 1.12 of this Agreement. This Exhibit A is intended to more fully clarify the application of the deductions listed in Section 1.12 of this Agreement. Any conflict of interpretation between this Exhibit A and Section 1.10 and/or Section 1.12 of this Agreement shall be controlled by the terms and conditions of Section 1.10 and/or Section 1.12 of this Agreement.

 

	
Gross Sales
    	
 
    	
 
    	
 
    	
$
    	
X,XXX,XXX
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
less:
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Freight/Insurance
    	
 
    	
$
    	
xx,xxx
    	
 
    	
 
    	
 
    
	
Discounts/Rebates
    	
 
    	
$
    	
xx,xxx
    	
 
    	
 
    	
 
    
	
Wholesaler Service Fees
    	
 
    	
$
    	
xx,xxx
    	
 
    	
 
    	
 
    
	
Returned Product
    	
 
    	
$
    	
xx,xxx
    	
 
    	
 
    	
 
    
	
Transportation/Sales Taxes
    	
 
    	
$
    	
xx,xxx
    	
 
    	
 
    	
 
    
	
Hospital Chargebacks
    	
 
    	
$
    	
xx,xxx
    	
 
    	
 
    	
 
    
	
GPO/HMO Rebates
    	
 
    	
$
    	
xx,xxx
    	
 
    	
 
    	
 
    
	
Medicaid Rebates
    	
 
    	
$
    	
xx,xxx
    	
 
    	
 
    	
 
    
	
Total Deductions
    	
 
    	
$
    	
xxx,xxx
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Net Sales
    	
 
    	
 
    	
 
    	
$
    	
X,XXX,XXXExhibit 10.14

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

Master Manufacturing Services Agreement

 

August 21, 2014

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

TABLE OF CONTENTS

 

	
ARTICLE 1   STRUCTURE OF AGREEMENT AND INTERPRETATION
    	
5
    
	
1.1.
    	
Master Agreement
    	
5
    
	
1.2.
    	
Product Agreements
    	
5
    
	
1.3.
    	
Definitions
    	
6
    
	
1.4.
    	
Currency
    	
12
    
	
1.5.
    	
Sections and Headings
    	
12
    
	
1.6.
    	
Singular Terms
    	
12
    
	
1.7.
    	
Appendix 1, Schedules   and Exhibits
    	
12
    
	
ARTICLE 2   PATHEON’S MANUFACTURING SERVICES
    	
13
    
	
2.1.
    	
Manufacturing Services
    	
13
    
	
2.2.
    	
Active Material Yield
    	
15
    
	
ARTICLE 3   CLIENT’S OBLIGATIONS
    	
17
    
	
3.1.
    	
Payment
    	
17
    
	
3.2.
    	
Active Materials and   Qualification of Additional Sources of Supply
    	
17
    
	
ARTICLE 4   CONVERSION FEES AND COMPONENT COSTS
    	
18
    
	
4.1.
    	
First Year Pricing
    	
18
    
	
4.2.
    	
Price Adjustments -   Subsequent Years’ Pricing
    	
18
    
	
4.3.
    	
Price Adjustments —   Current Year Pricing
    	
20
    
	
4.4.
    	
Adjustments Due to   Technical Changes or Regulatory Authority Requirements
    	
21
    
	
4.5.
    	
Multi-Country Packaging   Requirements
    	
22
    
	
ARTICLE 5   ORDERS. SHIPMENT. INVOICING. PAYMENT
    	
22
    
	
5.1.
    	
Orders and Forecasts
    	
22
    
	
5.2.
    	
Reliance by Patheon
    	
25
    
	
5.3.
    	
Minimum Orders
    	
26
    
	
5.4.
    	
Delivery and Shipping
    	
26
    
	
5.5.
    	
Invoices and Payment
    	
26
    
	
ARTICLE 6   PRODUCT CLAIMS AND RECALLS
    	
27
    
	
6.1.
    	
Product Claims
    	
27
    
	
6.2.
    	
Product Recalls and   Returns
    	
28
    
	
6.3.
    	
Patheon’s   Responsibility for Defective and Recalled Products
    	
28
    
	
6.4.
    	
Disposition of Defective   or Recalled Products
    	
29
    

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

	
6.5.
    	
Healthcare Provider or   Patient Questions and Complaints
    	
30
    
	
6.6.
    	
Sole Remedy
    	
30
    
	
ARTICLE 7   CO-OPERATION
    	
30
    
	
7.1.
    	
Quarterly Review
    	
30
    
	
7.2.
    	
Governmental Agencies
    	
30
    
	
7.3.
    	
Records and Accounting   by Patheon
    	
31
    
	
7.4.
    	
Inspection
    	
31
    
	
7.5.
    	
Access
    	
31
    
	
7.6.
    	
Notification of   Regulatory Inspections
    	
31
    
	
7.7.
    	
Reports
    	
31
    
	
7.8.
    	
Regulatory Filings
    	
32
    
	
7.9.
    	
Inspection by   Regulatory Authorities
    	
33
    
	
ARTICLE 8   TERM AND TERMINATION
    	
33
    
	
8.1.
    	
Initial Term
    	
33
    
	
8.2.
    	
Termination for Cause
    	
33
    
	
8.3.
    	
Product Discontinuation
    	
34
    
	
8.4.
    	
Obligations on   Termination
    	
34
    
	
ARTICLE 9   REPRESENTATIONS. WARRANTIES AND COVENANTS
    	
35
    
	
9.1.
    	
Authority
    	
35
    
	
9.2.
    	
Client Warranties
    	
36
    
	
9.3.
    	
Patheon Warranties
    	
37
    
	
9.4.
    	
Debarred Persons
    	
37
    
	
9.5.
    	
Permits
    	
37
    
	
9.6.
    	
No Warranty
    	
37
    
	
ARTICLE 10   REMEDIES AND INDEMNITIES
    	
37
    
	
10.1.
    	
Consequential Damages
    	
37
    
	
10.2.
    	
Limitation of Liability
    	
38
    
	
10.3.
    	
Patheon Indemnity
    	
38
    
	
10.4.
    	
Client Indemnity
    	
38
    
	
10.5.
    	
Reasonable Allocation   of Risk
    	
39
    
	
ARTICLE 11   CONFIDENTIALITY
    	
39
    
	
11.1.
    	
Confidentiality
    	
39
    

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

	
ARTICLE 12   DISPUTE RESOLUTION
    	
39
    
	
12.1.
    	
Commercial Disputes
    	
39
    
	
12.2.
    	
Technical Dispute   Resolution
    	
40
    
	
ARTICLE 13   MISCELLANEOUS
    	
40
    
	
13.1.
    	
Inventions
    	
40
    
	
13.2.
    	
Intellectual Property
    	
41
    
	
13.3.
    	
Insurance
    	
41
    
	
13.4.
    	
Independent Contractors
    	
41
    
	
13.5.
    	
No Waiver
    	
42
    
	
13.6.
    	
Assignment
    	
42
    
	
13.7.
    	
Force Majeure
    	
42
    
	
13.8.
    	
Additional Product
    	
43
    
	
13.9.
    	
Notices
    	
43
    
	
13.10.
    	
Severability
    	
44
    
	
13.11.
    	
Entire Agreement
    	
44
    
	
13.12.
    	
Other Terms
    	
44
    
	
13.13.
    	
No Third Party Benefit   or Right
    	
44
    
	
13.14.
    	
Execution in   Counterparts
    	
45
    
	
13.15.
    	
Use of Client Name
    	
45
    
	
13.16.
    	
Taxes
    	
45
    
	
13.17.
    	
Governing Law
    	
46
    

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

MASTER MANUFACTURING SERVICES AGREEMENT

 

THIS MASTER MANUFACTURING SERVICES AGREEMENT (the “Agreement”) is made as of August 21, 2014 (the “Effective Date”)

 

BETWEEN:

 

PATHEON PHARMACEUTICALS INC.,

a corporation existing under the laws of the State of Delaware

 

(“Patheon”),

 

– and –

 

OSMOTICA PHARMACEUTICAL CORP.,

a corporation existing under the laws of the State of Delaware

 

(“Client”).

 

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

 

ARTICLE 1

 

STRUCTURE OF AGREEMENT AND INTERPRETATION

 

1.1.                                                                            Master Agreement.

 

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

 

1.2.                                                                            Product Agreements.

 

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

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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

 

1.3.                                                                            Definitions.

 

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

 

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

 

“Active Materials Credit Value” means the value of the Active Materials for certain purposes of this Agreement, as set forth in a Product Agreement on Schedule D;

 

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

 

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

 

“Affiliate” means:

 

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

 

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

 

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

 

For this definition, “control” means the ownership of shares carrying at least a majority of the votes for the election of the directors of a corporation;

 

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

 

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

 

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

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

“Applicable Laws” means (i) for Patheon, the Laws of the State of Ohio [or local jurisdiction for Patheon Affiliate], being the jurisdiction where the Manufacturing Site is located; and (ii) for Client and the Products, the Laws of all jurisdictions where the Products are manufactured, distributed, and marketed as these are agreed and understood by the parties in this Agreement;

 

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

 

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

 

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

 

“Business Day” means a day other than a Saturday, Sunday or a day that is a statutory holiday in the State of Ohio;

 

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

 

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

 

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

 

(b)                                 EC Directive 2003/94/EC; and

 

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

 

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

 

“Client Intellectual Property” means Intellectual Property generated or derived by Client before entering into this Agreement, or by Patheon while performing any Manufacturing Services or otherwise generated or derived by Patheon in its business which Intellectual Property is specific to, or dependent upon, Client’s Active Material or Product or the manufacture of the Product;

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

“Client Property” has the meaning specified in Section 8.4(e);

 

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

 

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

 

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

 

“Confidentiality Agreement” means the agreement about the non-disclosure of confidential information between Patheon and Client dated September 16, 2013;

 

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

 

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

 

“Deficiency Notice” has the meaning specified in Section 6.1(a);

 

“Delivery Date” means the date scheduled for shipment of Product under a Firm Order as set forth in Section 5.1(d);

 

“EMA” means the European Medicines Agency;

 

“FDA” means the United States Food and Drug Administration;

 

“Firm Orders” have the meaning specified in Section 5.1(b);

 

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

 

“GST” has the meaning specified in Section 13.16{a)(ii);

 

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

 

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

 

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

 

“Initial Set Exchange Rate” means as of the Effective Date of a Product Agreement, the initial exchange rate set forth in the Product Agreement to convert one unit of the billing currency into the Patheon Manufacturing Site local currency, calculated as the daily average interbank exchange rate for conversion of one unit

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

of the billing currency into the Patheon Manufacturing Site local currency during the 90 day period immediately preceding the Effective Date as published by OANDA.com “The Currency Site” under the heading “FxHistory: historical currency exchange rates” at www.QANDA.com/convert/fxhistorv;

 

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

 

“Intellectual Property” includes, without limitation, rights in patents, patent applications, formulae, trademarks, trademark applications, trade-names, Inventions, copyrights, industrial designs, and trade secrets;

 

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

 

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

 

“Late Delivery” has the meaning specified in Section 5.1(e);

 

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

 

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

 

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

 

“Manufacturing Site” means the facility owned and operated by Patheon where the Manufacturing Services will be performed as identified in a Product Agreement;

 

“Marketing Partner” means Upstate Pharma, LLC or such other party that the Client may designate in writing to Patheon from time to time.

 

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

 

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

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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

 

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

 

“Patheon Competitor” means a business that derives greater than 50% of its revenues from performing contract pharmaceutical development or commercial manufacturing services;

 

“Patheon intellectual Property” means intellectual Property generated or derived by Patheon before performing any Manufacturing Services, developed by Patheon while performing the Manufacturing Services, or otherwise generated or derived by Patheon in its business which Intellectual Property is not specific to, or dependent upon, Client’s Active Material or Product or the manufacture of the Product including, without limitation, Inventions and Intellectual Property which may apply to manufacturing processes or the formulation or development of drug products, drug product dosage forms or drug delivery systems unrelated to the specific requirements of the Product(s);

 

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

 

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

 

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

 

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

 

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

 

“Quality Agreement” means the agreement (the general form of which is set forth in Exhibit B) between the parties entering a Product Agreement that sets out the quality assurance standards for the Manufacturing Services to be performed by Patheon for Client;

 

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

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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

 

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

 

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

 

“Set Exchange Rate” means the exchange rate to convert one unit of the billing currency into the Patheon Manufacturing Site local currency for each Year, calculated as the average daily interbank exchange rate for conversion of one unit of the billing currency into the Patheon Manufacturing Site local currency during the full year period (October 1st [preceding year] to September 30th) .as published by OANDA.com “The Currency Site” under the heading “FxHistory: historical currency exchange rates” at www.OANDA.com/convert/fxhistory;

 

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

 

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

 

(a)                                 specifications for Active Materials and Components;

 

(b)                                 manufacturing specifications, directions, and processes;

 

(c)                                  storage requirements;

 

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

 

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

 

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

 

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

 

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

 

“Tax” or “Taxes” have the meaning specified in Section 13.6(a);

 

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

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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

 

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

 

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

 

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

 

‘Yearly Forecast Volume” or “YFV” has the meaning specified in Section 4.2.1; and “Zero Forecast Period” has the meaning specified in Section 5.1(f).

 

1.4.                                                                            Currency.

 

Unless otherwise agreed in a Product Agreement, all monetary amounts expressed in this Agreement are in United States Dollars (USD).

 

1.5.                                                                            Sections and Headings.

 

The division of this Agreement into Articles, Sections, Subsections, an Appendix, Schedules and Exhibits and the insertion of headings are for convenience of reference only and will not affect the interpretation of this Agreement. Unless otherwise indicated, any reference in this Agreement to a Section, Appendix, Schedule or Exhibit refers to the specified Section, Appendix, Schedule or Exhibit to this Agreement. In this Agreement, the terms “this Agreement”, “hereof”, “herein”, “hereunder” and similar expressions refer to this Agreement as a whole and not to any particular part, Section, Appendix, Schedule or Exhibit of this Agreement.

 

1.6.                                                                            Singular Terms.

 

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

 

1.7.                                                                            Appendix 1, Schedules and Exhibits.

 

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

 

	
Appendix 1
    	
-
    	
Form of Product Agreement (including Schedules   A to D)
    
	
 
    	
 
    	
 
    
	
Exhibit A
    	
-
    	
Technical Dispute Resolution
    
	
 
    	
 
    	
 
    
	
Exhibit B
    	
-
    	
Commercial Quality Agreement
    

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

	
Exhibit C
    	
-
    	
Quarterly Active Materials Inventory Report
    
	
 
    	
 
    	
 
    
	
Exhibit D
    	
-
    	
Report of Annual Active Materials inventory   Reconciliation and Calculation of Actual Annual Yield
    
	
 
    	
 
    	
 
    
	
Exhibit E
    	
-
    	
Example of Price Adjustment Due to Currency   Fluctuation
    

 

ARTICLE 2

 

PATHEON’S MANUFACTURING SERVICES

 

2.1.                                                                            Manufacturing Services.

 

Patheon will perform the Manufacturing Services for the Territory for the fees specified in a Product Agreement in Schedules B and C to manufacture Products for Client. Schedule B to a Product Agreement sets forth a list of cost items that are included or not included in the Price for Products; all cost items that are not included in the Price are subject to additional fees to be paid by the Client. Patheon may amend the fees set out in Schedules B and C to a Product Agreement as set forth in Article 4. Patheon may change the Manufacturing Site for the Products only with the prior written consent of Client, this consent not to be unreasonably withheld. Patheon’s percentage of manufacturing exclusivity for the Product will be set forth in the Product Agreement. Patheon will be entitled to any applicable manufacturing tax credits that arise from performing the Manufacturing Services under this Agreement. In performing the Manufacturing Services, Patheon and Client agree that:

 

(a)                                 Conversion of Active Materials and Components. Patheon will convert Active Materials and Components into Products in accordance with the Specifications, cGMPs and Applicable Laws and as otherwise agreed by the parties.

 

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

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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

 

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

 

(e)                                  Packaging and Artwork. Patheon will package the Products as set out in the Specifications. Client will be responsible for the cost of artwork development. Patheon will determine and imprint the batch numbers and expiration dates for each Product shipped. The batch numbers and expiration dates will be affixed on the Products and on the shipping carton of each Product as outlined in the Specifications and as required by cGMPs. Client may, in its sole discretion, make changes to labels, product inserts, and other packaging for the Products. Those changes will be submitted by Client to ail -applicable Regulatory Authorities and other third parties responsible for the approval of the Products. Client will be responsible for the cost of labelling obsolescence when changes occur, as set forth in Section 4.4. Patheon’s name will not appear on the label or anywhere else on the Products unless: (i) required by any Laws; or (ii) Patheon consents in writing to the use of its name. At least 120 days prior to the Delivery Date of Product for which new or modified artwork is required, Client will provide at no cost to Patheon, final camera ready artwork for ail packaging Components to be used in the manufacture of the Product that meet the Specifications. For the avoidance of doubt, the parties acknowledge and agree that Client will be responsible for complying with any and all regulatory requirements for the labeling of the Product.

 

(f)                                   Active Materials and Client-Supplied Components. At least 30 days before the scheduled production date, Client will deliver the Active Materials and any Client-Supplied Components to the Manufacturing Site DDP (incoterms 2010), at no cost to Patheon, in sufficient quantity to enable Patheon to manufacture the desired quantities of Product and to ship Product on the Delivery Date, if the Active Materials and/or Client-Supplied Components are not received 30 days before the scheduled production date, Patheon may delay the shipment of Product by the same number of days as the delay in receipt of the Active Materials and/or Client-

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

Supplied Components. But if Patheon is unable to manufacture Product to meet this new shipment date due to prior third party production commitments, Patheon may delay the shipment until a later date as agreed to by the parties. All shipments of Active Material will be accompanied by certificate(s) of analysis from the Active Material manufacturer confirming the identity and purity of the Active Materials and its compliance with the Active Material specifications. For Active Materials or Client-Supplied Components which may be subject to import or export, Client agrees that its vendors and carriers will comply with applicable requirements of the U.S. Customs and Border Protection Service and the Customs Trade Partnership Against Terrorism (“C- TPAT”).

 

(g)                                  Bill Back items. Subject to Client’s prior written approval for items over [***], Bill Back Items will be charged to Client at Patheon’s cost plus a [***] handling fee for items that cost [***] or less or a [***] handling fee for items that cost more than [***].

 

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

 

2.2.                                                                            Active Material Yield.

 

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

 

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

 

Quantity Dispensed:       The total quantity of Active Materials dispensed at the Manufacturing Site during the applicable period. The Quantity Dispensed is calculated by adding the Quantity Received to the inventory of Active Materials that complies with the Specifications held at the beginning of the applicable period, less the inventory of Active Materials that complies with the Specifications held at the end of the period. The Quantity Dispensed will only include Active Materials received and dispensed in commercial manufacturing of Products and, for certainty, will not Include any (i) Active Materials that must be retained by Patheon as samples, (ii) Active Materials contained in Product that must be retained as samples, (iii) Active Materials used in testing (if applicable), and (iv) Active

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

Materials received or dispensed in technical transfer activities or development activities during the applicable period, including without limitation, any regulatory, stability, validation or test batches manufactured during the applicable period.

 

Quantity Converted:      The total amount of Active Materials contained in the Products manufactured with the Quantity Dispensed (including any additional Products produced in accordance with Section 6.3(a) or 6.3(b)), delivered by Patheon, and not rejected, recalled or returned in accordance with Section 6.1 or 6.2 because of Patheon’s failure to perform the Manufacturing Services in accordance with Specifications, cGMPs, and Applicable Laws.

 

Within 60 days after the end of each Year, Patheon will prepare an annual reconciliation of Active Materials on the reconciliation report form set forth in Exhibit D including the calculation of the “Actual Annual Yield” or “AAY” for the Product at the Manufacturing Site during the Year. AAY is the percentage of the Quantity Dispensed that was converted to Products and is calculated as follows:

 

Quantity Converted during the Year x                                    100%

Quantity Dispensed during the Year

 

After Patheon has produced a minimum of 15 successful commercial production batches of Product and has produced commercial production batches for at least six months at the Manufacturing Site (collectively, the “Target Yield Determination Batches”), the parties will agree on the target yield for the Product at the Manufacturing Site (each, a “Target Yield”). The Target Yield will be revised annually to reflect the actual manufacturing experience as agreed to by the parties.

 

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

 

Shortfall = [(Target Yield - [***]) - AAY] * Active Materials Credit Value * Quantity Dispensed

 

(c)                                  Credit for Shortfall. If there is a Shortfall for a Product in a Year, then Patheon will credit Client’s account for the amount of the Shortfall not later than 45 days after the end of the Year.

 

Each credit under this Section 2.2(c) will be summarized on the reconciliation report form set forth in Exhibit D. Upon expiration or termination of a Product Agreement, any remaining credit owing under this Section 2.2 will be paid to Client. The Annual Shortfall, if any, will be disclosed by Patheon on the reconciliation report form.

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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

 

(e)                                  No Material Breach. It will not be a material breach of this Agreement by Patheon under Section 8.2(a) if the Actual Annual Yield is less than the Target Yield.

 

ARTICLE 3

 

CLIENT’S OBLIGATIONS

 

3.1.                                                                            Payment.

 

Client will pay Patheon for performing the Manufacturing Services according to the Prices specified in Schedules B and C in a Product Agreement. These Prices may be subject to adjustment under other parts of this Agreement. Client will also pay Patheon for any Bill Back Items. Upon Written notice from the Client to Patheon, any payments to be made by the Client to Patheon under this Agreement may be made by the Marketing Partner on behalf of the Client. But the Client will remain responsible to Patheon for payment if the Marketing Partner fails to pay Patheon.

 

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

 

(a)                                 Client will at its sole cost and expense deliver the Active Materials to Patheon in accordance with Section 2.1(f). If applicable, Patheon and the Client will reasonably cooperate to permit the import of the Active Materials to the Manufacturing Site. Client’s obligation will include obtaining the proper release of the Active Materials from the applicable Customs Agency and Regulatory Authority. Client or Client’s designated broker will be the “Importer of Record” for Active Materials imported to the Manufacturing Site. The Active Materials will be held by Patheon on behalf of Client as set forth in this Agreement. Title to the Active Materials will at all times remain the property of Client. Any Active Materials received by Patheon will only be used by Patheon to perform the Manufacturing Services. Client will be responsible for paying for all rejected Product that arises from defects in the Active Materials which could not be reasonably discoverable by Patheon using the test methods set forth in the Specifications.

 

(b)                                 If Client asks Patheon to qualify an additional source for the Active Material or any Component, Patheon will evaluate the Active Material or Component to be supplied by the additional source to determine if it is suitable for use in the Product. The parties will agree on the scope of work to be performed by Patheon at Client’s cost. For an Active Material, this work will be defined and mutually agreed upon based on applicable Comparability Protocols, FDA Guidance Documents, and commitments made to a Regulatory Agency. Section 6.1(d) will apply to all Product

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

manufactured using the newly approved Active Material or Component because of the limited material characterization that is performed on additional sources of supply.

 

(c)                                  Patheon will advise Client within three days of becoming aware of potential supply problems, including delays and/or delivery of non-conforming Active Material or Components from a Client designated additional source; and (ii) Patheon and Client will cooperate to reduce or eliminate any supply problems from these additional sources of supply. Client will be obligated to certify a Client designated source of supply on an annual basis at its expense and will provide Patheon with copies of these annual certifications. If Patheon is required to certify a Client designated additional sources of supply, it will do so at Client’s expense.

 

ARTICLE 4

 

CONVERSION FEES AND COMPONENT COSTS

 

4.1.                                                                            First Year Pricing.

 

The Price for the first Year will be listed in Schedules B and C in a Product Agreement and will be subject to the adjustments set forth in Sections 4.2 and 4.3, The Price may also be increased or decreased by Patheon at any time upon written notice to Client if the underlying manufacturing, packaging or testing assumptions set forth in Schedule B of the Product Agreement change that result in an increase or decrease in the cost of performing the Manufacturing Services. The parties will negotiate in good faith to conclude agreement on the Price which fairly reflects the increased or decreased costs.

 

4.2.                                                                            Price Adjustments - Subsequent Years’ Pricing.

 

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

 

(a)                                 Manufacturing and Stability Testing Costs. For Products manufactured in the United States or Puerto Rico, Patheon may adjust the conversion component of the Price and the annual stability testing costs for inflation, based upon the preliminary number for any increase in the Producer Price Index pcu325412325412 for Pharmaceutical Preparation Manufacturing (“PPI”) published by the United States Department of Labor, Bureau of Labor Statistics in August of the preceding Year compared to the final number for the same month of the Year prior to that, unless the parties otherwise agree in writing. On or before November 30 of each Year, Patheon will give Client a statement setting forth the calculation for the inflation adjustment to be applied in calculating the Price for the next Year. For Products manufactured outside the United States or Puerto Rico, Patheon may similarly adjust the Price for inflation using an inflation index to be agreed by the parties in a Product Agreement.

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

(b)                                 Component Costs. If Patheon incurs an increase in Component costs during the Year, it may increase the Price for the next Year to pass through the additional Component costs at Patheon’s actual cost plus a [***] handling fee. If Patheon obtains a decrease in Component costs during the Year, it will decrease the Price for the next Year to pass through [***] of the cost savings to the Client. On or before November 30 of each Year, Patheon will give Client information about the increase or decrease in Component costs which will be applied to the calculation of the Price for the next Year to reasonably demonstrate that the Price increase or decrease is justified. But Patheon will not be required to give information to Client that is subject to obligations of confidentiality between Patheon and its suppliers.

 

(c)                                  Pricing Basis. Client acknowledges that the Price in any Year is quoted based upon the Minimum Order Quantity and the Annual Volume specified in Schedule B to a Product Agreement. The Price is subject to change if the specified Minimum Order Quantity changes or if the Annual Volume is not ordered in a Year. For greater certainty, if Patheon and Client agree that the Minimum Order Quantity will be reduced or the Annual Volume in the lowest tier will not be ordered in a Year whether as a result of a decrease in estimated Annual Volume or otherwise and, as a result of the reduction, Patheon demonstrates to Client that its costs to perform the Manufacturing Services or to acquire the Components for the Product will increase on a per unit basis {including the amount of the increase), then Patheon may increase the Price by an amount sufficient to absorb the documented increased costs. On or before November 30 of each Year, Patheon will give Client a statement setting forth the information to be applied in calculating those cost increases for the next Year. But Patheon will not be required to give information to Client that is subject to obligations of confidentiality between Patheon and its suppliers.

 

(d)                                 Adjustments Due to Currency Fluctuations. If the parties agree in a Product Agreement to invoice in a currency other than the local currency for the Manufacturing Site, Patheon will adjust the Price to reflect currency fluctuations. The adjustment will be calculated after all other annual Price adjustments under this Section 4.2 have been made. The adjustment will proportionately reflect the increase or decrease, if any, in the Set Exchange Rate compared to the Set Exchange Rate established for the prior Year or the initial Set Exchange Rate, as the case may be. An example of the calculation of the price adjustment (for a Canadian Manufacturing Site invoiced in USD) is set forth in Exhibit E.

 

(e)                                  Tier Pricing (if applicable). The pricing in Schedule B of a Product Agreement is set forth in Annual Volume tiers based upon the Client’s volume forecasts under Section 5.1. The Client will be invoiced during the Year for the unit price set forth in the Annual Volume tier based on the 18 month forecast provided in September of the previous Year. Within 30 days of the end of each Year or of the termination of the Agreement, Patheon will send Client a reconciliation of the actual volume of Product ordered by the Client during the Year with the pricing tiers. If Client has

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

overpaid during the Year, Patheon will issue a credit to the Client for the amount of the overpayment within 45 days of the end of the Year or will issue payment to the Client for the overpayment within 45 days of the termination of the Agreement. If Client has underpaid during the Year, Patheon will issue an invoice to the Client under Section 5.6 for the amount of the underpayment within 45 days of the end of the Year or termination of the Agreement. If Client disagrees with the reconciliation, the parties will work in good faith to resolve the disagreement amicably. If the parties are unable to resolve the disagreement within 30 days, the matter will be handled under Section 12.1.

 

(f)                                          For all Price adjustments under this Section 4.2, Patheon will deliver to Client on or before November 30 of each Year a revised Schedule B to the Product Agreement to be effective for Product delivered on or after the first day of the next Year. If in any Year Patheon would have been entitled to increase the Price based on any of the provisions of this Section 4.2 but Patheon did not exercise its right to do so, then at the expiry of any subsequent Year, Patheon will be entitled to make cumulative adjustments as set out in Section 4,2 based on changes during the preceding Years, provided these changes are properly documented within 60 days of the end of the current Year. These cumulative adjustments will apply to Pricing going forward and will not be applied retroactively to past Years.

 

4.2.1                     Price Adjustment due to Volume Changes from Yearly Forecast Volumes for Sterile Products.

 

On the execution of a Product Agreement, Client will give to Patheon a forecast of the volume of Product required for the first two Years of the Product Agreement (the “Yearly Forecast Volume” or “YFV”) that will become part of the Product Agreement. If at the end of the first Year the aggregate actual volume of Product ordered by Client and invoiced by Patheon under Section 5.5 (“Actual Yearly Volume” or “AYV”) during the Year is less than the YFV as set out in the Product Agreement, then Client will pay Patheon for its non-absorbed fixed manufacturing costs incurred during the Year in an amount to be determined as follows:

 

Amount due to Patheon = [(YFV – AYV)] [***] * conversion Price for the Product.

 

On or before June 10 of each Year, the parties will agree on the YFV for the next two Years of the Product Agreement on a rolling forward basis. The forecast of the volume of Product for the second Year may not vary by more than [***] from the original YFV for the second Year. Once agreed, the YFV for the next Year will become binding on the parties and any amount due to Patheon will be determined as set forth above.

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

4.3.                                                                            Price Adjustments — Current Year Pricing.

 

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

 

Extraordinary Increases in Component Costs, if, at any time, market conditions result in Patheon’s cost of Components being materially greater than normal forecasted increases, then Patheon will be entitled to an adjustment to the Price for any affected Product to compensate it for the increased Component costs. Changes materially greater than normal forecasted increases will have occurred if: (i) the cost of a Component increases by [***] of the cost for that Component upon which the most recent fee quote was based; or (ii) the aggregate cost for all Components required to manufacture a Product increases by [***] of the total Component costs for the Product upon which the most recent fee quote was based, if Component costs have been previously adjusted to reflect an increase in the cost of one or more Components, the adjustments set out in (i) and (ii) above will operate based on the last cost adjustment for the Components.

 

For a Price adjustment under this Section 4.3, Patheon will deliver to Client a revised Schedule B to the Product Agreement and budgetary pricing information, adjusted Component costs or other documents reasonably sufficient to demonstrate that a Price adjustment is justified. Patheon will have no obligation to deliver any supporting documents that are subject to obligations of confidentiality between Patheon and its suppliers. The revised Price will be effective for any Product delivered on or after the first day of the month following Client’s receipt of the revised Schedule B to the Product Agreement. Notwithstanding Section 4.2(b), Patheon will pass through [***] of the cost savings to Client for any decrease in the cost of Components that were increased under this Section 4.3.

 

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

 

Amendments to the Specifications or the Quality Agreement requested by Client will only be implemented following a technical and cost review that Patheon will perform at Client’s cost and are subject to Client and Patheon reaching agreement on Price changes required because of the amendment. Amendments to the Specifications, the Quality Agreement, or the Manufacturing Site requested by Patheon will only be implemented following the written approval of Client, the approval not to be unreasonably withheld. If Client accepts a proposed Price change, the proposed change in the Specifications and the associated scope of work will be implemented at Client’s cost, and the Price change will become effective, only for those orders of Products that are manufactured under the revised Specifications. In addition, Client agrees to purchase, at [***] all Inventory used under the “old” Specifications and purchased or maintained by Patheon in order to fill Firm Orders or under Section 5.2, if the Inventory can no longer be used under the revised Specifications. Open purchase orders for Components no longer required under any revised Specifications that were placed by Patheon with suppliers in order to fill Firm Orders or under Section 5.2 will be cancelled where possible, and if the orders may not be cancelled without

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

penalty, will be assigned to and satisfied by Client. Additional payments or price increases may also be required to compensate Patheon for fees and other expenses incurred by Patheon to comply with Regulatory Authority requirements which apply to the Manufacturing Services.

 

4.5.                                                                            Multi-Country Packaging Requirements.

 

If Client decides to have Patheon perform Manufacturing Services for the Product for countries outside the Territory, then Client will inform Patheon of the packaging requirements for each new country and Patheon will prepare a quotation for consideration by Client of any additional costs for Components (other than Client-Supplied Components) and the change over fees for the Product destined for each new country. The agreed additional packaging requirements and related packaging costs and change over fees will be set out in a written amendment to this Agreement.

 

ARTICLE 5

 

ORDERS. SHIPMENT. INVOICING. PAYMENT

 

5.1.                                                                            Orders and Forecasts.

 

(a)                                 Rolling 12 Month Forecasts. Concurrent with the execution of this Agreement, the Client will provide Patheon with a written non-binding 12 month forecast of the volume of each Product that the Client then anticipates with be required to be produced and delivered by Patheon to the Client during each month of that 12 month period. This forecast will be updated by the Client monthly on or before the 10th day of each calendar month on a rolling 12 month basis and updated forthwith upon the Client determining that the volumes set forth in the most recent forecast has changed by more than 20%. The most recent 12 month forecast will prevail. If Patheon is unable to accommodate any portion of the Roiling Forecast, it will notify Client immediately. A meeting of the Joint Committee will be convened within five Business Days of the notification.

 

(b)                                 Firm Orders. On or before the 10th day of each calendar month, the Client will issue firm written orders (“Firm Orders”) for Manufacturing Services for the Products to be produced and delivered to the Client 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. These Firm Orders will specify the Client’s Manufacturing Services 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 these written orders will be firm and binding on the Client and will not be subject to reduction by the Client.

 

(c)                                  Long Term Forecast. On or before the 10th day of June of each Year, the Client will provide to Patheon with a written non-binding three year forecast (broken down by

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

quarters for the last six months of the forecast) of the volume of each Product the Client then anticipates will be required to be produced and delivered by Patheon to the Client during the three year period.

 

(d)                                 Submission by Marketing Partner. The Client may notify Patheon in writing from time to time that any of the forecasts or orders described in the foregoing Sections 5.1(a), 5.1(b) and 5,1 (c) may be delivered directly to Patheon by the Marketing Partner on behalf of the Client.

 

(e)                                  Acceptance of Firm Order. Patheon will accept Firm Orders by sending an acknowledgement to Client within ten Business Days of its receipt of the Firm Order. The acknowledgement will include, subject to confirmation from the Client, the Delivery Date for the Product ordered. The Delivery Date and the quantity of Products ordered may be amended by agreement of the parties or as set forth in Section 2.1(f). if Patheon fails to acknowledge receipt of a Firm Order within the ten Business Day period, the Firm Order will be deemed to have been accepted by Patheon. if Patheon anticipates that it will not be able to deliver the amount of Product set forth in the Firm Order, it will notify Client as to the duration of the anticipated delay in meeting its obligation. If Patheon fails to deliver at least [***] of the quantity of Product specified in the Firm Order within ten days after the applicable Delivery Date due to an act or omission by Patheon (a “Late Delivery”), the following remedies will apply in the order of precedence presented:

 

(i)                                     Remedy Plan Mitigation: and Escalation

 

Client will give Patheon written notice of the Late Delivery. Within ten Business after receipt of the notice of Late Delivery form Client, Patheon will submit to Client a written plan setting forth the causes for the Late Delivery, the remedial efforts to be undertaken, by Patheon, the timing for the remedial efforts to be implemented and the preventive measures Patheon will take to avoid further Late Deliveries;

 

(ii)                                  Service Credit

 

If Patheon (i) fails to correct the Late Delivery by delivering the quantity of Product specified in the Firm Order for a period of [***] consecutive months or (ii) has further Late Deliveries [***] times within any [***] month period, then the Client will receive a credit in the amount of [***] of the amount that would have been paid to Patheon had Patheon supplied the quantity set forth in the respective Firm Orders;

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

(iii)                               Termination of Exclusivity: Termination of Cost Commitment

 

In addition to the provisions of 5.1(e)(ii), if Patheon (i) fails to correct the Late Delivery by delivering the quantity of Product specified in the Firm for a period of [***] consecutive months or (ii) has further Late Deliveries [***] times within any [***] month period, then the Client will have the right to revoke exclusivity pursuant to the Product Agreement upon written notice to Patheon with respect to one or more Products and terminate its obligations.

 

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

 

(f)                                   Cancellation of a Firm Order. Prior to the cancellation of a Firm Order and prior to the start of dispensing, the parties will use commercially reasonable efforts to agree to revise the Firm Order. Revisions to Firm Orders may be requested a maximum of once per calendar quarter, if a Firm Order cannot be revised and is cancelled, the Client will pay Patheon the Price set forth in the Firm Order.

 

(g)                                  Zero Volume Forecast, if Client forecasts zero volume for a family of Products for [***] successive months period during the term of a Product Agreement (the “Zero Forecast Period”), then Patheon will have the option, at its sole discretion, to provide a 30 day notice to Client of Patheon’s intention to terminate the Product Agreement on a stated day within the Zero Forecast Period. Client thereafter will have 30 days to either (i) withdraw the zero forecast and re-submit a reasonable volume forecast, or (ii) negotiate other terms and conditions on which the Product Agreement will remain in effect. Otherwise, Patheon will have the right to terminate the Product Agreement at the end of the 30 day notice period.

 

(h)                                 Controlled Substance Quota Requirements (if applicable). Client will give Patheon the information set forth below for obtaining any required DEA or equivalent agency quotas needed to perform the Manufacturing Services. Patheon will be responsible for routine management of DEA quota information in accordance with DEA regulations. Patheon and Client will cooperate to communicate the information and to assist each other in DEA information requirements related to the Product as follows: (i) as of April 1 of each Year for the applicable Product, Client will provide to Patheon the next Year’s annual quota requirements for the Product; (ii) as of August 1 of each Year, Client will provide to Patheon any changes to the next Year’s quota requirements; (iii) Client will pro-actively communicate any changes to the quota requirements for the then-current Year in sufficient time to allow Patheon to file and finalize DEA filings supporting the changes; (iv) upon Patheon receiving the necessary forecast information from Client in order to request additional quota, Patheon will submit to the DEA, on a timely basis, ail filings

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

necessary to obtain DEA or equivalent agency quotas for Active Materials and will use commercially reasonable efforts to secure sufficient quota from the DEA so as to achieve Delivery Dates for Product as set forth in applicable purchase orders and forecasts submitted to Patheon by Client or its designee; and (v) Patheon will not be responsible for DEA’s refusal or failure to grant sufficient quota for reasons beyond the reasonable control of Patheon.

 

(i)                                     Joint Committee. The parties will establish a Joint Committee to meet from time-to-time to review the performance of the parties under the Agreement. The Joint Committee will consist of two members from each party. If Patheon believes that it will not be able to accommodate the requirements of the 12 month forecast provided by Client pursuant to Section 5.1(a), the Joint Committee will meet to discuss appropriate plans to ensure that Product supply is maintained and agree on any revisions to the forecast.

 

5.2.                                                                            Reliance by Patheon.

 

(a)                                 Client understands and acknowledges that Patheon will rely on the Firm Orders and rolling forecasts submitted under Sections 5.1(a), and (b) in ordering the Components (other than Client- Supplied Components) required to meet the Firm Orders, in addition, Client understands that to ensure an orderly supply of the Components, Patheon may want to purchase the Components in sufficient volumes to meet the production requirements for Products during part or all of the forecasted periods referred to in Section 5.1(a) or to meet the production requirements of any longer period agreed to by Patheon and Client. Accordingly, Client authorizes Patheon to purchase Components to satisfy the Manufacturing Services requirements for Products for the first six months set forth in the most recent forecast given by Client under Section 5.1(a). Patheon may make other purchases of Components to meet Manufacturing Services requirements for longer periods if agreed to in writing by the parties. The Client will give Patheon written authorization to order Components for any launch quantities of Product requested by Client which will be considered a Firm Order when accepted by Patheon.

 

(b)                                 Client will reimburse Patheon for the cost of Components ordered by Patheon under Firm Orders or under Section 5.2(a) that are not included in finished Products manufactured for Client within six months after the forecasted month for which the purchases have been made (or for a longer period as the parties may agree) or if the Components have expired or are rendered obsolete due to changes in artwork or applicable regulations during the period (collectively, “Obsolete Stock”). This reimbursement will include Patheon’s cost to purchase (plus a [***] handling fee) and destroy the Obsolete Stock. If any non-expired Components are used in Products subsequently manufactured for Client or in third party products manufactured by Patheon, Client will receive credit for any costs of those Components previously paid to Patheon by Client.

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

(c)                                  If Client fails to take possession or arrange for the destruction of non-expired Components within 12 months of purchase or, in the case of the delivery of conforming finished Product not accepted by Client within one month of manufacture, Client will pay Patheon [***] per pallet, per month thereafter for storing the Components or finished Product. Storage fees for Components or Product which contain controlled substances or require refrigeration will be charged at [***] per pallet per month. Storage fees are subject to a one pallet minimum charge per month. Patheon may ship finished Product held by it longer* than one month to the Client at Client’s expense on 14 days written notice to the Client.

 

5.3.                                                                            Minimum Orders.

 

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

 

5.4.                                                                            Delivery and Shipping.

 

The Product will be delivered to Client after it has been manufactured and released to the Client by Patheon. Delivery of Products will be made EXW (Incoterms 2010) Patheon’s shipping point unless otherwise agreed in a Product Agreement. Risk of loss or of damage to Products will remain with Patheon until Patheon loads the Products onto the carrier’s vehicle for shipment at the shipping point at which time risk of loss or damage will transfer to Client. Patheon will, in accordance with Client’s instructions and as agent for Client, at Client’s risk, (i) arrange for shipping to be paid by Client or the Marketing Partner and (ii) at Client’s risk and expense, obtain any export license or other official authorization necessary to export the Products. Client will arrange for insurance and will select the freight carrier used by Patheon to ship Products and may monitor Patheon’s shipping and freight practices as they pertain to this Agreement. Products will be transported in accordance with the Specifications.

 

5.5.                                                                            Invoices and Payment.

 

invoices will be sent by fax or email to the fax number or email address given by Client to Patheon in writing, invoices will be issued when the Product is manufactured and released by Patheon to the Client. Patheon will also submit to Client or Marketing Partner, with each shipment of Products, a duplicate copy of the Invoice covering the shipment. Patheon will also give Client an invoice covering any Inventory or Components which are to be purchased by Client under Section 5.2 of this Agreement. Each invoice will, to the extent applicable, identify Client’s Manufacturing Services purchase order number, Product numbers, names and quantities, unit price, freight charges, and the total amount to be paid by Client. Client will pay ail invoices within 30 days of the date thereof. If any portion of an invoice is disputed, the Client will pay Patheon for the undisputed amount and the parties will use good faith efforts to reconcile the disputed amount as soon as practicable. Interest on undisputed past due accounts which have not been paid within 45 days of the date of invoice will accrue retroactively to the original due date at [***] per month which is equal to an annual rate of [***].

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

ARTICLE 6

 

PRODUCT CLAIMS AND RECALLS

 

6.1.                                                                            Product Claims.

 

(a)                                 Product Claims. Client has the right to reject any portion of any shipment of Products that deviates from the Specifications, cGMPs, or Applicable Laws without invalidating any remainder of the shipment. Client will inspect the Products manufactured by Patheon upon receipt and will give Patheon written notice (a “Deficiency Notice”) of all claims for Products that deviate from the Specifications, cGMPs, or Applicable Laws within 30 days after Client’s receipt thereof (or, in the case of any defects not reasonably susceptible to discovery upon receipt of the Product, within 30 days after discovery by Client, but not after the expiration date of the Product). Should Client fail to give Patheon the Deficiency Notice within the applicable 30 day period, then the delivery will be deemed to have been accepted by Client on the 30th day after delivery or discovery, as applicable. Patheon will 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 will have ten days to advise Client by notice in writing that it disagrees with the contents of the Deficiency Notice. If Client and Patheon fail to agree within ten days after Patheon’s notice to Client as to whether any Products identified in the Deficiency Notice deviate from the Specifications, cGMPs, or Applicable Laws, then the parties will mutually select an independent laboratory to evaluate if the Products deviate from the Specifications, cGMPs, or Applicable Laws. This evaluation will be binding on the parties, if the evaluation certifies that any Products deviate from the Specifications, cGMPs, or Applicable Laws, Client may reject those Products in the manner set forth in this Section 6.1 and Patheon will be responsible for the cost of the evaluation. If the evaluation does not so certify for any of the Products, then Client will be deemed to have accepted delivery of the Products on the 40th day after delivery {or, in the case of any defects not reasonably susceptible to discovery upon receipt of the Product, on the 40th day after discovery thereof by Client, but not after the expiration date of the Product) and Client will be responsible for the cost of the evaluation.

 

(c)                                  Shortages and Price Disputes. Claims for shortages in the amount of Products shipped by Patheon or a Price dispute will be dealt with by reasonable agreement of the parties. Any claim for a shortage or a Price dispute will be deemed waived if it has not been presented within 30 days of the date of invoice.

 

(d)                                 Product Rejection for Finished Product Specification Failure. Internal process specifications will be defined and agreed upon, if Patheon manufactures Product in accordance with the agreed upon process specifications, the batch production

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

record, and Patheon’s standard operating procedures for manufacturing, and a batch or portion of batch of Product does not meet a finished Product specification, Client will pay Patheon the applicable fee per unit for the non-conforming Product. The API in the non-conforming Product will be included in the “Quantity Converted” for purposes of calculating the “Actual Annual Yield” under Section 2.2(a).

 

6.2.                                                                            Product Recalls and Returns.

 

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

 

(b)                                 Recalls. If (i) any Regulatory Authority issues a directive, order or, following the issuance of a safety warning or alert about a Product, a written request that any Product be Recalled, (ii) a court of competent jurisdiction orders a Recall, or (iii) Client determines that any Product should be Recalled or that a “Dear Doctor” letter is required relating the restrictions on the use of any Product, Patheon will cooperate as reasonably required by Client, having regard to all applicable laws and regulations.

 

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

 

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

 

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

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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

 

(b)                                 Recalled Product. If a Recall or return results from, or arises out of, a failure by Patheon to perform the Manufacturing Services in accordance with the Specifications, cGMPs, or Applicable Laws, Patheon will be responsible for the documented out-of-pocket expenses of the Recall or return and will use its commercially reasonable efforts to replace the Recalled or returned Products with new Products, contingent upon the receipt from Client of all Active Materials and Client-Supplied Components required for the manufacture of the replacement Products. For greater certainty, Patheon’s responsibility for any loss of Active Materials in Recalled Product will be captured and calculated in the Active Materials Yield under Section 2.2. If Patheon is unable to replace the Recalled or returned Products (except where this inability results from a failure to receive the required Active Materials and Client-Supplied Components), then Client may request Patheon to reimburse Client for the price that Client paid to Patheon for Manufacturing Services for the affected Products. In all other circumstances, Recalls, returns, or other corrective actions will be made at Client’s cost and expense.

 

(c)                                  Except as set forth in Sections 6.3(a) and (b) above, Patheon will not be liable to Client nor have any responsibility to Client for any deficiencies in, or other liabilities associated with, any Product manufactured by it, (collectively, “Product Claims”). For greater certainty, Patheon will have no obligation for any Product Claims to the extent the Product Claim (i) is caused by deficiencies in the Specifications, the safety, efficacy, or marketability of the Products or any distribution thereof, (ii) results from a defect in a Component that is not reasonably discoverable by Patheon using the test methods set forth in the Specifications, (iii) results from a defect in the Active Materials, Client-Supplied Components or Components supplied by a Client designated additional source that is not reasonably discoverable by Patheon using the test methods set forth in the Specifications, (iv) is caused by actions of third parties occurring after the Product is shipped by Patheon under Section 5.4, (v) is due to packaging design or labelling defects or omissions for which Patheon has no responsibility, (vi) is due to any unascertainable reason despite Patheon having performed the Manufacturing Services In accordance with the Specifications, cGMP’s, and Applicable Laws, or (vii) is due to any other breach by Client of its obligations under this Agreement.

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

6.4.                                                                            Disposition of Defective or Recalled Products.

 

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

 

6.5.                                                                            Healthcare Provider or Patient Questions and Complaints.

 

Client will have the sole responsibility for responding to questions and complaints from its customers. Questions or complaints received by Patheon from Client’s customers, healthcare providers or patients will be promptly referred to Client. Patheon will co-operate as reasonably required to allow Client to determine the cause of and resolve any questions and complaints. This assistance will include follow-up investigations, including testing. In addition, Patheon will give Client all agreed upon information that will enable Client to respond properly to questions or complaints about the Products as set forth in the Quality Agreement. Unless it is determined that the cause of the complaint resulted from a failure by Patheon to perform the Manufacturing Services in accordance with the Specifications, cGMPs, and Applicable Laws, ail costs incurred under this Section 6,5 will be borne by Client.

 

6.6.                                                                            Sole Remedy.

 

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

 

ARTICLE 7

 

CO-OPERATION

 

7.1.                                                                            Quarterly Review.

 

Each party will forthwith upon execution of this Agreement appoint one of its employees to be a relationship manager responsible for liaison between the parties. The relationship managers will meet not less than quarterly to review the current status of the business relationship and manage any issues that have arisen.

 

7.2.                                                                            Governmental Agencies.

 

Subject to Section 7.8, each party may communicate with any governmental agency, including but not limited to governmental agencies responsible for granting regulatory approval for the Products, regarding the Products if, in the opinion of that party’s counsel, the communication is necessary to comply with the terms of this Agreement or the requirements of

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

any law, governmental order or regulation. Unless, in the reasonable opinion of its counsel, there is a legal prohibition against doing so, a party will permit the other party to accompany and take part in any communications with the agency, and to receive copies of ail communications from the agency.

 

7.3.                                                                            Records and Accounting by Patheon.

 

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

 

7.4.                                                                            Inspection.

 

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

 

7.5.                                                                            Access.

 

Patheon will give Client reasonable access at agreed times to the areas of the Manufacturing Site in which the Products are manufactured, stored, handled, or shipped to permit Client to verify that the Manufacturing Services are being performed in accordance with the Specifications, cGMPs, and Applicable Laws. But, with the exception of “for-cause” audits, Client will be limited each Year to one cGMP-type audit, lasting no more than two days, and involving no more than two auditors.

 

Client may request additional cGMP-type audits, additional audit days, or the participation of additional auditors subject to payment to Patheon of a fee of [***] for each additional audit day and [***] per audit day for each additional auditor. The right of access set forth in Sections 7.4 and 7.5 will not include a right to access or inspect Patheon’s financial records.

 

7.6.                                                                            Notification of Regulatory Inspections.

 

Patheon will notify Client within one Business Day of any inspections by any governmental agency specifically involving the Products. Patheon will also notify Client of receipt of any form 483’s or warning letters or any other significant regulatory action which Patheon’s quality assurance group determines could impact the regulatory status of the Products.

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

7.7.                                                                            Reports.

 

Patheon will supply on an annual basis all Product data in its control, including release test results, complaint test results, and all investigations (in manufacturing, testing, and storage), that Client reasonably requires in order to complete any filing under any applicable regulatory regime, including any Annual Report that Client is required to file with the FDA. Any additional report requested by Client beyond the scope of cGMPs and customary FDA requirements will be subject to an additional fee to be agreed upon between Patheon and the Client.

 

7.8.                                                                            Regulatory Filings.

 

(a)                                 Regulatory Authority.  Client will have the sole responsibility for filing all documents with all Regulatory Authorities and taking any other actions that may be required for the receipt and/or maintenance of Regulatory Authority approval for the commercial manufacture of the Products. Patheon will assist Client, to the extent consistent with Patheon’s obligations under this Agreement, to obtain Regulatory Authority approval for the commercial manufacture of all Products as quickly as reasonably possible.

 

(b)                                 Verification of Data. Prior to filing any documents with any Regulatory Authority that incorporate data generated by Patheon, Client will give Patheon a copy of the documents incorporating this data to give Patheon the opportunity to verify the accuracy and regulatory validity of those documents as they relate to Patheon generated data. Patheon requires 21 days to perform this review but the parties may agree to a shorter time for the review as needed. In any event. Patheon’s review of this data will not prohibit Client from filing the documents with a Regulatory Authority.

 

(c)                                  Verification of CMC. Prior to filing with any Regulatory Authority any documentation which is or is equivalent to the FDA’s Chemistry and Manufacturing Controls (all such documentation herein referred to as “CMC”) related to any Marketing Authorization, such as a New Drug Application or Abbreviated New Drug Application, Client will give Patheon a copy of the CMC as well as ail supporting documents which have been relied upon to prepare the CMC. This disclosure will permit Patheon to verify that the CMC accurately describes the work that Patheon has performed and the manufacturing processes that Patheon will perform under this Agreement. Patheon requires 21 days to perform this review but the parties may agree to a shorter time for the review as needed. Client will give Patheon copies of ail FDA filings at the time of submission which contain CMC information regarding the Product. In any event. Patheon’s review of this data will not prohibit Client from filing the documents with a Regulatory Authority.

 

(d)                                 Deficiencies. If, in Patheon’s sole discretion, acting reasonably, Patheon determines that any of the information given by Client under clauses (b) and (c) above is inaccurate or deficient in any manner whatsoever (the “Deficiencies”),

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

Patheon will notify Client in writing of the Deficiencies. The parties will work together to have the Deficiencies resolved prior to any pre-approval inspection.

 

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

 

7.9.                                                                            Inspection by Regulatory Authorities.

 

If Client does not give Patheon the documents requested under clause (b) above within the time specified and if Patheon reasonably believes that Patheon’s standing with a Regulatory Authority may be jeopardized, Patheon may, in its sole discretion after giving written notice to Client, delay or postpone any inspection by the Regulatory Authority until Patheon has reviewed the requested documents and is satisfied with their contents.

 

ARTICLE 8

 

TERM AND TERMINATION

 

8.1.                                                                            Initial Term.

 

This Agreement will become effective as of the Effective Date and will continue until December 31, 2016 (the “Initial Term”), unless terminated earlier by one of the parties in accordance herewith. This Agreement will automatically renew after the Initial Term for successive terms of one Year each if there is a Product Agreement in effect, unless either party gives written notice to the other party of its intention to terminate this Agreement at least 18 months prior to the end of the then current term. In any event, the Segal terms and conditions of this Agreement will continue to govern any Product Agreement in effect as provided in Section 1.2. Each Product Agreement will have an initial term of two Years from the start of commercial manufacture at the Manufacturing Site for the Product unless the parties agree to a different number of Years in the applicable Product Agreement (each, an “Initial Product Term”). Product Agreements will automatically renew after the Initial Product Term for successive terms of one Year each unless either party gives written notice to the other party of its intention to terminate the Product Agreement at least 18 months prior to the end of the then current term.

 

8.2.                                                                            Termination for Cause.

 

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

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

the Product Agreement within 60 days following receipt of a written notice (the “Remediation Period”) of the breach that expressly states that it is a notice under this Section 8.2(a) (a “Breach Notice”). The aggrieved party’s right to terminate this Agreement or a Product Agreement under this Section 8.2(a) may only be exercised for a period of 60 days following the expiry of the Remediation Period (where the breach has not been remedied) and if the termination right is not exercised during this period then the aggrieved party will be deemed to have waived the breach of the representation, warranty, or obligation described in the Breach Notice.

 

(b)                                 Either party at its sole option may immediately terminate this Agreement or a Product Agreement upon written notice, but without prior advance notice, to the other party if: (i) the other party is declared insolvent or bankrupt by a court of competent jurisdiction; (ii) a voluntary petition of bankruptcy is filed in any court of competent jurisdiction by the other party; or (iii) this Agreement or a Product Agreement is assigned by the other party for the benefit of creditors.

 

(c)                                  Client may terminate a Product Agreement upon 30 days’ prior written notice if any Authority takes any action, or raises any objection, that prevents Client from importing, exporting, purchasing, or selling the Product. But if this occurs, Client must still fulfill ail of its obligations under Section 8.4 below and under any Capital Equipment Agreement regarding the Product.

 

(d)                                 Patheon may terminate this Agreement or a Product Agreement upon six months’ prior written notice if Client assigns under Section 13.6 any of its rights under this Agreement or a Product Agreement to an assignee that, in the opinion of Patheon acting reasonably, is: (i) not a credit worthy substitute for Client; or (ii) a Patheon Competitor; or (iii) an entity with whom Patheon has had prior unsatisfactory business relations.

 

8.3.                                                                            Product Discontinuation.

 

Client will give at least six months’ advance notice if it intends to no longer order Manufacturing Services for a Product due to this Product’s discontinuance in the market.

 

8.4.                                                                            Obligations on Termination.

 

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

 

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

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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

 

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

 

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

 

(e)                                  Client will make commercially reasonable efforts, at its own expense, to remove from Patheon site(s), within 30 days, ail unused Active Material and Client-Supplied Components, all applicable inventory and Materials (whether current or obsolete), supplies, undelivered Product, chattels, equipment or other moveable property owned by Client, related to the Agreement and located at a Patheon site or that is otherwise under Patheon’s care and control (“Client Property”), if Client fails to remove the Client Property within 30 days following the completion, termination, or expiration of the Product Agreement, Client will pay Patheon [***] per pallet, per month, one pallet minimum (except that Client will pay [***] per pallet, per month, one pallet minimum, for any of the Client Property that contains controlled substances, requires refrigeration or other special storage requirements) thereafter for storing the Client Property and will assume any third party storage charges invoiced to Patheon regarding the Client Property. Patheon will invoice Client for the storage charges as set forth in Section 5.5 of this Agreement.

 

Any termination or expiration of this Agreement or a Product Agreement will not affect any outstanding obligations or payments due prior to the termination or expiration, nor will it prejudice any other remedies that the parties may have under this Agreement or a Product Agreement or any related Capital Equipment Agreement. For greater certainty, termination of this Agreement or of a Product Agreement for any reason will not affect the obligations and responsibilities of the parties under Articles 10 and 11 and Sections 5.4, 5.5, 8.4, 13.1, 13.2,13.3, and 13.16, all of which survive any termination.

 

ARTICLE 9

 

REPRESENTATIONS. WARRANTIES AND COVENANTS

 

9.1.                                                                            Authority.

 

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

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

9.2.                                                                            Client Warranties.

 

Client covenants, represents, and warrants that:

 

(a)                                 Non-Infringement.

 

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

 

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

 

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

 

(iv)                              there are no actions or other legal proceedings, concerning the infringement of Third Party Rights related to any of the Specifications, or any of the Active Materials and the Components, or the sale, use, or other disposition of any Product made in accordance with the Specifications;

 

(b)                                 Quality and Compliance.

 

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

 

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

 

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

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

9.3.                                                                            Patheon Warranties.

 

Patheon covenants, represents, and warrants that:

 

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

 

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

 

9.4.                                                                            Debarred Persons.

 

Patheon covenants that it will not in the performance of its obligations under this Agreement use the services of any person debarred or suspended under 21 U.S.C. §335(a) or (b). Patheon represents that It does not currently have, and covenants that it will not hire, as an officer or an employee 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.

 

Client will be solely responsible for obtaining or maintaining, on a timely basis, any permits or other regulatory approvals for the Products or the Specifications, including, without limitation, ail marketing and post-marketing approvals.

 

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

 

9.6.                                                                            No Warranty.

 

PATHEON MAKES NO WARRANTY OR CONDITION OF ANY KIND, EITHER EXPRESSED OR IMPLIED, BY FACT OR LAW, OTHER THAN THOSE EXPRESSLY SET FORTH IN THIS AGREEMENT. PATHEON MAKES NO WARRANTY OR CONDITION OF FITNESS FOR A PARTICULAR PURPOSE NOR ANY WARRANTY OR CONDITION OF MERCHANTABILITY FOR THE PRODUCTS.

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

ARTICLE 10

 

REMEDIES AND INDEMNITIES

 

10.1.                                                                     Consequential Damages.

 

Under no circumstances whatsoever will either party be liable to the other in contract, tort, negligence, breach of statutory duty, or otherwise for (i) any {direct or indirect) loss of profits, of production, of anticipated savings, of business, or goodwill or (ii) for any other liability, damage, costs, or expense of any kind incurred by the other party of an indirect or consequential nature, regardless of any notice of the possibility of these damages.

 

10.2.                                                                     Limitation of Liability.

 

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

 

(b)                                 Patheon Maximum liability. Patheon’s maximum liability to Client under this Agreement or any Product Agreement in a Year for any reason whatsoever, including, without limitation, any liability arising under Article 6 hereof or resulting from any and all breaches of its representations, warranties, or any other obligations under this Agreement or any Product Agreement, but excluding Patheon’s indemnity obligations under Section 10.3, will not exceed on a per Product basis the greater of [***] or [***] of revenues per Year to Patheon under the applicable Product Agreement.

 

10.3.                                                                     Patheon Indemnity.

 

(a)                                 Patheon agrees to defend and indemnify Client, its officers, employees, and agents against all losses, damages, costs, claims, demands, judgments and liability to, from and in favour of third parties (other than Affiliates) resulting from, or relating to any claim of personal injury or property damage to the extent that the injury or damage is the result of a failure by Patheon to perform the Manufacturing Services in accordance with the Specifications, cGMPs, and Applicable Laws except to the extent that the losses, damages, costs, claims, demands, judgments, and liability are due to the negligence or wrongful act(s) of Client, its officers, employees, agents, or Affiliates.

 

(b)                                 If a claim occurs, Client will: (a) promptly notify Patheon of the claim; (b) use commercially reasonable efforts to mitigate the effects of the claim; (c) reasonably cooperate with Patheon in the defense of the claim; and (d) permit Patheon to control the defense and settlement of the claim, ail at Patheon’s cost and expense.

 

10.4.                                                                     Client Indemnity.

 

(a)                                 Client agrees to defend and indemnify Patheon, its officers, employees, and agents against all losses, damages, costs, claims, demands, judgments and liability to, from and in favour of third parties {other than Affiliates) resulting from, or relating to

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

any claim of infringement or alleged infringement of any Third Party Rights in the Products, or any portion thereof, or any claim of personal injury or property damage to the extent that the injury or damage is the result of a breach of this Agreement by Client, including, without limitation, any representation or warranty contained herein, except to the extent that the losses, damages, costs, claims, demands, judgments, and liability are due to the negligence or wrongful act(s) of Patheon, its officers, employees, or agents.

 

(b)                                 If a claim occurs, Patheon will: (a) promptly notify Client of the claim; (b) use commercially reasonable efforts to mitigate the effects of the claim; (c) reasonably cooperate with Client in the defense of the claim; and (d) permit Client to control the defense and settlement of the claim, all at Client’s cost and expense.

 

10.5.                                                                     Reasonable Allocation of Risk.

 

This Agreement (including, without limitation, this Article 10) is reasonable and creates a reasonable allocation of risk for the relative profits the parties each expect to derive from the Products. Patheon assumes only a limited degree of risk arising from the manufacture, distribution, and use of the Products because Client has developed and holds the marketing approval for the Products, Client requires Patheon to manufacture and label the Products strictly in accordance with the Specifications, and Client, not Patheon, is best positioned to inform and advise potential users about the circumstances and manner of use of the Products.

 

ARTICLE 11

 

CONFIDENTIALITY

 

11.1.                                                                     Confidentiality.

 

The Confidentiality Agreement will apply to all confidential information disclosed by the parties under this Agreement or any Product Agreement. If the Confidentiality Agreement expires or is terminated prior to the expiration or termination of this Agreement or any Product Agreement, the terms of the Confidentiality Agreement will continue to govern the parties’ obligations of confidentiality for any confidential or proprietary information disclosed by the parties hereunder, for the term of this Agreement or any Product Agreement, as though the Confidentiality Agreement remained in full force and effect.

 

ARTICLE 12

 

DISPUTE RESOLUTION

 

12.1.                                                                     Commercial Disputes.

 

If any dispute arises out of this Agreement or any Product Agreement (other than a dispute under Section 6.1(b) or a Technical Dispute, as defined herein), the parties will first try to

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

resolve it amicably. In that regard, any party may send a notice of dispute to the other, and each party will appoint, within ten Business Days from receipt of the notice of dispute, a single representative having full power and authority to resolve the dispute. The representatives will meet as necessary in order to resolve the dispute. If the representatives fail to resolve the matter within one month from their appointment, or if a party fails to appoint a representative within the ten Business Day period set forth above, the dispute will immediately be referred to the Chief Operating Officer (or another officer as he/she may designate) of each party who will meet and discuss as necessary to try to resolve the dispute amicably. Should the parties fail to reach a resolution under this Section 12.1, the dispute will be referred to a court of competent jurisdiction in accordance with Section 13.16.

 

12.2.                                                                     Technical Dispute Resolution.

 

If a dispute arises (other than disputes under Sections 6.1(b) or 12.1) between the parties that is exclusively related to technical aspects of the manufacturing, packaging, labelling, quality control testing, handling, storage, or other activities under this Agreement (a “Technical Dispute”), the parties will make all reasonable efforts to resolve the dispute by amicable negotiations, in that regard, senior representatives of each party will, as soon as possible and in any event no later than ten Business Days after a written request from either party to the other, meet in good faith to resolve any Technical Dispute. If, despite this meeting, the parties are unable to resolve a Technical Dispute within a reasonable time, and in any event within 30 Business Days of the written request, the Technical Dispute will, at the request of either party, be referred for determination to an expert in accordance with Exhibit A. if the parties cannot agree that a dispute is a Technical Dispute, Section 12.1 will prevail. For greater certainty, the parties agree that the release of the Products for sale or distribution under the applicable marketing approval for the Products will not by itself indicate compliance by Patheon with its obligations for the Manufacturing Services and further that nothing in this Agreement (including Exhibit A) will remove or limit the authority of the relevant qualified person (as specified by the Quality Agreement) to determine whether the Products are to be released for sale or distribution.

 

ARTICLE 13

 

MISCELLANEOUS

 

13.1.                                                                     Inventions.

 

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

 

(b)                                 All Intellectual Property generated or derived by Patheon while performing the Manufacturing Services, to the extent it is specific to the development, manufacture, use, and sale of Client’s Product that is the subject of the Manufacturing Services, will be the exclusive property of Client.

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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

 

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

 

(e)                                  Either party will give the other party written notice, as promptly as practicable, of all Inventions which can reasonably be deemed to constitute improvements or other modifications of the Products or processes or technology owned or otherwise controlled by the party.

 

13.2.                                                                     Intellectual Property.

 

Subject to Section 13.1, all Client Intellectual Property will be owned by Client and all Patheon Intellectual Property will be owned by Patheon. Neither party has, nor will it acquire, any interest in any of the other party’s Intellectual Property unless otherwise expressly agreed to in writing. Neither party will use any Intellectual Property of the other party, except as specifically authorized by the other party or as required for the performance of its obligations under this Agreement.

 

13.3.                                                                     Insurance.

 

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

 

13.4.                                                                     Independent Contractors.

 

The parties are independent contractors and this Agreement and any Product Agreement will not be construed to create between Patheon and Client any other relationship such as, by way of example only, that of employer-employee, principal agent, joint-venturer, co-partners, or any similar relationship, the existence of which is expressly denied by the parties.

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

13.5.                                                                     No Waiver.

 

Either party’s failure to require the other party to comply with any provision of this Agreement or any Product Agreement will not be deemed a waiver of the provision or any other provision of this Agreement or any Product Agreement, with the exception of Sections 6.1 and 8.2 of this Agreement.

 

13.6.                                                                     Assignment.

 

(a)                                 Patheon may not assign this Agreement or any Product Agreement or any of its associated rights or obligations without the written consent of Client, this consent not to be unreasonably withheld. Patheon may arrange for subcontractors to perform specific testing services arising under any Product Agreement with the prior written consent of Client. Further it is specifically agreed that Patheon may subcontract any part of the Manufacturing Services under a Product Agreement to any of its Affiliates.

 

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

 

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

 

13.7.                                                                     Force Majeure.

 

Neither party will be liable for the failure to perform its obligations under this Agreement or any Product Agreement if the failure is caused by an event beyond that party’s reasonable control, including, but not limited to, strikes or other labor disturbances, lockouts, riots, quarantines, communicable disease outbreaks, wars, acts of terrorism, fires, floods, storms, interruption of or delay in transportation, lack of or inability to obtain fuel, power or components, or compliance with any order or regulation of any government entity acting within colour of right (a “Force Majeure Event”). A party claiming a right to excused performance under this Section 13.7 will immediately notify the other party in writing of the extent of its inability to perform, which notice will specify the event beyond its reasonable control that prevents the performance. Neither party will be entitled to rely on a Force Majeure Event to relieve it from an obligation to

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

pay money (including any interest for delayed payment) which would otherwise be due and payable under this Agreement or any Product Agreement.

 

13.8.                                                                     Additional Product.

 

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

 

13.9.                                                                     Notices.

 

Unless otherwise agreed in a Product Agreement, any notice, approval, instruction or other written communication required or permitted hereunder will be sufficient if made or given to the other party by personal delivery, by telecopy, facsimile communication, or confirmed receipt email or by sending the same by first class mail, postage prepaid to the respective addresses, telecopy or facsimile numbers or electronic mail addresses set forth below:

 

if to Client:.

 

Osmotica Pharmaceutical Corp.

895 Sawyer Road

Marietta, GA 30061

Attention: Steve Banet

Telecopier No.: 

Email address: 

 

With a copy to:

Osmotica Pharmaceutical Corp.

1205 Culbreth Drive, Suite 200

Wilmington, NC 28405

Attention; General Counsel

Telecopier No.: 

Email address: 

 

If to Patheon:

 

Patheon Pharmaceuticals Inc.

2110 East Galbraith Road

Cincinnati, OH 45237-1625

Attention: Director of Legal

Services 
 Telecopier No.: 

 

Email address: 

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

With a copy to:

 

Patheon Inc.

4721 Emperor Boulevard Research

Triangle Park,

NC 27703

Attention: General Counsel

Telecopier No.: 

Email address: 

 

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

 

13.10.                                                              Severability.

 

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

 

13.11.                                                              Entire Agreement.

 

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

 

13.12.                                                              Other Terms.

 

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

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

13.13.                                                              No Third Party Benefit or Right.

 

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

 

13.14.                                                              Execution in Counterparts.

 

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

 

13.15.                                                              Use of Client Name.

 

Patheon will not make any use of Client’s name, trademarks or logo or any variations thereof, alone or with any other word or words, without the prior written consent of Client, which consent will not be unreasonably withheld. Despite this, Client agrees that Patheon may include Client’s name and logo in customer lists or related marketing and promotional material for the purpose of identifying users of Patheon’s Manufacturing Services.

 

13.16.                                                              Taxes.

 

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

 

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

 

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

 

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

 

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

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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

 

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

 

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

 

13.17.                                                              Governing Law.

 

This Agreement and, unless otherwise agreed by the parties in a Product Agreement, will be construed and enforced in accordance with the laws of the State of New York and the laws of the United States of America applicable therein and subject to the exclusive jurisdiction of the courts thereof. The UN Convention on Contracts for the International Sale of Goods will not apply to this Agreement.

 

[Signature page to follow]

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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

 

	
 
    	
PATHEON   PHARMACEUTICALS INC.
    
	
 
    	
 
    	
 
    
	
APPROVED BY LEGAL
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Francis P. McCune
    
	
FPM 
    	
8-31-14
    	
 
    	
Name:
    	
Francis P. McCune
    
	
Initials 
    	
Date
    	
 
    	
Title:
    	
Secretary
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
OSMOTICA PHARMACEUTICAL   CORP.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Kenneth Gayron
    
	
 
    	
Name:
    	
Kenneth Gayron
    
	
 
    	
Title:
    	
Chief Financial Officer
    

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

APPENDIX 1
  FORM OF PRODUCT AGREEMENT
  includes Schedules A to D)

 

PRODUCT AGREEMENT

 

This Product Agreement (this “Product Agreement”) is issued under the Master Manufacturing Services Agreement dated August 21, 2014 between Patheon Pharmaceuticals Inc., and Osmotica Pharmaceutical Corp., (the “Master Agreement”), and is entered into [insert effective date] (the “Effective Date”), between Patheon Pharmaceuticals Inc., [or applicable Patheon Affiliate], a corporation existing under the laws of the State of Delaware [or applicable founding jurisdiction for Patheon Affiliate], having a principal place of business at 2110 East Gaibraith Road, Cincinnati, OH 45237-1625 [or Patheon Affiliate address] (“Patheon”) and [insert Client name, legal entity, founding jurisdiction and address] (“Client”).

 

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

 

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

 

1.                                      Product List and Specifications (See Schedule A attached hereto)

 

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

 

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

 

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

 

5.                                      Yearly Forecasted Volume: (insert for sterile products if applicable under Section 4.2.1)

 

6.                                      Territory: (insert the description of the Territory here)

 

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

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

8.                                      Governing Law: (if applicable under Section 13.17 of the Master Agreement)

 

9.                                      Inflation Index: (if applicable under Section 4.2(a) of the Master Agreement for Products manufactured outside of the Unites States or Puerto Rico)

 

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

 

11.                               Initial Set Exchange Rate: (if applicable under Section 4.2(d) of the Master Agreement)

 

12.                               Initial Product Term: (if applicable under Section 8.1 of the Master Agreement)

 

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

 

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

 

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

 

	
 
    	
 
    	
PATHEON   PHARMACEUTICALS INC. [or applicable Patheon Affiliate]
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
OSMOTICA   PHARMACEUTICAL CORP.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

SCHEDULE A

 

PRODUCT LIST AND SPECIFICATIONS

 

Product List

 

Specifications

 

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

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

SCHEDULE B

 

MINIMUM ORDER QUANTITY, ANNUAL VOLUME. AND PRICE

 

[Insert Price Table]

 

Manufacturing Assumptions:

 

Packaging Assumptions:

 

Testing Assumptions:

 

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

 

·                  [***]

 

·                  [***]

 

·                  [***]

 

·                  [***]

 

·                  [***]

 

·                  [***]

 

·                  [***]

 

·                  [***]

 

·                  [***]

 

·                  [***]

 

·                  [***]

 

·                  [***]

 

·                  [***]

 

·                  [***]

 

·                  [***]

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

·                  [***]

 

·                  [***]

 

·                  [***]

 

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

 

·                  [***]

 

·                  [***]

 

·                  [***]

 

·                  [***]

 

·                  [***]

 

·                  [***]

 

·                  [***]

 

·                  [***]

 

·                  [***]

 

·                  [***]

 

·                  [***]

 

·                  [***]

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

SCHEDULE C

 

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

 

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

 

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

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

SCHEDULE D

 

ACTIVE MATERIALS

 

	
Active Materials
    	
 
    	
Supplier
    
	
·
    	
 
    	
·
    
	
·
    	
 
    	
·
    

 

ACTIVE MATERIALS CREDIT VALUE

 

The Active Materials Credit Value will be as follows:

 

	
PRODUCT
    	
 
    	
ACTIVE MATERIALS
    	
 
    	
ACTIVE MATERIALS
   CREDIT VALUE
    
	
 
    	
 
    	
 
    	
 
    	
Client’s actual cost for Active Materials not to   exceed $   per kilogram
    

 

MAXIMUM CREDIT VALUE

 

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

 

	
PRODUCT
    	
 
    	
MAXIMUM CREDIT VALUE
    
	
 
    	
 
    	
[***] of revenues per Year to   Patheon under this Product
    

 

[End of Product Agreement]

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

EXHIBIT A

 

TECHNICAL DISPUTE RESOLUTION

 

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

 

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

 

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

 

3.             Not Arbitrator. No expert will be deemed to be an arbitrator and the provisions of the American Arbitration Act or of any other applicable statute (foreign or domestic) and the law relating to arbitration will not apply to the expert or the expert’s determination or the procedure by which the expert reaches his determination under this Exhibit A.

 

4.             Procedure. Where an expert is appointed:

 

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

 

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

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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

 

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

 

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

 

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

 

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

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

EXHIBIT C

 

QUARTERLY ACTIVE MATERIALS INVENTORY REPORT

 

TO:                 OSMOTICA PHARMACEUTICAL CORP.

 

FROM:          PATHEON PHARMACEUTICALS INC. [or applicable Patheon entity]

 

RE:                                                   Active Materials quarterly inventory report under Section 2.2(a) of the Master Manufacturing Services Agreement dated August 21, 2014 (the “Agreement”)

 

	
Reporting quarter:
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Active Materials on hand at beginning of quarter:
    	
 
    	
 
    	
 
    	
kg  (A)
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Active Materials on hand at end of quarter:
    	
 
    	
 
    	
 
    	
kg  (B)
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Quantity Received during quarter:
    	
 
    	
 
    	
 
    	
kg  (C)
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Quantity Dispensed(1) during quarter:
   (A + C – B)
    	
 
    	
 
    	
 
    	
kg
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Quantity Converted during quarter:
   (total Active Materials in Products produced and not rejected, recalled or   returned)
    	
 
    	
 
    	
 
    	
kg
    

 

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

 

	
PATHEON PHARMACEUTICALS INC.
    	
 
    	
Date:
    	
 
    
	
[or applicable Patheon entity]
    	
 
    	
 
    	
 
    

 

 

	
Per:
    	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    

 

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

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

EXHIBIT D

 

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

 

	
TO:
    	
 
    	
OSMOTICA PHARMACEUTICAL CORP.
    
	
 
    	
 
    	
 
    
	
FROM:
    	
 
    	
PATHEON PHARMACEUTICALS INC. [or applicable Patheon   entity]
    
	
 
    	
 
    	
 
    
	
RE:
    	
 
    	
Active Materials annual inventory reconciliation   report and calculation of Actual Annual Yield under   Section 2.2(a) of the Master Manufacturing Services Agreement dated   August 21, 2014 (the “Agreement”)
    

 

	
Reporting quarter:
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Active Materials on hand at beginning of Year:
    	
 
    	
 
    	
kg
    	
(A)
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Active Materials on hand at end of Year:
    	
 
    	
 
    	
kg
    	
(B)
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Quantity Received during Year:
    	
 
    	
 
    	
kg
    	
(C)
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Quantity Dispensed(2) during Year:
   (A + C – B)
    	
 
    	
 
    	
kg
    	
(D)
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Quantity Converted during Year:
   (total Active Materials in Products produced and not rejected, recalled or   returned)
    	
 
    	
 
    	
kg
    	
(E)
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Active Materials Credit Value:
    	
 
    	
$
    	
 
    	
/kg
    	
(F)
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Target Yield:
    	
 
    	
 
    	
%
    	
(G)
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Actual Annual Yield:
   ((E/D * 100)
    	
 
    	
 
    	
%
    	
(H)
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Shortfall:
   (((G-5) – H)/100) * F * D
    	
 
    	
$
    	
 
    	
 
    	
(I)
    

 

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

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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

 

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

 

	
Date:
    	
 
    	
 
    

 

PATHEON PHARMACEUTICALS INC.

[or applicable Patheon entity]

 

 

	
Per:
    	
 
    	
 
    
	
Name:
    	
 
    
	
Title:
    	
 
    

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

EXHIBIT E

EXAMPLE OF PRICE ADJUSTMENT DUE TO CURRENCY FLUCTUATION

Section 4.2(d)

 

OANDA — Currency Converter   Currency Tools   Data Services

 

Historical Exchange Rates: Results

 

Conversion table:  USD to CAD (Interbank rate)

 

Time period: 10/01/11 to 09/30/12

 

Average (365 days): [***] — “set Exchange Rate”

 

SAMPLE EXCHANGE CALCULATION

 

	
Initial Exchange Rate:
    	
 
    	
[***]
    	
CAD/USD
    
	
Set Exchange Rate:
    	
 
    	
[***]
    	
CAD/USD
    
	
 
    	
 
    	
 
    	
 
    
	
Initial Price:
    	
 
    	
[***]
    	
 
    
	
Revised Price (FX):
    	
 
    	
[***] (Material price and PPI   adjustments)
    

 

Calculation

 

[Revised Price (after FX)] = [Revised Price (Before FX)] X [Initial Exchange Rate] / [Set Exchange Rate]

 

= [***] X [[***]/[***]]

 

= [***]

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00287-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00287-of-00352.parquet"}]]