Document:

exv10w4

Exhibit 10.4

WILLIS
GROUP HOLDINGS

OPTION AGREEMENT

(Performance-Based Share Options)

GRANTED
UNDER THE HILB ROGAL & HOBBS COMPANY

2007 SHARE INCENTIVE PLAN

(AS AMENDED AND RESTATED ON DECEMBER 30, 2009 BY WILLIS GROUP

HOLDINGS LIMITED AND AS AMENDED AND RESTATED AND ASSUMED BY

WILLIS GROUP HOLDINGS PUBLIC LIMITED COMPANY

ON DECEMBER 31, 2009)

     THIS OPTION AGREEMENT (this “Agreement”), effective as of [INSERT DATE] is made by and between
Willis Group Holdings Public Limited Company and any successor thereto (hereinafter referred to as
the “Company”) and the individual (the “Optionee”) who has duly completed, executed and delivered
the Award Acceptance Form, a copy of which attached hereto as Schedule A and which is deemed to be
part hereof (the “Acceptance Form”) and, if applicable, the Agreement of Restrictive Covenants and
Other Obligations, a copy of which is set out in Schedule C attached hereto and deemed to be a part
hereof;.

     WHEREAS, the Company wishes to carry out the Plan (as hereinafter defined), the terms of which
are hereby incorporated by reference and made a part of this Agreement; and

     WHEREAS, the Committee (as hereinafter defined) has determined that it would be to the
advantage and best interest of the Company and its shareholders to grant the Option (as hereinafter
defined) provided for herein to the Optionee as an incentive for increased efforts on the part of
the Optionee during the Optionee’s employment with the Company or its Subsidiaries (as hereinafter
defined), and has advised the Company thereof and instructed the undersigned officer to prepare
said Option.

     NOW, THEREFORE, the parties hereto do hereby agree as follows:

ARTICLE I

DEFINITIONS

Defined terms in this Agreement shall have the meaning specified in the Plan or below unless
the context clearly indicates to the contrary.

Section 1.1 - Act

     “Act” shall mean the Companies Act 1963 of Ireland.

Section 1.2
- Adjusted Earnings Per Share

     “Adjusted Earnings Per Share” shall mean the adjusted earnings per share as
stated by the Company in its annual financial results as issued by the Company with respect to the
Performance Period.

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Section 1.3 - Adjusted Operating Margin

     “Adjusted Operating Margin” shall mean the adjusted operating margin as stated
by the Company in its annual financial results as issued by the Company with respect to the
Performance Period.

Section 1.4 - Board

     “Board” shall mean the board of directors of the Company.

Section 1.5 - Cause

     “Cause” shall mean (i) the Optionee’s continued and/or chronic failure to adequately
and/or competently perform his material duties with respect to the Company or its Subsidiaries
after having been provided reasonable notice of such failure and a period of at least ten days
after the Optionee’s receipt of such notice to cure and/or correct such performance failure, (ii)
willful misconduct by the Optionee in connection with the Optionee’s employment which is injurious
to the Company or its Subsidiaries (willful misconduct shall be understood to include, but not be
limited to, any breach of the duty of loyalty owed by the Optionee to the Company or its
Subsidiaries), (iii) conviction of any criminal act (other than minor road traffic violations not
involving imprisonment), (iv) any breach of the Optionee’s restrictive covenants and other
obligations as provided in Schedule C to this Agreement (if applicable), in the Optionee’s
employment agreement (if any), or any other 

non-compete agreement and/or confidentiality agreement
entered into between the Optionee and the Company or any of its Subsidiaries (other than an
insubstantial, inadvertent and non-recurring breach), or (v) any material violation of any written
Company policy after reasonable notice and an opportunity to cure such violation within ten (10)
days after the Optionee’s receipt of such notice.

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Section 1.6 - Change of Control

     “Change of Control” shall mean (a) the acquisition of ownership, directly or
indirectly, beneficially or of record, by any Person or group (within the meaning of the Exchange
Act and the rules of the U.S. Securities and Exchange Commission thereunder as in effect on the
date hereof) of the Ordinary Shares representing more than 50% of the aggregate voting power
represented by the issued and outstanding Ordinary Shares; or (b) occupation of a majority of the
seats (other than vacant seats) on the Board by persons who were neither (i) nominated by the
Board nor (ii) appointed by directors so nominated. For the avoidance of doubt, a transaction shall
not constitute a Change of Control (i) if effected for the purpose of changing the place of
incorporation or form of organization of the ultimate parent entity of the Willis Group (including
where the Company is succeeded by an issuer incorporated under the laws of another state, country
or foreign government for such purpose and whether or not the Company remains in existence
following such transaction) and (ii) where all or substantially all of the person(s) who are the
beneficial owners of the outstanding voting securities of the Company immediately prior to such
transaction will beneficially own, directly or indirectly, all or substantially all of the combined
voting power of the outstanding voting securities entitled to vote generally in the election of
directors of the ultimate parent entity resulting from such transaction in substantially the same
proportions as their ownership, immediately prior to such transaction, of such outstanding
securities of the Company.

Section 1.7 - Committee

     “Committee” shall mean the Compensation Committee of the Board or any successor
thereto.

Section 1.8 - Earned Date

     “Earned Date” shall mean the date that the annual financial results of the Company are
issued by the Company.

Section 1.9 - Earned Performance Shares

     “Earned Performance Shares” shall mean Shares subject to the Option in respect of which
the applicable Performance Objectives, as set out in Section 3.1, have been achieved and shall
become vested and exercisable as set out in Section 3.2.

Section 1.10 - Grant Date

     “Grant Date” shall mean [INSERT DATE].

Section 1.11 - Option

     “Option” shall mean the option to purchase Ordinary Shares of the Company
granted in accordance with this Agreement and the Plan.

Section 1.12 - Option Price

     “Option Price” shall mean the price per Share purchased on exercise of the Option, as set
forth in the Acceptance Form. The Option Price per Share shall not be less than 100% of the Fair
Market Value of one Share on the Grant Date.

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Section 1.13 - Performance Period

     “Performance Period” shall mean [INSERT PERFORMANCE PERIOD].

Section 1.14 - Performance Objectives

     “Performance Objectives” shall mean the performance objectives based on an Adjusted Earnings
Per Share or Adjusted Operating Margin that are set forth in Section 3.1(a).

Section 1.15 - Permanent Disability

     The Optionee shall be deemed to have a “Permanent Disability” if the Optionee meets the
requirements of the definition of such term, or of an equivalent term, as defined in the Company’s
or Subsidiary’s long-term disability plan applicable to the Optionee or, if no such plan is
applicable, in the event the Optionee is unable by reason of physical or mental illness or other
similar disability, to perform the material duties and responsibilities of his job for a period of
180 consecutive business days out of 270 business days.

Section 1.16 - Person

     “Person” shall have the meaning ascribed to such term used in Sections 13(d) and
14(d) of the Exchange Act.

Section 1.17 - Plan

     “Plan” shall mean the Hilb Rogal & Hobbs Company 2007 Share Incentive Plan, as
amended from time to time.

Section 1.18 - Pronouns

     The masculine pronoun shall include the feminine and neuter, and the singular the plural,
where the context so indicates.

Section 1.19 - Shares or Ordinary Shares

     “Shares” or “Ordinary Shares” means ordinary shares of the Company, which may be authorised
but unissued.

Section 1.20 - Subsidiary

     “Subsidiary” shall mean a body corporate which is a subsidiary of the Company
within the meaning of Section 155 of the Act. For purposes of granting share options or any other
“stock rights,” within the meaning of Section 409A of the Code, an entity shall not be considered a
Subsidiary if granting any such share right would result in the share right becoming subject to
Section 409A of the Code. For purposes of granting U.S. incentive stock options, an entity shall
not be considered a Subsidiary if it does not also meet the requirements of Section 424(f) of the
Code.

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Section 1.21 - Willis Group

     “Willis Group” shall mean the Company and its Subsidiaries collectively.

ARTICLE II

GRANT OF OPTIONS

Section 2.1 - Grant of Options

     Subject to the terms and conditions of the Plan and the additional terms and conditions
set forth in this Agreement, including any 

country-specific provisions set forth in Schedule B to
this Agreement, the Company hereby grants to the Optionee an Option to purchase all or part of the
aggregate number of Shares, as stated in the Acceptance Form. In circumstances where Optionee is
required to enter into the Agreement of Restrictive Covenants and Other Obligations set forth in
Schedule C, the Optionee agrees that the grant of an Option pursuant to this Agreement is
sufficient consideration for the Optionee entering into such agreement.

Section 2.2 - Option Price

     Subject to Section 2.4, the Option Price of each Share subject to the Option shall be as
stated in the Acceptance Form.

Section 2.3 - Employment Rights

     Subject to the terms of the Agreement of Restrictive Covenants and Other Obligations
where applicable, the rights and obligations of the Optionee under the terms of his office or
employment with the Company or any Subsidiary shall not be affected by his participation in this
Plan or any right which he may have to participate in it. The Option and the Optionee’s
participation in the Plan will not be interpreted to form an employment agreement with the Company
or any Subsidiary. The Optionee hereby waives any and all rights to compensation or damages in
consequence of the termination of his office or employment for any reason whatsoever insofar as
those rights arise or may arise from his ceasing to have rights under or be entitled to earn, vest
in or exercise any Option as a result of such termination. If, notwithstanding the foregoing, any
such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, the
Optionee shall be deemed irrevocably to have agreed not to pursue such claim and agrees to execute
any and all documents necessary to request dismissal or withdrawal of such claims.

Section 2.4 - Adjustments Upon a Change in Ordinary Shares

     In accordance with and subject to Article X of the Plan, in the event that the Shares
subject to any Option are, from time to time, changed into or exchanged for a different number or
kind of Shares or other securities, by reason of a (i) share dividend, share split-up, subdivision
or consolidation of shares or other similar changes in capitalization; (ii) spin-off, spin-out,
split-up, split-off, or other such distribution of assets to shareholders; or (iii) direct or
indirect assumptions and/or conversions of outstanding Options due to an acquisition of the
Company, then the terms of the Option shall be adjusted as the Committee shall determine to be
equitably required, provided the number of Shares subject to the Option shall always be a whole
number. Any such adjustment or determination made by the Committee shall be final and binding upon
the Associate, the Company and all other interested persons.

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ARTICLE III

PERIOD OF EXERCISABILITY

Section 3.1 - Commencement of Earning

     (a) Subject to Sections 3.1(b) and 3.1(d), the Shares subject to Option shall become
Earned Performance Shares as of the Earned Date and shall become eligible to vest and become
exercisable in accordance with the provisions of Section 3.2 if the following Performance
Objectives are attained and subject to the Optionee being in the employment of the Company or any
Subsidiary at each respective vesting date.

     (i) A number of Shares equal to 50% of the Shares subject to the Option shall become Earned
Performance Shares if in respect to the Performance Period the Company achieves an Adjusted
Earnings Per Share of not less than [INSERT VALUE].

     (ii) A number of Shares equal to 50% of the Shares subject to the Option shall become Earned
Performance Shares if in respect of the Performance Period the Company achieves an Adjusted
Operating Margin of not less than [INSERT PERCENTAGE].

     (b) The Optionee understands and agrees that the terms under which the Option shall become
Earned Performance Shares as described in Section 3.1(b) above is confidential and the Optionee
agrees not to disclose, reproduce or distribute such confidential information concerning the
Company, except as required in the course of the Optionee’s employment with the Company or one of
its Subsidiaries, without the prior written consent of the Company. The Optionee’s failure to
abide by this condition may result in the immediate cancellation of the Option.

     (c) As promptly as practicable following the Performance Period, the Committee shall determine
whether the applicable Performance Objectives were attained, and based on such determination, shall
declare the number of Shares subject to the Option that shall become Earned Performance Shares.
Anything to the contrary in this Section 3.1 notwithstanding, the Committee retains sole discretion
to determine the number of Shares subject to the Option that will become Earned Performance Shares

     (d) All Shares subject to the Option that are not declared by the Committee on the Earned Date
to be Earned Performance Shares shall be forfeited immediately.

Section 3.2 - Vesting/Exercisability

     (a) Subject to the Optionee’s continued employment with the Willis Group through the
applicable vesting date (set forth in the left column), the Earned Performance Shares shall vest
and become exercisable in accordance with Section 3.2 below:

	 	 	 
	 	 	Percentage of Earned Performance
	Date Earned Performance Shares Become Vested	 	Shares that Become Vested
	Second anniversary of Grant Date	 	 
	[INSERT DATE]
	 	[INSERT]%
	 	 	 
	Third anniversary of Grant Date	 	 
	[INSERT DATE]
	 	[INSERT]%
	 	 	 
	Fourth anniversary of Grant Date	 	 
	[INSERT DATE]
	 	[INSERT]%
	 	 	 
	Fifth anniversary of Grant Date	 	 
	[INSERT DATE]
	 	[INSERT]%

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     (b) In the event of a termination of the Optionee’s employment as a result of death or
Permanent Disability, then (i) the Earned Performance Shares and the Option in respect thereof
shall become immediately vested and exercisable with respect to all of the Shares underlying such
Option through the time period set forth in Section 3.3 (b) below, and (ii) as of the date of
termination of employment, any portion of the Option which then has not become an Earned
Performance Share shall immediately terminate and will at no time be exercisable.

     (c) Notwithstanding anything herewith to the contrary, at the discretion of the Committee, the
Option over Earned Performance Shares that have not yet vested shall immediately terminate and will
at no time become exercisable, except that the Committee may, for termination of employment for
reasons other than death, Permanent Disability or Cause, determine in its discretion that the
Option over the Earned Performance Shares that have not yet vested and become exercisable, shall
become vested and exercisable.

     (d) In the event of a termination of the Optionee’s employment for any reason other than death
or Permanent Disability, then the Earned Performance Shares that have vested and become exercisable
and the Option in respect thereof shall remain exercisable through the time period set forth in
Section 3.3 (b) below.

     (e) In the event of a Change of Control (as defined in the Agreement), the Option shall not
automatically vest and become exercisable and the Committee shall have the sole discretion to
accelerate the vesting of unvested Earned Performance Shares without regard to whether the Earned
Performance Shares are assumed or substituted by a successor company.

Section 3.3 - Expiration of Options

     (a) The Option shall immediately lapse upon the termination of the Optionee’s employment,
subject to, and except as otherwise specified within, the terms and conditions of Section 3.2
above.

     (b) The Option over Earned Performance Shares that has become vested and exercisable in
accordance with Section 3.2 will cease to be exercisable by the Optionee upon the first to occur of
the following events:

     (i) The eighth anniversary of the Grant Date; or

     (ii) The first anniversary of the date of the Optionee’s termination of employment by reason
of death or Permanent Disability; or

     (iii) Ninety days after the date of any termination of the Optionee’s employment by the
Company or its Subsidiary for any reason other than (A) death or Permanent

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Disability or (B) where the Committee has exercised its discretion in accordance with Section
3.2(c) above; or

     (iv) Six calendar months after the date of termination provided the Committee has exercised
its discretion pursuant to Section 3.2(c) above and termination is other than for Cause; or

     (v) If the Committee so determines pursuant to Section 3.2(e) of this Agreement, the effective
date of a Change of Control, so long as the Optionee has a reasonable opportunity to exercise his
Options prior to such effective date.

     (c) The Optionee agrees to execute and deliver the following agreements or other documents in
connection with the grant of the Option within the period set forth below:

     (i) the Optionee must execute the Agreement of Restrictive Covenants and Other Obligations
pursuant to Article VII below, if applicable, and deliver it to the Company within 45 days of the
receipt of this Agreement;

     (ii) the Optionee must execute the Option Acceptance Form and deliver it to the Company within
45 days of the receipt of this Agreement; and

     (iii) the Optionees who are resident in the United Kingdom must execute the form of joint
election as described in terms set forth in Schedule B for the United Kingdom and deliver it to
their employing company within 45 days of the receipt of this Agreement.

     (d) The Committee may, in its sole discretion, cancel the Option, if the Optionee fails to
execute and deliver the agreements and documents within the period set forth in Section 3.3(c) or
fails to meet the requirements set forth in Section 3.1(a).

ARTICLE IV

EXERCISE OF OPTION

Section 4.1 - Person Eligible to Exercise

     During the lifetime of the Optionee, only he may exercise an Option or any portion
thereof. After the death of the Optionee, any exercisable portion of an Option may, prior to the
time when an Option becomes unexercisable under Section 3.3, be exercised by any person empowered
to do so under the Optionee’s will or under then applicable laws of inheritance.

Section 4.2 - Partial Exercise

     Any exercisable portion of an Option or the entire Option, if then wholly exercisable,
may be exercised in whole or in part at any time prior to the time when the Option or portion
thereof becomes unexercisable under Section 3.3; provided, however, that any partial exercise shall
be for whole Shares only.

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Section 4.3 - Manner of Exercise

     An Option, or any exercisable portion thereof, may be exercised solely by delivering to
the Secretary or his office or the Company’s agent if so directed all of the following prior to the
time when the Option or such portion becomes unexercisable under Section 3.3:

     (a) Notice in writing signed by the Optionee or the other person then entitled to exercise the
Option or portion thereof, stating that the Option or portion thereof is thereby exercised, such
notice complying with all applicable rules established by the Committee and made available to the
Optionee (or such other person then entitled to exercise the Option);

     (b) Full payment (in cash, by cheque, electronic transfer, by way of a cashless exercise as
approved by the Company, by way of surrender of Shares to the Company or by a combination thereof)
of the Option Price for the Shares with respect to which such Option or portion thereof is
exercised;

     (c) Full payment to the Company or any Subsidiary by which the Optionee is employed (the
“Employer”), of all income tax, payroll tax, payment on account, and social insurance contributions
amounts (“Tax”) which, under federal, state, local or foreign law, it is required to withhold upon
exercise of the Option; and

     (d) In a case where any Employer is obliged to (or would suffer a disadvantage if it were not
to) account for any Tax (in any jurisdiction) for which the Optionee is liable by virtue of the
Optionee’s participation in the Plan and/or any social security contributions recoverable from and
legally applicable to the Optionee (the “Tax-Related Items”), the Optionee has either:

     (i) made full payment to the Employer of an amount equal to the Tax-Related Items, or

     (ii) entered into arrangements acceptable to the Employer or another Subsidiary to secure
that such a payment is made (whether by withholding from the Optionee’s wages or other cash
compensation paid to the Optionee or from the proceeds of the sale of Shares acquired at exercise
of the Option either through a voluntary sale or through a mandatory sale arranged by the Company
(on the Optionee’s behalf pursuant to this authorization)).

     (e) In the event the Option or any portion thereof shall be exercised pursuant to Section 4.1
by any person or persons other than the Optionee, appropriate proof of the right of such person or
persons to exercise the Option.

     Without limiting the generality of the foregoing, the Committee may prior to exercise, require
an opinion of counsel reasonably acceptable to it to the effect that any subsequent transfer of
Shares acquired on exercise of an Option does not violate the Exchange Act and may issue
stop-transfer orders in the U.S. covering such Shares.

Section 4.4 - Conditions to Issuance of Shares

     The Earned Performance Shares to be delivered upon the exercise of an Option, or any
portion thereof, in accordance with Section 3.2 of this Agreement may be either previously
authorized but unissued Shares or issued Shares held by any other person. Such Shares shall be
fully paid. The Company shall not be required to issue or deliver any certificates representing

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such Shares or their electronic equivalent granted upon the exercise of an Option or portion
thereof prior to fulfillment of all of the following conditions:

     (a) The obtaining of approval or other clearance from any state, federal, local or foreign
governmental agency which the Committee shall, in its absolute discretion, determine to be
necessary or advisable; and

     (b) The lapse of such reasonable period of time following the exercise of the Option as the
Committee may from time to time establish for reasons of administrative convenience.

Section 4.5 - Rights as Shareholder

     The Optionee shall not be, nor have any of the rights or privileges of, a shareholder of
the Company in respect of any Shares that may be received upon the exercise of the Option or any
portion thereof unless and until certificates representing such Shares or their electronic
equivalent shall have been issued by the Company to the Optionee.

ARTICLE V

ADDITIONAL TERMS AND CONDITIONS OF OPTION

Section 5.1 - Nature of Grant

     In accepting the Option, the Optionee acknowledges, understands and agrees that:

     (a) the Plan is established voluntarily by the Company, is discretionary in nature and may be
amended, suspended or terminated by the Company at any time;

     (b) the grant of the Option is voluntary and occasional and does not create any contractual or
other right to receive future options, or benefits in lieu of options, even if options have been
granted repeatedly in the past;

     (c) all decisions with respect to future Option grants, if any, will be at the sole discretion
of the Company;

     (d) the Optionee’s participation in the Plan is voluntary;

     (e) the Option and any Shares acquired under the Plan are not intended to replace any pension
rights or compensation under any pension arrangement;

     (f) the Option and any Shares acquired under the Plan are not part of normal or expected
compensation or salary for any purposes, including, but not limited to, calculating any severance,
resignation, termination, redundancy, end of service payments, dismissal, bonuses, long-service
awards, pension or retirement or welfare benefits or similar payments and in no event should be
considered as compensation for, or relating in any way to past services for, the Employer, the
Company or a Subsidiary;

     (g) the future value of the Shares underlying the Option is unknown and cannot be predicted
with certainty; and

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     (h) if the Optionee exercises the Option and acquires Shares, the value of such Shares may
increase or decrease in value, even below the Option Price.

Section 5.2 -No Advice Regarding Grant

     The Company is not providing any tax, legal or financial advice, nor is the Company making any
recommendations regarding the Optionee’s participation in the Plan, or the issuance of Shares upon
exercise of the Option or sale of the Shares. The Optionee is hereby advised to consult with his
own personal tax, legal and financial advisors regarding his participation in the Plan before
taking any action related to the Plan.

ARTICLE VI

DATA PRIVACY NOTICE AND CONSENT

Section 6 - Data Privacy

     (a) The Optionee hereby explicitly and unambiguously consents to the collection, use and
transfer, in electronic or other form, of the Optionee’s personal data as described in this
Agreement and any other Option grant materials by and among, as applicable, the Employer, the
Company and its Subsidiaries for the exclusive purpose of implementing, administering and managing
the Optionee’s participation in the Plan.

     (b) The Optionee understands that the Company and the Employer may hold certain personal
information about the Optionee, including, but not limited to, the Optionee’s name, home address,
telephone number, date of birth, social insurance number or other identification number, salary,
nationality, job title, any Shares or directorships held in the Company, details of all Options or
any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in
the Optionee’s favor, for the exclusive purpose of implementing, administering and managing the
Plan (“Data”).

     (c) The Optionee understands that Data will be transferred to Morgan Stanley SmithBarney or to
any other third party assisting in the implementation, administration and management of the Plan.
The Optionee understands that the recipients of the Data may be located in the Optionee’s country
or elsewhere, and that the recipients’ country (e.g., Ireland) may have different data privacy laws
and protections from the Optionee’s country. The Optionee understands that he may request a list
with the names and addresses of any potential recipients of the Data by contacting his local human
resources representative. The Optionee authorizes the Company, Morgan Stanley SmithBarney and any
other recipients of Data which may assist the Company (presently or in the future) with
implementing, administering and managing the Plan to receive, possess, use, retain and transfer the
Data, in electronic or other form, for the sole purpose of implementing, administering and managing
his participation in the Plan. The Optionee understands that Data will be held only as long as is
necessary to implement, administer and manage the Optionee’s participation in the Plan. The
Optionee understands that he may, at any time, view Data, request additional information about the
storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the
consents herein, in any case without cost, by contacting in writing his local human resources
representative. The Optionee understands, however, that refusing or withdrawing his consent may
affect the Optionee’s ability to participate in the Plan. For more information on the consequences
of the Optionee’s refusal to consent or withdrawal of consent, the Optionee understands that he may
contact his local human resources representative.

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ARTICLE VII

AGREEMENT OF RESTRICTIVE COVENANTS AND OTHER OBLIGATIONS

Section 7 - Restrictive Covenants and Other Obligations

     In consideration of the grant of an Option, the Optionee shall enter into the Agreement of
Restrictive Covenants and Other Obligations, a copy of which is attached hereto as Schedule C. In
the event the Optionee does not sign and return the Agreement of Restrictive Covenants and Other
Obligations within 45 days of the receipt of this Agreement, the Committee may, in its sole
discretion, cancel the Option. If no such agreement is required, Schedule C shall state none or
not applicable.

ARTICLE VIII

MISCELLANEOUS

Section 8.1 - Administration

     The Committee shall have the power to interpret the Plan and this Agreement and to adopt
such rules for the administration, interpretation and application of the Plan as are consistent
therewith and to interpret or revoke any such rules. All actions taken and all interpretations and
determinations made by the Committee shall be final and binding upon the Optionee, the Company and
all other interested persons. No member of the Committee shall be personally liable for any
action, determination or interpretation made in good faith with respect to the Plan or the Options.
In its absolute discretion, the Committee may at any time and from time to time exercise any and
all rights and duties of the Committee under the Plan and this Agreement.

Section 8.2 - Options Not Transferable

     Neither the Options nor any interest or right therein or part thereof shall be subject to
the debts, contracts or engagements of the Optionee or his successors in interest or shall be
subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or
any other means whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including
bankruptcy), and any attempted disposition thereof shall be null and void and of no effect;
provided, however, that this Section 8.2 shall not prevent transfers made solely for estate
planning purposes or under a will or by the applicable laws of inheritance.

Section 8.3 - Binding Effect

     The provisions of this Agreement shall be binding upon and accrue to the benefit of the
parties hereto and their respective heirs, legal representatives, successors and assigns.

Section 8.4 - Notices

     Any notice to be given under the terms of this Agreement to the Company shall be
addressed to the Company at the following address:

Willis Group Holdings Public Limited Company

c/o Willis North America, Inc.

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One World Financial Center

New York, NY 10281

Attention: General Counsel

and any notice to be given to the Optionee shall be at the address set forth in the Option
Acceptance Form.

     By a notice given pursuant to this Section 8.4, either party may hereafter designate a
different address for notices to be given to him. Any notice that is required to be given to the
Optionee shall, if the Optionee is then deceased, be given to the Optionee’s personal
representatives if such representatives have previously informed the Company of their status and
address by written notice under this Section 8.4. Any notice shall have been deemed duly given
when sent by facsimile or enclosed in a properly sealed envelope or wrapper addressed as aforesaid,
deposited (with postage prepaid) in a post office or branch post office regularly maintained by the
United States Postal Service or the United Kingdom’s Post Office or in the case of a notice given
by an Optionee resident outside the United States of America or the United Kingdom, sent by
facsimile or by a recognized international courier service.

Section 8.5- Titles

     Titles are provided herein for convenience only and are not to serve as a basis for
interpretation or construction of this Agreement.

Section 8.6- Applicability of Plan

     The Options and the Earned Performance Shares underlying the Options shall be subject to
all of the terms and provisions of the Plan, to the extent applicable to the Options. With the
exception of the definition of Change of Control, in the event of any conflict between this
Agreement and the Plan, the terms of the Plan shall control.

Section 8.7- Amendment

     The Committee shall have authority to make such amendments to this Agreement as are consistent
with the Plan.

Section 8.8 - Governing Law

     This Agreement shall be governed by, and construed in accordance with the laws of the
Commonwealth of Virginia; without regards to its conflicts of law provisions, provided, however,
that the Agreement of Restrictive Covenants and Other Obligations, if applicable, shall be governed
by and construed in accordance with the laws specified in that agreement.

Section 8.9 - Jurisdiction

     The courts of the state of New York shall have jurisdiction to hear and determine any
suit, action or proceeding and to settle any disputes which may arise out of or in connection with
this Agreement and, for such purposes, the parties hereto irrevocably submit to the jurisdiction of
such courts; provided, however, where applicable, that with respect to the Agreement of Restrictive
Covenants and Other Obligations the courts specified in such agreement shall have jurisdiction to
hear and determine any suit, action or proceeding and to settle any disputes which may arise out of
or in connection with that agreement.

13

 

Section 8.10 - Electronic Delivery

     The Company may, in its sole discretion, decide to deliver any documents related to
current or future participation in the Plan by electronic means. The Optionee hereby consents to
receive such documents by electronic delivery and agrees to participate in the Plan through an
on-line or electronic system established and maintained by the Company or a third party designated
by the Company.

Section 8.11 - Language

     If the Optionee has received this Agreement, or any other document related to the Option
and/or the Plan translated into a language other than English and if the translated version is
different than the English version, the English version will control.

Section 8.12 - Severability

     The provisions of this Agreement are severable and if any one or more provisions are
determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions
shall nevertheless be binding and enforceable.

Section 8.13 - Schedule B

     The Option shall be subject to any special provisions set forth in Schedule B for the
Optionee’s country of residence, if any. If the Optionee relocates to one of the countries
included in Schedule B during the life of the Option, the special provisions for such country shall
apply to the Optionee, to the extent the Company determines that the application of such provisions
is necessary or advisable in order to comply with local law or facilitate the administration of the
Plan. Schedule B constitutes part of this Agreement.

Section 8.14 - Imposition of Other Requirements

     The Company reserves the right to impose other requirements on the Option and the Shares
acquired upon exercise of the Option, to the extent the Company determines it is necessary or
advisable in order to comply with local laws or facilitate the administration of the Plan, and to
require the Optionee to sign any additional agreements or undertakings that may be necessary to
accomplish the foregoing.

14

 

Section 8.15 - Counterparts

     This Agreement may be executed in any number of counterparts (including by facsimile),
each of which shall be deemed to be an original and all of which together shall constitute one and
the same instrument.

     IN WITNESS WHEREOF the Company and the Optionee have each executed this Agreement.

	 	 	 	 	 
	 	WILLIS GROUP HOLDINGS PUBLIC LIMITED COMPANY

 	 
	 	By: 	 	 
	 	Name:  	 
	 	Title:  	 
	 

15

 

SCHEDULE A

WILLIS
GROUP HOLDINGS

OPTION
AGREEMENT- ACCEPTANCE FORM

HILB
ROGAL & HOBBS COMPANY

2007 SHARE INCENTIVE PLAN

(AS AMENDED AND RESTATED ON DECEMBER 30, 2009 BY WILLIS GROUP

HOLDINGS LIMITED AND AS AMENDED AND RESTATED AND ASSUMED BY

WILLIS GROUP HOLDINGS PUBLIC LIMITED COMPANY

ON DECEMBER 31, 2009)

	 	 	 

	Name
	 	 
	 
	 	 
	Number of Shares Granted Under Option
	 	 
	 
	 	 
	Grant Date

	 	[TBD]
	 
	 	 
	Option Price

	 	[TBD]

I accept the grant of the Option under the Hilb Rogal & Hobbs 2007 Share Incentive Plan, as amended
from time to time and I agree to be bound by the terms and conditions of the Option Agreement dated
[TBD] and any country-specific terms set forth in Schedule B, thereto.

	 

	Signature:

	 

	Address:

Once completed, please return one copy of this form to:

General Counsel

Willis Group Holdings Public Limited Company

c/o Willis North America, Inc.

One World Financial Center

New York, NY 10281

U.S.A.

This form should be returned to the above address within 45 days of receipt. Your option may be
cancelled if your form is not received by that date.

16

 

SCHEDULE B

WILLIS
GROUP HOLDINGS

COUNTRY-SPECIFIC
APPENDIX TO OPTION AGREEMENT

HILB
ROGAL & HOBBS COMPANY

2007 SHARE INCENTIVE PLAN

(AS AMENDED AND RESTATED ON DECEMBER 30, 2009 BY WILLIS GROUP

HOLDINGS LIMITED AND AS AMENDED AND RESTATED AND ASSUMED BY

WILLIS GROUP HOLDINGS PUBLIC LIMITED COMPANY

ON DECEMBER 31, 2009)

Terms and Conditions

This Schedule B includes additional terms and conditions that govern the Option granted to the
Optionee under the Hilb Rogal & Hobbs 2007 Share Incentive Plan, as amended from time to time (the
“Plan”) if the Optionee resides in one of the countries listed below. This Schedule B forms part of
the Agreement. Capitalized terms used but not defined herein shall have the meanings ascribed to
them in the Agreement or the Plan.

Notifications

This Schedule B also includes information based on the securities, exchange control and other laws
in effect in the Optionee’s country as of July 2010. Such laws are often complex and change
frequently. As a result, the Company strongly recommends that the Optionee not rely on the
information noted herein as the only source of information relating to the consequences of the
Optionee’s participation in the Plan because the information may be out of date at the time the
Optionee exercises the Option under the Plan.

In addition, the information is general in nature. The Company is not providing the Optionee with
any tax advice with respect to the Option. The information is provided below may not apply to the
Optionee’s particular situation, and the Company is not in a position to assure the Optionee of any
particular result. Accordingly, the Optionee is strongly advised to seek appropriate professional
advice as to how the tax or other laws in the Optionee’s country apply to the Optionee’s situation.

If the Optionee is a citizen or resident of a country other than the one the Optionee is working in
or transfers employment after the Grant Date, the information contained in this Schedule B may not
be applicable the Optionee.

UNITED KINGDOM

Terms and Conditions

Tax Withholding Obligations. The following provisions supplement Section 4.3(d) of the Agreement:

The Optionee agrees that if he or she does not pay or the Employer or the Company does not withhold
from the Optionee the full amount of Tax-Related Items that the Optionee owes at

17

 

exercise of the Option, or the release or assignment of the Option for consideration, or the
receipt of any other benefit in connection with the Option (the “Taxable Event”), within 90 days
after the Taxable Event or such other period specified in section 222(1)(c) of the U.K. Income Tax
(Earnings and Pensions) Act 2003, then the amount that should have been withheld shall constitute a
loan owed by the Optionee to the Employer, effective 90 days after the Taxable Event. The Optionee
agrees that the loan will bear interest at the official rate of HM Revenue & Customs (“HMRC”) and
will be immediately due and repayable by the Optionee, and the Company and/or the Employer may
recover it at any time thereafter by withholding the funds from salary, bonus or any other funds
due to the Optionee by the Employer, by withholding in Shares issued upon exercise of the Option or
from the cash proceeds from the sale of Shares or by demanding cash or a check from the Optionee.
The Optionee also authorizes the Company to delay the issuance of any Shares unless and until the
loan is repaid in full.

The Optionee acknowledges that the Company or the Employer may recover any such additional income
tax and NICs at any time thereafter by any of the means referred to in the Section 4.3(d) of the
Agreement, although the Optionee acknowledges that the Optionee ultimately will be responsible for
reporting any income tax or National Insurance Contributions (“NICs”) due on this additional
benefit directly to HMRC under the self-assessment regime.

Joint Election

If the Optionee is a U.K. tax resident, the grant of this Option is conditional upon the Optionee
hereby agreeing to accept any liability for any employer National Insurance contributions
(“Employer NICs”) which may be payable by the Employer in connection with the exercise, assignment,
release or cancellation of any Option. The Employer NICs may be collected by the Company or the
Employer using any of the methods described in Section 4 of the Agreement. Without prejudice to the
foregoing, the Optionee agrees to execute a joint election with the Company and/or the Employer
(“Election”), the form of such Election being formally approved by HMRC, and any other consent or
elections required to accomplish the transfer of the Employer NICs to the Optionee. The Optionee
further agrees to execute such other joint elections as may be required between the Optionee and
any successor to the Company and/or the Employer. If the Optionee does not make an Election prior
to the vesting of the Option or if approval to the Election is withdrawn by HMRC and a new Election
is not entered into, without any liability to the Company, the Employer or any Subsidiary of the
Company, the Option shall become null and void without any liability to the Company and/or the
Employer and may not be exercised by the Optionee.

UNITED STATES OF AMERICA

Notifications

Tax Information

The Option is not an incentive stock option within the meaning of Section 422 of the Code.

Exchange Control Information. If the Optionee holds assets (i.e., Options, Shares) or other
financial assets in an account outside of the United States and the aggregate amount of said assets
is US$10,000 or more, the Optionee is required to submit a report of Foreign Bank and Financial
Account (“FBAR”) with the United States Internal Revenue Service by June 30 of the year following
the year in which the assets in his or her account meet the US$10,000 threshold.

18exv10w1

Confidential
Materials omitted and filed separately with the
Securities and
Exchange Commission. Asterisks denote omission.

Exhibit 10.1

Manufacturing Services Agreement

June 7, 2010

 

 

Table of Contents

	 	 	 	 	 

	ARTICLE 1 INTERPRETATION
	 	 	1	 
	1.1 Definitions 
	 	 	1	 
	1.2 Currency
	 	 	5	 
	1.3 Sections and Headings; Interpretation
	 	 	5	 
	1.4 Singular Terms
	 	 	6	 
	1.5 Schedules
	 	 	6	 
	ARTICLE 2 PATHEON’S MANUFACTURING SERVICES
	 	 	6	 
	2.1 Manufacturing Services
	 	 	6	 
	ARTICLE 3 PENWEST’S OBLIGATIONS
	 	 	7	 
	3.1 Payment
	 	 	7	 
	ARTICLE 4 PRICING AND COMPONENT COSTS
	 	 	7	 
	4.1 First Year Pricing
	 	 	7	 
	4.2 Price Adjustments — Subsequent Years’ Pricing
	 	 	7	 
	4.3 Price Adjustments — Current Year Pricing
	 	 	8	 
	4.4 Adjustments Due to Technical Changes
	 	 	8	 
	4.5 Audit Rights
	 	 	9	 
	4.6 Limitation on Price Adjustments
	 	 	9	 
	ARTICLE 5 ORDERS, SHIPMENT, INVOICING, PAYMENT
	 	 	9	 
	5.1 Orders and Forecasts
	 	 	9	 
	5.2 Orders
	 	 	11	 
	5.3 Shipments
	 	 	11	 
	5.4 On Time Delivery
	 	 	11	 
	5.5 Invoices and Payment
	 	 	12	 
	ARTICLE 6 PRODUCT CLAIMS, FAILURE TO SUPPLY AND RECALLS
	 	 	12	 
	6.1 Product Claims
	 	 	12	 
	6.2 Product Recalls and Product Returns
	 	 	13	 
	6.3 Patheon’s Responsibility for Defective and Recalled Products
	 	 	14	 

- i -

 

	 	 	 	 	 

	6.4 Failure to Supply
	 	 	14	 
	6.5 Disposition of Defective or Recalled Products
	 	 	15	 
	6.6 Healthcare Provider or Patient Questions and Complaints
	 	 	16	 
	6.7 Sole Remedy
	 	 	16	 
	ARTICLE 7 CO-OPERATION
	 	 	16	 
	7.1 Quarterly Review
	 	 	16	 
	7.2 Governmental Agencies
	 	 	16	 
	7.3 Records and Accounting by Patheon
	 	 	16	 
	7.4 Inspection
	 	 	17	 
	7.5 Access to the Facility; Audit Rights
	 	 	17	 
	7.6 Notification of Regulatory Inspections
	 	 	17	 
	7.7 Reports
	 	 	17	 
	7.8 FDA Filings
	 	 	17	 
	ARTICLE 8 TERM AND TERMINATION
	 	 	18	 
	8.1 Initial Term
	 	 	18	 
	8.2 Termination for Cause
	 	 	18	 
	8.3 Termination by Penwest
	 	 	19	 
	8.4 Obligations on Termination
	 	 	19	 
	ARTICLE 9 REPRESENTATIONS, WARRANTIES AND COVENANTS
	 	 	20	 
	9.1 Authority
	 	 	20	 
	9.2 Penwest Warranties
	 	 	20	 
	9.3 Patheon Warranties
	 	 	21	 
	9.4 Debarred Persons
	 	 	21	 
	9.5 Permits
	 	 	21	 
	9.6 No Warranty
	 	 	21	 
	ARTICLE 10 REMEDIES AND INDEMNITIES
	 	 	22	 
	10.1 Consequential Damages
	 	 	22	 
	10.2 Limitation of Liability
	 	 	22	 
	10.3 Patheon
	 	 	22	 

- ii -

 

	 	 	 	 	 

	10.4 Penwest
	 	 	23	 
	ARTICLE 11 CONFIDENTIALITY
	 	 	24	 
	11.1 Confidentiality
	 	 	24	 
	ARTICLE 12 DISPUTE RESOLUTION
	 	 	24	 
	12.1 Commercial Disputes
	 	 	24	 
	12.2 Technical Dispute Resolution
	 	 	25	 
	ARTICLE 13 MISCELLANEOUS
	 	 	25	 
	13.1 Inventions
	 	 	25	 
	13.2 Intellectual Property
	 	 	26	 
	13.3 Insurance
	 	 	26	 
	13.4 Independent Contractors
	 	 	26	 
	13.5 No Waiver
	 	 	26	 
	13.6 Assignment
	 	 	26	 
	13.7 Force Majeure
	 	 	26	 
	13.8 Additional Product
	 	 	27	 
	13.9 Notices
	 	 	27	 
	13.10 Severability
	 	 	28	 
	13.11 Entire Agreement
	 	 	29	 
	13.12 Other Terms
	 	 	29	 
	13.13 No Third Party Benefit or Right
	 	 	29	 
	13.14 Use of Penwest Name
	 	 	29	 
	13.15 Governing Law
	 	 	29	 
	13.16 Language Clause
	 	 	29	 
	13.17 Execution in Counterparts
	 	 	29	 

- iii -

 

MANUFACTURING SERVICES AGREEMENT

     THIS MANUFACTURING SERVICES AGREEMENT (the “Agreement”) is made as of this
7th day of June, 2010 (the “Effective Date”)

B E T W E E N:

	 	 	 	PATHEON INC.,
	 
	 	 	 	a corporation existing under the laws of Canada and having offices at 2100 Syntex Court, Mississauga, Ontario L5N 7K9, Canada,

	 	 	 	(“Patheon”),

- and -

	 	 	 	PENWEST PHARMACEUTICALS CO.,
	 
	 	 	 	a corporation existing under the laws of the state of Washington,
USA, and having offices at 2981 Route 22, Suite 2, Patterson, NY
12563, USA,

	 	 	 	(“Penwest”).

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

ARTICLE 1

INTERPRETATION

1.1 Definitions.

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

“Act” means the United States Food, Drug and Cosmetic Act, as amended from time to time, and
the regulations promulgated thereunder.

“Affiliate” means, with respect to either Party, any other corporation or business entity
that directly, or indirectly through one or more intermediaries, controls, is controlled by
or is under common control with such Party. For purposes of this definition, the term
“control” means direct or indirect ownership of more than fifty percent (50%) of the
securities or other ownership interests representing the equity voting stock or general
partnership or membership interest of such entity or the power to direct or cause the
direction of the management or policies of such entity, whether through the ownership of
voting securities, by contract, or otherwise.

- 1 -

 

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

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

“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.

“Batch” means a specific quantity of Product that is intended to have uniform character and
quality, within specified limits, and is produced according to a single manufacturing order
during the same cycle of manufacture.

“Bill Back Items” means the expenses for all Third Party supplier fees [**] and which are
not (a) included as Components, (b) identified on Schedule C as included in the
Price or (c) included in the annual stability testing in accordance with this Agreement and
Schedule D. For example, Bill Back Items includes [**].

“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 Province of Ontario, Canada or a state or federal holiday in the state of New
York, USA.

“Competitor of Patheon” has the meaning specified in Section 8.2(d).

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

“Confidentiality Agreement” means the agreement about the non-disclosure of confidential
information between Patheon and Penwest dated May 29, 2009. A true and accurate copy of the
Confidentiality Agreement is attached hereto as Schedule G.

“Current Good Manufacturing Practices” or “cGMPs” or “GMP” means current good manufacturing
practices, as applicable in accordance with the country(ies) in which Product will be
manufactured or distributed, the practices set out in the guidelines (i) published as the
Good Manufacturing Practices for Drug Manufacturers and Importers by the HPFBI, as amended
from time to time, with respect to Product manufactured or distributed in Canada, (ii) for
the manufacture of pharmaceutical products and the Current Good Manufacturing Practices as
defined in United States 21 CFR 210, et seq., as amended from time to time, with respect to
Product manufactured or distributed in the United States, and (iii) the EU Guidelines to
Good Manufacturing Practice for Medical Products for Human and Veterinary Use, as amended
from time to time, with respect to Product manufactured or distributed in the European
Union, and, in any event, (iv) such other relevant good manufacturing practices as required
by applicable Laws, including the latest Health Canada, FDA and EMEA guidance documents
pertaining to manufacturing and quality control practice, all as updated, amended and
revised from time to time.

- 2 -

 

“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(e).

“Effective Date” has the meaning set forth in the first paragraph of this Agreement.

“EMEA” means the European Medicines Agency.

“Facility” means the facility owned and operated by Patheon that is located at 111 Consumers
Drive, Whitby, Ontario, L1N 5Z5, or such other manufacturing site agreed to by the Parties
in writing in accordance with Section 2.1.

“Failure to Supply” has the meaning specified in Section 6.4(a).

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

“Firm Order” has the meaning specified in Section 5.1(c).

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

“Force Majeure Event” has the meaning specified in Section 13.7(a).

“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.

“Incoterms 2000” means the International Commercial Terms published by the International
Chamber of Commerce, as amended from time to time, codifying the contractual rules for the
interpretation of standardized commercial terms for transactions. Where referenced, the
relevant provisions of Incoterms 2000 shall be deemed to have been incorporated by reference
in this Agreement except in so far as they may conflict with any other provision of this
Agreement, in which case the Agreement provision shall prevail.

“Initial Manufacturing Month” has the meaning specified in Section 5.1(b).

“Initial Manufacturing Period” has the meaning specified in Section 5.1(b).

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

“Intellectual Property” means rights in patents, patent applications, formulae, trade-marks,
trade-mark applications, trade-names, Inventions, copyrights, industrial designs, trade
secrets, and know how.

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

- 3 -

 

“Inventory” means all inventories of Components and work-in-process produced or held by
Patheon for the manufacture of Product.

“Late Delivery” has the meaning specified in Section 5.4(b).

“Laws” means any law, statute, rule, regulation, guideline (including Current Good
Manufacturing Practices), ordinance or other pronouncement of any Governmental Authority
having the effect of law in the United States, Canada, or any other relevant country or any
territory in the world, or any domestic or foreign state, province, county, city or other
political subdivision.

“Manufacturing Process” means the manufacturing process for TIMERx®-N, including
the manufacturing process-schematic, set forth on Schedule B-2.

“Manufacturing Services” means the Product manufacturing, quality control, quality
assurance, stability testing, packaging, supply and related services set forth in
Schedule B-1.

“Party” means either Patheon or Penwest, individually; “Parties” means Patheon and Penwest,
collectively.

“Patheon Intellectual Property” means Intellectual Property, other than the Penwest
Intellectual Property that is (a) generated or derived by Patheon before performing any
Manufacturing Services, (b) developed by Patheon while performing the Manufacturing
Services, or (c) otherwise generated or derived by Patheon in its business.

“Penwest Intellectual Property” means Intellectual Property (a) generated or derived by
Penwest before entering into this Agreement or at any time during the Term, or (b) [**]
while performing any Manufacturing Services that is [**] (i) any Product or an improvement
thereto, including, for purposes of clarity, the composition, formulation, use or method of
manufacture of any Product, or (ii) the Manufacturing Process or an improvement to the
Manufacturing Process.

“Price” means the price measured in Canadian Dollars to be charged by Patheon for performing
the Manufacturing Services as set forth in Schedule C. For purposes of clarity, the
Price set forth on Schedule C incorporates the cost of Components and the items
identified on Schedule C.

“Product(s)” means TIMERxâ-N, as set forth on Schedule A, together
with any additional products the Parties agree in writing to add to Schedule A
pursuant to Section 13.8.

“Product Forecast” and “Extended Product Forecast” have the meanings specified in Section
5.1(a) and 5.1(d).

“Quality Agreement” means the agreement (the form of which is set forth in Schedule
E) between the Parties setting out the quality assurance standards for the Manufacturing
Services to be performed by Patheon for Penwest.

“Recall” means any action (i) by Penwest to recover title to or possession of quantities of
the Products sold or shipped to Third Parties (including the voluntary withdrawal of
Products from the market); or (ii) by any Regulatory Authorities to detain or destroy any of
the Products. Recall will

- 4 -

 

also include any action by either Party to refrain from selling
or shipping quantities of the Products to Third Parties which would have been subject to a
Recall if sold or shipped.

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

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

“RFID” means Radio Frequency Identification Devices which (at present or in the future) may
be affixed to Products or Components to assist in inventory control, tracking, and
identification.

“Specifications” means the specifications for TIMERx®-N set forth on Schedule
A.

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

“Term” has the meaning specified in Section 8.1.

“Third Party” means any person or entity other than the Parties or their Affiliates.

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

“TIMERxâ-N” means TIMERxâ-N, as used in several marketed
pharmaceutical products as of the Effective Date, and meeting the Specifications.

“TIMERxâ-N Formulation” means the TIMERxâ-N formulation
set forth on Schedule A.

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

1.2 Currency.

     Unless otherwise indicated, all monetary amounts are expressed in this Agreement in Canadian
dollars.

1.3 Sections and Headings; Interpretation.

     The division of this Agreement into Articles, Sections, Subsections, and Schedules and the
insertion of headings are for convenience of reference only and will not affect the interpretation
of this Agreement. Unless otherwise indicated, any reference in this Agreement to a Section or
Schedule refers to the specified Section or Schedule to this Agreement. In this Agreement, the
terms “this Agreement,” “hereof,” “herein,” “hereunder” and similar expressions refer to this
Agreement and not to any particular part, Section or Schedule of this Agreement. The terms of this
Agreement represent the results of negotiations between the Parties and their representatives, each
of which has been represented by counsel of its own choosing, and neither of which has acted under
duress or compulsion, whether legal, economic or otherwise. Accordingly, the terms of this
Agreement shall be interpreted and construed in accordance with their usual and customary meanings,
and each of the Parties hereto hereby waives the application in connection with the interpretation
and construction of this Agreement of any rule of Law to

- 5 -

 

the effect that ambiguous or conflicting terms or provisions contained in this Agreement shall
be interpreted or construed against the Party whose attorney prepared the executed draft or any
earlier draft of this Agreement.

     Except where the context otherwise requires, (a) any definition of or reference to any
agreement, instrument or other document refers to such agreement, instrument other document as from
time to time amended, supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein or therein), (b) any reference to any Law
refers to such Law as from time to time enacted, repealed or amended, (c) the words “include,”
“includes,” “including,” “exclude,” “excludes,” and “excluding,” shall be deemed to be followed by
the phrase “but not limited to,” “without limitation” or words of similar import, and (d) the word
“or” is used in the inclusive sense (and/or).

	1.4	 	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.

	1.5	 	Schedules.

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

	 	 	 	 	 

	Schedule A

	 	—
	 	Product Specifications and Formulation
	Schedule B-1

	 	—
	 	Manufacturing Services
	Schedule B-2

	 	—
	 	Manufacturing Process and Process Schematic
	Schedule C

	 	—
	 	Product Prices
	Schedule D

	 	—
	 	Annual Stability Testing Protocol and Costs
	Schedule E

	 	—
	 	Quality Agreement
	Schedule F

	 	—
	 	Technical Dispute Resolution
	Schedule G

	 	—
	 	Confidentiality Agreement
	Schedule H

	 	—
	 	Shipping Logistics Protocol

ARTICLE 2

PATHEON’S MANUFACTURING SERVICES

	2.1	 	Manufacturing Services.

     Patheon will perform the Manufacturing Services and supply Product to Penwest for the fees
specified in Schedule C and Schedule D and in accordance with the terms of this
Agreement. Patheon will bear all of its own costs and expenses incurred in performing the
Manufacturing Services unless otherwise specifically provided for in this Agreement. Subject to
Section 6.4 (Failure to Supply), the Manufacturing Services shall be performed at the Facility;
provided that Patheon may change the Facility only with the prior written consent of Penwest, this
consent not to be unreasonably withheld. If Manufacturing Services have not started within [**]
after the Effective Date, Patheon may amend the fees set out in Schedule C.

     Commencing on the date that the Facility is approved by the FDA for the manufacture of the
Product for use in finished pharmaceutical products for commercial sale, Patheon will be the sole
manufacturer of Product purchased by Penwest in any Year for the United States and Canada.
However,

- 6 -

 

Patheon acknowledges that Penwest may qualify an alternative supplier (i) where Penwest’s
agreements with its Third Party customer(s) require Penwest to qualify more than one supplier of
Product, (ii) where a pharmaceutical product comprising the Product that is developed, manufactured
or commercialized by a Penwest customer is unable to meet the applicable pharmaceutical product
specifications and such failure is due to the failure of Patheon to perform the Manufacturing
Services in accordance with the Specifications, the Manufacturing Process, cGMP’s, and applicable
laws or because the Product did not conform to the Specifications at the time of shipment      , or
(iii) if a Failure to Supply occurs. If required by an agreement between Penwest and its Third
Party customer(s) or for the reasons specified in clause (ii) of this paragraph, or if a Failure to
Supply occurs, Penwest shall be entitled to obtain Product from another supplier, provided,
however, that once Patheon is able to supply Penwest’s requirements for Product meeting the
Specifications on the Delivery Date for [**] consecutive Firm Orders, then, unless precluded by an
agreement between Penwest and its Third Party customer(s), Patheon shall be Penwest’s sole
manufacturer once again. Products in addition to TIMERxâ-N may be added to this
Agreement as specified in Section 13.8.

ARTICLE 3

PENWEST’S OBLIGATIONS

	3.1	 	Payment.

     Penwest will pay Patheon for performing the Manufacturing Services according to the prices
specified in Schedule C and Schedule D. These prices may be subject to adjustments
to the extent provided in Article 4 of this Agreement. Penwest will also pay Patheon for any Bill
Back Items as specified herein.

ARTICLE 4

PRICING AND COMPONENT COSTS

	4.1	 	First Year Pricing.

     The Price for the Product for the first Year are listed in Schedule C and are subject
to the adjustments set forth in Sections 4.2 and 4.3.

	4.2	 	Price Adjustments – Subsequent Years’ Pricing.

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

	 	(a)	 	Manufacturing Costs. Patheon may adjust the Price for inflation, based
upon the [**], unless the Parties otherwise agree in writing. On or about [**] of each
Year, Patheon will give Penwest a statement setting forth the calculation for the
inflation adjustment to be applied in calculating the Price for the next Year.
	 
	 	(b)	 	Component Costs. If Patheon incurs an increase in Component costs
during the Year, it may increase the Price for the next Year [**]. Similarly, if
Patheon obtains a decrease in Component costs during the Year, it shall decrease the
Price for the next Year [**]. On or about [**] of each Year, Patheon will give Penwest
information about the [**], provided,

- 7 -

 

	 	 	 	however that, subject to Section 4.5, Patheon
will not be required to give information to Penwest that is subject to obligations of
confidentiality between Patheon and its suppliers.
	 
	 	(c)	 	Pricing Basis. Penwest acknowledges that the Price in any Year is
quoted based upon the annual volume as set forth on Schedule C. Penwest
acknowledges and agrees, from and after Penwest places its first purchase order
pursuant to this Agreement, if the forecast for a Year significantly decreases (a
change of [**] percent ([**]%) or greater measured by volume) from the Product Forecast
for the prior Year, and Patheon can demonstrate that such decreased volume will result
in increased manufacturing costs to Patheon (other than due to increased Component
costs which are addressed separately in Section 4.2(b)), Patheon may adjust the Price
upward. Similarly, if the forecast for a Year significantly increases (a change of
[**]%) or greater measured by volume) from the Product Forecast for the prior Year, and
such increased volume will result in decreased manufacturing costs to Patheon (other
than due to decreased Component costs which are addressed separately in Section
4.2(b)), Patheon shall adjust the Price downward. Patheon shall provide Penwest with
evidence to reasonably demonstrate the Price adjustment, or (if applicable) to support
a finding of no Price adjustment; provided, however that, subject to Section 4.5,
Patheon will not be required to give information to Penwest that is subject to
obligations of confidentiality between Patheon and its suppliers.

     For all Price adjustments under this Section 4.2, Patheon will deliver to Penwest on or about
October 1st of each Year a revised Schedule C to be effective for the next Year.

	4.3	 	Price Adjustments – Current Year Pricing.

     During any Year of this Agreement, the Prices set out in Schedule C will be adjusted
as follows:

	 	(a)	 	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 [**] percent ([**]%) or more 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 [**] percent ([**]%) or more
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. The foregoing provisions
of this Section 4.3(a) notwithstanding, in no event shall Component costs be increased
pursuant to both this Section 4.3 and Section 4.2(b) with respect to the same Component
cost increase.
	 
	 	(b)	 	For a Price adjustment under this Section 4.3, Patheon will deliver to Penwest
a revised Schedule C and budgetary pricing information, adjusted Component
costs or other documents reasonably sufficient to demonstrate that a Price adjustment
is justified; provided however that, subject to Section 4.5, Patheon will have no
obligation to provide any supporting documents that are subject to obligations of
confidentiality between

- 8 -

 

Patheon and its suppliers. The revised Price will be effective
for any Product ordered on or after the first day of the month following Penwest’s
receipt of the revised Schedule C.

	4.4	 	Adjustments Due to Technical Changes.

     Amendments to the Specifications or the Quality Agreement requested by Penwest will only be
implemented following a technical and cost review by Patheon and are subject to Penwest and Patheon
reaching agreement on Price changes required because of the amendment. Amendments to the
Specifications or the Quality Agreement requested by Patheon will only be implemented
following the written approval of Penwest. If Penwest accepts a proposed Price change, the
proposed change in the Specifications will be implemented, and the Price change will become
effective, only for those orders of Products that are manufactured under the revised
Specifications. In addition, Penwest agrees to purchase, at Patheon’s cost (including all costs
incurred by Patheon for the purchase and handling of the Inventory), all Inventory used under the
“old” Specifications and purchased or maintained by Patheon in order to fill Firm Orders, 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 will be cancelled where possible, and if the orders may not
be cancelled without penalty, will be assigned to and satisfied by Penwest. Patheon agrees to use
commercially reasonable efforts to minimize Penwest’s costs under this Section 4.4.

	4.5	 	Audit Rights. 

     Not more than once in any Year, Penwest, through the use of an independent Third Party auditor
who has executed a confidentiality agreement providing Patheon with protections substantially
similar to the Confidentiality Agreement, may audit Patheon records as reasonably necessary to
substantiate (i) the cost components (as described in this Article 4) of the then-current Product
Price (as set forth on Schedule C), (ii) prices for Components, Bill Back Items and the
validation services set forth on Schedule D, or (iii) any Component or Price adjustments
pursuant to Sections 4.2, 4.3 and/or 4.4. Any such audit shall be conducted upon reasonable
advance notice to Patheon during Patheon’s normal business hours. For greater certainty Penwest
acknowledges that the Patheon Confidential Information provided to the Third Party auditor cannot
be shared with or provided to Penwest, and that the Third Party auditor is there simply to verify
adjustments to the foregoing Product Prices, prices for Components, Bill Back Items, or the
validation services. The audit shall be at the expense of Penwest, unless the audit reveals that,
with respect to the period under audit, Penwest has been overcharged by [**] percent ([**]%) or
more with respect to, as applicable, (1) the Product Price, (2) Components, (3) Bill Back Items,
(4) the validation services identified on Schedule D, or (5) Component or Price adjustments
pursuant to Sections 4.2, 4.3 or 4.4, in which event Patheon shall (a) pay or reimburse Penwest for
the reasonable expenses of such audit and (b) within [**] days after completion of the audit, pay
Penwest the amount of the overpayment plus interest determined in accordance with Section 5.5,
applied to Patheon, mutatis mutandis.

	4.6	 	Limitation on Price Adjustments. 

     For purposes of clarity, except where Sections 4.3 or 4.4 apply, the Product Price shall be
determined and adjusted no more often than annually at the start of each Year (i.e., the adjusted
Price shall become effective on January 1st). Patheon shall provide Penwest with written notice of
each such adjustment on or before October 1st of the previous Year and such price
adjustment shall be effective in the next Year. The Parties shall review and discuss any such
adjustment based on actual and substantiated changes to the cost Components described in this
Article 4.

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ARTICLE 5

ORDERS, SHIPMENT, INVOICING, PAYMENT

	5.1	 	Orders and Forecasts. 

	 	(a)	 	Rolling [**] Month Forecast. Within [**] days after the
Effective Date, Penwest will give Patheon a non-binding [**] month forecast of the
volume of Product that Penwest expects to order in the first [**] months of commercial
manufacture of the Product under this Agreement (the “Product Forecast”), it
being understood that Penwest anticipates its first Product order will be for a
Delivery Date no sooner than January 1, 2011. The Product Forecast will be routinely
updated by Penwest on or before the Friday of the 3rd week of
each month on a rolling forward basis and will be known as the Product Forecast.
The most recent [**] month Product Forecast will prevail.
	 
	 	(b)	 	Firm Orders for Initial Manufacturing Month. At least [**] months
before the start of commercial manufacture of the Product by Patheon pursuant to this
Agreement, Penwest will update the Product Forecast for the first [**] months of
manufacture of the Product (the “Initial Manufacturing Period”). The first
month of this updated Product Forecast (“Initial Manufacturing Month”) will
constitute a firm written order in the form of a purchase order or otherwise
(“First Firm Order”) by Penwest to purchase and, when accepted by Patheon, for
Patheon to manufacture the quantity of the Product. Penwest may cancel any Batches
from the First Firm Order at no cost if notice of cancellation is received by Patheon
[**] days or more before the scheduled Delivery Date under the First Firm Order.
Penwest may cancel any Batches from the First Firm Order if notice of cancellation is
received by Patheon more than [**] days but fewer than [**] days before the scheduled
Delivery Date under the First Firm Order, but Penwest will pay Patheon C$[**] for each
cancelled Batch. The Parties agree that this payment will be considered liquidated
damages for Patheon’s loss of manufacturing capacity due to Penwest’s cancellation of
manufacturing and will not be considered a penalty. If the First Firm Order is changed
or adjusted as described above, then the initial Product Forecast will also be adjusted
as necessary. The cancellation rights in this Section 5.1(b) are subject to Penwest
retaining responsibility for any costs or expenses actually incurred or irrevocably
committed by Patheon under this Agreement before it received notice of the
cancellation, provided that Patheon agrees to use commercially reasonable efforts to
minimize Penwest’s costs under this Section 5.1(b).
	 
	 	(c)	 	Firm Orders Thereafter. After the Initial Manufacturing Month, on a
rolling basis during the Term of this Agreement, on or before the Friday of the third
week of each month, Penwest will issue an updated Product Forecast and the first [**]
months of that updated forecast will constitute a firm written order in the form of a
purchase order or otherwise (“Firm Order”) by Penwest to purchase and, when
accepted by Patheon, for Patheon to manufacture and deliver the agreed quantity of the
Products on a date not less than [**] months after the first day of the month
immediately following the date that the Firm Order is submitted. Firm Orders submitted
to Patheon will specify Penwest’s purchase order number, quantities by Product type,
monthly delivery schedule and Delivery Dates, and any other elements necessary to
ensure the timely manufacture and shipment of the Products. Upon Patheon’s acceptance
of a Firm Order, the quantities of Products ordered will be firm and binding on Penwest
and Patheon, and may not be reduced by

- 10 -

 

	 	 	 	Penwest. Patheon shall use commercially
reasonable efforts to meet any request by Penwest to increase the amount of Product to
be supplied pursuant to any Firm Order.
	 
	 	(d)	 	Two Year Forecast. On or before the 10th day of June of
each Year (or, in the case of the first Year of this Agreement, within [**] days after
the Effective Date), Penwest will give Patheon a written, non-binding two-year
forecast, broken down by quarters for the second year of the forecast, of the volume of
each Product Penwest then anticipates will be required to be manufactured and delivered
to Penwest during the two-year period (the “Extended Product Forecast”).
	 
	 	(e)	 	Acceptance of Firm Order. Patheon will accept Firm Orders by promptly
sending a written acknowledgement to Penwest; provided that Patheon’s failure to
deliver a written acceptance of the purchase order within [**] Business Days after its
receipt of the Firm Order shall constitute Patheon’s deemed acceptance of the purchase
order. The acknowledgement will include, subject to confirmation from Penwest, the
Delivery Date for the Product ordered. Once agreed by the Parties pursuant to this
Section 5.1(e), the
Delivery Date may be amended by written agreement of the Parties or as set forth in
Section 5.1(b).

	5.2	 	Orders.

     Penwest may only order Manufacturing Services for a minimum of at least [**] of Product, and
may not order Manufacturing Services for partial or incomplete Batches.

	5.3	 	Shipments.

	 	(a)	 	Shipments of Product will be made [**] (INCOTERMS 2000) Facility’s loading
dock, unless otherwise mutually agreed. Risk of loss or of damage to Products will
remain with Patheon until Patheon loads the Products onto the carrier’s vehicle for
shipment at the Facility loading dock, at which time risk of loss or damage will
transfer to Penwest. Patheon will, in accordance with Penwest’s instructions and as
agent for Penwest, (i) arrange for shipping to be paid by Penwest and (ii) at Penwest’s
risk and expense, obtain any export licence or other official authorization necessary
to export the Products. Penwest 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.
	 
	 	(b)	 	Product shall not be shipped to Penwest or its designated shipping point unless
and until (i) all applicable Batch records, certificates of analysis and other
certificates have been provided to and reviewed by Penwest, and (ii) Penwest’s quality
assurance representative has performed Product release on such quantities of Product
for shipment, in the case of both (i) and (ii), in accordance with the procedures set
forth in the Quality Agreement. Penwest agrees that it shall review all Batch records
and other certificates within [**] Business Days after receipt of such documents from
Patheon.

	5.4	 	On Time Delivery.

	 	(a)	 	Patheon and Penwest understand that there may be uncertainties and necessary
adjustments in production schedules during the Initial Manufacturing Period. The
Parties

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	 	 	 	agree that they will work together closely to expedite deliveries and manage the
scheduling of the initial Product launch. However, if, during the Initial
Manufacturing Period, Patheon is unable to deliver the quantity of Product ordered
under a Firm Order, within [**] Business Days after the scheduled Delivery Date (a
“Late Initial Delivery Date”), Penwest will receive a credit from Patheon
for the Initial Late Delivery that will be applied against the purchase price under
Penwest’s next Firm Order. The credit will be [**] percent ([**]%) of the Price of
the quantities of Product not delivered by Patheon under the Firm order on the
Initial Delivery Date (i.e. Penwest Credit = (quantity Ordered in the Firm Order –
Actual Delivery Quantities of Product) x Price x [**]%).
	 
	 	(b)	 	If, after the Initial Manufacturing Period, Patheon is unable to deliver the
quantity of Product ordered under a Firm Order on the Scheduled Delivery Date (a
“Late Delivery”), Penwest shall receive a credit from Patheon for the Late
Delivery, as specified in the following table, which will be applied against the
purchase price under the next Firm Order:

	 	 	 
	If Scheduled Shipment Date Is:	 	Delay Fee Due:
	More than [**] days after the scheduled Delivery Date

	 	[**]
	 
	 	 
	more than [**] days, but [**] days or less, after the scheduled Delivery Date

	 	[**]
	 
	 	 
	[**] days or less after the scheduled Delivery Date

	 	[**]

	 	(c)	 	A late delivery of less than [**] days will not be a material breach of this
Agreement by Patheon for the purposes of Section 8.2.
	 
	 	(d)	 	For clarity, a Late Delivery will not include any delay in shipment of Product
caused by events outside of Patheon’s reasonable control or ability to plan for,
including but not limited to a Force Majeure Event, a delay in Product release approval
from Penwest or unanticipated supply availability or shipment delays from approved
Component vendors. Promptly after becoming aware of potential disruptions or changes to
the normal availability of Components from approved vendors, Patheon shall provide
written notice thereof to Penwest, and Patheon shall thereafter use commercially
reasonable efforts, in consultation with Penwest, to increase Patheon’s inventory of
the applicable Component(s) or ordering lead time for the applicable Component(s).

5.5 Invoices and Payment.

     Invoices will be sent by fax or email to the fax number or email address given by Penwest to
Patheon in writing. Invoices will be sent when the Product is manufactured and released by Patheon
to Penwest. Patheon will also submit to Penwest, with each shipment of Product, a duplicate copy
of the invoice covering the shipment. Each invoice will, to the extent applicable, identify
Penwest’s purchase order number, Product numbers, names and quantities, unit price, freight
charges, and the total amount to be paid by Penwest. Penwest will pay all undisputed invoices for
Product(s) actually delivered to

- 12 -

 

Penwest within [**] days after the date thereof. Interest on past due accounts for undisputed
amounts will accrue at [**]% per month which is equal to an annual rate of [**]%, or, if lower, the
highest rate permitted by applicable Law. The Late Delivery credits set forth in this Article 5
are only available to Penwest if all outstanding undisputed invoices have been paid in full or are
within [**] days outstanding from the invoice date when the Late Delivery occurs.

ARTICLE 6

PRODUCT CLAIMS, FAILURE TO SUPPLY AND RECALLS

6.1 Product Claims.

	 	(a)	 	Product Claims. Penwest has the right to reject any portion of any
shipment of Products that deviates from the Specifications, the Manufacturing Process,
cGMPs, or applicable Laws without invalidating any remainder of the shipment. Penwest
will inspect the Products manufactured by Patheon for obvious defects or damage upon
receipt, and will give Patheon written notice (a “Deficiency Notice”) of all
claims for Products that deviate from the Specifications, the Manufacturing Process,
cGMPs, or applicable Laws within [**] days after Penwest’s receipt thereof (or, in the
case of any defects not reasonably susceptible to discovery upon receipt of the
Product, within [**] days after discovery by Penwest or its customer, but not after the
expiration date of the Product). Should Penwest fail to give Patheon the Deficiency
Notice within the applicable [**] or [**] day period, then the delivery will be deemed
to have been accepted by Penwest on either the [**] or [**] day after delivery or
discovery, as applicable.
	 
	 	(b)	 	Determination of Deficiency. Upon receipt of a Deficiency Notice,
Patheon will have [**] days to advise Penwest by notice in writing that it disagrees
with the contents of the Deficiency Notice. If Penwest and Patheon fail to agree
within [**] days after Patheon’s notice to Penwest as to whether any Products
identified in the Deficiency Notice deviate from the Specifications, the Manufacturing
Process, cGMPs, or applicable Laws, then the Parties will mutually select an
independent laboratory to evaluate whether the Products deviate from the
Specifications, the Manufacturing Process, cGMPs, or applicable Laws. This evaluation
will be binding on the Parties. If the evaluation certifies that any Products deviate
from the Specifications, the Manufacturing Process, cGMPs, or applicable Laws, Penwest
may reject those Products in the manner contemplated in this Section 6.1 and [**]. If
the evaluation does not so certify for any of the Products, then Penwest will be deemed
to have accepted delivery of the Products on the [**] day after delivery (or, in the
case of any defects not reasonably susceptible to discovery upon receipt of the
Product, on the [**] day after discovery thereof by Penwest or its customer(s), but not
after the expiration date of the Product) and, as between Penwest and Patheon, [**].
	 
	 	(c)	 	Shortages. If a shipment of Product fails to conform to the ordered
quantity to be delivered, in addition to its obligations under Sections 5.4(a) and
5.4(b), Patheon shall replace such Product within [**] days after the applicable
Delivery Date, [**].
	 
	 	(d)	 	Notwithstanding the existence of a dispute concerning Product rejected by
Penwest, pending resolution of such dispute, Patheon shall, as promptly as possible,
but in any event within [**] days after issue by Penwest of a purchase order for
additional Product of

- 13 -

 

	 	 	 	the type and quantity claimed to be rejected as contemplated by this Section 6.1,
deliver such additional Product to Penwest.
	 
	 	(e)	 	Penwest acknowledges that the time frames to provide replacement Product
outlined in clauses (c) and (d) above are subject to Patheon being able to procure the
required Components for such additional Product; provided that, promptly after the
first indication that a Product deficiency or shortage may occur, Patheon shall use
commercially reasonable efforts to obtain additional Component supply sufficient to
satisfy its actual or potential obligations to provide replacement Product in
accordance with clauses (c) and (d) above.

6.2 Product Recalls and Product Returns.

	 	(a)	 	Patheon and Penwest will each maintain records necessary to permit a Recall of
any Products delivered to Penwest or customers of Penwest. 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 quantities of
the applicable Product in its possession or control until a decision has been made
whether a Recall or some other corrective action is necessary. As between the Parties,
the decision to initiate a Recall or to take some other corrective action, if any, will
be made and implemented by Penwest. Patheon shall cooperate with Penwest in the event
of any Recall, and shall provide such reasonable assistance in connection therewith as
Penwest may reasonably request.
	 
	 	(b)	 	Penwest will have the responsibility for handling all customer returns of
Product. Patheon will give Penwest any assistance that Penwest may reasonably require
to handle the returns.

6.3 Patheon’s Responsibility for Defective and Recalled Products.

     (a) Defective Product. If Penwest 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, this Agreement or applicable Laws, or because the
Product did not conform to the Specifications at the time of shipment, [**] defective Products. If
[**], Patheon will promptly, at Penwest’s election, either: (i) [**]; Patheon will make every
effort to provide replacement Product within [**] days after receipt of Penwest’s Deficiency
Notice; provided, that promptly after receipt of a Deficiency Notice from Penwest, Patheon shall
use commercially reasonable efforts to obtain additional Component supply sufficient to satisfy its
obligations to provide replacement Product requested by Penwest pursuant to this Section 6.3(a).

     (b) Recalls. 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, the
Manufacturing Process, cGMPs, or applicable Laws, or because the Product did not conform to the
Specifications at the time of shipment, Patheon will be responsible for the [**] of the Recall or
return and will use its commercially reasonable efforts to replace the Recalled or returned
Products with new Products as soon as reasonably practicable. If Patheon is unable to replace the
Recalled or returned Products within [**] days, then, upon Penwest’s request Patheon shall
reimburse Penwest for the Price that Penwest paid to Patheon for the Product and

- 14 -

 

the Manufacturing Services (including stability testing, if applicable) for the affected
Products. In all other circumstances, Recalls, returns or other corrective actions will be made at
Penwest’s cost and expense.

6.4 Failure to Supply.

	 	(a)	 	A Failure to Supply shall have occurred under this Agreement under any of the
following circumstances (a“Failure to Supply”):

	 	(i)	 	Patheon fails to deliver a shipment of Product by the Delivery
Date, and fails to replace such Product shipment within [**]) days after the
scheduled Delivery Date; or
	 
	 	(ii)	 	Patheon fails to ship the complete number of ordered Batches by
the Delivery Date, and Patheon fails to ship the remaining Batches within [**]
days after the scheduled Delivery Date, and such failure occurs (A) with
respect to Product shipments over [**] consecutive calendar quarters during any
Year, or (B) with respect to [**] or more Product shipments in any Year; or
	 
	 	(iii)	 	Product delivered to Penwest or to a Penwest customer is
determined to be defective for a reason set forth in the first Sentence of
Section 6.3(a), and there are [**] or more such deliveries of defective Product
in any one Year.

	 	(b)	 	If a Failure to Supply occurs, then Penwest or its Affiliates, itself or on
behalf of its licensees or customers, may at its election, (i) require Patheon to
qualify, as soon as reasonably practicable and at Patheon’s cost, a second Patheon
facility to manufacture and supply Product to Penwest hereunder, it being understood
that Penwest shall have the right to approve such second Patheon facility, such
approval not to be unreasonably withheld or delayed; and/or (ii) retain a Third Party
to manufacture and supply the requirements of Penwest and its Affiliates’, licensees’
and customers’ requirements for Product.
	 
	 	(c)	 	Except as set forth in this Agreement, Patheon will not be liable to Penwest
nor have any responsibility to Penwest 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 as provided to Patheon by Penwest, the safety, efficacy, or
marketability of the Products or any distribution thereof; provided that the Product
was manufactured in accordance with the Manufacturing Process, the Specifications,
cGMPs and applicable Laws, and conformed to the Specifications at the time of shipment;
(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
Components supplied by Penwest 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 5.3, (v) is due
to packaging design or labelling defects or omissions for which Patheon has no
responsibility; provided that the Product was manufactured in accordance with the
Manufacturing Process, the Specifications, cGMPs and applicable Laws, and conformed to
the Specifications at the time of shipment, (vi) is due to any unascertainable reason
despite Patheon having performed the Manufacturing Services in accordance with the

- 15 -

 

	 	 	 	Specifications, cGMP’s, the Manufacturing Process and applicable Laws and despite
the Product having met the Specifications at the time of shipment, or (vii) is due
to a breach by Penwest of its obligations under this Agreement.

6.5 Disposition of Defective or Recalled Products.

     Penwest 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 Penwest 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 this Agreement. In all other circumstances Penwest will bear the cost
of disposition, including all applicable fees for Manufacturing Services, for any damaged,
defective, returned or Recalled Product.

6.6 Healthcare Provider or Patient Questions and Complaints.

     As between the Parties, Penwest will have the sole responsibility for responding to questions
and complaints from its customers. Questions or complaints received by Patheon from Penwest’s
customers, healthcare providers or patients will be promptly referred to Penwest. Patheon will
co-operate as reasonably required to allow Penwest 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 Penwest all mutually agreed upon information that will
enable Penwest 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, the
Manufacturing Process, cGMPs, and applicable Laws, or because the Product does not meet the
Specifications, all costs incurred under this Section 6.6 will be borne by Penwest.

6.7 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 Penwest’s sole remedy for
any failure by Patheon to provide the Manufacturing Services in accordance with the Specifications,
the Manufacturing Process, cGMPs or 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.

- 16 -

 

7.2 Governmental Agencies.

     Subject to Section 7.8, Patheon may communicate with any Authority, including governmental
agencies responsible for granting Regulatory Approval for the Products, regarding the manufacture
of the Products if, in the opinion of Patheon’s counsel, the communication is necessary to comply
with the terms of this Agreement or the requirements of applicable Law. Unless in the reasonable
opinion of its counsel there is a legal prohibition against doing so, Patheon will provide Penwest
with prior written notice of such proposed communications, and will permit Penwest to accompany
Patheon or take part in any communications with the Authority (as applicable), and to receive
copies of all communications to and from the Authority.

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 a period of
one year following the date of Product expiry, or longer if required by applicable Laws, at which
time Penwest will be contacted concerning the delivery and destruction of the documents or samples
of Products.

7.4 Inspection.

     Penwest 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 to the Facility; Audit Rights.

     Patheon will give Penwest (or its designee, provided that such designee is not a direct
Competitor of Patheon (as defined in Section 8.2(d)) reasonable access at mutually agreeable times
to the areas of the Facility in which the Products are manufactured, stored, handled, or shipped to
permit Penwest 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, Penwest
will be limited each Year to one cGMP-type audit, lasting no more than two days, and involving no
more than two auditors. Penwest 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 this Section 7.5 will not include a right to access or inspect Patheon’s financial
records.

7.6 Notification of Regulatory Inspections.

     Patheon will notify Penwest at least five (5) Business Days prior to any inspections by any
Regulatory Authority or other Authority involving the Product or the Facility as it relates to the
Product, and Penwest (or its designee) shall have the right to appoint a representative to attend
any such inspection as an observer. Patheon will also notify Penwest of receipt of any form 483’s
or warning letters or any other regulatory action regarding the manufacture of the Product or the
Facility as it relates to the Product.

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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 Penwest reasonably requires in order to complete any filing under any applicable
regulatory regime, including any Annual Report that Penwest is required to file with the FDA. At
Penwest’s request, Patheon will provide a copy of the Annual Product Review Report to Penwest at no
additional cost. Any additional report requested by Penwest beyond the scope of cGMPs and
customary FDA requirements will be subject to an additional commercially reasonable fee to be
agreed upon by Patheon and Penwest in good faith.

7.8 FDA Filings.

	 	(a)	 	Regulatory Authority. As between the Parties, Penwest will have sole
responsibility for filing all documents with all Regulatory Authorities and taking any
other actions that may be required for the receipt or maintenance of Regulatory Authority
approval for the commercial manufacture of the Product. Patheon will assist Penwest, to
the extent consistent with Patheon’s obligations under this Agreement, to obtain Regulatory
Authority approval for the commercial manufacture of Product at the Facility as quickly as
reasonably possible.
	 
	 	(b)	 	Verification of Data. At least [**] Business Days prior to filing with the
Regulatory Authority any documentation which is or is equivalent to the FDA’s Drug Master
File (DMF), Penwest will provide a designated representative of Patheon with a copy of any
portions of such DMF filing that contain data generated by Patheon pursuant to this
Agreement. Any such information disclosed to Patheon pursuant to this Section 7.8(b) shall
be the Confidential Information of Penwest and shall be used by Patheon solely to verify
that such portions of the DMF accurately describe the Patheon-generated data, Manufacturing
Services that Patheon has performed and the Manufacturing Processes that Patheon has
applied under this Agreement. Penwest shall consider in good faith any comments to such
DMF filing provided by Patheon, it being understood that Penwest shall have no obligation
to incorporate such comments into, or to modify, such DMF filings. Patheon will not assume
any liability or responsibility whatsoever for delays or otherwise should Penwest choose
not to incorporate comments or modify the DMF filings as per Patheon’s suggestion.
	 
	 	(c)	 	Penwest 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. Penwest is solely
responsible for the preparation and filing of the application for approval by the
Regulatory Authorities and any relevant costs will be borne by Penwest.
	 
	 	(d)	 	Inspection by Regulatory Authorities. If Penwest 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, delay or postpone any inspection by the Regulatory
Authority until Patheon has reviewed the requested documents and is satisfied with their
contents.

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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 continue after the Initial Term for
successive terms of two (2) years each unless either Party gives written notice to the other Party
of its intention to terminate this Agreement at least eighteen (18) months prior to the end of the
then current term (the Initial Term, together with any extensions thereto, the “Term”).

8.2 Termination for Cause.

	 	(a)	 	Either Party at its sole option may terminate this Agreement upon written notice where
the other Party has failed to remedy a material breach of any of its representations,
warranties, or other obligations under this 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”).
	 
	 	(b)	 	Either Party at its sole option may immediately terminate this Agreement upon written
notice, but without prior advance notice, to the other Party if: (i) the other Party is
declared insolvent or bankrupt by a court of competent jurisdiction; (ii) a voluntary
petition of bankruptcy is filed in any court of competent jurisdiction by the other Party;
or (iii) this Agreement is assigned by the other Party for the benefit of creditors.
	 
	 	(c)	 	Penwest may terminate this Agreement as to any Product upon thirty (30) days prior
written notice if any Regulatory Authority takes any action, or raises any objection, that
prevents Penwest from importing, exporting, purchasing, or selling the Product. But if
this occurs, Penwest will still fulfill all of its obligations under Section 8.4 below.
	 
	 	(d)	 	Patheon may terminate this Agreement upon six (6) months prior written notice to
Penwest if Penwest assigns under Section 13.6 any of its rights under this Agreement to an
assignee that in the opinion of Patheon acting reasonably and in good faith is (i) not a
credit worthy substitute for Penwest or (ii) is a Competitor of Patheon. As used in this
Agreement, “Competitor of Patheon” means a corporation that [**].

8.3 Termination by Penwest.

	 	(a)	 	Penwest may terminate this Agreement at any time upon twelve (12) months written notice
to Patheon.
	 
	 	(b)	 	Penwest may terminate this Agreement by written notice to Patheon at any time (i) if
Patheon is unable to successfully validate the Manufacturing Process, or (ii) if Patheon
has not obtained approval as a manufacturer of the Product, including approval of the
Patheon Facility by the FDA or any other applicable Regulatory Authority, on or before
December 31, 2010.

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	 	(c)	 	Penwest will give at least six (6) months advance notice if it intends to no longer
order Manufacturing Services for a Product due to the Product’s discontinuance in the
market.

8.4 Obligations on Termination.

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

	 	(a)	 	Penwest will take delivery of and pay for all undelivered Products that (i) are
manufactured or packaged under a Firm Order, (ii) conform to the Specifications at the
time of shipment, and (iii) were manufactured in accordance with the Manufacturing
Process, cGMP and applicable Laws, at the Price in effect at the time the Firm Order
was placed;
	 
	 	(b)	 	Penwest 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;
	 
	 	(c)	 	Penwest acknowledges that no Competitor of Patheon will be permitted access to
the Facility; and
	 
	 	(d)	 	Penwest will make commercially reasonable efforts, at its own expense, to
remove from Patheon site(s), within [**] days after the effective date of termination
any Product or work-in-process produced or held by Patheon for the manufacture of the
Product and located at a Patheon site or that is otherwise under Patheon’s care and
control (“Penwest Property”). If Penwest fails to remove the Penwest Property
within [**] days following the completion, termination, or expiration of the Agreement
Penwest will pay Patheon $[**] per pallet, per month, one pallet minimum ($[**] per
pallet, per month, one pallet minimum, for any of the Penwest Property that contains
controlled substances or requires refrigeration) thereafter for storing the Penwest
Property and will assume any Third Party storage charges invoiced to Patheon regarding
the Penwest Property. Patheon will invoice Penwest for the storage charges as set
forth in Section 5.5 of this Agreement.

Any termination or expiration of this Agreement will not affect any outstanding obligations or
payments due hereunder prior to the termination or expiration, nor will it prejudice any other
remedies that the Parties may have under this Agreement. For greater certainty, expiration or
termination of this Agreement for any reason will not affect the obligations and responsibilities
of the Parties under Articles 1, 6, 9, 10, 11, 12 and 13, and Sections 5.3, 5.4, 5.5, 7.7 and this
Section 8.4 all of which survive any such expiration or 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.

9.2 Penwest Warranties.

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     Penwest represents and warrants as of the Effective Date that:

	 	(a)	 	Non-Infringement.

	 	(i)	 	Penwest has the right to disclose the Specifications to Patheon;
	 
	 	(ii)	 	Except with respect to the Patheon Intellectual Property as to which
Penwest makes no representations or warranties, Penwest is not aware of any
Intellectual Property of any Third Party that is necessary for Penwest to make, have
made, use or sell the Product, as contemplated hereby;
	 
	 	(iii)	 	Penwest is not aware of any action or other legal proceedings alleging
that Third Party Intellectual Property rights would be infringed by the manufacturing
of the Product as contemplated by this Agreement; and

	 	(b)	 	Quality and Compliance.

	 	(i)	 	the Specifications for all Products conform to all applicable cGMPs and
applicable Laws.

9.3 Patheon Warranties.

     Patheon covenants, represents, and warrants that:

	 	(a)	 	All Product manufactured in accordance with this Agreement will (i) be manufactured in
accordance with the Specifications, the Manufacturing Process, cGMPs, and all Regulatory
Approvals and Laws (to the extent applicable at the time of Manufacture), (ii) will conform
to the Specifications at the time of shipment, and (ii) be delivered free from all liens,
encumbrances, restrictions and security interests;
	 
	 	(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 any Third Party IP Rights;
	 
	 	(c)	 	Patheon shall hold, and shall continue to hold during the Term, all material licenses
necessary or required for the performance of the Manufacturing Services and the performance
of its obligations hereunder; and
	 
	 	(d)	 	As of the Effective Date, Patheon is not aware of Intellectual Property of any Third
Party that is necessary for Patheon to manufacture the Product in accordance with the
Manufacturing Process as contemplated by this Agreement;
	 
	 	(e)	 	the Facility, all equipment and tooling utilized in the manufacture of Products
hereunder, and the procedures and processes (including installation, operation and
performance qualifications) instituted by Patheon in connection herewith are, and shall
continue during the Term, to be in material compliance with all applicable Laws and
maintained in good operating condition.

- 21 -

 

9.4 Debarred Persons.

     Patheon represents and warrants as of the Effective Date that neither it, nor any of its
officers, directors or employees expected to perform Manufacturing Services under this Agreement
has been debarred or convicted of a crime which could lead to debarment, under 21 USC §§335(a) and
(b), or other applicable Laws. 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 Act.

9.5 Permits.

     Penwest 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 all
marketing and post-marketing approvals.

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

9.6 No Warranty.

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

ARTICLE 10

REMEDIES AND INDEMNITIES

10.1 Consequential Damages. 

     Under no circumstances whatsoever will either Party be liable to the other Party in connection
with this Agreement 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.

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10.2 Limitation of Liability.

Except with respect to each Party’s indemnification obligations with respect to Third Party claims
hereunder, and excluding Patheon’s liability for replacement Product under Article 6, each Party’s
total liability for damages sustained by the other Party pursuant to this Agreement in any given
Year shall be [**].

10.3 Patheon.

	 	(a)	 	Patheon agrees to defend, indemnify, and hold Penwest, its officers, employees,
and agents harmless against any and all losses, damages, costs, claims, demands,
judgments and liability to, from and in favour of Third Parties (together
“Losses”) resulting from, or relating to any claim of personal injury or
property damage to the extent that the injury or damage is the result of (i) a failure
by Patheon to perform the Manufacturing Services in accordance with the Specifications,
the Manufacturing Process, cGMPs, and applicable Laws, (ii) the gross negligence or
wilful misconduct of Patheon, or (iii) a breach of this Agreement by Patheon, including
any representation or warranty of Patheon contained herein, and in each case, except to
the extent that the losses, damages, costs, claims, demands, judgments, and liability
are due to the negligence or wrongful act(s) of Penwest, its officers, employees,
agents, or Affiliates.
	 
	 	(b)	 	If Penwest intends to claim indemnification under Section 10.3(a), Penwest
shall promptly notify Patheon in writing of any claim, lawsuit or other action in
respect of which Penwest intends to claim such indemnification, and shall use
commercially reasonable efforts to mitigate the effects of the claim. Penwest shall
permit Patheon, at its discretion, to settle any such claim, lawsuit or other action
and agrees to the complete control of such defense or settlement by Patheon; provided,
however, that in order for Patheon to exercise such rights, such settlement shall not
adversely affect Penwest’s rights under this Agreement or impose any obligations on
Penwest in addition to those set forth herein. No such claim, lawsuit or other action
shall be settled without the prior written consent of the Patheon, and Patheon shall
not be responsible for any legal fees or other costs incurred other than as provided
herein. Penwest shall cooperate fully with Patheon and its legal representatives in
the investigation and defense of any claim, lawsuit or other action covered by this
indemnification, all at the reasonable expense of Patheon. Penwest shall have the
right, but not the obligation, to be represented by counsel of its own selection and
expense.

10.4 Penwest.

	 	(a)	 	Penwest agrees to defend, indemnify, and hold Patheon, its officers, employees,
and agents harmless against any and all Losses resulting from any claim of personal
injury or property damage to the extent such injury or damage is the result of (i) a
breach of this Agreement by Penwest, including any representation or warranty of
Penwest contained herein, (ii) any claim that the Specifications or the Manufacturing
Process for the Product do not conform to all applicable cGMPs and other applicable
Laws, (iii) any claim that Product conforming to the Specifications, and labelled and
manufactured in accordance with the Specifications, the Manufacturing Process, cGMPs
and applicable Laws, is not safe for human consumption, (iv) any claim that the
composition or method of use of the Product infringes the intellectual property rights
of any Third Party, or (v) the gross

- 23 -

 

	 	 	 	negligence or wilful misconduct of Penwest, except to the extent in each case 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 Patheon intends to claim indemnification under Section 10.4(a), Patheon
shall promptly notify Penwest in writing of any claim, lawsuit or other action in
respect of which Patheon intends to claim such indemnification, and shall use
commercially reasonable efforts to mitigate the effects of the claim. Patheon shall
permit Penwest, at its discretion, to settle any such claim, lawsuit or other action
and agrees to the complete control of such defense or settlement by Penwest; provided,
however, that in order for Penwest to exercise such rights, such settlement shall not
adversely affect Patheon’s rights under this Agreement or impose any obligations on
Patheon in addition to those set forth in this Agreement. No such claim, lawsuit or
other action shall be settled without the prior written consent of Penwest, and Penwest
shall not be responsible for any legal fees or other costs incurred other than as
provided herein. Patheon shall cooperate fully with Penwest and its legal
representatives in the investigation and defense of any claim, lawsuit or other action
covered by this indemnification, all at the reasonable expense of Penwest. Patheon
shall have the right, but not the obligation, to be represented by counsel of its own
selection and expense.

ARTICLE 11

CONFIDENTIALITY

11.1 Confidentiality.

     The Confidentiality Agreement will apply to all information provided by one Party to the other
Party pursuant to this Agreement. The terms of the Confidentiality Agreement are deemed to be
incorporated herein by reference; provided, that (i) notwithstanding any provisions of the
Confidentiality Agreement to the contrary, the Purpose, as defined in the Confidentiality
Agreement, shall be deemed to include the Parties’ respective activities under this Agreement or
the Quality Agreement, and (ii) the term “Confidential Information” set forth in the
Confidentiality Agreement shall be deemed to include all information, know-how and technology
provided by one Party to the other Party pursuant to this Agreement or the Quality Agreement. If
the Confidentiality Agreement expires or terminates prior to the expiration or termination of this
Agreement, then the terms of the Confidentiality Agreement will nonetheless continue to govern the
Parties’ obligations of confidentiality for the Term of this Agreement and for five (5) years
thereafter. Notwithstanding the foregoing provisions of this Section 11.1, either Party may
disclose Confidential Information of the other Party or the terms of this Agreement or the Quality
Agreement if such Party reasonably determines, based on advice from its counsel, that it is
required to make such disclosure by applicable Law or legal process, including by the rules or
regulations of the United States Securities and Exchange Commission (the “SEC”) or similar
regulatory agency in a country other than the United States or of any stock exchange, in which
event such Party shall (a) provide prior notice of such intended disclosure to such other Party
sufficiently in advance (to the extent practicable) to enable the other Party to seek confidential
treatment or other protection for the Confidential Information subject to such requirement unless
the disclosing Party is prevented by Law from providing such advance notice, (b) shall disclose
only such Confidential Information of such other Party as such disclosing Party reasonably
determines is required to be disclosed, and shall (c) use commercially reasonable efforts to seek
confidential treatment of any terms of this Agreement or the

- 24 -

 

Quality Agreement that such other Party considers particularly sensitive from the SEC, similar
regulatory agencies in countries other than the United States, or any stock exchange.

ARTICLE 12

DISPUTE RESOLUTION

12.1 Commercial Disputes.

     If any dispute arises out of this Agreement (other than a dispute under Section 6.1(b) or a
Technical Dispute, as defined herein), the Parties will first try to resolve it amicably. In that
regard, any Party may send a notice of dispute to the other, and each Party will appoint, within
ten Business Days from receipt of the notice of dispute, a single representative having full power
and authority to solve 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 Executive 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
13.15.

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 or storage of Products 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 practicable
and in any event no later than ten (10) 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
thirty (30) Business Days after the written request, the Technical Dispute will, at the request of
either Party, be referred for determination to an expert in accordance with Schedule F. If
the Parties cannot agree that a dispute is a Technical Dispute, Section 12.1 will prevail. For
greater certainty, the Parties agree that the release of the Products for sale or distribution
under the applicable marketing approval for the Products will not by itself indicate compliance by
Patheon with its obligations for the Manufacturing Services and further that nothing in this
Agreement (including Schedule F) 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, Penwest hereby grants to Patheon a
non-exclusive, paid-up, royalty-free, non-transferable license of Penwest’s
Intellectual Property which Patheon must use in order to perform the Manufacturing
Services.

- 25 -

 

	 	(b)	 	All Penwest Intellectual Property, will be the exclusive property of Penwest.
Patheon hereby assigns its entire right, title and interest in and to the Penwest
Intellectual Property to Penwest, and agrees to execute all documents and take such
other actions as are reasonably necessary to effectuate the forgoing assignment
obligations.
	 
	 	(c)	 	All Patheon Intellectual Property will be the exclusive property of Patheon.
Patheon hereby grants to Penwest a perpetual, irrevocable, non-exclusive, paid-up,
royalty-free, transferable license to under the Patheon Intellectual Property used by
Patheon to in the performance of the Manufacturing Services or the manufacture of
Products pursuant to this Agreement, to manufacture or have manufactured Product(s).
Upon the reasonable request of Penwest, Patheon shall transfer to Penwest any tangible
manifestations of the Patheon Intellectual Property, and shall provide Penwest with
reasonable access to Patheon employees or agents, to enable Penwest to exercise the
foregoing license.
	 
	 	(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 Penwest Intellectual Property will be owned by Penwest and all
Patheon Intellectual Property will be owned by Patheon. Except as otherwise expressly provided in
this Agreement, neither Party has, nor will it acquire, any interest in any of the other Party’s
Intellectual Property unless otherwise expressly agreed to in writing. Neither Party will use any
Intellectual Property of the other Party, except as specifically authorized by the other Party or
as required for the performance of its obligations under this Agreement.

13.3 Insurance.

     Each Party will maintain commercial general liability insurance, including blanket contractual
liability insurance covering the obligations of that Party under this Agreement through the term of
this Agreement and for a period of [**] years thereafter. This insurance will have policy limits
of not less than (i) $[**] for each occurrence for personal injury or property damage liability;
and (ii) $[**] in the aggregate per annum for product and completed operations liability. Claims
made coverage is acceptable, if occurrence coverage isn’t reasonably available. 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 [**] days’ written
notice to the insured of a cancellation of the insurance. If a Party is unable to maintain the
insurance policies required under this Agreement, 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. [**].

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13.4 Independent Contractors.

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

13.5 No Waiver.

     Either Party’s failure to require the other Party to comply with any provision of this
Agreement will not be deemed a waiver of the provision or any other provision of this Agreement.

13.6 Assignment.

     Neither this Agreement, nor any of either Party’s rights hereunder, may be assigned or
otherwise transferred by either Party without the prior written consent of the other Party, which
consent will not be unreasonably withheld; provided that either Party shall have the right to
assign or transfer its rights or obligations under this Agreement, in whole or in part, to an
affiliated entity or to a successor to all or substantially all of its assets or business relating
to this Agreement, whether by sale, merger, operation of law or otherwise provided that such
successor executes documentation by which it agrees to be bound by the terms and conditions of this
Agreement.

13.7 Force Majeure.

	 	(a)	 	Neither Party will be liable for the failure to perform its obligations under
this Agreement if the failure is caused by an event beyond that Party’s reasonable
control and is not caused by the act or omission of that Party, including strikes or
other labour disturbances, lockouts, riots, quarantines, communicable disease
outbreaks, wars, acts of terrorism, fires, floods, storms, interruption of or delay in
transportation, or lack of or inability to obtain fuel, power or components or
compliance with any order or regulation of any government entity acting within colour
of right (a “Force Majeure Event”). A Party claiming a right to excused
performance under this Section 13.7 will immediately notify the other Party in writing
of the extent of its inability to perform, which notice will specify the event beyond
its reasonable control that prevents the performance. Neither Party will be entitled
to rely on a Force Majeure Event to relieve it from an obligation to pay money
(including any interest for delayed payment) which would otherwise be due and payable
under this Agreement.
	 
	 	(b)	 	A Party shall be deemed not to be in default with respect to non-performance of
any of its obligations under this Agreement, if and so long as such non-performance is
due in whole or in some material way to an event of Force Majeure and that Party has
used commercially reasonable efforts to remove the event of Force Majeure and to
perform its obligations under the Agreement.
	 
	 	(c)	 	Subject to Section 13.7(b), if Patheon is unable to supply Penwest with its
requirements of Products by reason of Force Majeure, Force Majeure shall excuse
Patheon’s performance until the Force Majeure has ceased and for a reasonable period of
time thereafter, to allow Patheon to restore itself to the position it was in with
respect to the manufacture of Products immediately prior to the Force Majeure. Within
ninety (90) days

- 27 -

 

	 	 	 	of notification by Patheon that it is able to resume the necessary supply of the
Products to Penwest, Penwest shall resume obtaining its requirements of Product from
Patheon pursuant to this Agreement. Penwest shall be excused from its obligation
set forth in Section 2.1 hereof during Patheon’s inability to manufacture the
Products as a result of a Force Majeure event, until the cessation of such Force
Majeure event in accordance with this Section 13.7(c) and thereafter as specified in
Section 2.1. Patheon shall suffer no penalty or incur any liability for its
inability to perform hereunder by reason of Force Majeure.
	 
	 	(d)	 	If a Party fails to perform any of its obligations under this Agreement by
reason of Force Majeure and such non-performance continues for a period of one hundred
and eighty (180) days after the first occurrence of the event of Force Majeure, the
other Party may terminate this Agreement by providing written notice to that effect to
the non-performing Party. In the event of such termination, both Parties’ respective
rights and obligations under this Agreement shall terminate except for any amounts
previously due and owing by one Party to the other and except for any other obligations
which this Agreement expressly provides shall survive termination.

13.8 Additional Product.

     Additional products may be added to this Agreement and the additional products will be
governed by the general conditions hereof with any special terms (including price) governed by
amendments to Schedules A, B-1, B-2, C and D as applicable.

13.9 Notices.

     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 electronic mail 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 Penwest:
	 
	 	 
	 

	 	Penwest Pharmaceuticals Co., Inc.
	 

	 	2981 Route 22, Suite 2
	 

	 	Patterson, NY 12563-2335
	 

	 	Attn.: Kevin Fitzmaurice,
	 

	 	Director, Technical Operations
	 

	 	Facsimile: (845) 878-3420

- 28 -

 

	 	 	 

	 

	 	A Party may change its address for notice by notifying the other Party at any time
in accordance with the provisions of this Section 13.9.
	 
	 	 
	 

	 	If to Patheon:
	 
	 	 
	 

	 	Patheon Inc.
	 

	 	2100 Syntex Court
	 

	 	Mississauga, Ontario L5N 7K9
	 

	 	Canada
	 

	 	Attention: Law Department
	 

	 	Telecopier No.: 905.812.6613
	 
	 	 
	 

	 	With a copy to:
	 
	 	 
	 

	 	Patheon Inc.
	 

	 	4721 Emperor Boulevard
	 

	 	Research Triangle Park,
	 

	 	NC 27703
	 

	 	Attention: General Counsel
	 

	 	Telecopier No.: 919-474-2269
	 

	 	Email address: Doaa.Fathallah@patheon.com

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 or Canada, mail, postage prepaid or upon receipt, whichever is
sooner.

13.10 Severability.

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

13.11 Entire Agreement.

     This Agreement, together with the 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 all previous written or oral negotiations, commitments,
agreements, transactions, or understandings concerning the subject matter hereof. Any
modification, amendment, or supplement to this Agreement must be in writing and signed by
authorized representatives of both Parties. In case of conflict, the prevailing order of documents
will be this Agreement, 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 Penwest or Patheon will have any effect on the rights, duties, or obligations
of the

- 29 -

 

Parties under or otherwise modify this Agreement, regardless of any failure of Penwest or
Patheon to object to the terms, provisions, or conditions unless the document specifically refers
to this Agreement and is signed by both Parties.

13.13 No Third Party Benefit or Right.

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

13.14 Use of Penwest Name.

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

13.15 Governing Law.

     This Agreement will be construed and enforced in accordance with the laws of the State of New
York, U.S.A., without reference to any of its conflicts of laws provisions that would require the
application of the laws of any other jurisdiction. The UN Convention on Contracts for the
International Sale of Goods will not apply to this Agreement.

13.16 Language Clause. 

     The Parties have requested that this Agreement and all ancillary documents be drawn up in the
English language only. Les Parties ont exigé que cette entente ainsi que tous les documents y
afférent soient rédigés en anglais seulement.

13.17 Execution in Counterparts.

     This 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.

- 30 -

 

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

	 	 	 	 	 	 	 

	 	 	PATHEON INC.
	 
	 	 	 	 	 	 
	 

	 	by
	 	/s/ Eric W. Evans	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	by
	 	Eric W. Evans, Chief Financial Officer	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	PENWEST PHARMACEUTICALS CO.
	 
	 	 	 	 	 	 
	 

	 	by
	 	/s/ Amale Hawi	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	by
	 	Amale Hawi, SVP, Pharmaceutical Development	 	 
	 

	 	 	 	 	 	 

- 31 -

 

SCHEDULE A

PRODUCT SPECIFICATIONS AND FORMULATION

[**]

A total of 3 pages were omitted and filed separately with the Securities and Exchange Commission
pursuant to a request for confidential treatment.

A-1

 

SCHEDULE B-1

Manufacturing Services

(1) 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 Penwest
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 Product to Penwest, it will provide Penwest with a certificate of analysis
and certificate of compliance including a statement that the Batch has been manufactured and tested
in accordance with Specifications, the Manufacturing Process, cGMPs, and all applicable Laws, and
that the Product conforms to the Specifications. The form and style of Batch documents, including
Batch production records, lot packaging records, equipment set up control, operating parameters,
and data printouts, raw material data, and laboratory notebooks are the exclusive property of
Patheon. Specific Product related information contained in those Batch documents is Penwest
property.

(2) Components. Patheon will purchase and test all Components [**] and as required by the
Specifications.

(3) Packaging. Patheon will package the Products as set out in the Specifications.
Penwest 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 the Manufacturing Process, cGMPs and applicable
Laws. Penwest may, in its sole discretion, make changes to labels, product inserts, and other
packaging for the Products. Those changes will be submitted by Penwest to all applicable
governmental agencies and other Third Parties responsible for the approval of the Products.
Penwest will be responsible for the cost of labelling obsolescence when changes occur. Patheon’s
name will not appear on the label or anywhere else on the Products unless required by applicable
Laws or Patheon consents in writing to the use of its name .

(4) Bill Back Items. Bill Back Items will be charged to Penwest at Patheon’s cost plus a
[**]% handling fee.

Manufacturing Assumptions. Patheon will use the following manufacturing equipment train in
the Manufacturing Process and for production of the TIMERxâ-N Product.

[**]

	•	 	There will be [**]. Final blending will be performed in the [**].
	 
	•	 	Single Batch manufacturing runs are anticipated. Each Batch will yield approximately [**]
kilograms of TIMERxâ-N.
	 
	•	 	Patheon assumes that the TIMERxâ-N Formulation does not absorb/adsorb to
any metal, glass or other components used during the processing and analytical testing of the
Batch.
	 
	•	 	Patheon assumes the current cleaning procedure is adequate and full cleaning occurs after
each campaign.

B-1 - 1

 

	•	 	A manufacturing yield of [**] percent ([**]%) is expected based on Penwest’s prior
experience with the Manufacturing Process.
	 
	•	 	Patheon shall conduct finished Product testing on all Product Batches, in accordance with
the Manufacturing Process, cGMPs and Specifications, such testing to include: [**].
	 
	•	 	As per Penwest, granulation will be bulk packaged into approximately [**] drums double
lined with [**].

(5) Stability Samples and Testing. Patheon will complete stability testing on each Batch.
The process and details for conducting stability testing will be determined by the Parties and set
forth in a stability protocol. If a confirmed stability test failure occurs Patheon will notify
Penwest within [**], after which Patheon and Penwest will jointly determine the procedure 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 the cost of the investigation unless
it has failed to perform the Manufacturing Services in accordance with the Specifications, the
Manufacturing Process, cGMP’s and applicable Laws or the Product fails to conform to the
Specifications. Patheon will give Penwest all stability test data and results at Penwest’s
request.

(6) Packing and Shipping. TIMERxâ-N Product will be bulk packaged by
Patheon into drums double lined with [**] bags.

B-1 - 2

 

SCHEDULE B-2

Manufacturing Processes and Process Schematic

[**]

A total of 4 pages were omitted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment.

C-1

 

SCHEDULE C

PRODUCT PRICES

	 	 	 
	Product	 	Year 2010 Prices/per kg
	TIMERxâ-N ([**] kg/Batch)
	 	C$[**]/kg*

 

			
	*	 	Initial pricing assumes an annual volume of [**] kg

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

	 	•	 	Product manufactured, tested and packaged under the Agreement
	 
	 	•	 	Standard certificate of analysis (“COA”)
	 
	 	•	 	Standard certificate of compliance (“COC”)
	 
	 	•	 	GMP required retention samples
	 
	 	•	 	Copies of deviation reports
	 
	 	•	 	Batch Production Records (“BPR”)/Lot Packaging Records (“LPR”)
copies for all Batches produced
	 
	 	•	 	One label copy change per Year
	 
	 	•	 	BPR/LPR changes, one major change per Year
	 
	 	•	 	Common HPLC/GC columns, reagents, and lab supplies
	 
	 	•	 	Copy of the Annual Product Review Report
	 
	 	•	 	Product Approval Inspection (“PAI”) and copy of FDA Report
	 
	 	•	 	Simple, routine statistical review
	 
	 	•	 	Storage of Production Test Record (“PTR”) batches and other experimental
batches for three months
	 
	 	•	 	Storage of registration batches and other experimental batches for two years or
until Product approval, whichever comes first
	 
	 	•	 	Routine sampling and analysis as part of Product manufacture and release
	 
	 	•	 	[**]

B-1 - 2

 

SCHEDULE D

ANNUAL STABILITY TESTING PROTOCOL AND COSTS

Product Information

	 	 	 

	Product Name/Strength: TIMERx-N

	 	Study Initiation:
	 

	 	Sample Type:
	 
	 	 
	 

	 	GMP — specification #:
	 
	 	 
	Product Lot #

	 	Primary Packaging: [**]
	Batch Size: [**] Kg

	 	Secondary Packaging:[**]
	Manufacturer:

	 	Packager:

Storage Conditions

	 	 	 	 	 	 	 	 	 	 	 
	Condition	 	12 month	 	24 month	 	36 month	 	48 month	 	60 month
	[**]

	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	Other:
	 	 	 	 	 	 	 	 	 	 

Test Requirements

All of the following tests are performed at each time point:

[**].

Sample Requirements

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Condition	 	12 month	 	24 month	 	36 month	 	48 month	 	60 month	 	Total
	[**]

	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	Other:
	 	 	 	 	 	 	 	 	 	 	 	 
	Grand Total:

	 	 	 	 	 	 	 	 	 	 	 	[**]

	 	 	 	 	 	 	 

	Comments 

*[**]

	 	Approvals	 	 	 	 
	[**]. 

	 	 

Pharmaceutics
	 	 

Date
	 	 
	 
	 	 	 	 	 	 
	 

	 	 

QA/QC
	 	 

Date
	 	 

D-1

 

1. 2010 Annual Stability (FUST)

Stability samples will be tested as per the methods and acceptance criteria outlined in the
TIMERx-N Control and Stability Procedure. Patheon will prepare a stability protocol outlining the
product description, storage conditions and pullpoints.

Note: One batch in a given production year will be placed on FUST.

The following tests will be completed at each pullpoint:

	 	 	 	 	 	 	 

	•

	 	[**]
	 	•
	 	[**]
	•

	 	[**]
	 	•
	 	[**]
	•

	 	[**]
	 	•
	 	[**]
	•

	 	[**]
	 	•
	 	[**]

For requested changes that affect the type of testing to be performed at a given pull point, the
price per sample may be re-evaluated and a formal quote may be issued to capture any additional
work. Alternatively, a discount for work not performed may be applied to the invoice without a
formal quote. Stability cost will be reviewed on a per annual basis.

D-2

 

2. Fee Summary for Overall Budget

BUDGET SUMMARY

Penwest Pharmaceutical Company

TIMERx-N

THE FOLLOWING COSTS ARE ALL QUOTED IN:           USD

All amounts quoted are valid for [**] days from the date of this Proposal.

			
	STABILITY — COMMERCIAL
	 	USD

	 	 	 	 	 	 	 

	 

	 	ACTIVITY
	 	 	 	PRICE
	 
	 	 	 	 	 	 
	 

	 	Number of Lots	 	 	 	 
	 

	 	Total Samples	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Subtotal	 	 
	 

	 	Protocol Generation
	 	$[**]	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

	Pullpoint Month

	 	T = 1
	 	T = 3
	 	T = 6
	 	T = 9
	 	 	T = 12	 	 	T = 18
	 	 	T = 24	 	 	 	T = 36	 	 	 	T = 48	 	 	 	T = 60	 
	[**]

	 	 	 	 	 	 	 	 	 	 	x	 	 	 	 	 	x	 	 	 	x	 	 	 	x	 	 	 	x	 
	Samples per pullpoint

	 	 	 	 	 	 	 	 	 	 	1	 	 	 	 	 	1	 	 	 	1	 	 	 	1	 	 	 	1	 
	Microbiology

	 	 	 	 	 	 	 	 	 	 	x	 	 	 	 	 	x	 	 	 	x	 	 	 	x	 	 	 	x	 
	Cost per pullpoint

(Milestone Price)

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

	 	Total
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	[**]	 
	 
	BUDGET TOTAL

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	USD
	 	$	[**]	 

D-3

 

SCHEDULE E

Quality Agreement

Commercial Product

Between

Penwest Pharmaceuticals Co.,

a corporation existing under the laws of the state of Washington, USA and having

offices at 2981 Route 22, Suite 2, Patterson, NY 12563, USA

(hereinafter referred to as “Penwest”)

-and-

Patheon Inc.,

a corporation existing under the laws of Canada and having offices at 2100

Syntex Court, Mississauga, Ontario L5N 7K9, Canada,

(hereinafter referred to as “Patheon”)

Specific sites covered under this Agreement:

Patheon Whitby

111 Consumers Road

Whitby, ON

L1N5Z5

Effective Date: June 7, 2010

Version: QG01-05-T001-01

 

 

TABLE OF CONTENTS

	 	 	 	 	 

	SECTION 1: PREMISES AND AGREEMENT
	 	 	3	 
	SECTION 2: RESPONSIBILITIES TABLE
	 	 	3	 
	SECTION 3: GENERAL
	 	 	5	 
	SECTION 4: DESCRIPTION OF RESPONSIBILITIES
	 	 	6	 
	SECTION 5: APPENDICES
	 	 	20	 

	 	 	 

	APPENDIX A:

	 	PRODUCT(S)
	APPENDIX B:

	 	QUALITY CONTACTS
	APPENDIX C:

	 	PATHEON APPROVED VENDOR LIST
	APPENDIX D:

	 	CLIENT APPROVED VENDOR LIST
	APPENDIX E:

	 	PATHEON APPROVED CONTRACT LABORATORIES LIST

Page 2 of 25

 

SECTION 1:  PREMISES AND AGREEMENT

     PREMISES. Under the Manufacturing Services Agreement dated June 7, 2010 and the
TIMERx®-N Technology Transfer and Manufacturing Services Agreement dated October 30, 2009, in each
case by and between Patheon and Penwest (the “MSA”, the “Technology Transfer
Agreement” and this “Quality Agreement”, respectively), Patheon agreed to perform
Manufacturing Services (as defined in the MSA and the Technology Transfer Agreement) for the
Products identified in Appendix A, attached hereto, in accordance with the terms and
conditions of the MSA, the Technology Transfer Agreement and this Quality Agreement.

     The Parties desire to allocate the responsibility for procedures and Specifications impacting
on the identity, strength, quality and purity of the Products.

     Capitalized terms not otherwise defined herein shall have the meaning specified in the MSA or,
if not defined in the MSA, as defined in the Technology Transfer Agreement.

     In the event of any conflict between the terms of this Quality Agreement and the MSA or the
Quality Agreement and the Technology Transfer Agreement, the order of precedence shall be: (i) the
MSA and this Quality Agreement, or (ii) the Technology Transfer Agreement and this Quality
Agreement.

     AGREEMENT. NOW THEREFORE in consideration of the Premises and rights conferred and
the obligations assumed under the MSA, the Technology Transfer Agreement and this Quality
Agreement, 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:

SECTION 2:  RESPONSIBILITIES TABLE

     Patheon will be responsible for all the operations that are marked with “X” in the column
titled “Patheon” and Penwest will be responsible for all the operations that are marked with “X” in
the column titled “Penwest”. If marked with “(X)”, cooperation is required from the designated
Party.

	 	 	 	 	 	 	 	 	 
	Section No.	 	Subject / Terms	 	Penwest	 	Patheon
	4.1 Quality Management	 	 	 	 	 	 
	 
	4.1.1

	 	cGMP, Health and Safety
Compliance
	 	 	X	 	 	X
	4.1.2

	 	Penwest Audit Rights
	 	 	X	 	 	 
	4.1.3

	 	Subcontracting
	 	 	(X	)	 	X
	4.1.4

	 	Self-Inspection
	 	 	 	 	 	X

Page 3 of 25

 

	 	 	 	 	 	 	 	 	 
	Section No.	 	Subject / Terms	 	Penwest	 	Patheon
	4.2 Regulatory Requirements	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	4.2.1

	 	Permits and Manufacturing
License(s)
	 	 	 	 	 	X
	4.2.2

	 	Regulatory Filing /Registration
Change Control
	 	 	X	 	 	(X)
	4.2.3

	 	Regulatory Compliance
	 	 	 	 	 	X
	4.2.4

	 	Government Agency
Inspections, Communications
and Requisitions
	 	 	(X	)	 	X
	 
	 	 	 	 	 	 	 	 
	4.3 Component Control	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	4.3.1

	 	Test Methods and
Specifications
	 	 	X	 	 	(X)
	4.3.2

	 	Component Destruction
	 	 	(X	)	 	X
	4.3.3

	 	Vendor Audit Responsibility
	 	 	X	 	 	X
	4.3.4

	 	Penwest Furnished Components
	 	 	X	 	 	 
	4.3.5

	 	Incoming Component Release
	 	 	 	 	 	X
	 
	 	 	 	 	 	 	 	 
	4.4 Building, Facilities, Utilities and Equipment	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	4.4.1

	 	General
	 	 	 	 	 	X
	4.4.2

	 	Equipment, Calibration and
Preventative Maintenance
	 	 	 	 	 	X
	4.4.3

	 	Environmental Monitoring

Program
	 	 	 	 	 	X
	 
	 	 	 	 	 	 	 	 
	4.5 Product Controls	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	4.5.1

	 	Master Batch Record
	 	 	(X	)	 	X
	4.5.2

	 	Reprocessing and Rework
	 	 	(X	)	 	X
	4.5.3

	 	Personnel Training
	 	 	 	 	 	X
	 
	 	 	 	 	 	 	 	 
	4.6 Packaging, Labeling and Printed Components	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	4.6.1

	 	Packaging Documentation
	 	 	(X	)	 	X
	4.6.2

	 	Printed Components and Artwork
	 	 	X	 	 	(X)
	4.6.3

	 	Test Methods
	 	 	X	 	 	(X)
	 
	 	 	 	 	 	 	 	 
	4.7 Exception Reports (Deviations / Investigations)	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	4.7.1

	 	Manufacturing Instruction

Deviations
	 	 	(X	)	 	X
	4.7.2

	 	Notification of Deviations
	 	 	 	 	 	X
	 
	 	 	 	 	 	 	 	 
	4.8 Release of Product	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	4.8.1

	 	Test Methods and
Specifications
	 	 	X	 	 	(X)
	4.8.2

	 	Batch Release for Shipment
	 	 	 	 	 	X
	4.8.3

	 	Certificate of Compliance
	 	 	 	 	 	X
	4.8.4

	 	Product Release
	 	 	X	 	 	 
	 
	 	 	 	 	 	 	 	 
	4.9 Validation
	 	 	 	 	 	 

Page 4 of 25

 

	 	 	 	 	 	 	 	 	 
	Section No.	 	Subject / Terms	 	Penwest	 	Patheon
	4.9.1

	 	Master Validation Plan
	 	 	(X	)	 	X
	4.9.2

	 	Cleaning Validation Program
	 	 	(X	)	 	X
	4.9.3

	 	Analytical Method and Process
Transfer
	 	 	 X	 	 	 
	 
	 	 	 	 	 	 	 	 
	4.10 Change Control	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	4.10.1

	 	General
	 	 	X	 	 	X
	 
	 	 	 	 	 	 	 	 
	4.11 Documentation	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	4.11.1

	 	Record Retention
	 	 	 	 	 	X
	 
	 	 	 	 	 	 	 	 
	4.12 Laboratory Controls	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	4.12.1

	 	Specifications and Test
Methods
	 	 	X	 	 	X
	4.12.2

	 	Out of Specifications (OOS) /Out
of Trend (OOT)
	 	 	(X	)	 	X
	4.12.3

	 	Method Transfer of Validated
Methods
	 	 	X	 	 	X
	 
	 	 	 	 	 	 	 	 
	4.13 Stability
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	4.13.1

	 	Sample Storage
	 	 	 	 	 	X
	4.13.2

	 	Stability Studies and Protocol
	 	 	X	 	 	X
	4.13.3

	 	Stability Failures
	 	 	(X	)	 	X
	4.13.4

	 	Termination of the MSA or the
Technology Transfer Agreement
	 	 	 	 	 	X
	 
	 	 	 	 	 	 	 	 
	4.14 Annual Product Review	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	4.14.1

	 	General
	 	 	X	 	 	(X)
	 
	 	 	 	 	 	 	 	 
	4.15 Storage and Distribution	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	4.15.1

	 	General
	 	 	 	 	 	X
	4.15.2

	 	Product Storage and Shipment
Changes
	 	 	(X	)	 	X
	4.15.3

	 	Product Quarantine
	 	 	 	 	 	X
	 
	 	 	 	 	 	 	 	 
	4.16 Product Complaints	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	4.16.1

	 	Complaint Investigation
	 	 	X	 	 	(X)
	 
	 	 	 	 	 	 	 	 
	4.17 Product Recall	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	4.18 Retention Samples	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	4.18.1

	 	Component Retention Samples
	 	 	 	 	 	X

SECTION 3:  GENERAL

	3.1	 	Any communications about the subject matter of this Agreement will be directed, in the first
instance, to the person(s) identified in Appendix B. A Party may change its designed
representatives identified on Appendix B by written notice to the other Party in
accordance with Section 13.9 of the MSA.

Page 5 of 25

 

	3.2	 	If any provision of this Agreement should be or found invalid, or unenforceable by applicable
Law, the rest of the Agreement will remain valid and binding and the Parties will negotiate a
valid provision which meets as close as possible the objective of the invalid provision.
	 
	3.3	 	Any amendment of this Agreement will be made in writing and signed by both Parties; provided
that (i) either Party may change its designated representative(s) identified on Appendix
B by written notice to the other Party in accordance with Section 13.9 of the MSA.
	 
	3.4	 	This Quality Agreement will become effective on the Effective Date (set forth on the cover
page of this Agreement) and will remain in effect until the termination or expiration of both
the Technology Transfer Agreement and the MSA (the “Term”).

SECTION 4: DESCRIPTION OF RESPONSIBILITIES

	4.1	 	Quality Management.

	 	4.1.1	 	cGMP, Health and Safety Compliance.
	 
	 	 	 	Patheon will conduct operations in compliance with all applicable Laws, including
environmental, occupational health and safety Laws.

	 	4.1.2	 	Penwest Audit Rights.
	 
	 	 	 	Patheon will give Penwest and its customer’s reasonable access at mutually
agreeable times to the areas of the Manufacturing Facility in which the Product is
manufactured, stored, handled, tested or shipped to permit Penwest and its
customers to verify that the Manufacturing Services are being performed in
accordance with the Specifications, cGMPs and applicable Laws. Penwest’s audit
right (as described above) is limited to one audit each calendar year for up to
[**] calendar days and involving no more than [**] auditors; provided that Penwest
and its customers shall have the right to conduct additional “for-cause” audits.
Penwest may request additional cGMP-type audits, additional audit days, or the
participation of additional auditors subject to payment. The fees associated with
these additional cGMP audits are specified in the MSA. The right of access set
forth in this Section 4.1.2 will not include a right to access or inspect Patheon’s
financial records.

	 	4.1.3	 	Subcontracting. 
	 
	 	 	 	Patheon shall not have the right to subcontract, in whole or in part, its
obligations under this Quality Agreement, without the prior written consent of
Penwest, which consent Penwest may withhold

Page 6 of 25

 

	 	 	 	in its sole discretion. Appendix E lists the Patheon approved contract
laboratories list.

	 	4.1.4	 	Self-Inspection.
	 
	 	 	 	Patheon will perform self-inspections of its premises, facilities, and processes
used to manufacture, package, test, and store Penwest’s Components and/or finished
Products in accordance with Patheon’s written standard operating procedures
(“SOPs”) to ensure compliance with cGMP and this Quality Agreement.

	4.2	 	Regulatory Requirements.

	 	4.2.1	 	Permits and Manufacturing Licenses.
	 
	 	 	 	Patheon will obtain and maintain the appropriate manufacturing license(s) to enable
Patheon to perform its obligations under the MSA, the Technology Transfer Agreement
and this Agreement, as set forth in Sections 9.3(e) and 9.5 of the MSA and in
Sections 10.2(b) and 10.2(c) of the Technology Transfer Agreement.

	 	4.2.2	 	Regulatory Filing / Registration Change Control.
	 
	 	 	 	Penwest will determine whether changes to the Product or related to the Product
will impact the current DMF and will apply for and receive approval for any
required manufacturing amendment, change or addition to the Product DMF. Upon
request, Patheon will provide assistance in the preparation and review of pertinent
sections of new or supplemental regulatory applications before filing. Penwest
will provide Patheon with copies of relevant sections of the Product DMF filings,
as set forth in Section 7.8(b) of the MSA and Section 11.2 of the Technology
Transfer Agreement. Penwest is responsible for all communications with Regulatory
Authorities as well as for the approval, maintenance, and updating of the current
DMF.

	 	4.2.3	 	Regulatory Compliance.
	 
	 	 	 	Patheon will ensure that Product(s) are manufactured and tested in strict
compliance with cGMP for the manufacture of finished Product) as applicable,
Regulatory Approvals and applicable Laws.

	 	4.2.4	 	Government Agency Inspections, Communication and Requisitions.
	 
	 	 	 	Patheon will permit all relevant inspections by Regulatory Authorities of premises,
procedures, and documentation.

Page 7 of 25

 

	 	 	 	Patheon will notify Penwest within three (3) Business Days after receipt of any
notice of inspection from a Regulatory Authority and within one (1) Business Day
after any Regulatory Authority request for Product samples, Batch documentation, or
other information related to the Product.
	 
	 	 	 	Patheon will notify Penwest within one (1) Business Day after receipt of any Form
483’s warning letter or the like from any Regulatory Authority that relates to the
Product; or if the supply of Product will be affected, or if the facilities used to
produce, test or package the Product will be affected.
	 
	 	 	 	The responses from Patheon related to the Product will be reviewed and approved by
Penwest prior to submission to the Regulatory Authority.

	4.3	 	Component Control.

	 	4.3.1	 	Test Methods and Specifications.
	 
	 	 	 	Penwest will give Patheon a copy of the Specifications and test methods to be used
if Penwest issues Component Specifications. Patheon will create internal test
methods and specifications in support of the Components; provided that all
QC testing for Components will be conducted by Patheon using the methods and
Specifications provided by Penwest to Patheon, or otherwise approved by Penwest in
writing. Raw materials used in manufacture of Products hereunder shall be released
as per USP/NF/EP or to Penwest’s specifications, as approved in writing by Penwest.

	 	4.3.2	 	Component Destruction.
	 
	 	 	 	Patheon has the right to either return to Penwest or dispose of any outdated or
rejected Components. If Components are disposed of, disposal will be consistent
with the nature of the Components and sent to a permitted waste disposal facility.
Prior to such disposal:

Page 8 of 25

 

	 	(i)	 	Patheon will send notice to Penwest about Patheon’s intent to
dispose of the Component. If no direction is received from Penwest, Patheon
will dispose of the Component no sooner than [**] days after the date of the
notice.
	 
	 	(ii)	 	The Components will be disposed and destroyed in compliance
with local environmental regulations and other applicable Laws, and performed
in a secure and legal manner that prevents unauthorized use or diversion.

Patheon will maintain destruction records in accordance with Patheon’s SOP’s.

	 	4.3.3	 	Vendor Audit Responsibility.

	 	(i)	 	Excipient Vendors:

	 	a.	 	If Penwest stipulates an excipient vendor,
Penwest will audit and approve the manufacturers/supplier and ensure
cGMP compliance in accordance with Section 4.3.4 of this Agreement.
The Penwest stipulated vendor(s) will be included on Penwest’s
approved vendor list (attached hereto as Appendix D).
	 
	 	b.	 	If Patheon stipulates the excipient vendor,
Patheon will audit and approve the manufacturers/supplier and ensure
cGMP compliance in accordance with Patheon’s SOP. The Patheon
stipulated vendor(s) will be included on Patheon’s approved vendor
list (attached hereto as Appendix C).

	 	(ii)	 	Packaging Component Vendors:

	 	a.	 	If Penwest stipulates a packaging Component
vendor, Penwest will audit and approve the manufacturer/supplier and
ensure cGMP compliance. The Penwest stipulated vendor(s) will be
included on the approved vendor list (attached hereto as Appendix
D).
	 
	 	b.	 	If Patheon stipulates the packaging
Component vendor, Patheon will audit and approve the
manufacturer/supplier and ensure cGMP compliance in accordance with
Patheon’s SOP. The Patheon stipulated vendor(s) will be included on
the approved supplier list (Appendix C).

Page 9 of 25

 

	 	4.3.4	 	Penwest Furnished Components.
	 
	 	 	 	Penwest is responsible for vendor qualification of Penwest furnished Components and
for providing a certificate of compliance confirming the following:

	 	(i)	 	That the Components are compliant with the provisions
outlined in the “Note for Guidance on minimizing the risk of transmitting
spongiform encephalopathy agents via human and veterinary medicinal products”
(EMEA/410/01, Rev.2 or update)”; and
	 
	 	(ii)	 	A residual solvent certificate confirming that there is no
potential for specific toxic solvents listed in the USP / ICH residual
solvents Class I, Class II or Class III to be present and the Components, if
tested, will comply with established USP / ICH requirements. If any of the
solvents listed in the USP / ICH residual solvents Class I, Class II or Class
III are used in the manufacture or are generated in the Manufacturing Process,
solvents of concern will be indicated.

	 	4.3.5	 	In-Coming Component Release.
	 
	 	 	 	Prior to its use in the manufacture of any Product all Component(s) will be
inspected, tested and released by Patheon against the Specification approved by
Penwest.

	4.4	 	Building, Facilities, Utilities and Equipment.

	 	4.4.1	 	General.
	 
	 	 	 	All buildings and facilities used in the manufacturing, packaging, testing and
storage of any Components and/or Product will be of suitable size, construction and
location to facilitate cleaning, and will be maintained in a good state of repair.
Maintenance and cleaning records will be kept in accordance with Patheon’s SOP’s.

	 	4.4.2	 	Equipment, Calibration and Preventative Maintenance.
	 
	 	 	 	All equipment used in the manufacturing, packaging, testing and stage of any
Components and/or Product will be suitable for its intended use and appropriately
located to allow for cleaning and maintenance. Calibration and maintenance records
will be kept according to Patheon SOP’s for all critical equipment. Patheon will
calibrate instrumentation and qualify computer systems used in the manufacture and
testing of the Product in accordance with Patheon’s SOP’s.

Page 10 of 25

 

	 	4.4.3	 	Environmental Monitoring Program.
	 
	 	 	 	Patheon will perform and maintain an environmental monitoring program. The
collected data will be reviewed and interpreted by the responsible person within
Patheon’s quality unit. Any out of limit results impacting the Product will be
reported immediately to Penwest and managed appropriately in accordance with
Patheon SOPs.

	4.5	 	Production Controls.

	 	4.5.1	 	Master Batch Record.
	 
	 	 	 	Penwest will provide the Product Specifications to Patheon and Patheon will
manufacture Product in accordance with the Specifications.
	 
	 	 	 	Patheon is responsible for preparing the Master Batch Records for the Product;
provided however that both Patheon and Penwest are responsible for
reviewing and approving such Master Batch Records prior to the manufacture of the
Product.
	 
	 	 	 	Patheon will not make changes to the approved Master Batch Records except through
the established Patheon change control system, and all master document revisions
will be approved by Penwest’s quality unit. Any changes made to approved Master
Batch Records (prior to master revisions) must be reviewed and approved by
Penwest’s quality unit prior to implementation.

	 	4.5.2	 	Reprocessing and Rework.
	 
	 	 	 	Patheon will not reprocess or rework the Product without the prior written consent
of Penwest.
	 
	 	 	 	Reprocessing is defined as the introduction of material back into the process and
repeating a step, (e.g., redrying, remilling) using the same equipment and
techniques of the established Manufacturing Process.
	 
	 	 	 	Rework is defined as the introduction of material to one or more processing steps
that are different from the established Manufacturing Process.

	 	4.5.3	 	Personnel Training.
	 
	 	 	 	Patheon will provide appropriate training for all employees. Each person engaged
in the manufacture, packaging, testing, storage, and shipping of the Product will
have the education, training, and

Page 11 of 25

 

	 	 	 	experience necessary, consistent with cGMP and safety training requirements. All
training will be documented and available upon request by Penwest.

	4.6	 	Packaging, Labeling and Printed Components.

	 	4.6.1	 	Packaging Documentation.
	 
	 	 	 	Penwest will provide Patheon with the Specifications for all packaging Components.
Patheon will create internal test methods and specifications in support of the
packaging Components; provided that all QC testing for Components will be
conducted by Patheon using the methods and Specifications provided by Penwest to
Patheon, or otherwise approved by Penwest in writing. Packaging Components used
during the manufacture of Products hereunder shall be released as per USP/NF/EP or
to Penwest’s specifications, as approved in writing by Penwest.

	 	4.6.2	 	Printed Components and Artwork.
	 
	 	 	 	Penwest will provide artwork and labeling text (drum label) specifications to
Patheon. Patheon will create the labeling proofs which must be reviewed and
approved in writing in advance by Penwest.

	 	4.6.3	 	Test Methods.
	 
	 	 	 	Penwest will provide test methods for packaging Components to Patheon. Where
applicable, Patheon will provide test methods and validation for packaging
Components purchased from vendors on the Patheon approved vendor list only
(Appendix C).

	4.7	 	Exception Reports (Deviations / Investigations).

	 	4.7.1	 	Manufacturing Instruction Deviations.
	 
	 	 	 	Patheon will document, investigate and resolve deviations from the approved
Manufacturing Process, the Specifications and cGMP in accordance with Patheon’s
SOP’s. Patheon will report all deviation report (“DR”) type deviations to
Penwest’s responsible person. Patheon will provide copies of all DR’s to Penwest
as part of the executed Batch record.

	 	4.7.2	 	Notification of Deviations.
	 
	 	 	 	Patheon will notify Penwest, via email, within [**] if any deviation occurs during
manufacture of the Product.

Page 12 of 25

 

	4.8	 	Release of Product.

	 	4.8.1	 	Test Methods and Specifications.
	 
	 	 	 	Penwest will provide to Patheon the finished Product Specifications and will supply
validated analytical test methods to Patheon for the finished Product. Penwest and
Patheon will perform a method transfer as considered necessary.

	 	4.8.2	 	Batch Release for Shipment.
	 
	 	 	 	Batch review and release for shipment to Penwest will be the responsibility of
Patheon’s Quality Assurance department who will act in accordance with Patheon’s
SOP’s. Any problem discovered by Patheon likely to cause rejection of the Product
will be communicated to Penwest directly along with any supporting documentation
(i.e., OOS, Non-Conforming Report, etc.) of the problem. The communication should
occur within one (1) Business Day after the discovery of the problem. The Product
will be immediately placed in quarantine until a joint Patheon/Penwest material
review board convenes to determine the final disposition of the Product. For each
lot manufactured, Patheon will send via overnight mail (i.e: Fed Ex) a copy of the
Batch record, certificate of analysis and other certificates in order to perform
the Product Release to the attention of Penwest QA.

	 	4.8.3	 	Certificate of Compliance.
	 
	 	 	 	For each Batch released by Patheon for shipment to Penwest, Patheon will deliver to
Penwest a certificate of compliance that will include a statement that the Batch
has been manufactured in accordance with cGMPs, the Manufacturing Process and the
Specifications.

	 	4.8.4	 	Product Release.
	 
	 	 	 	Product shall not be shipped to Penwest or its designated shipping point unless and
until (i) all applicable Batch records, certificates of analysis and other
certificates have been provided to and reviewed by Penwest, and (ii) Penwest’s
quality assurance representative has performed product release on such quantities
of Product for shipment, in the case of both (i) and (ii), in accordance with the
procedures set forth in this Quality Agreement. Penwest agrees that it shall
review all Batch records and other certificates within 10 days after receipt of
such documents from Patheon.

Page 13 of 25

 

	4.9	 	Validation.

	 	4.9.1	 	Master Validation Plan.
	 
	 	 	 	Patheon will establish applicable master validation plans and maintain a validation
program for the Product. Penwest will review and approve the master validation
plan, performance qualification and process validation protocols and reports for
the Product.

	 	4.9.2	 	Cleaning Validation Program.
	 
	 	 	 	Penwest will provide to Patheon toxicological information (if applicable) to be
used in the development of a cleaning program. Patheon will maintain an
appropriate cleaning and cleaning validation program.

	 	4.9.3	 	Analytical Method and Process Transfer.
	 
	 	 	 	Penwest must ensure that its analytical methods and manufacturing procedures) are
validated. If the methods and procedures are not validated by Penwest, then
Patheon may assist in validation development with the costs being borne by Penwest.

	4.10	 	Change Control.

	 	4.10.1	 	General.
	 
	 	 	 	Patheon will notify and obtain approval from Penwest before implementing any
proposed changes to the Process, Components, testing, equipment or the Facility as
it pertains to the Product.
	 
	 	 	 	Penwest will be responsible for submitting the proper amendments to the Regulatory
Authorities for any changes to the current DMF for the Product.
	 
	 	 	 	Following validation of a process change, Patheon will deliver a copy of the
related validation report to Penwest and the associated stability data, if
applicable, as it becomes available.

	4.11	 	Documentation.

	 	4.11.1	 	Record Retention.
	 
	 	 	 	Patheon will maintain all Batch records for a minimum of [**] after the applicable
Product expiration date and supply all these records to Penwest upon request.

Page 14 of 25

 

	 	 	 	Patheon will maintain records and evidence on the testing of Components,
packaging/labeling and other Components for [**] years after the applicable
Components were last used in the manufacture of the Product.
	 
	 	 	 	At the end of the above noted retention period, Penwest will be contacted
concerning the future storage or destruction of the documents.

	4.12	 	Laboratory Controls.

	 	4.12.1	 	Specifications and Test Methods.
	 
	 	 	 	Patheon will test and approve the finished Product in accordance with the approved
Specifications, cGMP, analytical methods, and Patheon’s SOP’s.

	 	4.12.2	 	Out of Specifications (OOS) / Out of Trend (OOT).
	 
	 	 	 	Patheon will notify Penwest’s quality unit of confirmed out-of-Specification
(“OOS”) or out-of-trend (“OOT”) results within one (1) Business
Day. Patheon will generate a DR type deviation as per Patheon SOP’s and obtain
approval of the DR from Penwest’s responsible person within their quality unit.

	 	4.12.3	 	Method Transfer of Validated Methods.
	 
	 	 	 	Penwest will provide Patheon with validated test methods for non-compendial
excipients. Penwest will transfer the validated methods to Patheon using approved
protocols.

	4.13	 	Stability.

	 	4.13.1	 	Sample Storage.
	 
	 	 	 	Patheon will store stability samples as defined in the current MSA or Technology
Transfer Agreement.

	 	4.13.2	 	Stability Studies and Protocol.
	 
	 	 	 	Stability Studies will be conducted in accordance with the MSA or the Technology
Transfer Agreement, as applicable.

	 	4.13.3	 	Stability Failures.
	 
	 	 	 	Patheon will notify Penwest of any stability failure for Product supplied to
Penwest. If a result indicates that a Product has failed

Page 15 of 25

 

to remain within stability Specifications, Patheon will notify Penwest within
one (1) Business Day.

     4.13.4 Termination of the MSA or the Technology Transfer Agreement.

If the MSA or the Technology Transfer Agreement is terminated, Patheon will
continue to provide Penwest with stability data supporting the acceptability of the
Product until all Product distributed by Penwest has reached the end of its
shelf-life.

4.14 Annual Product Review.

     4.14.1 General.

Penwest will complete the annual Product review in accordance with requirements of
the Product Regulatory Approval. Patheon will provide copies of all information
and correspondence necessary to support the annual Product reviews when requested
by Penwest.

4.15 Storage and Distribution.

     4.15.1 General.

Patheon will ship Product in accordance with the agreed qualified transportation
requirements provided by Penwest to Patheon.

     4.15.2 Product Storage and Shipment Changes.

Patheon will communicate any proposed changes in storage or shipping to Penwest for
review and approval, such approval not to be unreasonably withheld.

     4.15.3 Product Quarantine.

Patheon will have a system in place for assuring that Penwest unreleased Product is
not shipped unless authorized by Penwest’s quality unit.

4.16 Product Complaints.

     4.16.1 Complaint Investigation.

Penwest will investigate and resolve all medical and non-medical Product
complaints. Patheon will investigate all Patheon manufacturing and packaging type
Product complaints related to the Manufacturing Services provided. The timing of
the complaint investigations will be within 30 days. If the complaint is deemed to
be critical in nature, then both Parties will agree to a shorter

Page 16 of 25

 

timeframe. Penwest will retrieve complaint sample(s) and forward them to Patheon in
a timely manner to facilitate a complete and comprehensive investigation.

4.17 Product Recall.

Product Recalls shall be addressed in accordance with Sections 6.2, 6.3 and 6.5 of the MSA.

4.18 Retention Samples.

     4.18.1 Component Retention Samples.

Patheon will keep a retention sample of each Component received by Patheon and used
to manufacture the Product. The retention sample will consist of at least [**] the
necessary quantity for all Quality Control tests required to determine whether the
Components meets required specifications.

The retention samples will be stored by Patheon under controlled conditions in
accordance with cGMP storage requirements for [**]. The retention samples will be
made available by Patheon to Penwest, if requested

     4.18.2 Finished Product Retention Samples.

Retention samples of finished Product will be retained by Patheon for one (1) year
past Product expiry or such longer period as required by applicable Law.

Page 17 of 25

 

SECTION 5: MISCELLANEOUS

5.1 Additional Product.

     Additional products may be added to this Agreement by amending Appendix A hereof, and
upon such amendment the additional products will be deemed Products under this Agreement and shall
be governed by the general conditions hereof.

5.2 Notices.

     Except as otherwise expressly set forth in this Quality Agreement, any notice, approval,
instruction or other written communication required or permitted hereunder will be made in
accordance with Section 13.9 of the MSA.

5.3 Entire Agreement.

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

5.4 Other Terms.

     Sections 13.1, 13.4, 13.5, 13.6, 13.10, 13.12, 13.13, 13.14, 13.15, 13.16 and 13.17 of the
Master Services Agreement shall apply to this Agreement, and are hereby incorporated herein by
reference.

Page 18 of 25

 

     IN WITNESS WHEREOF, the Parties have caused their duly authorized officer to execute and
deliver this Quality Agreement as of the Effective Date:

	 	 	 	 	 	 	 	 	 

	Penwest Pharmaceuticals Co.	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	By:
	 	 /s/ Paula D. Buckley	 	Date:	 	 June 8, 2010	 	 
	 	 	 /s/
(Paula D. Buckley, Vice President QA/QC)
	 	 
	 	 

	 	 
	 	 	 	 	 	 	 	 	 
	Patheon Inc.	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	By:
	 	 /s/ Brian J. Dale	 	Date:	 	 June 7, 2010	 	 
	 	 	 
(Brian J. Dale, Director Quality Operations)
	 	 
	 	 

	 	 

Page 19 of 25

 

SECTION 6: APPENDICES

	 	•	 	Appendix A: Product(s)
	 
	 	•	 	Appendix B: Quality Contacts
	 
	 	•	 	Appendix C: Patheon Approved Supplier List
	 
	 	•	 	Appendix D: Penwest Approved Supplier List
	 
	 	•	 	Appendix E: Patheon Approved Contract Laboratories List

Page 20 of 25

 

APPENDIX A: PRODUCT(S)

	 	 	 	 	 
	Products(s)	 	Galenic Form	 	Dosage (Strength)
	 
	TIMERx-N	 	 	 	 

A-1

 

APPENDIX B: QUALITY CONTACTS

	 	 	 	 	 
	 	 	Patheon	 	Penwest
	Responsibility

	 	Quality Assurance
	 	Quality Assurance
	Name

	 	[**]
	 	[**]
	Title

	 	[**]
	 	[**]
	Phone

	 	[**]
	 	[**]
	Fax

	 	 	 	[**]
	E-mail

	 	[**]
	 	[**]
	Address

	 	[**]
	 	[**]
	 
	Responsibility

	 	Regulatory Affairs
	 	Regulatory Affairs
	Name

	 	[**]
	 	[**]
	Title

	 	[**]
	 	[**]
	Phone

	 	[**]
	 	[**]
	Fax

	 	 	 	[**]
	E-mail

	 	[**]
	 	[**]
	Address

	 	[**]
	 	[**]
	 
	 	 	 	 
	Responsibility

	 	Product Complaints
	 	Audits
	Name

	 	[**]
	 	[**]
	Title

	 	 	 	[**]
	Phone

	 	 	 	[**]
	Fax

	 	 	 	[**]
	E-mail

	 	 	 	[**]
	Address

	 	 	 	[**]
	 
	 	 	 	 
	Responsibility

	 	Product Release
	 	Product Release
	Name

	 	[**]
	 	[**]
	Title

	 	 	 	[**]
	Phone

	 	 	 	[**]
	Fax

	 	 	 	[**]
	E-mail

	 	 	 	[**]
	Address

	 	 	 	[**]
	 
	 	 	 	 
	Responsibility

	 	Account Manager
	 	Account Manager
	Name

	 	[**]
	 	[**]
	Title

	 	[**]
	 	[**]
	Phone

	 	[**]
	 	[**]
	Fax

	 	 	 	[**]
	E-mail

	 	[**]
	 	[**]
	Address

	 	[**]
	 	[**]

B-1

 

APPENDIX C: PATHEON APPROVED VENDOR LIST

	 	 	 
	Raw Material/Component	 	Supplier
	[**]

	 	[**]

C-1

 

APPENDIX D: PENWEST APPROVED VENDOR LIST

	 	 	 
	Raw Material/Component	 	Supplier
	[**]

	 	[**]
	[**]

	 	[**]
	[**]

	 	[**]
	[**]

	 	[**]
	[**]

	 	[**]
	[**]

	 	[**]
	[**]

	 	[**]

D-1

 

APPENDIX E: PATHEON APPROVED CONTRACT LABORATORIES LIST

	 	 	 	 	 
	Contract Laboratory	 	Address	 	Contact Information
	[**]

	 	[**]
	 	[**]
	[**]

	 	[**]
	 	[**]
	[**]

	 	[**]
	 	[**]
	[**]

	 	[**]
	 	[**]
	[**]

	 	[**]
	 	[**]
	[**]

	 	[**]
	 	[**]
	[**]

	 	[**]
	 	[**]
	[**]

	 	[**]
	 	[**]
	[**]

	 	[**]
	 	[**]
	[**]

	 	[**]
	 	[**]

     This list does not include any contract laboratories specified by individual clients of
Patheon.

E-1

 

SCHEDULE F

TECHNICAL DISPUTE RESOLUTION

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

1. Appointment of Expert. Within [**] 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 [**] 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 International
Chamber of Commerce.

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
Arbitration Act (Ontario) or of any other applicable statute (foreign or domestic) and the law
relating to arbitration will not apply to the expert or the expert’s determination or the procedure
by which the expert reaches his determination under this Schedule F.

4. Procedure. Where an expert is appointed:

	 	(a)	 	Timing. The expert will be so appointed on condition that (i) he or
she promptly fixes a reasonable time and place for receiving representations,
submissions or information from the Parties and that he or she issues the
authorizations to the Parties and any relevant Third Party for the proper conduct of
his or her determination and any hearing and (ii) he or she renders his decision (with
full reasons) within [**] Business Days (or another other date as the Parties and the
expert may agree) after receipt of all information requested by him or her 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 or her, which information such Party will disclose promptly and in any event
within [**] Business Days after a written request from the relevant expert to do so.

	 	(c)	 	Advisors. Each Party may appoint any counsel, consultants and advisors
as it feels appropriate to assist the expert in his or her 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.

F-1

 

	 	(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 or her
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 or
her decision with full reasons prior to the appointment of the new expert, then this
first 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 [**] for any matter referred to an expert
hereunder and, in the absence of express provision in the Agreement to the contrary,
[**].

For greater certainty, the release of the Products for sale or distribution under the applicable
marketing approval for the Products will not by itself indicate compliance by Patheon with its
obligations for the Manufacturing Services and further that nothing in this Agreement (including
this Schedule F) 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.

F-2

 

SCHEDULE G

CONFIDENTIALITY AGREEMENT

[To be provided.]

G-1

 

SCHEDULE H

SHIPPING LOGISTICS PROTOCOL

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

Exports of Products from Canada to the United States

	1.	 	Shipping terms will be [**] (INCOTERMS 2000), the Facility.

	2.	 	Patheon, as the exporter of record from Canada, will carry out all customs formalities
necessary to export the Products including declaring the value of the Products being exported
from Canada by completing a B-13 Export Declaration form which will be completed showing
Patheon as the exporter of record of the Products with a value equivalent to the Price of the
Products to Penwest.

	3.	 	Patheon will report exports directly to Canada Revenue Agency and Statistics Canada at the
time of shipment from the Facility.

H-1

 

[CLIENT LETTERHEAD]

Form of Logistics Routing Guide

Patheon Inc.

[INSERT ADDRESS]

Attention:                     , A/M

	1.	 	Routine Routing/Shipping Instructions

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

	 	•	 	Freight forwarder  Contact:            PH: ( )

	 	•	 	Customs broker     Contact:            PH: ( )

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

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

	 	•	 	Proforma Invoice

	 	•	 	Bill of Lading (“B/L”)

	 	•	 	Applicable Permits/Declarations

	 	•	 	Packing List

	 	•	 	If eligible, NAFTA Certificate of Origin will be provided in blanket form yearly to
[INSERT CLIENT’S NAME] or [INSERT CLIENT’S NAME] broker.

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

	 	•	 	[INSERT CLIENT CONTACT FAX OR EMAIL]

	 	 	Freight is shipped to:

	 	 	 	[INSERT DESTINATION NAME AND ADDRESS]

	 	 	Information to be provided on Proforma Invoice.

	 	•	 	Net Quantity

	 	•	 	Patheon Code & Lot Number

	 	•	 	Penwest Lot Number/ purchase order (“PO”)Number

	 	•	 	C$ / Unit Including Assist Value & Toll Manufacturing Charge

	 	•	 	HTS (Harmonize Tariff Schedule)#

	 	•	 	NDC/IND/ANDA

	 	•	 	FDA Product Code

	 	•	 	Ship Date

	 	•	 	Patheon Bill of Lading Number

 

	 	•	 	Gross Weight

	 	•	 	Number of Pallets

	 	 	Assist Values:

	 	 	Information to be provided on Bill of Lading:

	 	•	 	B/L Number

	 	•	 	Carrier

	 	•	 	Origin Point

	 	•	 	Shipper Information

	 	•	 	Consignee

	 	•	 	Consignee Address

	 	•	 	Ship Date

	 	•	 	Number of Pallets

	 	•	 	Gross Weight

	 	•	 	PO Number for each Product/Lot

	 	•	 	Description of Goods Indication PC, Lot Number Quantity

	 	•	 	Seal Number

	 	•	 	Freight Terms (FCA)

	 	•	 	Carrier Signature

	 	 	Information to be provided on Packing List:

	 	•	 	Ship date

	 	•	 	Bill of Lading Number

	 	•	 	Number of Pallets

	 	•	 	Weight

	 	•	 	Product Description

	 	•	 	Patheon Code Number, if applicable

	 	•	 	Patheon Lot Number, if applicable

	 	•	 	Number of Full Cartons (drums if bulk) x Quantity Per Carton

	 	•	 	Number of Partial Cartons (drums if bulk) x Quantity Per Carton

	 	•	 	Total Number of Cartons with Total Quantity Shipped

	2.	 	Non-Routine Routing/Shipping Instructions

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

Yours truly,

                                                                                

AUTHORIZED SIGNATORY

CLIENT NAME

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