Document:

Supplemental Agreement Dtd. June 1st between the Co. and Citadel Equity Fund Ltd

 Exhibit 4.44 
  
 DATED 1st JUNE 2005 
  
 (1) BIOPROGRESS PLC

  
 (2) CITADEL EQUITY FUND LTD. 
  

  
 SUPPLEMENTAL AGREEMENT 
  

  
 

 

  
 CONTENTS

  

					
			
	 1
	  	DEFINITIONS	  	3
			
	 2
	  	REPAYMENT AND CANCELLATION OF THE INITIAL LOAN NOTES	  	5
			
	 3
	  	CONDITIONS	  	5
			
	 4
	  	CLOSING	  	6
			
	 5
	  	WARRANTIES, UNDERTAKINGS AND ACKNOWLEDGEMENT	  	6
			
	 6
	  	MISCELLANEOUS	  	9

  

 2 

  
 THIS AGREEMENT is made on
1st June 2005  
  
 BETWEEN: 
  

	(1)	BIOPROGRESS PLC, a company registered in England and Wales (registration number 4617139) whose registered office is at Hostmoor Avenue, March Industrial Estate,
March, Cambridgeshire PE15 0AX (the “Company”); and 

  

	(2)	CITADEL EQUITY FUND LTD., a company incorporated in the Cayman Islands with its registered office at Ugland House, P.O. Box 309, George Town, Grand Cayman, Cayman
Islands, British West Indies (“Citadel”), of c/o Citadel Limited Partnership, 131 South Dearborn St., Chicago, Illinois 60603, U.S.A. 

  
 WHEREAS 
  

	(A)	Pursuant to the Subscription Agreement dated 30 September 2004 and made between (1) the Company (2) Citadel and (3) Collins Stewart Limited (the “Subscription
Agreement”) Citadel subscribed for and is at the date hereof the registered holder of an aggregate principal amount of the £5 million of the 4% Convertible Unsecured Loan Notes 2009 issued by the Company (the “Initial
Loan Notes”) and constituted by the Loan Note Instrument. 

  

	(B)	The Company and Citadel have agreed that Citadel will surrender and transfer the Initial Loan Notes to the Company and, as regards themselves and the Company, terminate the
Subscription Agreement on the terms set out in this Agreement. 

  
 IT IS AGREED: 
  

	1	DEFINITIONS 

  

	1.1	The following terms used in this Agreement shall, unless the context otherwise requires bear the following meanings:- 

  
 “AIM” a market operated by the London Stock
Exchange; 
  
 “Announcement” the issue by
the Company to an RNS of an announcement setting out the conclusions of its strategic review; 
  
 “Bloomberg” Bloomberg Financial Markets; 
  
 “Business Day” a day (except Saturday or Sunday) on which banks in the City of London are open for business; 
  
 “Buy-Back Announcement” the issue by the Company to
an RNS of an announcement regarding the transaction contemplated by this Agreement; 
  
 “Cash Consideration” shall have the meaning given in clause 2.2(a) of this Agreement; 
  

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 “Citadel Investment Group (Europe)” means Citadel Investment Group (Europe)
Limited of 10th Floor, 2 George Yard, Lombard Street, London EC3V 9DH; 
  
 “Closing Date” shall have the meaning given in
clause 4.1 of this Agreement; 
  
 “Company’s
Solicitors” Dechert LLP of 2 Serjeants’ Inn, London EC4Y 1LT; 
  
 “Disrupted Day” any Business Day on which AIM fails to open for trading during its regular trading session or on which a Market Disruption Event has occurred; 
  
 “Initial Loan Notes” shall have the meaning given in
the recitals to this Agreement; 
  
 “Listing”
the admission to trading on AIM or other relevant recognised investment exchange approved by Citadel (such approval not to be unreasonably withheld) and “List” and “Listed” shall be construed accordingly;

  
 “Market Disruption Event” the
occurrence or existence of any material suspension or limitation imposed on trading by AIM and whether by reason of movements in price exceeding limits permitted by AIM or otherwise (i) relating to the Ordinary Shares of the Company on AIM or (ii)
in futures or options contracts relating to the Ordinary Shares of the Company on AIM; 
  
 “the Consideration Shares” shall have the meaning given in clause 2.2(b) of this Agreement; 
  
 “the Issue Price” 97% of the Volume Weighted Average Price of the Ordinary Shares of the Company as reported by Bloomberg through
its VWAP function at close of business on the date of the Announcement or, if the date of the Announcement is a Disrupted Day, on the first succeeding Business Day that is not a Disrupted Day being in any event not more than 50p and not less than
30p; 
  
 “the Loan Note Instrument” the
Convertible Loan Note Instrument entered into by the Company dated 6 October 2004; 
  
 “the Subscription Agreement” shall have the meaning given in the recitals to this agreement; 
  
 “Volume Weighted Average Price” the price calculated by adding up the value (in pence) traded for every transaction in the
Ordinary Shares of the Company on the relevant day (price in pence multiplied by number of Ordinary Shares traded) and then dividing it by the total number of Ordinary Shares traded on the relevant day to obtain a price in pence. 
  

	1.2	All terms used in this Agreement which are defined in the Subscription Agreement shall, unless otherwise expressly defined in this Agreement, bear the same meaning as in the
Subscription Agreement. 

  

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	2	REPAYMENT AND CANCELLATION OF THE INITIAL LOAN NOTES 

  

	2.1	In consideration of the payment of the cash sum and the issue of the Consideration Shares in accordance with clause 2.2, Citadel shall surrender and transfer to the Company the
Initial Loan Notes for cancellation which, subject to the other provisions of this Agreement, shall be in full and final settlement of all of the obligations of the Company in respect of the Initial Loan Notes. 

  

	2.2	The consideration for the surrender of the Initial Loan Notes shall be £3.3 million (pounds sterling) payable as follows:- 

  

	 	(a)	the payment in cash of £1.65 million (pounds sterling) or, if applicable, such greater amount as determined in accordance with the proviso below (the “Cash
Consideration”); and 

  

	 	(b)	the unconditional allotment and issue to Citadel of such number of Ordinary Shares (credited as fully paid up) of the Company as at the Issue Price shall have an aggregate value of
£1.65 million (pounds sterling) (the “Consideration Shares”), 

  
 provided that if the number of Consideration Shares would otherwise exceed 9.9% of the aggregate number of Ordinary Shares of the Company in issue on the
date of issue of the Consideration Shares or the number of Ordinary Shares of the Company which the directors of the Company are duly authorised to allot pursuant to s.80 and s.95 Companies Act 1985 (the “Authorised
Shares”), whichever is the lesser, the Cash Consideration payable under Clause 2.2(a) will be increased, and the Consideration Shares to be issued under Clause 2.2(b) correspondingly reduced, to the extent necessary for the
number of Consideration Shares to represent (i) 9.9% of the aggregate number of issued Ordinary Shares of the Company or (ii) the number of Authorised Shares, as the case may be such that, following such increase and decrease, the aggregate of the
Cash Consideration and the Consideration Shares (based on the Issue Price) shall be equal to £3.3 million (pounds sterling). 
  

	3	CONDITIONS 

  
 This Agreement is conditional upon the London Stock Exchange admitting the Consideration Shares to trading on AIM (subject only to allotment) and the
Company undertakes to apply for such admission on the date of this Agreement and to use all reasonable endeavours to obtain it as soon as reasonably practicable. The Company shall promptly notify Citadel upon such admission to trading being granted.

  

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	4	CLOSING 

  

	4.1	Closing shall take place not later than the second Business Day following the satisfaction of the Condition (the “Closing Date”) at the offices of the
Company’s solicitors (or such other date and place as the parties may agree) when the following shall take place: 

  

	4.1.1 	the Company shall: 

  

	 	(a)	transfer to such bank account of Citadel as Citadel shall have previously notified the Company, the Cash Consideration for value on the Closing Date; 

  

	 	(b)	allot and issue to Citadel the Consideration Shares (credited as fully paid up); 

  

	 	(c)	procure that Citadel is entered in the Company’s register of members as the legal owner of all of the Consideration Shares; and 

  

	 	(d)	deliver to Citadel Investment Group (Europe) on behalf of Citadel a share certificate in the name of Citadel in respect of all of the Consideration Shares. 

 

	4.1.2 	Citadel shall deliver: 

  

	 	(a)	the certificate in respect of the Initial Loan Notes or in the absence of such certificate an indemnity in the form agreed between the Company and Citadel; 

 

	 	(b)	a transfer of the Initial Loan Notes in such form as the Company may reasonably require. 

  

	5	WARRANTIES, UNDERTAKINGS AND ACKNOWLEDGEMENT 

  

	5.1	Citadel warrants that it: 

  

	 	(a)	is the only legal and beneficial owner of the Initial Loan Notes and is entitled to surrender and transfer the Initial Loan Notes to the Company free from all liens charges
encumbrances options or restrictions without the consent of any third party; 

  

	 	(b)	has full power and authority to enter into this agreement and the other documents to be executed in connection therewith all of which will constitute (or will when executed)
constitute legal, valid and binding obligations on it enforceable in accordance with their respective terms; 

  

	 	(c)	is a non-U.S. person whose investment activities are managed on a discretionary basis by Citadel Limited Partnership, a professional fiduciary organized or incorporated in the U.S.
(as defined in Rule 902(k)(2)(i) of Regulation S (“Regulation S”) of the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”)) and, as such, is not a “U.S. person” for purposes of Regulation S;

  

	 	(d)	understands that brokers and dealers in the United States may not have an available exemption under the U.S. Securities Act to trade the Consideration Shares during the 40-day
period following their issue to Citadel; 

  

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	 	(e)	will not reoffer, resell or transfer all or any portion of the Consideration Shares in violation of the U.S. Securities Act or any other applicable United States federal or state
securities laws; and 

  

	 	(f)	confirms that this transaction is not part of a plan or scheme to evade the registration provisions of the U.S. Securities Act as set forth in Preliminary Note 2 to Regulation S.

  

	5.2	The Company hereby represents and warrants to Citadel on the date of this Agreement and on the Closing Date (except that insofar as any warranty refers to a state of affairs as of a
specific date, it is deemed to be given only as of such date) as follows : 

  

	 	(a)	The Company is duly incorporated and validly existing under the laws of England. 

  

	 	(b)	The Company has all requisite power and authority to execute, deliver and perform this Agreement, including the allotment and issue of the Consideration Shares and the payment of
the Cash Consideration, having been duly authorised by the board of directors of the Company. 

  

	 	(c)	This Agreement has been duly executed and delivered by the Company, constitutes the legal, valid and binding obligations of the Company and is enforceable as to the Company in
accordance with its terms. 

  

	 	(d)	The execution and delivery by the Company of this Agreement and the allotment and issue of the Consideration Shares and the payment of the Cash Consideration contemplated hereby do
not and will not violate or conflict with (i) any agreement or other instrument to which the Company is a party, (ii) any law, rule, regulation, order, judgment or decree binding on the Company or (iii) the memorandum and articles of association of
the Company. 

  

	 	(e)	When issued in accordance with the terms of this Agreement, the Consideration Shares will be duly authorised, validly issued and outstanding and fully paid and will be free of any
pre-emptive rights, rights of first refusal, lock-up restrictions, restrictions on sale or transfer (except as otherwise described in Sections 5.1 (d) and (e) hereof as acknowledged and agreed to by Citadel) or any liens or other encumbrances, will
be issued in compliance with all applicable securities laws and will carry the same rights (including, without limitation, as to dividends) as all other shares of the same class. 

  

	 	(f)	the Company is not unable to pay its debts within the meaning of Section 123 of the Insolvency Act 1986 and will not become unable to pay its debts within the meaning of that
Section in consequence of entering into this Agreement and the transactions contemplated hereby. 

  

	 	(g)	 In the opinion of the board of directors of the Company (after due consideration of the transactions contemplated by this Agreement and 

  

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the financial position of the Company), the transactions contemplated by this Agreement are in the best interests of the Company.

  

	 	(h)	As at the date hereof, there is no “substantial U.S. market interest” (as defined in Rule 902(j)(1) of Regulation S) with respect to the equity securities of the Company.

  

	 	(i)	Neither the Company, nor any of its affiliates, nor any other person acting on its behalf has made any “directed selling efforts” (as defined in Rule 902(c)(1) of
Regulation S) in the United States with respect to the Consideration Shares offered hereunder in reliance on Regulation S. 

  

	 	(j)	The directors of the Company are duly authorised to allot at least 5,500,000 Ordinary Shares pursuant to s.80 and s.95 Companies Act 1985. 

  

	5.3	The Company will issue to an RNS the Buy-Back Announcement giving details of this Agreement immediately upon signing of this Agreement, the contents of which announcement shall have
been previously approved in writing by Citadel. 

  

	5.4	The Company undertakes, so long as any other Ordinary Shares are Listed, to use its best endeavours to maintain the Listing of all Consideration Shares. 

  

	5.5	All representations, warranties and undertakings of the Company in this Agreement shall survive completion of the issue of the Consideration Shares and the payment of the Cash
Consideration contemplated hereby. 

  

	5.6	Each of the Company and Citadel acknowledges and confirms that upon Closing in accordance with the terms of Clause 4 of this Agreement:- 

  

	 	(a)	the Initial Loan Notes shall be deemed to be cancelled; 

  

	 	(b)	the Subscription Agreement shall as between the Company and Citadel be deemed to be terminated so that upon such termination the Subscription Agreement and the Loan Note Instrument
shall cease to have effect and in particular but without prejudice to the generality the Company shall have no obligation to issue the Additional Loan Notes. 

  

	5.7	The Company represents and warrants that it has not prior to the date hereof provided to Citadel any unpublished price sensitive information with respect to itself or its Ordinary
Shares and neither it nor any of its representatives or agents has provided Citadel or any of its representatives or agents identified to or known by the Company with any such information. 

  

	5.8	 To the extent that the Company is in possession of unpublished price sensitive information (“the UPSI”) and provides such information to
Citadel, its representatives or agents after the date hereof and prior to Closing, the Company undertakes to use all reasonable endeavours to issue to an RNS an announcement in respect of such matters (with the intention that such matters 

  

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will no longer be unpublished price sensitive information) by not later than Wednesday 8th June 2005). If at any time the Company believes that the UPSI no longer constitutes unpublished price sensitive information (other than where an RNS
announcement has been made), the Company will inform Citadel immediately. 

  

	6	MISCELLANEOUS 

  

	6.1	FURTHER ASSURANCE: 

  
 Each party shall do and perform, or cause to be done and performed all such further acts and things and shall execute and deliver all such other
agreements, certificates instruments and documents as the other party may reasonably request in order to carry out the intent and completion of purposes of this Agreement and the completion of the transactions contemplated thereby. 
  

	6.2	GOVERNING LAW 

  
 This Agreement (together with all documents to be entered into pursuant to it) shall be governed by and construed and take effect in accordance with the
laws of England. Each of Bioprogress and Citadel: 
  

	 	(a)	hereby irrevocably submits to the exclusive jurisdiction of the English courts for the purposes of any suit, action or proceeding arising out of or relating to this Agreement; and

  

	 	(b)	hereby waives, and agrees not to assert in any such suit, action or proceeding any claim that it is not personally subject to the jurisdiction of such court, that the suit, action
or proceedings is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper. 

  

	6.3	NOTICES 

  

	6.3.1	Any notice or other communication required or permitted to be given under the terms of this Agreement shall be in writing and shall be deemed to have been received:

  

	 	(a)	upon hand delivery (receipt acknowledged) or facsimile transmission (with transmission confirmation report) at the address or number designated below (if delivered on a business day
prior to 5:30 p.m., local time, (where such notice is to be received) or the first Business Day following such delivery (if delivered other than on a Business Day prior to 5:30 p.m. local time, (where such notice is to be received); or

  

	 	(b)	on the third Business Day following the date of posting by inland recorded delivery or following its delivery into the custody of a generally recognised internal courier service if
sent overseas, in each case addressed in such address, or upon actual receipt, whichever shall first occur. 

  

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	6.4	The address for such communications shall be: 

  

	 	(i)	as to the Company, at its registered office 

  
 (Fax Number: 44 (0) 1354 655 858, marked “for the attention of Dan Farrow” with a copy to Dechert (attention David Vogel) fax number 44 (0) 20
7353 3683); and 
  

	 	(ii)	as to Citadel, at the offices of Citadel Investment Group (Europe) (Fax Number: 44 (0)20 7645 9756, marked “for the attention of Rebecca Fuller” with a copy to John
Fitzgerald, fax number 44 (0)20 7645 9701). 

  
 or,
in each case, such other address in England and fax number as shall be notified in writing to each of the parties from time to time. 
  

	6.5	HEADINGS 

  
 The headings in this Agreement are for convenience only and shall be ignored in construing its terms. 
  
 EXECUTED by the parties 
  

			
	BIOPROGRESS PLC
	 Signed by:
	 	 /s/ Daniel Farrow

			
	 Name:
	 	 Daniel Farrow

			
	 In the presence of:
	 	 /s/ G. A. Godby

  

			
	CITADEL EQUITY FUND LTD.
	By:	 	Citadel Limited Partnership, its Portfolio Manager
	 By:
	 	Citadel Investment Group, L.L.C, its General Partner
		
	 By:
	 	/s/ Matthew Hinerfeld
	 Name:
	 	MATTHEW HINERFELD
	 Title:
	 	 Managing Director and
 Deputy General
Counsel

	Duly authorised

  

 10Equipment Purchase Agreement, dated February 3rd, 2004

 Exhibit 4.45 
  
 Equipment Purchase Agreement 
  
 This Agreement is made as of February 3, 2004 by and between Harro Höfliger Verpackungsmaschinen GmbH of
Helmholtzstrasse 4 71573 Allmersbach im Tal, Germany (“HH”) and BioProgress PLC, Hostmoor Avenue, March, Cambridgeshire, PE15 0AX, United Kingdom (“BioProgress”). 
  
 WHEREAS, BioProgress, BioProgress Technology International Inc (“BioProgress T.I. Inc”) and FMC Corporation, FMC
BioPolymer, 1735 Market Street, Philadelphia, PA 19103 USA (“FMC”) have entered into an alliance whereby FMC has received an exclusive license of BioProgress T.I. Inc’s NRobeTM System intellectual property as more specifically described in the Master License
Agreement executed as of this same date between such parties; 
  
 WHEREAS, FMC desires to enter into a long-term commitment to purchase Equipment for the production of the NRobeTM dosage form as more specifically described in Annex A (the “NRobeTM Equipment” or the “Equipment”) exclusively from BioProgress and BioProgress is willing to supply FMC
with NRobeTM Equipment. 
  
 WHEREAS BioProgress wishes to appoint HH as its contract manufacturer to
manufacture NRobeTM Equipment for the purpose of
fulfilling its obligations to FMC and HH is willing to manufacture and supply NRobeTM Equipment for such purpose 
  
 NOW, THEREFORE, HH agrees to sell and BioProgress agrees to purchase the NRobeTM Equipment subject to the following terms and conditions: 
  
 Article One - The NRobeTM Dosage Form Machine; Specifications 
  
 1.1 The
NRobeTM Equipment to be delivered to BioProgress
shall meet the broad specifications set forth in Annex A. The parties acknowledge that although a lab scale model of the Equipment has been produced, the specifications for the Equipment that will eventually be purchased under this Agreement and
commercialized by FMC have not been finalized but will be developed by mutual agreement between the parties hereto and FMC according to the process set forth in Annex B. Accordingly, BioProgress shall procure that FMC acknowledges that it will be
jointly responsible for the final agreed Specifications (the “Specifications”) and that it has undertaken its own due diligence with respect to whether Equipment made fully in accordance with the Specifications is fit for any particular
purpose. The warranty given by HH 

  

 1 

 
pursuant hereto shall, accordingly, be limited to compliance with the Specifications and freedom from defects in materials or workmanship. 
  
 1.2 HH acknowledges that (i) FMC will have the right to consult and visit HH in connection
with the fabrication of any element of the Equipment; (ii) that FMC has exclusive rights to the NRobeTM System intellectual property, and HH hereby expressly disclaims and waives any claim to such intellectual property currently existing and\or developed by BioProgress, BioProgress T.I.
Inc or FMC in the future, and undertakes to assign such intellectual property to BioProgress T.I. Inc (for licensing to FMC pursuant to the Master License Agreement); (iii) to the extent that any improvements in such intellectual property are
developed by HH, HH shall grant to BioProgress T.I. Inc a fully paid royalty free irrevocable licence to use such improvements (for licensing to FMC); where such improvements are not severable from the NRobeTM System intellectual property, such licence shall be exclusive in the field of the
NRobeTM System; and (iv) that its appointment
hereunder is as a subcontractor of BioProgress only and that it shall not, at any time seek to make use of the NRobeTM System intellectual property nor supply, nor enter into any arrangement to supply, any third party (other than FMC as provided herein) with NRobeTM Equipment or provide parts or servicing therefor
without the prior written consent of BioProgress; 
  
 1.3 HH warrants that :-

  

	 	i)	it has a demonstrable and successful record of manufacturing equipment for producing solid dosage forms; 

  

	 	ii)	it is in compliance with all applicable cGMP standards and other regulations applicable to production of pharmaceutical (or vitamin, as applicable) dosage forms;

  

	 	iii)	it has demonstrable technical capabilities that will assure it can meet its specific design, production, and\or installation role. 

  
 1.4 BioProgress reserves the right, on reasonable notice, to change the Specifications of the
Equipment to meet specific FMC needs subject to the Change Control Procedure set out in Article 1.5. If the Specifications change requires a design change, the design review procedures set forth in Article Two shall also be triggered. 
  
 1.5 If BioProgress or FMC require a change in the Specifications of the Equipment,
BioProgress shall notify HH in writing specifying in as much detail 

  

 2 

 
as practicable the nature of the such change or improvement. Upon receipt of such notification, the following procedures shall come into effect: 

 

	 	(i)	HH will consider the impact upon the design or production of the Equipment of the change or improvement proposed, the requirement for any additional development work tooling and/ or
equipment, the effect upon existing production schedules, the manner of defraying the additional development or capital costs and the potential effect upon the price of the Equipment concerned and shall, as soon as practicable, and in any event
within twenty eight (28) days, prepare and deliver to BioProgress a report specifying in reasonable detail the additional costs likely to be incurred and/ or any investment required and giving a preliminary estimate on the effects on the price of
the Equipment (including, if so requested, amortization of additional investment costs over any quantity of the Equipment for which FMC is prepared to place firm and binding orders with BioProgress), its estimate of the effect of such change or
improvement on production of existing orders and, if applicable, why it considers that its ability to provide Equipment pursuant to this Agreement may be adversely affected. 

  

	 	(ii)	HH shall discuss any proposed change or improvement with BioProgress which may withdraw its proposal or make such changes as it deems expedient to its proposal in the light of
HH’s comments and HH shall then prepare a firm estimate of the effect on the price of the Equipment. 

  

	 	(iii)	Within twenty one (21) days of receipt of such firm estimate, BioProgress shall either: 

  

	 	(a)	accept the proposal in which case the parties shall sign a memorandum recording the change to the Specifications the resulting change to the price of the Equipment and any
additional development or tooling costs payable; or 

  

	 	(b)	withdraw its request. 

  

	 	(iv)	No change to the Specifications shall be implemented without the agreement of both parties recorded in accordance with sub-clause 1.5(iii)(a) above. 

  
 1.6 HH shall use all reasonable efforts also to devise and propose improvements in the
Equipment which shall be dealt with in accordance with clause 1.5 above. 
  

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 1.7 The parties recognize that modifications to the Specifications may be required by law or regulation, particularly
those relating to the safety of the Equipment or any products produced thereby. Such modifications shall be addressed in accordance with clause 1.5 above. 
  
 1.8 HH undertakes to use all reasonable efforts to respond in writing to any inquiries by BioProgress as to any matter concerning this Agreement within 3 days of receipt
of the inquiry. 
  
 Article Two - Design Reviews 

 
 2.1 Consistent with the Design Cooperation Protocol set forth in Annex B, BioProgress
shall periodically review the final design of the NRobeTM Equipment with HH and FMC as such designs are being developed so that FMC and BioProgress may verify HH’s progress and compliance with the Specifications. Prior to the release of the final design BioProgress and
HH shall conduct a final design review with FMC. It is understood that all designs, layout and detail drawings, etc., necessary for FMC’s and BioProgress’s verification and review will be made available at these times. Upon request,
HH’s engineers and managers will be available to BioProgress and/or FMC for consultation regarding the design. 
  
 2.2 During the period HH is manufacturing the Equipment, BioProgress and/or FMC shall have the right to visit the manufacturing plant (by prior written notice during
normal working hours) as may be necessary to allow FMC and/or BioProgress to review progress and verify that the Equipment is being manufactured according to the Specifications provided that BioProgress shall and shall procure that FMC shall use all
reasonable efforts not to disrupt production at the Contract Manufacturer’s plant and shall undertake to comply with such security and safety requirements as BioProgress or HH shall reasonably require. HH will provide reports to BioProgress not
less than monthly describing the progress being made by HH in the major production steps as outlined in the production schedule set forth in Annex C. 
  
 Article Three - Acceptance\Performance Testing 
  
 3.1 Prior to shipment of any Equipment hereunder HH shall conduct a preshipment trial pursuant to the procedure set forth in Annex D. The purpose 

  

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of this trial shall be primarily to determine that the Equipment is compliant with the Specifications. With each machine delivered hereunder, HH shall
deliver a written certificate certifying that the specific machine has passed this preshipment trial and fully meets the Specifications. FMC and BioProgress shall have the option to observe any such preshipment trial. It is understood that all
defects in materials and workmanship which may be identified as a result of this trial will be corrected by HH prior to shipment of the Equipment unless specifically directed to the contrary by FMC or BioProgress. 
  
 3.2 Unless otherwise specifically agreed, HH shall assist with the installation,
commissioning and on site qualification of each unit of the Equipment. For the avoidance of doubt, HH shall include the cost of such installation, commissioning and qualification in its invoices for the Equipment but shall show the same as a
separate item over and above the price of the unit of Equipment. BioProgress shall procure that FMC shall be responsible, at its own cost or the cost of its customer, for ensuring that all footings and preparatory works required for the Equipment
and made known to BioProgress by HH are satisfactorily completed prior to the commencement of such installation and that all power and other services are laid on in accordance with the requirements to be included in the Specifications. FMC shall be
responsible for the cost of all consumables used as part of any commissioning and testing process. 
  
 3.3 Upon completion of installation of each NRobeTM Equipment machine, HH shall notify BioProgress and FMC’s representative that the subject Equipment is installed and ready for site acceptance testing. BioProgress shall procure that FMC or its designee
shall promptly commence the site acceptance test procedure set out in Annex D. 
  
 3.4 BioProgress shall procure that FMC shall certify to BioProgress (in writing, upon request) its acceptance of each NRobeTM Equipment machine installed once the NRobeTM Equipment machine has demonstrated during the site acceptance procedure its performance to be in accordance with the Specifications. 
  
 3.5 In the event that FMC reasonably believes that the acceptance procedure identifies areas
of nonconformance with the Specifications, BioProgress shall procure that FMC shall itemize those areas in which the NRobeTM Equipment has failed to perform acceptably in accordance with the Specifications. HH shall acknowledge said list and, save in the case of any bona fide
dispute, in which case the provisions of Clause 3.6 shall apply, shall inform BioProgress and FMC, in writing, as to how and when the nonconformance shall be corrected. HH agrees that such corrections shall be carried out with all reasonable
dispatch. BioProgress shall have the right to withhold payment of any outstanding funds 

  

 5 

 
due on such specific machine until such time as it has fully complied with Specifications. Upon completion of the corrections by HH, HH shall notify
BioProgress of same and the acceptance procedures shall again be commenced in their entirety, should FMC elect to do so. Where FMC does not elect to repeat the acceptance procedures or to refer any dispute as to compliance pursuant to Clause 3.6
within fourteen (14) days of such notification, the specific machine shall be deemed accepted and any sums withheld in respect thereof shall become due and payable. 
  
 3.6 In the event that the parties and FMC are unable to agree whether or not the Equipment has performed acceptably in accordance with the
Specifications under the acceptance procedure or whether any Equipment has any defect in workmanship or materials, the matter may be referred at the instance of either BioProgress or FMC or HH to such person as may be appointed by agreement between
them or, in default of agreement, nominated on the application of either BioProgress or FMC or HH by the President for the time being of the Institute of Mechanical Engineers in London (the “Expert”). Such person shall act as an expert and
not as an arbitrator and shall be entitled to appoint such technical expert or experts as he considers necessary to assist him in determining the matter referred to him. The decision of the Expert (which shall be given by him in writing stating his
reasons) shall, in the absence of manifest error, be final and binding on the parties hereto and on FMC. Each party shall provide the Expert with such information as he may reasonably require for the purposes of his determination. If any party
claims any such information to be confidential to it, then provided that in the opinion of the Expert, that party has properly claimed the same as confidential, the Expert shall not disclose the same to the other parties or to any third party. The
costs of the Expert (including the costs of any technical expert appointed by him) shall be borne in such proportions as the Expert may determine to be fair and reasonable in all the circumstances or, if no such determination is made by the Expert,
by the parties hereto and FMC in equal proportions. 
  
 Article
Four - Term 
  
 4.1 The term of this Agreement shall commence as of 3 February
2004 (“the Commencement Date”) and save where terminated earlier in accordance with Clauses 4.2 below, continue until the tenth anniversary of the Commencement Date and thereafter unless and until terminated by either party by not less
than six (6) months notice in writing to terminate on or after such tenth anniversary. 
  

 6 

 4.2 If, (a) during any full calendar year (commencing on 1 January 2005 or any anniversary thereof) greater than twenty
per cent (20%) of the Equipment ordered for an agreed delivery date within such year fails to be delivered within 5 weeks following such agreed delivery date, or (b) at any time, any single item of Equipment fails to be delivered within fifteen (15)
weeks following the agreed delivery date; or (c) any item of the Equipment fails to be accepted pursuant to Article 3, or (d) any item of Equipment is in breach of the clause 11.2 below and HH cannot replace, repair or make good such defects or
defaults in accordance with clause 11.3 below; or (f) HH ceases or threatens to cease business, makes an assignment for the benefit of or a composition with its creditors, or an arrangement of similar effect, has a receiver or administrative
receiver (or the equivalent in any relevant jurisdiction) appointed over it or any part of its assets or passes a resolution for winding up (otherwise than for the purposes of a bona fide amalgamation or reconstruction) or any court of competent
jurisdiction makes an order to such effect or ceases to be able to pay its debts as they fall due or (g) HH is otherwise in material breach of any of its obligations hereunder and, if capable of remedy, has failed to remedy the same within 30 days
of notice in writing giving details of such breach, BioProgress may terminate this Agreement on sixty (60) days written notice. 
  
 4.3 Upon termination of this Agreement, however occurring:- 
  
 i) HH will, subject to the payment by BioProgress of all outstanding costs and charges to HH not subject to bona fide dispute as and when due, provide
such assistance (for a period not to exceed 6 months) as BioProgress may reasonably request in transferring the manufacture of the Equipment to BioProgress or to a third party. The parties shall co-operate fully to agree on a termination plan and to
implement the same which shall specify such measures as are necessary to ensure an orderly transfer of the production of the Equipment (at HH’s sole cost) to BioProgress or such other person as BioProgress may nominate and that there is no
substantial disruption of the supply of the Equipment to BioProgress; 
  
 ii) Save where otherwise agreed, HH will continue to supply Equipment pursuant to orders accepted prior to the date of termination and where required by BioProgress to install and commission the same and BioProgress shall accept the same,
in each case on the terms hereof. 
  
 iii) on the completion of
the last such order HH shall deliver up (or procure that any subcontractors which may have been appointed with the consent of BioProgress deliver up) to BioProgress any and all plans and/or design materials in respect of the NRobeTM Equipment together with all dies or tooling either
paid for by BioProgress or which are designed or adapted only for 

  

 7 

 
use in respect of the NRobeTM Equipment without further charge to BioProgress. HH shall not have any lien or security interest in any such plans, design materials dies or tooling.

  
 iv) upon request, HH shall procure the assignment to
BioProgress or such person as it may nominate of the benefit, subject to the burden, of any contracts entered into by HH with any subcontractor or component supplier in connection with the supply of the Equipment and necessary for its continued
supply and, to the extent that rights in any element necessary for the production of the Equipment are owned by HH, either grant to BioProgress or such person as BioProgress may designate a fully paid up irrevocable license to produce such element
or to enter into a one-time buy arrangement with BioProgress in respect of such element pursuant to which HH will sell to BioProgress sufficient quantities of such element to meet the reasonable requirements of BioProgress therefor at a price no
greater than that previously charged to BioProgress for such element hereunder. 
  
 v) such termination shall neither affect any accrued rights or liabilities of either party nor affect the coming into effect or continuance in effect of any provision of this Agreement which is expressly or by
implication intended to come into or to remain in effect on or after such termination. 
  
 Article Five - Equipment Orders 
  
 5.1
BioProgress undertakes that, during the term of this Agreement, it will purchase NRobeTM Equipment only from HH. BioProgress shall provide to HH no later than September 30 in each year a non-binding written rolling forecast of anticipated orders for the next three (3) calendar years broken down to
show orders anticipated for delivery in each calendar quarter. The first such written forecast shall be due on September 30, 2004. 
  
 5.2 Orders during the first year of this Agreement’s term shall be provided consistent with Annex C. Following that period BioProgress shall give binding orders to
HH on a quarterly basis, with orders for delivery in each calendar quarter to be provided in writing no later than one hundred and seventy (170) days prior to the start of the respective calendar quarter. Orders shall state the desired delivery
period. Such orders shall be binding on HH when accepted, provided that orders will not be unreasonably refused and shall be deemed accepted unless HH refuses to accept the same in writing within seven (7) days of receipt thereof. If HH is unable to
supply the quantity of Equipment specified in the delivery period specified, HH may offer BioProgress an alternative delivery date. If such alternative delivery date is acceptable to BioProgress, BioProgress shall confirm the same in writing and
there shall be a 

  

 8 

 
binding contract for the purchase of the Equipment on the terms of the order amended as to the delivery date. 
  
 5.3 It is acknowledged that the business structure whereby FMC makes the Equipment available
for use or ownership by customers shall be solely determined by FMC but BioProgress shall procure that FMC shall not thereby increase or purport to increase the liability of HH to BioProgress or FMC or any third party beyond that set out in this
Agreement. Without limiting the generality of the foregoing BioProgress shall procure that any warranty offered by FMC to any customer in excess of that pursuant to Article 11 hereof shall be at the sole expense of FMC. 
  
 5.4 BioProgress shall specify with each order placed the location where each item of
NRobeTM Equipment is to be installed to permit any
necessary customization to comply with local conditions and regulatory requirements 
  
 5.5 No later than 28 days following the date of acceptance of any order, HH shall provide to BioProgress a firm and detailed plan for the production of the Equipment concerned and shall provide BioProgress full and detailed project and
financial statements in respect of all outstanding orders as at the end of each month by the 7th of the following
month. 
  
 Article Six - Purchase Price 
  
 6.1 HH shall be responsible for the delivery of all Equipment purchased hereunder on an Ex
Works basis (Incoterms 2000) (suitably packed for safe transit) and for installation and commissioning such Equipment at the site where the Equipment is to be installed and shall invoice each such element of the price separately. However,
BioProgress shall procure that FMC shall be responsible for the costs of shipment of the Equipment from the premises of the Contract Manufacturer to the site where the Equipment is to be installed and for insuring the Equipment from the time of
delivery Ex Works. 
  
 6.2 The price to be paid by BioProgress to HH shall be

  
 a) in respect of the pilot one-tenth scale and first full scale machines, on a
cost plus basis as set out in Annex F 
  
 b) thereafter, determined pursuant to
the formula set forth in Annex E. 
  
 6.3 Unless otherwise mutually agreed in
writing, payment for each order shall be in the following stage payments which shall, unless otherwise agreed, be invoiced separately: 
  
 a) In the case of the first pilot one tenth scale machine and the first full scale machine ordered hereunder, the stage payment shall be as set out in Annex C 

 

 9 

 b) In the case of the second to the fifth full scale machines ordered inclusive 
  
 Forty percent (40%) deposit with order to be paid within thirty (30) days of the order.

  
 Forty five percent (45%) upon receipt of the preshipment test certificate, to
be paid within thirty (30) days of such receipt. 
  
 Fifteen percent (15%)
together with the cost of installation, commissioning and on site qualification, upon installation and acceptance of the subject machine to be paid within thirty (30) days of acceptance. 
  
 c) Thereafter 
  
 One third deposit with order to be paid within thirty (30) days of the order 
  
 One third upon receipt of the preshipment test certificate, to be paid within thirty (30) days of such receipt 
  
 One third together with the cost of installation, commissioning and on site qualification,
upon installation and acceptance of the subject machine to be paid within thirty (30) days of acceptance 
  
 PROVIDED that in each case, where BioProgress or FMC shall not have arranged for shipment to take place and/or installation of the Equipment to commence within ten (10) weeks of the date on which HH has informed
BioProgress and FMC that the Equipment is ready for delivery, then the balance of the price (less any element thereof identified as in respect of installation, commissioning and on site qualification) shall immediately become due and payable and, in
addition, BioProgress shall be liable to pay to HH, by way of supplement to the price for each piece of Equipment, US $750 per week (or the actual, reasonable cost of storage incurred, if higher) for each additional week beyond such ten (10) week
period up to a maximum of $15,000. HH shall provide to BioProgress, upon request, full details of the costs incurred in providing such storage. 
  
 Unless otherwise mutually agreed, payments hereunder shall be made in Euros by wire transfer 
  
 6.4 If BioProgress should fail to pay any amounts specified under this Agreement by the due date thereof, the amount owed shall bear
interest from the due date until paid at four percent (4%) over the prime interest rate of the 

  

 10 

 
European Central Bank from the due date until paid, as reported on the due date in the Financial Times. Except where there is a bona fide dispute, HH shall
further be entitled to suspend delivery of Equipment until the outstanding amount, together with any interest due thereon, has been received in full from BioProgress. Where any amount is subject to bona fide dispute, BioProgress shall be entitled to
withhold the sums in dispute only pending resolution of the dispute but, in the event that it is found or agreed that such sums were properly payable, interest shall be due thereon (or upon such amount as was properly payable) from the original due
date until the date of payment. All sums shall otherwise be payable in full without deduction or set off 
  
 6.5 HH shall, in consideration of the Marketing Support element of the price, provide to BioProgress and/or FMC upon request or otherwise as required, without additional charge, the Marketing Support Services as more
particularly described in Annex H 
  
 Article Seven - Spare
Parts and Service 
  
 7.1 BioProgress agrees and acknowledges that FMC may at
its sole discretion choose to enter into a contract directly with HH on terms to be agreed to provide spare parts for the NRobeTM Equipment and\or to provide technical support and service for the NRobeTM Equipment after it is installed including repair service, provided however, that if repairs are for a failure of the
Equipment covered by the warranty set forth in Article 11, then, whether or not FMC has entered into such a contract, BioProgress shall procure that FMC shall offer HH the first opportunity to carry out such repairs and the cost of such repairs
shall be borne by HH. BioProgress hereby grants any and all necessary consents required for FMC to procure spare parts proprietary to BioProgress or covered by the NRobeTM intellectual property direct from HH without the involvement of BioProgress for the purposes of providing such spares
and technical support but HH shall pay to BioProgress in respect of such use a royalty of 2.5% of the Net Sales Value of such parts and technical support where “Net Sales Value” shall mean the gross amounts invoiced to FMC or its customers
by HH in respect thereof exclusive of VAT and other similar sales taxes. HH shall maintain full and accurate books of account in respect of such supply and shall send a detailed account of the total sums invoiced and the royalty due in respect
thereon together with payment of such royalty due to BioProgress within thirty (30) days of 30 June and 31 December in each year during the continuance hereof. 
  

 11 

 7.2 The warranty provided under Article 11 of this Agreement shall not apply to the extent that, in the reasonable
opinion of HH, any defect in the Equipment is due to technical support or service provided, or spare parts supplied, by an unauthorized third party. 
  
 7.3 HH undertakes to retain adequate stocks (or the facility to manufacture at reasonable cost to BioProgress) all spare parts likely to be required for the maintenance
and repair of each item of Equipment for not less than ten [10] years from the commissioning date of such item of Equipment. If, at any time, any spare part required to maintain or repair the Equipment is believed by HH to have become obsolete, HH
will, if so requested by BioProgress, sell to BioProgress all remaining useable stocks of such part at the cost of such parts to HH and use all reasonable efforts to identify and make available to BioProgress at reasonable cost suitable alternative
parts which can be used or adapted to effect the necessary repairs to the Equipment without compromising the Equipment or its performance or requiring a major rebuild. 
  
 Article Eight - Excuses for Non-Performance 
  
 8.1 Neither party shall be held liable or responsible to the other party for failure or delay in fulfilling any obligation of this Agreement
or of any orders placed or any acknowledgement sent in accordance with this Agreement, if such delay or failure is caused by actions or events which are beyond the reasonable control of the affected party, the effect of which is to prevent or
interfere with that party’s performance hereunder, including, without limitation, (i) any Act of God or public enemy, fire, explosion, accident, embargo or any other circumstances of like or different character commonly referred to as force
majeure; or (ii) interruption of or delay in transportation or shortage or failure of supply of materials or equipment, breakdowns, labor strife from whatever cause arising; or (iii) compliance by either party hereto with any order, action,
directive or request of any governmental official, department, agency or authority. 
  
 8.2 If either party hereto is rendered unable, wholly or in part, by any of the conditions described in Article 8.1 above to carry out any of its duties or obligations under this Agreement, other than accrued obligations to make cash
payments, such party shall forthwith give written notice thereof to the other party, such notice to briefly describe the cause of such inability; and in the event that the party giving such notice is unable to perform, shall, to the extent caused by
those reasons, be excused and such duties and obligations and the corresponding duties and obligations of the other party shall be adjusted accordingly. The party giving the notice pursuant to the foregoing provision shall be obligated to use all
reasonable diligence to remove the cause. 
  

 12 

 Article Nine - Assignment 
  
 This Agreement may not be assigned to a third party by either party without the prior written consent of the other party,
provided however, that BioProgress shall have the right at any time freely to assign its rights and obligations under this Agreement to FMC upon written notice to HH. 
  
 Article Ten - Waiver 
  
 Either party’s waiver of any breach, or failure to enforce any of the terms and conditions of this Agreement, at any time, shall not in any way
affect, limit or waive such party’s right thereafter to enforce and compel strict compliance with every term and condition of this Agreement. 
  
 Article Eleven - Warranty 
  
 11.1 HH shall perform its services with care, skill and diligence, using that degree of skill and care ordinarily exercised and consistent with generally accepted
practices. HH shall be responsible for the professional quality, technical accuracy, completeness, and coordination of all reports, designs, drawings, plans, information, specifications, and other items and services to the extent furnished by HH
under this Agreement but shall be responsible for the production of joint development work only as set out in Article 1.1. 
  
 11.2 HH warrants that all goods, articles, material and work will conform with the Specifications, and that Equipment supplied hereunder shall at the time of delivery and
for the period of one (1) year or 2000 hours of operation from the date of the relevant acceptance certificate (whichever is less) (the “Warranty Period”) be free from defects in materials or workmanship. 
  
 11.3 HH shall replace, repair or make good without cost to BioProgress any defects or faults
arising within the Warranty Period, resulting from imperfect or defective work or materials furnished by HH provided that such defects or faults are reported to HH in writing within forty five (45) days of the date of discovery of such defect and HH
is provided access to inspect the Equipment concerned. Acceptance or use of goods by BioProgress or FMC shall not constitute a waiver of any claim under this warranty. After the expiration of the Warranty Period HH will cooperate reasonably and in
good faith with FMC, but at FMC’s sole cost, in addressing claims by customers related to alleged defects or failure to meet Specifications. 
  

 13 

 11.4 The warranties set out above shall not apply to: 
  

	 	(a)	any defect caused other than by faulty materials or workmanship or caused by an accident, misuse, negligence, lack of reasonable maintenance, incorrect fitting, storage or
alteration; 

  

	 	(b)	any part or accessory which is not supplied by HH or an approved Component Manufacturer or subcontractor; 

  

	 	(c)	any high wear or consumable parts or materials replaced as part of normal maintenance. The parties agree to develop a list of such high wear or consumable parts as part of the Full
Scale Machine Final Specification and to add such list to this Agreement as Annex G 

  
 11.5 Upon receipt of a claim report from FMC or BioProgress during the Warranty Period, HH shall promptly, and without undue delay, notify BioProgress and FMC’s representative of its plans to effect repair of the
Equipment. 
  
 11.6 In respect of any claim by an unaffiliated third party
(“Third Party Claim” which shall, for the avoidance of doubt include any claim by FMC or its subsidiaries) relating to Equipment supplied by HH to BioProgress, HH shall indemnify, defend and hold BioProgress harmless from and against any
and all claims, demands, losses, liabilities, damages, costs and expenses (including the cost of settlement, reasonable legal and accounting fees and any other expenses for investigating or defending any actions or threatened actions) directly
arising out of or directly resulting from any such Third Party Claim involving death or bodily injury actually or allegedly arising out of or resulting from the use of the Equipment, where such use of the Equipment was in accordance with its
intended use 
  
 11.7 SAVE AS PROVIDED IN CLAUSE 11.6, HH SHALL ON NO ACCOUNT BE
LIABLE TO BIOPROGRESS FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT OR FOR LOST PROFITS ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT REGARDLESS OF
ANY NOTICE OF SUCH DAMAGES. 
  

 14 

 11.8 With effect from the date of delivery of the first item of the Equipment delivered hereunder, during the term of
this Agreement and for one (1) year thereafter, HH shall maintain product liability insurance in respect of Equipment delivered hereunder with minimum limits of the sterling equivalent of $1,000,000 (One Million Dollars) per occurrence and
$20,000,000 (Twenty Million Dollars) in the aggregate with a reputable insurance company. HH shall provide BioProgress with a copy of the certificate of such insurance and evidence of the payment of premiums therefore promptly upon request.

  
 Article 12 Notice of Claims 
  
 12.1 A Party seeking indemnification pursuant to Article 11 above (an “Indemnified
Party”) shall give prompt notice to the party from whom such indemnification is sought (the “Indemnifying Party”) of the commencement or assertion of any Third Party Claim in respect of which indemnity may be sought hereunder, shall
give the Indemnifying Party such information with respect thereto as the Indemnifying Party may reasonably request, and shall not make any admission concerning such Third Party Claim, unless such admission is required by applicable law or legal
process, including in response to questions presented in depositions or interrogatories. Any admission made by the Indemnified Party, except for an admission required by applicable law or legal process, or the failure to give such notice shall
relieve the Indemnifying Party of any liability hereunder only to the extent that the ability of the Indemnifying Party to defend such Third Party Claim is prejudiced thereby. The Indemnifying Party shall have the right, exercisable by written
notice to the Indemnified Party within thirty (30) days of receipt of notice from the Indemnified Party of the commencement or assertion of a Third Party Claim, to assume and conduct the defense of such Third Party Claim with counsel selected by the
Indemnifying Party and reasonably acceptable to the Indemnified Party; provided that 
  
 (A) the Third Party Claim involves (and continues to involve) solely monetary damages and the Indemnifying Party expressly agrees in such notice that, as between the Indemnifying Party and the Indemnified Party, the Indemnifying Party shall
be solely obligated to satisfy and discharge the Third Party Claim; 
  
 (B) the
defense of such Third Party Claim by the Indemnifying Party will not, in the reasonable judgment of the Indemnified Party, have any continuing material adverse effect on the Indemnified Party’s business; and 
  
 (C) the Indemnifying Party makes reasonably adequate provision to ensure the Indemnified
Party of the ability of the Indemnifying Party to satisfy the full amount of any adverse monetary judgment that may result (the conditions set 

  

 15 

 
forth in clauses (A), (B) and (C) are collectively referred to as the “Litigation Conditions”). 
  
 The Indemnified Party shall not settle such Third Party Claim within such thirty (30) day
period. Subject to the initial and continuing satisfaction of the Litigation Conditions, the Indemnifying Party shall have full control of such Third Party Claim, including settlement negotiations and any legal proceedings. If the Indemnifying Party
does not assume the defense of such Third Party Claim in accordance with this Article 12, the Indemnified Party may defend the Third Party Claim. 
  
 12.2 The Indemnifying Party or the Indemnified Party, as the case may be, shall have the right to participate in (but not control), at its own expense (subject to the
immediately succeeding sentence), the defense of any Third Party Claim which the other is defending as provided in this Agreement. The Indemnifying Party shall not be liable for any litigation costs or expenses incurred, without its consent, by the
Indemnified Party where the action or proceeding is under the control of the Indemnifying Party; provided, however, that if the Indemnifying Party fails to take reasonable steps necessary to defend such Third Party Claim, the Indemnified Party may
assume its own defense, and the Indemnifying Party will be liable for all reasonable costs or expenses paid or incurred in connection therewith. 
  
 12.3 The Indemnifying Party, if it shall have assumed the defense of any Third Party Claim as provided in this Agreement, shall not consent to a settlement of, or the
entry of any judgment arising from, any such Third Party Claim to the extent such Third Party Claim involves equitable or other non-monetary relief from the Indemnified Party. No party shall, without the prior written consent of the other Party,
enter into any compromise or settlement which commits the other Party to take, or to forbear to take, any action. Whether the Indemnifying Party chooses to defend or prosecute any Third Party Claim, all the parties hereto shall cooperate in the
defense or prosecution thereof and shall furnish such records, information and testimony, and attend such conferences, discovery proceedings, hearings, trials and appeals, as may be reasonably requested in connection therewith. 
  
 Article Thirteen - Risk and Title 
  
 13.1 Unless otherwise mutually agreed in writing, all Equipment shall be sold to BioProgress
on Ex Works (Incoterms 2000) basis, with risk in each item of 

  

 16 

 
Equipment therefore passing to FMC on delivery of the Equipment to the carrier designated by FMC. While HH shall carry out the installation and commissioning
of the Equipment, risk shall remain with FMC, and BioProgress shall procure that FMC acknowledges that neither BioProgress nor HH shall be responsible for any loss of or damage to the Equipment unless and to the extent caused by any negligent act or
omission of BioProgress, HH or their servants or agents. 
  
 13.2 HH shall, at all
times until risk in the Equipment passes to FMC keep the Equipment insured against all standard risks for its full replacement value. In the event that there is a partial or total loss of the Equipment to be supplied (including a total write off for
insurance purposes) prior to risk passing, HH shall (unless BioProgress shall have elected to exercise the right to cancel the contract by reason of delay) use all reasonable endeavours to replace the lost or damaged items without delay at its own
expense and shall apply to proceeds of any insurance for such purposes. Where BioProgress shall have elected to cancel the order, HH shall procure that the proceeds of any applicable insurance shall be paid to BioProgress to the extent of any and
all sums previously paid to BioProgress by FMC in respect of the order concerned. 
  
 13.3 Notwithstanding delivery, title to the Equipment shall not pass to BioProgress or FMC until FMC has certified acceptance pursuant to Article 3.4 and payment in full (save for any amount in bona fide dispute) is received by HH.

  
 Article Fourteen - Late Delivery 
  
 The Parties recognize that the initial items of NRobeTM Equipment up to and including the fourth machine to be
delivered hereunder (whether 1/10th scale or full sized production machines) will be the subject of continuing development work and that, while HH will seek to deliver such Equipment so far as is practicable in accordance with any agreed delivery
schedule, such delivery schedule cannot be guaranteed and BioProgress shall have no claim against HH by reason of any failure to adhere thereto. 
  
 With effect from the fifth machine to be delivered hereunder, where any item of Equipment is not made available for delivery within five (5) weeks
following the agreed delivery date (and the parties agree that, by such stage of development, the delivery time will not exceed six (6) months for a 1/10th scale machine and ten (10) months for a full sized machine) then HH will allow BioProgress a
rebate of one hundred and fifteen percent (115%) of one percent (1%) of the purchase price of such item of Equipment (less VAT and any 

  

 17 

 
installation or commissioning element) for each additional week or part of a week following the end of such five (5) week period during which such item of
Equipment remains not available for delivery up to a maximum rebate of one hundred and fifteen percent (115%) of ten percent (10%) of such purchase price. 
  
 Article Fifteen-Accounting Records 
  
 For such time as the price of Equipment hereunder is on a cost plus basis only (and not, for the avoidance of doubt, during any period where machines are
sold on the basis of a fixed price whether or not adjusted in accordance with Annex E(iii)) HH will keep records showing cost of production and cost of installation and commissioning of Equipment sold to BioProgress under this Agreement, such
records to be in sufficient detail to enable the production costs to be accurately determined in accordance with HH’s standard accounting practices. HH will permit its books and records to be examined by representatives of BioProgress and /or
FMC once a year for the preceding year during regular office hours to the extent necessary to verify the cost of production as used to determine the price of Equipment supplied hereunder as a cost plus basis, such examination to be made at the
expense of BioProgress and/ or FMC (as the case may be) by independent auditors appointed by FMC and BioProgress who shall report to FMC or BioProgress (as the case may be) only the amount of the cost of production and cost of installation and
commissioning of Equipment sold on a cost plus basis during the period under examination. Any such examination must be made within sixty (60) days following the end of any calendar year. If any examination reveals that BioProgress has been charged
more than the cost of production or the cost of commissioning and installation of the Equipment supplied plus the agreed markup for the period being examined, the auditor shall promptly notify FMC, BioProgress and HH of the perceived discrepancy
together with the auditor’s detailing of the asserted discrepancy. Save in the event of any manifest error, the findings of the auditor shall be final and binding on the parties. If any examination reveals that BioProgress overpaid sums due to
HH under this Agreement as to costs being examined by more than the greater of (i) $100,000 and (ii) five percent (5%) of the cost amount that was the basis for such original payment, then HH shall pay the cost of the auditor’s examination of
the books and records. BioProgress agrees to hold and shall procure that FMC holds strictly confidential all information concerning costs of production and all information learned in the course of any audit hereunder, except when, it is necessary
for BioProgress to enforce its rights under this Agreement or for FMC 

  

 18 

 
to enforce its rights against BioProgress. If neither BioProgress nor FMC chooses to audit during the required time period for any year, or if they audit and
neither objects to any report within seventy (70) days of the date the report is delivered, the report shall be deemed final, binding and conclusive and not subject to any further review or adjustment for any reason whatsoever. 
  
 Article Sixteen - Notices 
  
 All notices required or permitted to be given under this Agreement shall be
in writing and shall be sent by courier, registered or certified mail and also by telecopier and shall be deemed to have been given upon mailing and telecopier transmission. Any such notices shall be addressed to the receiving party at such
party’s address set forth above, or at such other address as may from time to time be furnished by similar notice by either party. 
  
 Article Seventeen - General Terms 
  
 17.1 The validity, interpretation and performance of this Agreement shall be governed and construed in accordance with the laws of the Commonwealth of Pennsylvania,
U.S.A., without regard to conflict of law principles. 
  
 17.2 This document is
executed in the English language and constitutes the full understanding of the parties, and a complete and exclusive statement of the terms of their agreement. This Agreement supersedes any and all prior and/or existing agreements and courses of
dealings between the parties (other than the Confidentiality Agreement between the parties effective as of 28 July 2003, which shall remain in full force and effect) and all such prior and/or existing agreements and courses of dealings are hereby
terminated by mutual consent of the parties. It is agreed and understood that this agreement is in respect of NRobeTM technology only and that arrangements, if any) between the parties with respect to supply of equipment for other technologies shall be by separate
agreement. 
  
 17.3 The Agreement may be amended by agreement of the parties,
provided however, that no terms, conditions, understanding or agreement purporting to modify or vary the terms of this Agreement shall be binding unless hereafter made in writing and signed by the duly authorized representatives of each party, and
no modification shall be effected by the acknowledgement or acceptance of purchase order or shipping instruction forms containing terms and conditions at variance with or in addition to those set forth herein. 
  

 19 

 17.4 The unenforceability or invalidity of any provisions of this Agreement shall not effect the enforceability or
validity of the balance of this Agreement. 
  
 17.5 Each party hereto is an
independent contractor and it not an agent, employee, or legal representative of the other and persons engaged by each of them shall not be employees, legal representatives or agents of the other party. Other than as specifically set forth in this
Agreement, neither party is authorized to do business in the other party’s name or to obligate the other party in any way. 
  
 17.6 Save where otherwise expressly agreed, the price quoted for any Equipment shall be exclusive of any tax, duty or other governmental charges arising as a result of
the export, importation, sale, or use of the NRobeTM Equipment. 
  
 IN WITNESS WHEREOF,
the parties have executed this Agreement as of the date and year written above. 
  

									
	 HARRO HOEFLIGER
	 	 	 	 
	 VERPACKUNGSMASCHINEN GmbH
	 	 	 	 BIOPROGRESS PLC

					
	By:	 	 /s/ Illegible
	 	 	 	 By:
	 	 /s/ Graham Hind

					
	Name:	 	 Illegible
	 	 	 	 Name:
	 	 Graham Hind

					
	Date:	 	 Illegible
	 	 	 	 Date:
	 	 12/5/2002

  

 20 

 Annex A 
 Baseline Equipment Specifications 
  
 There are two stages to establishing machine specifications 1) initial machine and dose form design specifications for the 1/10th machine and 2) the subsequent design requirements needed to meet customer requirements for full production scale machines. 
  

During the design of the 1/10th scale
machine, FMC would provide design input for the 1/10th scale machine User Requirement Specification (URS) that would
include but not limited to the following three areas. 
  

	 	•	 	Productivity: 

  

	 	•	 	Modular design (separate film, fill, compaction, plc stations) 

  

	 	•	 	High output: 5,000 dose/hour for 1/10th machine

  

	 	•	 	Consistent output per hour 

  

	 	•	 	Rapid changeover (film, fill, etc) 

  

	 	•	 	Easy clean (polished stainless steel, dust removal, sealed bearings, sealed plc, etc.) 

  

	 	•	 	Smallest dimensions possible (i.e. size of unit) 

  

	 	•	 	Minimal change parts 

  

	 	•	 	All product contact parts traceable, fit for purpose and certified as required by F.D.A e.g. where possible/practicable contact parts in 316L stainless steel

  

	 	•	 	Operation: 

  

	 	•	 	Easy to use software system for programming temperatures, pressures, weights, etc. 

  

	 	•	 	Touch screen plc 

  

	 	•	 	Secure User levels, password protected 

  

	 	•	 	Batch programmable operation 

  

	 	•	 	Fault diagnostics 

  

	 	•	 	Independent of human intervention except for loading of input materials 

  

	 	•	 	Recipe Driven Option 

  

	 	•	 	Varying Extent of Automation i.e. modular design so that customers can add on increasingly complex process automation 

  

	 	•	 	All pneumatic and electrical drawings supplied 

  

	 	•	 	Control: 

  

	 	•	 	Alarms indicating warning and action limits, which can be set as required by operator 

  

	 	•	 	Programmable settings where appropriate (with suitable ranges and limits) for; fill weight, tamping force, film temperature, vacuum?, etc. 

  

 21 

	 	•	 	High sensitivity and reliability, with feedback control of all critical parameters at a level appropriate for control parameter 

  

	 	•	 	Safety interlocks and emergency shutoff 

  

	 	•	 	All critical process parameters measured using instrumentation calibrated to appropriate standards. Calibration certificates available 

  

	 	•	 	Detailed documentation database, export capable, compliance to FDA documentation regs, GMP compliant. Software validated and in accordance with requirements of CFR 21 Part 11

  

	 	•	 	User requirements for the final dosage form performance criteria would include but not be limited to 

  

	 	•	 	Must be capable to enrobing pharmaceutical formulations in the form of powders, pellets and granules 

  

	 	•	 	Feed mechanism for film is flexible i.e. machine capable of running with films which support themselves during forming and advance through the machine supplied as rolls

  

	 	•	 	Machine design does not negatively impact dosage form performance e.g. due to process temp have a retardation of disintegration/dissolution 

  

	 	•	 	Fill mechanism adaptable depending on whether powders, pellets or granules within limits of the dosator function are being filled to specific weight limits within + or -5% of
individual weight requirements 

  

	 	•	 	Force limits can be varied within specified range to appropriate accuracy. 

  

	 	•	 	Seal integrity assured by control of process variables. 

  

	 	•	 	Disintegration and dissolution performance comparable to industry standards 

  

	 	•	 	Capable of running different film formulations at similar speeds without need to redesign machine to accommodate minor changes for example adequate control of roller temperature via
chilled water supply or heating method to enable different temp of operation for different films 

  

	 	•	 	General Notes 

  

	 	•	 	These are initial specifications that we believe are needed to design the machine and dosage form. As the 1/10th design process evolves, FMC requires the flexibility to change the machine design in order to clarify the specifications so they will be representative of a
final machine. This would be done during the design cooperation protocol process 

  

	 	•	 	FMC would then sign off on the 1/10th size
specifications. This would be the starting point for the URS for the full-scale machine. 

  

 22 

 Final Equipment Specifications 
  
 A full scale machine URS will be completed by the team and will be consistent with the above as well as reflect the
experience of the parties, market expectations and design refinement and would include 
  

	 	•	 	A specified dose form per hour 

  

	 	•	 	Weighting checking 

  

	 	•	 	Software 

  

	 	•	 	Clean in Place options 

  

	 	•	 	Fill mechanism adaptable to powder, pellets and granules 

  
 General Notes 
  

	 	•	 	Full scale production machine specifications will be finalized upon after the production of the first five machines to allow for debugging the machines in a commercial
environment 

  

	 	•	 	Changes made after this point would then be made as per section 1.5 in the equipment supply contract 

  

 23 

 Annex B 
  
 Design Cooperation Protocol 
  

	 	•	 	During the design period, technical meetings will be regularly held with FMC, HH and BioProgress to assess progress in design and manufacture of equipment. Such meetings shall,
among other things, discuss design of equipment from a customer perspective and reach decisions around design and manufacturing path forward to be done to work toward the required specifications 

  

	 	•	 	Design project plan shall be completed by the design cooperation team within 30 days of signing the contract for the 1/10th scale machine so timelines and milestones can be established 

  

	 	•	 	Milestones should be established to evaluate three stages of the 1/10th machine and full size machine for 

  

	 	•	 	dose form design 

  

	 	•	 	cGMP design 

  

	 	•	 	beta site design 

  

	 	•	 	Milestone achievement is documented through appropriate testing 

  

	 	•	 	FMC will provide a URS for the full-scale machine and then milestones and project plans will be created. 

  

	 	•	 	Meetings will be held to update team on machine design and production progress via reporting against the milestones and project plans created 

  

	 	•	 	Annually this team should present an overview to the Liaison team as defined by the Framework agreement 

  

 24 

 Annex C 
  
 Delivery Schedule 
  
 Estimated delivery of first operational 1/10th scale machine is June 2004. Revised final specs will be agreed by September 2004 and machine adjustment will be targeted to be complete November 2004. (To be agreed as
soon as practicable following signature) 
  
 Preferred lead times will
then be established by FMC and BioProgress to build subsequent 1/10th scale machines and lead times to deliver and
install the machines provided that the lead time for any repeat 1/10th scale machines shall not, under any
circumstances, exceed 9 months from URS to the date of shipment (including FAT) unless expressly agreed in writing in advance by both BioProgress and FMC 
  
 Learnings from the design of 1/10th
machine will then be applied to the full-scale machine and the estimated delivery of full-scale machines will work from milestones and timelines set in Annex B. Initial estimates are the full-scale machine design and operating machine can be
completed seven months after the completion of the 1/10th machine. 
  
 The full-scale machine specifications will then be finalized when customers evaluate the
first five machines. 
  
 Preferred lead times will then be established by FMC and
BioProgress to build subsequent full-scale machines and lead times to deliver and install the machines provided that the lead time for the first off full size production machine shall not, under any circumstances, exceed 14 months from URS to the
date of shipment (including FAT but excluding the concept stage) and the lead time for any subsequent full size production machines shall not, under any circumstances exceed 10 months from URS to the date of shipment (including FAT) unless, in
either case, expressly agreed in writing in advance by both BioProgress and FMC 
  
 Payment Terms 
  
 Payment terms for the initial 1/10th scale and first production scale machine are 
  
 20% Deposit 
  

 25 

 20% 1st stage payment on design acceptance 
  
 20% 2nd stage payment on commencement of placing purchase orders 
  
 20% on start of assembly 
  
 10% on satisfactory completion of FAT 
  
 10% on satisfactory completion of site acceptance test 
  
 Each stage shall be separately invoiced no earlier than the date of the trigger event and each invoice shall be payable within 30 days from receipt 
  
 These stage payments will be based on an estimated price of € 720,000 in respect if the
1/10th pilot machine and € 2.3 million in respect of the first production machine unless otherwise agreed.
Following the successful site test HH will provide to BioProgress full details of the actual costs incurred and the parties shall agree the final price on the formula set out in Annex F and any balance due either way. Save in the case of bona fide
dispute, the party owing the same shall pay such balance within 4 months of the date of the successful site acceptance test. 
  
 Payment terms for all subsequent machines shall be as set out in Clause 6.3(b) or (c). 
  

 26 

 Annex D 
  
 Factory Acceptance Test Procedures – to be performed at HH Plant Machine defined by the URS to test the machine operates with the guidelines 
  

	 	•	 	Produces a dose form of suitable characteristics, including but not limited to 

  

	 	•	 	Weight uniformity 

  

	 	•	 	Good seal integrity 

  

	 	•	 	Dosage form per hour 

  
 Site Acceptance Test – to be performed at customer site 
  

	 	•	 	Testing to reflect the URS as it falls within pharmaceutical tests for 

  

	 	•	 	Installation Qualification 

  

	 	•	 	Operational Qualification 

  

	 	•	 	Includes calibration, software testing and training of operators & engineers 

  

	 	•	 	Productivity Qualification 

  

	 	•	 	If needed 

  

 27 

 Annex E 
  
 NRobeTM Equipment Price Formula 
  
 i) The price of the first one tenth scale machine and the first full scale machine to be delivered hereunder shall be fixed as set out in Article 6.2. 
  
 ii) the price for the second to fifth full size machines delivered hereunder shall be: 
  
 a) the actual cost of production of such machines to HH; plus 
  
 b) 21% of such costs of production (10% sales and marketing costs and 11%
margin); plus 
  
 c) the cost to HH of installing commissioning
and on site qualification of the machine 
  
 (each element
calculated in accordance with the standard accounting conventions operated by the HH at the relevant time) 
  
 Provided, however, that the cost of production shall exclude any design and development costs (other than the dosator) which shall be borne by BioProgress
but may include any significant changes to the specifications set out in Annex A as at the date hereof which shall be dealt with in accordance with Article 1.5. HH undertakes to use all reasonable efforts to bring down the actual production costs
over these four machines by finding alternate processes and manufacturing efficiencies. Hourly rates for HH employees actually employed shall be as set out in Annex F unless and until otherwise agreed. 
  
 iii) With respect to machines from the sixth full-sized machine delivered hereunder onwards,
the parties shall annually negotiate in good faith a fixed machine price reflecting a) the price of the machine Ex Works (including margin to be agreed) and b) the commissioning installation and on site qualification element 
  
 a) With effect from the first and each subsequent anniversary of the date upon which the
fixed price was first agreed, HH shall be entitled to increase each of the two elements of the price by the rise in the cost to HH of labour and materials included in each such element calculated in accordance with the tables published by the German
Institute of Machine Manufacturers up to a maximum 

  

 28 

 
of the percentage increase in the German retail prices index over the period concerned 
  
 b) Productivity savings and economies of scale (based on all projected sales to BioProgress whether of NRobe or other technology equipment)
shall be shared between the parties. Half of BioProgress’s share of projected productivity gains shall be reflected in the fixed price for the subject year; the remainder of BioProgress’s share of such productivity gains, if and to the
extent actually achieved, shall be rebated to BioProgress at the end of the year, along with BioProgress’s share of any further productivity gains achieved as a result of the actual number of machines being produced for BioProgress being higher
than the number projected for the year. It is understood that FMC shall be entitled to a share of productivity gains in respect of NRobeTM Equipment only. FMC’s share shall be one-third of the total productivity gains actually achieved related to production of NRobeTM machines. All remaining productivity gains, after
deduction of the FMC share (and the share payable to any other non NRobeTM purchaser in respect of sales of their relevant equipment only) shall be divided as to two thirds to BioProgress and one third to HH. For the avoidance of doubt, the annual fixed price agreed pursuant to the above
framework shall be 
  
 a) based on compliance with regulatory requirements as laid
down by the EU. Any additional costs required in order to adapt machines to comply with local regulatory requirements, electrical current differences or otherwise for machines to be installed outside the EU shall be payable by FMC 
  
 b) subject to any changes agreed pursuant to Article 1(5) and 
  
 c) exclusive of any optional items identified as available at extra cost in the
Specifications 
  

 29 

 Annex F 
 Pricing for Initial Machines 
  
 1/10th
Scale Pilot Machine: 
  

										
	 Estimated price for the 1/10th scale machine:
	  	 	  	 	 	 	 	€€	720,000
		
	This is are our best estimate based on the information currently available. The machine will be built and the costs recorded on an open book basis, regularly reported to the Project
Management Team and this will be invoiced to BioProgress. Note that additional features and enhancements beyond this description are not included in the estimated prices.	    	 	 	 
				
	 Our prices are calculated as follows:
	  	 	  	 	 	 	 	 	 
				
	 Hourly rates for the work at HH:
	  	 	  	 	 	 	 	 	 
				
	 Mechanical / Electrical Designer / Software Engineer:
	  	 	  	€€	62	 	 	 	 
				
	 Mechanical / Electrical Fitter:
	  	 	  	€€	54	 	 	 	 
				
	 Validation Engineer:
	  	 	  	€€	70	 	 	 	 
	 - Project Manager:
	  	 	  	€€	70	 	 	 	 
	 - Department Leader Technologies:
	  	 	  	€€	85	 	 	 	 
				
	 Head of Design Department (Manfred Reiser):
	  	 	  	€€	120	 	 	 	 
				
	 Manufactured and purchased parts:
	  	 	  	 	 	 	 	 	 
	 The price factor applied to all parts is
	  	 	  	 	1.4	 	 	 	 
				
	 Sales and Marketing costs:
	  	Surcharge:	  	 	10	%	 	 	 
				
	 HH Profit Margin:
	  	Surcharge:	  	 	11 	%	 	 	 
				
	 Production Machine:
	  	 	  	 	 	 	 	 	 
	 Estimated price for the production machine
	  	 	  	 	 	 	 	€€	2,200,00
	 	  	 	  	 	 	 	 	 	to
	 	  	 	  	 	 	 	 	€€	2,400,00
		
	These are our best estimate based on the information currently available. The machine will be built and the costs recorded on an open book basis, regularly reported to the Project
Management Team and this will be invoiced to BioProgress. Note that additional features and enhancements beyond this description are not included in the estimated prices.	    	 	 	 

  

 30 

							
	 Our prices are calculated as follows:
	  	 	 	  	 	 
			
	 Hourly rates for the work at HH:
	  	 	 	  	 	 
			
	 Mechanical / Electrical Designer / Software Engineer:
	  	€€ 	62	  	 	 
			
	 Mechanical / Electrical Fitter:
	  	€€ 	54	  	 	 
			
	 Validation Engineer:
	  	€€	70	  	 	 
	 - Project Manager:
	  	€€	70	  	 	 
	 - Department Leader Technologies:
	  	€€	85	  	 	 
			
	 Head of Design Department (Manfred Reiser):
	  	€€	120	  	 	 
			
	 Manufactured and purchased parts:
	  	 	 	  	 	 
	 The price factor applied to all parts is
	  	 	1.4	  	 	 
			
	 Sales and Marketing costs:
	  	 	Surcharge:	  	10	%
			
	 HH Profit Margin:
	  	 	Surcharge:	  	11	%

  

 31 

 Annex H 
  
 Marketing Support 
  
 Marketing support services shall include, but not be limited to, provision of the following services free of additional cost at the reasonable request of BioProgress or FMC: 
  

	 	•	 	Initial evaluation of powder materials, 

  

	 	•	 	Communication media, 

  

	 	•	 	Customer visits to HH + hosting, 

  

	 	•	 	Presentation to customers, 

  

	 	•	 	Technical, 

  

	 	•	 	Qualifications, 

  

	 	•	 	Materials, 

  

	 	•	 	Business, 

  

	 	•	 	Quotations, administration, 

  

	 	•	 	Contribution to overall sales organisation, 

  

	 	•	 	Support to BIOPROGRESS, 

  

	 	•	 	Translations, 

  

	 	•	 	Project Administration, 

  

	 	•	 	Legal fees, 

  

	 	•	 	Agents’ fees, 

  

	 	•	 	Brand development. 

  

 32 

 Annex G 
 High Wear and Consumable Parts 
  

 33

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