Document:

Exhibit 10.3

 

EGALET CORPORATION

 

2013 STOCK-BASED

INCENTIVE COMPENSATION PLAN

 

 

EGALET CORPORATION

 

2013 STOCK-BASED

INCENTIVE COMPENSATION PLAN

 

1.                                      Purpose of the Plan

 

The purpose of the Plan is to assist the Company, its Subsidiaries and Affiliates in attracting and retaining valued Employees, Consultants and Non-Employee Directors by offering them a greater stake in the Company’s success and a closer identity with it, and to encourage ownership of the Company’s stock by such Employees, Consultants and Non-Employee Directors.

 

2.                                      Definitions

 

As used herein, the following definitions shall apply:

 

2.1.                            “Affiliate” means any entity other than the Subsidiaries in which the Company has a substantial direct or indirect equity interest, as determined by the Board.

 

2.2.                            “Award” means a grant of Common Stock, Deferred Stock, Restricted Stock, Restricted Stock Units, Options or SARs under the Plan.

 

2.3.                            “Award Agreement” means the written agreement, instrument or document evidencing an Award, including any such item in an electronic medium.

 

2.4.                            “Board” means the Board of Directors of the Company.

 

2.5.                            “Change in Control” means, after the Effective Date (and not including the public offering of the Company, which shall not be treated as a Change in Control for purposes of the Plan), any of the following events:

 

 

(a)                                 a “person” (as such term in used in Sections 13(d) and 14(d) of the 1934 Act), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the “beneficial owner” (as defined in Rule 13D-3 under the 1934 Act), directly or indirectly, of securities of the Company representing [fifty percent (50%)] or more of the combined voting power of the Company’s then outstanding securities; or

 

(b)                                 during any period of two consecutive years, individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in Section 2.5(a), Section 2.5(c) or Section 2.5(d) hereof) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously approved, cease for any reason to constitute a majority thereof; or

 

(c)                                  the Company merges or consolidates with any other corporation, other than in a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least [fifty percent (50%)] of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or

 

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(d)                                 the complete liquidation of the Company or the sale or other disposition of all or substantially all of the Company’s assets.

 

(e)                                  Notwithstanding anything in the Plan or an Award Agreement to the contrary, if an Award is subject to Section 409A of the Code, no event that, but for this Section, would be a Change in Control as defined in the Plan or the Award Agreement, as applicable, shall be a Change in Control unless such event is also a “change in control event” as defined in Section 409A of the Code.

 

2.6.                            “Code” means the Internal Revenue Code of 1986, as amended, and the Treasury regulations promulgated thereunder.  A reference to any provision of the Code or the Treasury regulations promulgated thereunder shall include reference to any successor provision of the Code or the Treasury regulations.

 

2.7.                            “Committee” means the committee designated by the Board to administer the Plan under Section 4.  The Committee shall have at least two members and each member of the Committee shall be a Non-Employee Director, an Outside Director and an “independent director” within the meaning of Rule 5605(a)(2) of the NASDAQ Stock Market Equity Rules.

 

2.8.                            “Common Stock” means the common stock of the Company, par value $0.001 per share, or such other class or kind of shares or other securities resulting from the application of Section 13.

 

2.9.                            “Company” means Egalet Corporation, a Delaware corporation, or any successor corporation.

 

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2.10.                     “Consultant” means an individual who renders services to the Company, a Subsidiary or an Affiliate as a consultant, advisor or independent contractor.

 

2.11.                     “Deferral Period” means the period during which the receipt of a Deferred Stock Award under Section 7 will be deferred.

 

2.12.                     “Deferred Stock” means Common Stock to be delivered at the end of a Deferral Period and awarded by the Committee under Section 7.

 

2.13.                     “Effective Date” has the meaning set forth in Section 25.

 

2.14.                     “Employee” means an individual, including an officer or director, who is employed by the Company, a Subsidiary or an Affiliate.

 

2.15.                     “Fair Market Value” means the fair market value of Common Stock determined by such methods or procedures as shall be established from time to time by the Committee in good faith and in accordance with applicable law.  Unless otherwise determined by the Committee, the Fair Market Value of Common Stock shall mean, on any given date, the closing price of a share of Common Stock on the principal national securities exchange on which the Common Stock is listed on such date or, if Common Stock was not traded on such date, on the last preceding day on which the Common Stock was traded.

 

2.16.                     “Incentive Stock Option” means an Option or a portion thereof intended to meet the requirements of an incentive stock option as defined in Section 422 of the Code and designated as an Incentive Stock Option in the applicable Award Agreement.

 

2.17.                     “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder.  A reference to any provision of the 1934 Act or rule promulgated under the 1934 Act shall include reference to any successor provision or rule.

 

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2.18.                     “Non-Employee Director” means a member of the Board who meets the definition of a “non-employee director” under Rule 16b-3(b)(3) promulgated by the Securities and Exchange Commission under the 1934 Act.

 

2.19.                     “Non-Qualified Option” means an Option or a portion thereof not intended to be an Incentive Stock Option and designated as a Non-Qualified Option in the applicable Award Agreement.

 

2.20.                     “Option” means a right to purchase a specified number of shares of Common Stock at a specified price awarded by the Committee under Section 6 of the Plan.

 

2.21.                     “Outside Director” means a member of the Board who meets the definition of an “outside director” under Section 162(m) of the Code.

 

2.22.                     “Participant” means any Employee, Consultant or Non-Employee Director who receives an Award.

 

2.23.                     “Performance Cycle” means the period selected by the Committee during which the performance of the Company, any Subsidiary, any Affiliate or any business unit thereof, or any individual is measured for the purpose of determining the extent to which a Performance Goal has been achieved.

 

2.24.                     “Performance Goal” means a goal that must be met by the end of a period specified by the Committee (but that is substantially uncertain of being met before the grant of the Award) and that, in the case of Qualified Performance-Based Awards, must be based upon any one or more of the following as they relate to the Company, its Subsidiaries or Affiliates (or any business unit or department thereof): (i) stock price, (ii) market share, (iii) sales, (iv) earnings per share, (v) diluted earnings per share, (vi) diluted net income per share,

 

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(vii) return on shareholder equity, (viii) costs, (ix) cash flow, (x) return on total assets, (xi) return on capital or invested capital, (xii) return on net assets, (xiii) operating income, (xiv) net income, (xv) earnings (or net income) before interest, taxes, depreciation and amortization, (xvi) improvements in capital structure, (xvii) gross, operating or other margins, (xviii) budget and expense management, (xix) productivity ratios, (xx) working capital targets, (xxi) enterprise value, (xxii) safety record, (xxiii) completion of acquisitions or business expansion of the company, our subsidiaries or affiliates (or any business unit or department thereof) (xxiv) economic value added or other value added measurements, (xxv) expenses targets, (xxvi) operating efficiency, (xxvii) regulatory body approvals for commercialization of products,  (xxviii) implementation or completion of critical projects or related milestones (including, without limitation, milestones such as clinical trial enrollment targets, commencement of phases of clinical trials and completion of phases of clinical trials) or (xxix) partnering or similar transactions, in all cases, whether measured absolutely or relative to an index or peer group.  The Committee shall have discretion to determine the specific targets with respect to each of these categories of Performance Goals.  Performance Goals with respect to Awards that are not intended to be Qualified Performance-Based Awards may be based on one or more of the preceding measures or any other measure that the Committee may determine in its sole discretion.  If the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company, or the manner in which it conducts its business, or other events or circumstances render the Performance Goals unsuitable, the Committee may modify such Performance Goals or the related minimum acceptable level of achievement, in whole or in part, as the Committee deems appropriate and equitable.

 

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2.25.                     “Plan” means the Egalet Corporation 2013 Stock-Based Incentive Compensation Plan herein set forth, as amended from time to time.

 

2.26.                     “Qualified Performance-Based Award” means an Award or portion of an Award that is intended to satisfy the requirements for “qualified performance-based compensation” under Section 162(m) of the Code.

 

2.27.                     “Restricted Stock” means Common Stock awarded by the Committee under Section 8 of the Plan.

 

2.28.                     “Restricted Stock Unit” means the right to a payment in Common Stock or in cash, or in a combination thereof, awarded by the Committee under Section 9 of the Plan.

 

2.29.  “Restriction Period” means the period during which Restricted Stock awarded under Section 8 of the Plan and Restricted Stock Units awarded under Section 9 of the Plan are subject to forfeiture.

 

2.30.                     “SAR” means a stock appreciation right awarded by the Committee under Section 11 of the Plan.

 

2.31.                     “Subsidiary” means any corporation (other than the Company), partnership, joint venture or other business entity of which 50% or more of the outstanding voting power is beneficially owned, directly or indirectly, by the Company.

 

2.32.                     “Ten Percent Shareholder” means a person who on any given date owns, either directly or indirectly (taking into account the attribution rules contained in Section 424(d) of the Code), stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or a Subsidiary.

 

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3.                                      Eligibility

 

Any Employee, Consultant or Non-Employee Director is eligible to receive an Award.

 

4.                                      Administration and Implementation of Plan

 

4.1.                            The Plan shall be administered by the Committee.  Any action of the Committee in administering the Plan shall be final, conclusive and binding on all persons, including the Company, its Subsidiaries and Affiliates, their Employees, Consultants and directors, Participants, persons claiming rights from or through Participants and stockholders of the Company.  No member of the Committee shall be personally liable for any action, determination, or interpretation taken or made in good faith by the Committee with respect to the Plan or any Awards granted hereunder, and all members of the Committee shall be fully indemnified and protected by the Company in respect of any such action, determination or interpretation.

 

4.2.                            Subject to the provisions of the Plan, the Committee shall have full and final authority in its discretion (a) to select the Employees, Consultants and Non-Employee Directors who will receive Awards pursuant to the Plan, (b) to determine the type or types of Awards to be granted to each Participant, (c) to determine the number of shares of Common Stock to which an Award will relate, the terms and conditions of any Award granted under the Plan (including, but not limited to, restrictions as to vesting, transferability or forfeiture, exercisability or settlement of an Award and waivers or accelerations thereof, and waivers of or modifications to performance conditions relating to an Award, based in each case on such considerations as the Committee shall determine) and all other matters to be determined in

 

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connection with an Award; (d) to determine whether, to what extent, and under what circumstances an Award may be canceled, forfeited, or surrendered; (e) to determine whether, and to certify that, Performance Goals to which the settlement of an Award is subject are satisfied; (f) to correct any defect or supply any omission or reconcile any inconsistency in the Plan, and to adopt, amend and rescind such rules and regulations as, in its opinion, may be advisable in the administration of the Plan; and (g) to construe and interpret the Plan and to make all other determinations as it may deem necessary or advisable for the administration of the Plan.

 

4.3.                            The Committee’s powers shall also include responsibility to determine the effect, if any, of a Change in Control of the Company upon outstanding Awards.  Upon a Change in Control, the Committee may, at its discretion, (i) fully vest any or all Awards made under the Plan, (ii) determine whether all applicable Performance Goals have been achieved and the applicable level of performance, (iii) cancel any outstanding Awards in exchange for a cash payment of an amount (including zero) equal to the difference between the then Fair Market Value of the Award less the option or base price of the Award, (iv) after having given the Participant a reasonable chance to exercise any vested outstanding Options or SARs, terminate any or all of the Participant’s unexercised Options or SARs, (v) where the Company is not the surviving corporation, cause the surviving corporation to assume all outstanding Awards or replace all outstanding Awards with comparable awards or (vi) take such other action as the Committee shall determine to be appropriate.

 

4.4.                            The Committee may impose on any Award or the exercise thereof, at the date of grant or thereafter, such terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine, including terms requiring forfeiture of Awards in

 

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the event of the Participant’s termination of employment or service with the Company or any Subsidiary or Affiliate; provided, however, that the Committee shall retain full power to accelerate or waive any such term or condition as it may have previously imposed, including, without limitation, any minimum vesting period.  All Awards shall be evidenced by an Award Agreement.  The right of a Participant to exercise or receive a grant or settlement of any Award, and the timing thereof, may be subject to such Performance Goals as may be specified by the Committee.

 

4.5.                            To the extent permitted by applicable law, the Committee may delegate some or all of its authority with respect to the Plan and Awards to any executive officer of the Company or any other person or persons designated by the Committee, in each case, acting individually or as a committee, provided that the Committee may not delegate its authority hereunder to make awards to Employees who are (i) “officers” as defined in Rule 16a-1(f) under the 1934 Act, (ii) “covered employees” within the meaning of Section 162(m) of the Code or (iii) officers or other Employees who are delegated authority by the Committee pursuant to this Section.  Any delegation hereunder shall be subject to the restrictions and limits that the Committee specifies at the time of such delegation or thereafter.  The Committee may at any time rescind the authority delegated to any person pursuant to this Section.  Any action undertaken by any such person or persons in accordance with the Committee’s delegation of authority pursuant to this Section shall have the same force and effect as if undertaken directly by the Committee.

 

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5.                                      Shares of Stock Subject to the Plan

 

5.1.                            Subject to adjustment as provided in Section 13, the total number of shares of Common Stock available for Awards under the Plan shall be [NUMBER OF SHARES](1).

 

5.2.                            Subject to adjustment as provided in Section 13, (i) the maximum number of shares of Common Stock available for Awards that are intended to be Incentive Stock Options shall not exceed [NUMBER](2) and (ii) the maximum number of shares of Common Stock available for Awards that may be granted to any individual Participant shall not exceed [NUMBER](3) during any calendar year.

 

5.3.                            If any shares subject to an Award are forfeited or such Award otherwise terminates, any shares counted against the number of shares available for issuance pursuant to the Plan with respect to such Award shall, to the extent of any such forfeiture or termination, again be available for Awards under the Plan; provided, however, that the Committee may adopt procedures for the counting of shares relating to any Award to ensure appropriate counting, avoid double counting, and provide for adjustments in any case in which the number of shares actually distributed differs from the number of shares previously counted in connection with such Award.  SARs or Restricted Stock Units to be settled in shares of Common Stock shall be counted in full against the number of shares available for award under the Plan,

 

(1)  To equal 15% of the Company’s Common Stock.

 

(2)  To equal 15% of the Company’s Common Stock.

 

(3)  To be determined.

 

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regardless of the number of shares of Common Stock issued upon settlement of the SAR or Restricted Stock Unit.  If any shares subject to an Award are retained or reacquired by the Company in payment of an exercise price or satisfaction of a withholding or other tax obligation in connection with any Award, such shares shall not be made available for future Awards under the Plan.

 

5.4.                            Any shares issued hereunder may consist, in whole or in part, of authorized and unissued shares or treasury shares.  Any shares issued by the Company through the assumption or substitution of outstanding grants in connection with the acquisition of another entity shall not reduce the maximum number of shares available for delivery under the Plan.

 

6.                                      Common Stock

 

An Award of Common Stock is a grant by the Company of a specified number of shares of Common Stock to the Participant, which shares are not subject to forfeiture except as set forth in Section 21.  Upon the Award of Common Stock, the Committee may direct the number of shares of Common Stock subject to such Award be issued to the Participant, designating the Participant as the registered owner.  The Participant shall have all of the customary rights of a stockholder with respect to the Award of Common Stock, including the right to vote shares of the Common Stock and receive dividends with respect to the Common Stock.

 

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7.                                      Deferred Stock

 

An Award of Deferred Stock is an agreement by the Company to deliver to the Participant a specified number of shares of Common Stock at the end of a specified Deferral Period or Periods.  Such an Award shall be subject to the following terms and conditions:

 

7.1.                            Upon the Award of Deferred Stock, the Committee shall direct that the number of shares subject to such Award be credited to the Participant’s account on the books of the Company but that issuance and delivery of the same shall be deferred until the date or dates provided in the Award Agreement.  Prior to issuance and delivery of the Deferred Stock, the Participant shall have no rights as a stockholder with respect to any shares of Deferred Stock credited to the Participant’s account.

 

7.2.                            During the Deferral Period, no dividend shall be paid with respect to shares covered by a Deferred Stock Award and the Participant shall have no future right to any dividend paid during the Deferral Period.

 

7.3.                            The Deferral Period may consist of one or more installments.  Provided that the Deferred Stock has not been previously forfeited, at the end of the Deferral Period or any installment thereof, the shares of Deferred Stock applicable to such installment, shall be issued and delivered to the Participant (or, where appropriate, the Participant’s legal representative) in accordance with the terms of the Award Agreement.  Subject to the Committee’s authority under Sections 4.3 and 4.4 to accelerate the vesting of Awards, the Deferral Period with respect to Deferred Stock granted to a Participant other than a Non-Employee Director shall commence on the date of grant and end no earlier than four years following the date of grant; provided that the Deferral Period may end for up to one-quarter of

 

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the shares of Deferred Stock on each anniversary of the date of grant; further provided that the Deferral Period for Deferred Stock that vests based on the achievement of specified Performance Goals shall end no earlier than one year following the date of grant.

 

8.                                      Restricted Stock

 

An Award of Restricted Stock is a grant by the Company of a specified number of shares of Common Stock to the Participant, which shares are subject to forfeiture upon the happening of specified events.  Such an Award shall be subject to the following terms and conditions:

 

8.1.                            Upon the Award of Restricted Stock, the Committee may direct the number of shares of Common Stock subject to such Award be issued to the Participant or placed in a restricted stock account (including an electronic account) with the transfer agent and in either case designating the Participant as the registered owner.  The certificate(s), if any, representing such shares shall be physically or electronically legended, as applicable, as to sale, transfer, assignment, pledge or other encumbrances during the Restriction Period and, if issued to the Participant, returned to the Company to be held in escrow during the Restriction Period.  In all cases, the Participant shall sign a stock power endorsed in blank to the Company to be held in escrow during the Restriction Period.

 

8.2.                            During the Restriction Period, the Participant shall have the right to vote shares of Restricted Stock.  During the Restriction Period, no dividend shall be paid with respect to the number of shares covered by a Restricted Stock Award and the Participant shall have no future right to any dividend paid during the Restriction Period.

 

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8.3.                            Provided that the Restricted Stock has not been previously forfeited, at the end of the Restriction Period the restrictions imposed under the Award Agreement shall lapse with respect to the number of shares specified thereunder, and the legend, if any, imposed hereunder shall be removed and such number of shares delivered to the Participant (or, where appropriate, the Participant’s legal representative).

 

8.4.                            Subject to the Committee’s authority under Sections 4.3 and 4.4 to accelerate the vesting of Awards, the Restriction Period with respect to Restricted Stock granted to a Participant other than a Non-Employee Director shall commence on the date of grant and end no earlier than four years following the date of grant; provided that the Restriction Period may end for up to one-quarter of the shares of Restricted Stock on each anniversary of the date of grant; further provided that the Restriction Period for Restricted Stock that vests based on the achievement of specified Performance Goals shall end no earlier than one year following the date of grant.

 

9.                                      Restricted Stock Units

 

An Award of Restricted Stock Units is a grant by the Company of the right to receive a payment in Common Stock or in cash, or in a combination thereof, that is equal to the Fair Market Value of a share of Common Stock as of the date of vesting or payment, as set forth in the applicable Award Agreement, which right is subject to forfeiture upon the happening of specified events. Such an Award shall be subject to the following terms and conditions:

 

9.1. Any amount payable upon the end of the Restriction Period with respect to a Restricted Stock Unit shall be paid by the Company in shares of Common Stock, in

 

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cash or in a combination of shares of Common Stock and cash, as determined by the Committee in its sole discretion or as set forth in the Award Agreement.

 

9.2.  Provided that the Restricted Stock Units have not been previously forfeited, at the end of the Restriction Period the restrictions imposed under the Award Agreement shall lapse with respect to the number of Restricted Stock Units specified thereunder, and shares of Common Stock or cash with a value equal to the Fair Market Value of the shares of Common Stock underlying such Restricted Stock Units shall be delivered to the Participant (or, where appropriate, the Participant’s legal representative).

 

9.3.  Subject to the Committee’s authority under Sections 4.3 and 4.4 to accelerate the vesting of Awards, the Restriction Period with respect to Restricted Stock Units granted to a Participant other than a Non-Employee Director shall commence on the date of grant and end no earlier than four years following the date of grant; provided that the Restriction Period may end for up to one-quarter of the Restricted Stock Units on each anniversary of the date of grant; further provided that the Restriction Period for Restricted Stock Units that vest based on the achievement of specified Performance Goals shall end no earlier than one year following the date of grant.

 

10.                               Options

 

Options give a Participant the right to purchase a specified number of shares of Common Stock from the Company for a specified time period at a fixed price.  Options may be either Incentive Stock Options or Non-Qualified Stock Options.  The grant of Options shall be subject to the following terms and conditions:

 

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10.1.                     Option Price:  The price per share at which Common Stock may be purchased upon exercise of an Option shall be determined by the Committee, but shall be not less than 100% of the Fair Market Value of a share of Common Stock on the date of grant (or 110% of such Fair Market Value in the case of an Incentive Stock Option granted to a Ten Percent Shareholder), unless the Option was granted through the assumption of, or in substitution for, outstanding awards previously granted by an entity acquired by the Company or any Subsidiary or Affiliate or with which the Company or any Subsidiary or Affiliate combines.

 

10.2.                     Term of Options:  The term of an Option shall in no event be greater than ten years (five years in the case of an Incentive Stock Option granted to a Ten Percent Shareholder).

 

10.3.                     Incentive Stock Options:  Each provision of the Plan and each Award Agreement relating to an Incentive Stock Option shall be construed so that each Incentive Stock Option shall be an incentive stock option as defined in Section 422 of the Code, and any provisions of an Award Agreement that cannot be so construed shall be disregarded.  In no event may a Participant be granted an Incentive Stock Option which does not comply with the grant and vesting limitations prescribed by Section 422(b) of the Code.  Incentive Stock Options may not be granted to Employees of Affiliates or to Consultants or Non-Employee Directors.

 

10.4.                     Payment of Option Price:  The option price of the shares of Common Stock received upon the exercise of an Option shall be paid within three days of the date of exercise: (i) in cash, or (ii) with the proceeds received from a broker-dealer whom the Participant has authorized to sell all or a portion of the Common Stock covered by the Option, or (iii) with the consent of the Committee, in whole or in part in Common Stock held by the

 

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Participant and valued at Fair Market Value on the date of exercise.  With the consent of the Committee, payment upon the exercise of a Non-Qualified Option may be made in whole or in part by Restricted Stock held by the Participant and valued at Fair Market Value on the date the Option is exercised.  In such case, the Common Stock to which the Option relates shall be subject to the same forfeiture restrictions originally imposed on the Restricted Stock exchanged therefor.  An Option may be exercised only for a whole number of shares of Common Stock.

 

10.5.                     Minimum Vesting Period for Options:  Subject to the Committee’s authority under Sections 4.3 and 4.4 to accelerate the vesting of Awards, the minimum vesting period for an Option granted to a participant other than a Non-Employee Director shall be four years from the date of grant; provided that an Option may vest and become exercisable for up to one-quarter of the shares of Common Stock underlying the Option on each anniversary of the date of grant; further provided that an Option that vests based on the achievement of specified Performance Goals may vest and become exercisable for the shares of Common Stock underlying the Option at any time on or after the first anniversary of the date of grant. Notwithstanding the foregoing, a Participant who is subject to Section 16 of the 1934 Act may direct the Company to withhold Shares otherwise to be delivered upon the exercise of an Award in order to pay the exercise price due on such Award.

 

11.                               Stock Appreciation Rights

 

SARs give the Participant the right to receive, upon exercise of the SAR, the excess of (i) the Fair Market Value of one share of Common Stock on the date of exercise over (ii) the grant price of the SAR as determined by the Committee, but which may never be less

 

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than 100% of the Fair Market Value of a share of Common Stock on the date of grant.  The grant of SARs shall be subject to the following terms and conditions:

 

11.1.                     The term of a SAR shall in no event be greater than ten years.

 

11.2.                     The Committee shall determine the time or times at which a SAR may be exercised in whole or in part, the method of exercise, the method of settlement, form of consideration payable in settlement, method by which Common Stock will be delivered or deemed to be delivered to Participants, whether or not a SAR shall be in tandem with any other Award, and any other terms and conditions of any SAR.

 

11.3.                     Subject to the Committee’s authority under Sections 4.3 and 4.4 to accelerate the vesting of Awards, the minimum vesting period for a SAR granted to a Participant other than a Non-Employee Director shall be four years from the date of grant; provided that a SAR may vest and become exercisable for up to one-quarter of the shares of Common Stock underlying the SAR on each anniversary of the date of grant; further provided that a SAR that vests based on the achievement of specified Performance Goals may vest and become exercisable for the shares of Common Stock underlying the SAR at any time on or after the first anniversary of the date of grant.

 

11.4.                     The Committee may provide that a SAR shall be deemed to be exercised at the close of business on the scheduled expiration date of such SAR.

 

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12.                               Qualified Performance-Based Awards.

 

To the extent the Committee determines, in its sole discretion, that it is necessary or advisable in order to comply with the deductibility limitations of Section 162(m) of the Code applicable to Qualified Performance-Based Awards, the following rules shall apply:

 

12.1.                     Only an Employee who is a  “covered employee” within the meaning of Section 162(m) of the Code shall be eligible to receive Qualified Performance-Based Awards.  The Committee shall designate in its sole discretion which covered employees will be Participants for a Performance Cycle within the earlier of (i) the first 90 days of a Performance Cycle and (ii) the lapse of 25% of the Performance Cycle.

 

12.2.                     The Committee shall establish in writing within the earlier of (i) the first 90 days of a Performance Cycle and (ii) the lapse of 25% of the Performance Cycle, and in any event, while the outcome is substantially uncertain, (A) Performance Goals for the Performance Cycle, and (B) in respect of such Performance Goals, a minimum acceptable level of achievement below which no payment will be made or no Award shall vest or become exercisable, and an objective formula or other method for determining the amount of any payment to be made or the extent to which an Award hereunder shall vest or become exercisable if performance is at or above such minimum acceptable level but falls short of the maximum achievement of the specified Performance Goals.

 

12.3.                     Following the completion of a Performance Cycle, the Committee shall review and certify in writing whether, and to what extent, the Performance Goals for the Performance Cycle have been achieved and, if so, to also calculate and certify in writing the amount of the Qualified Performance-Based Awards earned for the Performance Cycle based upon the Performance Goals and the related formulas or methods as determined pursuant to

 

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Section 12.2.  The Committee shall then determine the actual amount payable or the extent to which an Award is vested or exercisable as a result of attainment of such Performance Goals under each Participant’s Award for the Performance Cycle, and, in doing so, may reduce or eliminate, except as otherwise provided in the Award Agreement, the amount of the Award.  In no event shall the Committee have the authority to increase Award amounts to any covered employee under a Qualified Performance-Based Award.

 

12.4.                     A Qualified Performance-Based Award granted, vesting or becoming exercisable with respect to a Performance Cycle shall be paid (unless such Award is subject to the Participant’s exercise, which exercise such Participant has not effectuated) as soon as practicable following completion of the certification described in Section 12.3 but in no event later than December 31 of the year following the year in which the applicable Performance Cycle ends.

 

13.                               Adjustments upon Changes in Capitalization

 

13.1.                     In order to prevent dilution or enlargement of the rights of Participants under the Plan as a result of any stock dividend, recapitalization, forward stock split or reverse stock split, reorganization, division, merger, consolidation, spin-off, combination, repurchase or share exchange, extraordinary or unusual cash distribution or other similar corporate transaction or event that affects the Common Stock, the Committee shall adjust (i) the number and kind of shares of Common Stock which may thereafter be issued in connection with Awards, (ii) the number and kind of shares of Common Stock issuable in respect of outstanding Awards, (iii) the aggregate number and kind of shares of Common Stock available under the Plan, and (iv) the exercise or grant price relating to any Award.  Any such adjustment shall be

 

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made in an equitable manner which reflects the effect of such transaction or event.  It is provided, however, that in the case of any such transaction or event, the Committee may make any additional adjustments to the items in (i) through (iv) above which it deems appropriate in the circumstances, or make provision for a cash payment with respect to any outstanding Award; and it is provided, further, that no adjustment shall be made under this Section that would cause the Plan to violate Section 422 of the Code with respect to Incentive Stock Options or that would adversely affect the status of any Award that is “performance-based compensation” under Section 162(m) of the Code.

 

13.2.                     In addition, the Committee is authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards, including any Performance Goals, in recognition of unusual or nonrecurring events (including, without limitation, events described in Section 13.1) affecting the Company, any Subsidiary or Affiliate, or in response to changes in applicable laws, regulations, or accounting principles.  Notwithstanding the foregoing, no adjustment shall be made in any outstanding Awards to the extent that such adjustment would adversely affect the intended status of the Award as “performance-based compensation” under Section 162(m) of the Code.

 

14.                               Termination and Amendment

 

14.1.                     The Board may amend, alter, suspend, discontinue, or terminate the Plan without the consent of the Company’s stockholders or Participants, except that any such amendment, alteration, suspension, discontinuation, or termination shall be subject to the approval of the Company’s stockholders if (i) such action would increase the number of shares subject to the Plan, (ii) such action results in the repricing, replacement or repurchase of any

 

22

 

Option, SAR  or other Award, or (iii) such stockholder approval is required by any federal or state law or regulation or the rules of any stock exchange or automated quotation system on which the Common Stock may then be listed or quoted, in each case, except as provided in Section 13.1; provided, however, that without the consent of an affected Participant, no amendment, alteration, suspension, discontinuation, or termination of the Plan may materially and adversely affect the rights of such Participant under any Award theretofore granted and any Award Agreement relating thereto, except as the Committee determines in its sole discretion to be necessary or advisable to ensure a deduction under Section 162(m) of the Code or to comply with Section 409A of the Code or an exemption therefrom.  The Committee may waive any conditions or rights under, or amend, alter, suspend, discontinue, or terminate, any Award theretofore granted and any Award Agreement relating thereto; provided, however, that without the consent of an affected Participant, no such amendment, alteration, suspension, discontinuation, or termination of any Award may materially and adversely affect the rights of such Participant under such Award, except as the Committee determines in its sole discretion to be necessary or advisable to ensure a deduction under Section 162(m) of the Code or to comply with Section 409A of the Code or an exemption therefrom.

 

14.2.                     The foregoing notwithstanding, any Performance Goal or other performance condition specified in connection with an Award shall not be deemed a fixed contractual term, but shall remain subject to adjustment by the Committee, in its discretion at any time in view of the Committee’s assessment of the Company’s strategy, performance of comparable companies, and other circumstances, except to the extent that any such adjustment to

 

23

 

a performance condition would adversely affect the intended status of an Award as “performance-based compensation” under Section 162(m) of the Code.

 

15.                               No Right to Award, Employment or Service

 

Neither the Plan nor any action taken hereunder shall be construed as giving any Employee, Consultant or Non-Employee Director any right to be retained in the employ or service of the Company, any Subsidiary or Affiliate.  For purposes of the Plan, transfer of employment or service between the Company and its Subsidiaries and Affiliates shall not be deemed a termination of employment or service.

 

16.                               Taxes

 

The Company, any Subsidiary or Affiliate is authorized to withhold from any payment relating to an Award under the Plan, including from a distribution of Common Stock or any payroll or other payment to a Participant amounts of withholding and other taxes due in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Company, the Subsidiary or Affiliate and Participants to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award.  This authority shall include authority to withhold or receive Common Stock or other property and to make cash payments in respect thereof in satisfaction of a Participant’s tax obligations.  Withholding of taxes in the form of shares of Common Stock shall not occur at a rate that exceeds the minimum required statutory federal and state withholding rates.  Participants who are subject to the reporting requirements of Section 16 of the 1934 Act may elect to pay all or a portion of any withholding or other taxes due in connection with an

 

24

 

Award by directing the Company to withhold shares of Common Stock that would otherwise be received in connection with such Award.

 

17.                               Limits on Transferability; Beneficiaries

 

No Award or other right or interest of a Participant under the Plan shall be pledged, encumbered, or hypothecated to, or in favor of, or subject to any lien, obligation, or liability of such Participant to, any party, other than the Company, any Subsidiary or Affiliate, or assigned or transferred by such Participant otherwise than by will or the laws of descent and distribution, and such Awards and rights shall be exercisable during the lifetime of the Participant only by the Participant or his or her guardian or legal representative.  Notwithstanding the foregoing, the Committee may, in its discretion, provide that Awards or other rights or interests of a Participant granted pursuant to the Plan (other than an Incentive Stock Option) be transferable, without consideration, to immediate family members (i.e., children, grandchildren or spouse), to trusts for the benefit of such immediate family members and to partnerships in which such family members are the only partners.  The Committee may attach to such transferability feature such terms and conditions as it deems advisable.  In addition, a Participant may, in the manner established by the Committee, designate a beneficiary (which may be a person or a trust) to exercise the rights of the Participant, and to receive any distribution, with respect to any Award upon the death of the Participant.  A beneficiary, guardian, legal representative or other person claiming any rights under the Plan from or through any Participant shall be subject to all terms and conditions of the Plan and any Award Agreement applicable to such Participant, except as otherwise determined by the Committee, and to any additional restrictions deemed necessary or appropriate by the Committee.

 

25

 

18.                               No Rights to Awards; No Stockholder Rights

 

No Participant shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Participants.  No Award shall confer on any Participant any of the rights of a stockholder of the Company unless and until Common Stock is duly issued or transferred to the Participant in accordance with the terms of the Award.

 

19.                               Foreign Nationals.

 

Without amending the Plan, Awards may be granted to Employees, Consultants and Non-Employee Directors who are foreign nationals or are employed or providing services outside the United States or both, on such terms and conditions different from those specified in the Plan as may, in the judgment of the Committee, be necessary or desirable to further the purpose of the Plan.  Moreover, the Committee may approve such supplements to, or amendments, restatements or alternative versions of, the Plan as it may consider necessary or appropriate for such purposes without thereby affecting the terms of the Plan as in effect for any other purpose, provided that no such supplements, amendments, restatements or alternative versions shall include any provisions that are inconsistent with the terms of the Plan, as then in effect, unless the Plan could have been amended to eliminate such inconsistency without further approval by the stockholders of the Company.

 

20.                               Securities Law Requirements

 

20.1.                     No Award granted hereunder shall be exercisable if the Company shall at any time determine that (a) the listing upon any securities exchange, registration or qualification under any state or federal law of any Common Stock otherwise deliverable upon such exercise, or (b) the consent or approval of any regulatory body or the satisfaction of

 

26

 

withholding tax or other withholding liabilities, is necessary or appropriate in connection with such exercise.  In any of the events referred to in clause (a) or clause (b) above, the exercisability of such Awards shall be suspended and shall not be effective unless and until such withholding, listing, registration, qualifications or approval shall have been effected or obtained free of any conditions not acceptable to the Company in its sole discretion, notwithstanding any termination of any Award or any portion of any Award during the period when exercisability has been suspended.

 

20.2.                     The Committee may require, as a condition to the right to exercise any Award that the Company receive from the Participant, at the time any such Award is exercised, vests or any applicable restrictions lapse, representations, warranties and agreements to the effect that the shares are being purchased or acquired by the Participant for investment only and without any present intention to sell or otherwise distribute such shares and that the Participant will not dispose of such shares in transactions which, in the opinion of counsel to the Company, would violate the registration provisions of the Securities Act of 1933, as then amended, and the rules and regulations thereunder.  The certificates issued to evidence such shares shall bear appropriate legends summarizing such restrictions on the disposition thereof.

 

21.                               Recoupment

 

Any Award granted pursuant to the Plan shall be subject to mandatory repayment by the Participant to the Company pursuant to the terms of any Company “clawback” or recoupment policy directly applicable to the Plan and (i) set forth in the Participant’s Award Agreement or (ii) required by law to be applicable to the Participant.

 

27

 

22.                               Termination

 

Unless the Plan previously shall have been terminated by action of the Board, the Plan shall terminate on the 10-year anniversary of the Effective Date, and no Awards under the Plan shall thereafter be granted.

 

23.                               Fractional Shares

 

The Company will not be required to issue any fractional shares of Common Stock pursuant to the Plan.  The Committee may provide for the elimination of fractions and for the settlement of fractions in cash.

 

24.                               Governing Law

 

To the extent that Federal laws do not otherwise control, the validity and construction of the Plan and any Award Agreement entered into thereunder shall be construed and enforced in accordance with the laws of the State of Delaware, but without giving effect to the choice of law principles thereof.

 

25.                               Effective Date

 

The Plan shall be effective as of the date approved by the Company’s shareholders.

 

28Exhibit 10.4

 

CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS DENOTE SUCH OMISSIONS.

 

HALO-

PHARMA

 

Project Hawk

 

Clinical Manufacturing and Commercial Pricing

 

Prepared for

Egalet Limited

 

Proposal ID: EGA.C02.W1210.V4

 

December 4, 2012

 

Building

Partnerships

for Life

 

CONFIDENTIAL

 

 

	
1.
    	
 
    	
Parties
    	
 
    	
Halo Pharmaceutical, Inc

30 North Jefferson Road

Whippany, NJ 07981
    	
 
    	
Egalet Limited

c/o Trout Creek Consulting, LLC

P.O. Box 645

Devon, PA 19333-0645
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
2.
    	
 
    	
Product
    	
 
    	
Project Hawk
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
3.
    	
 
    	
Contract
    	
 
    	
This Proposal (including Project Scope,   Budget Summary and Standard Terms and Conditions for Pharmaceutical   Development Services (“Terms and Conditions”) when accepted by Client shall   become a contract binding on the Parties (“Contract”).
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
4.
    	
 
    	
Budget Summary
    	
 
    	
Part A
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
5.
    	
 
    	
Project Scope
    	
 
    	
Part B
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
6.
    	
 
    	
Capital Requirements and Commercial Pricing
    	
 
    	
Part C
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
7.
    	
 
    	
Standard Terms and Conditions
    	
 
    	
Part D
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
8.
    	
 
    	
Effective Date
    	
 
    	
December 4, 2012
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
9.
    	
 
    	
Terms
    	
 
    	
From the Effective Date until completion of   the Pharmaceutical Development Services (“Services”) by Halo   Pharmaceutical, Inc.
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
10.
    	
 
    	
Date of Confidentiality Agreement
    	
 
    	
July 23, 2012
    

 

 

	
Halo Pharmaceutical, Inc.
    	
 
    	
Egalet Limited
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
X
    	
/s/   David Widman
    	
 
    	
X
    	
/s/   Robert S. Radie
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Name
    	
David   Widman
    	
 
    	
Name
    	
Robert   S. Radie
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Title
    	
Sr.   Regional Sales Director
    	
 
    	
Title
    	
President   and CEO
    

 

 

About Halo Pharmaceutical, Inc

 

Halo Pharmaceutical, Inc is a Contract Development and Manufacturing Organization (COMO) headquartered in Whippany, New Jersey. Since 2008, Halo Pharmaceutical has served the Pharmaceutical community by providing Quality products and Services to our customers with a focus on making a difference in the life of the Patient.

 

Halo Pharmaceutical’s Whippany facility has maintained an outstanding and exemplary track record with key Regulatory Agencies.

 

Below is the past compliance history of the site:

 

	
July 2009
    	
 
    	
June 2011
    
	
cGMP (COER)
    	
 
    	
cGMP {COER)
    
	
March 2010
    	
 
    	
 
    
	
PAI &   cGMP
    	
 
    	
 
    

 

Continually updated with state of the art equipment, the plant utilizes cutting-edge laboratory and manufacturing technologies. Whippany is perfectly suited to handle a wide range of solid, liquid and sterile ointment dosage forms. The facility includes a flexible Kilo Lab for API synthesis, microbiology lab, and labs for testing and analytic method development. A variety of packaging services are also available.

 

	
FACILITY SIZE
    	
 
    	
167,000 SQFT
    
	
REGULATORY APPROVAL
    	
 
    	
U.S. FDA
    
	
 
    	
 
    	
U.S. DEA
    

 

PRODUCTION CAPACITIES

 

	
SOLID DOSAGE
    	
 
    	
3 BILLION UNITS
    
	
LIQUID
    	
 
    	
500,000 LITRES
    
	
SUPPOSITORY
    	
 
    	
5 MILLION UNITS
    
	
BULK POWDER
    	
 
    	
1,500 KG
    
	
OINTMENT
    	
 
    	
200,000 KG
    

 

 

Executive Summary

 

This document outlines the services that Halo Pharmaceutical is proposing to perform for the successful development, manufacture and supply of Hawk (4 strengths), a morphine-based, solid oral, controlled release drug product using Egalet’s proprietary ADPREM (abuse deterrent prolonged release erosion matrix) injection molding-based technology and formulations. Hawk is indicated for moderate to severe pain and intended for the US Market.

 

The Hawk manufacturing process combines **  for the matrix, combined with a continuous injection molding process to form the dosage. The resultant delivery system is coated for cosmetic purposes. The following equipment has been evaluated to be ideal for this product:

 

Development Scale: **

**

 

**

**

**

 

Clinical Scale: **

**

**

**

**

 

Commercial Scale: **

**

**

**

**

 

Pricing for the Technology Transfer, Development, Clinical, and related activities and Commercial unit pricing have been prepared from the technical documents provided with the RFP. Certain assumptions have been made and are identified throughout this proposal document. Halo Pharmaceutical reserves the right to modify the pricing presented if the assumptions are found to be inaccurate or if the technical requirements change.

 

 

Halo Pharmaceutical will promptly communicate with Egalet Limited on any such findings that impact the pricing presented for the work to be performed in advance of carrying out any further work. All such further work at increased prices is subject to the prior written consent of Egalet Limited.

 

Should the project requirements change during execution of the agreed upon scope of work, Halo Pharmaceutical will provide Egalet Limited with a brief written explanation and approval costing for any such activity in a “Change of Scope” document.

 

Project Timeline

 

	
Milestone
    	
 
    	
Estimated Timing
    
	
Proposal Acceptance:
    	
 
    	
October — December 2012
    
	
Project Kick-off/Quota Request: (Technology   Transfer Start)
    	
 
    	
No later than 1 week after proposal   acceptance
    
	
GMP Audit:
    	
 
    	
December 11-12, 2012
    
	
Site Visit: {Manufacturing Observation at   Egalet)
    	
 
    	
January 2013
    
	
Clinical Materials, Stability Start:
    	
 
    	
Q4 2013
    
	
Clinical Studies:
    	
 
    	
H12014
    
	
Submit NDA : (50Sb2)
    	
 
    	
Q3 2014
    
	
NDA Approval:
    	
 
    	
H1 2015
    
	
Validation Batches:
    	
 
    	
Immediately after approval
    

 

 

Part A: Budget Summary

 

Prices quoted are valid for twelve (12) months from the date of this proposal.
 Prices are quoted in US Dollars.

 

	
1.0 
    	
ENVIRONMENTAL HEALTH AND SAFETY
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Environmental Health and Safety Assessment
    	
 
    	
**
    	
 
    	
**
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
2.0 
    	
ANALYTICAL SERVICES
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
2.1 
    	
Cleaning Residuals Assay — Method   Development and Validation
    	
 
    	
 
    	
**
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
2.2 
    	
Evaluation of USP API Release Testing   Methods
    	
 
    	
 
    	
**
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
2.3 
    	
Excipient Specification Generation **   Excipients
    	
 
    	
 
    	
**
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
2.4 
    	
Packaging Material Specification Generation   2 Components
    	
 
    	
 
    	
**
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
2.5 
    	
API Testing, Documentation and Release — Per   Lot
    	
 
    	
 
    	
**
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
2.6 
    	
Excipient Testing, Documentation and Release   ** Excipients
    	
 
    	
 
    	
**
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
2.7 
    	
Packaging Material Testing, Documentation   and Release
    	
 
    	
 
    	
**
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
2.8 
    	
Product Potency and Related Substances Assay   by HPCL — Method Evaluation and Validation [4 Strengths]
    	
 
    	
 
    	
**
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
2.9 
    	
Product Dissolution Assay by HPCL [Profile]   — Method Evaluation and Validation [4 Strengths]
    	
 
    	
 
    	
**
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
2.10 
    	
**
    	
 
    	
 
    	
**
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Analytical Services   Total
    	
 
    	
 
    	
**
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
3.0 
    	
FORCED DEGRADATION 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Preparation, Execution and   Documentation/Report
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Forced Degradation   Total
    	
 
    	
 
    	
**
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
4.0 
    	
MICROBIOLOGY SERVICES  
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Microbiology Services will be contracted out   to a qualified third party testing laboratory. The Services will be handled   as a pass through cost to Egalet Limited
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
5.0 
    	
PD SERVICES — DEVELOPMENT MANUFACTURING
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
5.1 
    	
Development Batch 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Development Batch Manufacturing 
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Development Batch Analytical Testing
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Development Batch Manufacturing Total
    	
 
    	
 
    	
**
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
5.2 
    	
Design of Experiments — Matrix Blend and   Injection Molding
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
DoE Study Design, Analysis and Report [**   Studies] 
    	
  **
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Design of Experiments Matrix Blending   Manufacturing [**kg batch size] 
    	
  **
    	
 
    	
 
    	
 
    
	
 
    	
Design of Experiments Matrix Blend   Analytical Testing 
    	
 
    	
**
    	
 
    	
 
    	
 
    
	
 
    	
DoE Batches — Per Batch 
    	
 
    	
**
    	
 
    	
 
    	
 
    

 

 

	
 
    	
DoE Batches — ** Batch Total
    	
 
    	
**
    	
 
    	
 
    

 

 

	
Design of Experiments — Injection Molding   Manufacturing [** batch view]
    	
 
    	
 
    	
 
    	
 
    
	
Design of Experiments — Injection Molding   Analytical Testing
    	
**
    	
 
    	
 
    	
 
    
	
DoE Batches — Per Batch
    	
**
    	
 
    	
 
    	
 
    
	
DoE Batches — ** Batch Total
    	
 
    	
**
    	
 
    	
 
    
	
Design of Experiments Matrix Blend and Injection   Molding Manufacturing
    	
 
    	
 
    	
**
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
PD Services — Development Manufacturing Total
    	
 
    	
**
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
6.0
    	
PD SERVICES — ENGINEERING/SCALE-UP BATCH   MANUFACTURING
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Documentation
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Batch Record   (Manufacturing) — 4 Strengths
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Batch Record   (Packaging)
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Manufacturing   Report
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Documentation Total
    	
 
    	
 
    	
**
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
6.1
    	
Engineering/Scale-up Batch
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Analytical   Start-up (Cleaning Verification, etc.)
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Manufacturing
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Analytical Support
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Engineering/Scale-up Batch Total
    	
 
    	
 
    	
**
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
6.2
    	
Allrounder Optimization Batch
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Analytical   Start-up (Cleaning Verification, etc.)
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Manufacturing and   Packaging
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Analytical Support
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Allrounder Optimization Batch Total
    	
 
    	
 
    	
**
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
6.3
    	
Verification Batches
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Analytical   Start-up (Cleaning Verification, etc.)
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Manufacturing and   Packaging
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Analytical Support
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Verification Batch — 30mg Strength   Total
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Verification Batch — 60mg Strength   Total
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Verification Batch — 90mg Strength   Total
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Verification Batch — 120mg Strength   Total
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Verification Batch — 4 Batch Total
    	
 
    	
 
    	
**
    	
 
    
	
 
    	
Project Management
    	
 
    	
 
    	
**
    	
 
    
	
 
    	
Engineering Batch   Manufacturing Total
    	
 
    	
**
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
7.0
    	
CLINICAL TRIAL BATCH MANUFACTURING
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Documentation
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Batch Record   (Manufacturing) — 4 Strengths & Placebo
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Batch Record   (Packaging) — 4 Strengths & Placebo)
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Manufacturing   Report
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
QA Review
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Documentation Total
    	
 
    	
 
    	
**
    	
 
    

 

 

	
7.1
    	
Clinical Batch — Placebo
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Analytical   Start-up (Cleaning Verification, etc.)
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Manufacturing and   Packaging
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Analytical Support
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Clinical Batch — Placebo Total
    	
 
    	
 
    	
**
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
7.2
    	
Clinical Batches — 30mg, 60mg, 90mg and 120mg   Strengths
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Analytical Start-up   (Cleaning Verification, etc.)
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Manufacturing and   Packaging
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Analytical Support
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Clinical Batch — 30mg Strength Total
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Clinical Batch — 60mg Strength Total
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Clinical Batch — 90mg Strength Total
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Clinical Batch — 120mg Strength Total
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Clinical Batch — 4 Batch Total
    	
 
    	
 
    	
**
    	
 
    
	
 
    	
Project Management
    	
 
    	
 
    	
**
    	
 
    
	
 
    	
Clinical Batch   Manufacturing Total
    	
 
    	
**
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
8.0
    	
SCALE-UP BATCH MANUFACTURING (OPTIONAL)
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Documentation
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Batch Record   (Manufacturing)
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Documentation Total
    	
 
    	
 
    	
**
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
8.1
    	
Scale-Up Batch
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Analytical   Start-up (Raw Material testing, etc.)
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Manufacturing and   Packaging
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Analytical Support
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Scale-up Batch   Total
    	
 
    	
 
    	
**
    	
 
    
	
 
    	
Project Management
    	
 
    	
**
    	
**
    	
 
    
	
 
    	
Scale-up Batch   Manufacturing Total
    	
 
    	
**
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
9.0
    	
STABILITY — VERIFICATION BATCHES
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Documentation
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Protocol
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Stability Report
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
 
    	
Documentation Total
    	
 
    	
**
    	
 
    
	
 
    	
Stability Program Details
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
No. of Lots tested
    	
4
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
No. of   Presentations
    	
1
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
No. of Pullpoints
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
4 Sample Pullpoint Price
    	
 **
    	
1
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
8 Sample Pullpoint Price
    	
**
    	
3
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
 
    	
Pullpoint Total
    	
 
    	
 
    	
**
    	
 
    
	
 
    	
Stability Program Total
    	
 
    	
**
    

 

 

	
 
    	
 
    	
Pull point Month
    
	
Condition
    	
 
    	
T=1
    	
 
    	
T=2
    	
 
    	
T=3
    	
 
    	
T=6
    	
 
    	
T=9
    	
 
    	
T=12
    	
 
    	
T=18
    	
 
    	
T=24
    	
 
    	
T=36
    
	
40°c / 75% RH
    	
 
    	
x
    	
 
    	
x
    	
 
    	
x
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
30°c / 65% RH
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
x
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
25°c / 60% RH
    	
 
    	
x
    	
 
    	
 
    	
 
    	
x
    	
 
    	
x
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
# of Samples
    	
 
    	
8
    	
 
    	
4
    	
 
    	
8
    	
 
    	
8
    	
 
    	
0
    	
 
    	
0
    	
 
    	
0
    	
 
    	
0
    	
 
    	
0
    

 

	
10.0
    	
STABILITY — CLINICAL BATCHES
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Documentation
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Protocol
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Stability Report
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
 
    	
Documentation Total
    	
 
    	
**
    	
 
    
	
 
    	
Stability Program Details
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
No. of Lots tested   
    	
4
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
No. of   Presentations 
    	
1
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
No. of Pullpoints
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
4 Sample Pullpoint Price
    	
**
    	
3
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
8 Sample Pullpoint Price
    	
**
    	
3
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
12 Sample Pullpoint Price
    	
**
    	
2
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
4 Sample Microbial Testing
    	
**
    	
3
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
 
    	
Pullpoint Total
    	
 
    	
 
    	
**
    	
 
    
	
 
    	
Stability Program Total
    	
 
    	
**
    

 

	
 
    	
 
    	
Pull point Month
    
	
Condition
    	
 
    	
T=1
    	
 
    	
T=2
    	
 
    	
T=3
    	
 
    	
T=6
    	
 
    	
T=9
    	
 
    	
T=12
    	
 
    	
T=18
    	
 
    	
T=24
    	
 
    	
T=36
    
	
40°c / 75% RH
    	
 
    	
x
    	
 
    	
 
    	
 
    	
x
    	
 
    	
x
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
30°c / 65% RH
    	
 
    	
x
    	
 
    	
 
    	
 
    	
x
    	
 
    	
x
    	
 
    	
x
    	
 
    	
x
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
25°c / 60% RH
    	
 
    	
 
    	
 
    	
 
    	
 
    	
x
    	
 
    	
x
    	
 
    	
x
    	
 
    	
x
    	
 
    	
x
    	
 
    	
x
    	
 
    	
x
    
	
Micro
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
m
    	
 
    	
 
    	
 
    	
m
    	
 
    	
m
    
	
# of Samples
    	
 
    	
8
    	
 
    	
0
    	
 
    	
12
    	
 
    	
12
    	
 
    	
8
    	
 
    	
8
    	
 
    	
4
    	
 
    	
4
    	
 
    	
4
    

 

 

	
11.0
    	
STABILITY — VALIDATION BATCHES
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Documentation
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Protocol
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
Stability Report
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
 
    	
Documentation Total
    	
 
    	
 
    	
**
    	
 
    
	
 
    	
Stability Program Details — First Validation Lot   of Each Strength
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
No. of Lots tested   
    	
4
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
No. of   Presentations 
    	
1
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
No. of Pullpoints
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
4 Sample Pullpoint Price 
    	
** 
    	
3
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
8 Sample Pullpoint Price 
    	
** 
    	
3
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
12 Sample Pullpoint Price 
    	
** 
    	
2
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
4 Sample Microbial Testing 
    	
** 
    	
3
    	
 
    	
**
    	
 
    	
 
    
	
 
    	
 
    	
Pullpoint Total
    	
 
    	
 
    	
**
    	
 
    
	
 
    	
Additional 2 Validation Lots of Each Strength, Pullpoint Total
    	
 
    	
 
    	
**
    	
 
    
	
 
    	
Stability Program Total
    	
 
    	
**
    

 

	
 
    	
 
    	
Pull point Month
    
	
Condition
    	
 
    	
T=1
    	
 
    	
T=2
    	
 
    	
T=3
    	
 
    	
T=6
    	
 
    	
T=9
    	
 
    	
T=12
    	
 
    	
T=18
    	
 
    	
T=24
    	
 
    	
T=36
    
	
40°c / 75% RH
    	
 
    	
x
    	
 
    	
 
    	
 
    	
x
    	
 
    	
x
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
30°c / 65% RH
    	
 
    	
x
    	
 
    	
 
    	
 
    	
x
    	
 
    	
x
    	
 
    	
x
    	
 
    	
x
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
25°c / 60% RH
    	
 
    	
 
    	
 
    	
 
    	
 
    	
x
    	
 
    	
x
    	
 
    	
x
    	
 
    	
x
    	
 
    	
x
    	
 
    	
x
    	
 
    	
x
    
	
Micro
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
m
    	
 
    	
 
    	
 
    	
m
    	
 
    	
m
    
	
# of Samples
    	
 
    	
8
    	
 
    	
0
    	
 
    	
12
    	
 
    	
12
    	
 
    	
8
    	
 
    	
8
    	
 
    	
4
    	
 
    	
4
    	
 
    	
4
    

 

	
12.0
    	
BLEND   HOLD STUDY
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Preparation, Execution and Documentation/Report
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Blend   Hold Study Total
    	
 
    	
**
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
13.0   
    	
VALUDATION   PREMIUM
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Manufacturing for Validation Activities will   be in accordance with the proposed Commercial Pricing.  Pricing for Validation Premium is provided   for budgeting purposes only
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Master   Validation Plan
    	
 
    	
**
    
	
 
    	
Packaging   Validation (per container closure system)
    	
 
    	
**
    
	
 
    	
Process   Validation Premium for 3 Validation Batches Per Strength
    	
**
    	
 
    
	
 
    	
4   Strength Total
    	
 
    	
**
    
	
 
    	
Cleaning   Validation
    	
 
    	
**
    
	
 
    	
PROJECT TOTAL
    	
 
    	
 
    
	
 
    	
Total   Estimated Budget for Hawk
    	
 
    	
** 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Project   Initiation Fee
    	
 
    	
$625,000
    
							

 

 

Part B:  Project Scope

 

This section of the proposal outlines the Technology Transfer, Development, and Clinical manufacturing that Halo Pharmaceutical is proposing to perform for Egalet Limited relating to Project Hawk.

 

Costs for supplies such as analytical columns, reference standards, etc. are not included in the pricing for the services. Halo Pharmaceutical will provide an estimation of the expected casts for these items for approval by Egalet Limited prior to purchase.

 

Cost for materials such as packaging components, Active Pharmaceutical Ingredients (API), excipients and other common processing aids are included in the pricing for the services. Egalet Limited specified grades of these materials will be procured by Halo Pharmaceutical from Egalet Limited specified suppliers or suppliers suggested by Halo Pharmaceutical and approved by Egalet Limited. Also included in the pricing for the services:

 

Petitioning with the U.S. DEA for API procurement quota

Material procurement

Direct Labor

In-process and Finished Product Testing

General factory overhead

 

All exclusive excipients will be purchased on behalf of Egalet Limited; any excess quantities upon completion of the project will be billed to Egalet Limited at Halo Pharmaceutical’s cost and disposed of or shipped to Egalet Limited.

 

1.0 Environmental Health and Safety (EH&S)

 

Active Pharmaceutical Ingredient:

 

Morphine Sulfate

Indication: Pain

 

The preliminary EHS categorization of this API is a Safebridge Risk Level 2.

 

Prior to the commencement of analytical method development, formulation development and manufacturing activities, a thorough review by Halo Pharmaceutical (and/or Industrial Hygiene service provider SafeBridge®) of the Environmental, Health and Safety (EH&S) requirements for the API will be completed in order to determine if the material can be handled safely at Halo Pharmaceutical’s Whippany site. Halo Pharmaceutical assumes that the EH&S review will determine that the API can be handled safely. If it is determined that Halo Pharmaceutical cannot handle the API safely, the entire Project Initiation Fee will be refunded.

 

2.0 Analytical Services

 

Halo Pharmaceutical will perform raw material testing and Analytical method transfers for the drug product as required to support this project. Halo Pharmaceutical will transfer existing Egalet analytical documentation into the Halo Pharmaceutical format.

 

2.1  Cleaning Residuals Assay — Method Development and Validation

2.2  Evaluation of USP API Release Testing Methods(1)

Morphine Sulfate USP

2.3 Excipient Specification Generation — ** Excipients

**

**

**

 

 

**

**

**

 

2.4  Packaging Material Specification Generation — 2 Components

**

**

2.5  API Testing, Documentation and Release — Per Lot(1)

2.6  Excipient Testing, Documentation and Release — * Excipients(2), (3)

2.7  Packaging Material Testing, Documentation and Release

2.8  Product Potency and Related Substances Assay by HPLC — Method Evaluation and Validation (4 Strengths)

2.9  Product Dissolution Assay by HPLC (Profile) — Method Evaluation and Validation (4 Strengths)

2.10 Product BHT Assay by HPLC — Method Evaluation and Validation (4 Strengths)

 

(1)  Analytical testing such as **  is not included in the pricing and wilt be contracted to an approved third-party testing facility. Costs for these activities (if applicable) will be handled as a pass-through fee.

(2)  Excipient Testing and Release Testing fee is applied on a per lot basis, per excipient.

(3)  An additional fee will apply to excipients requiring Residual Solvents Assay by GC. Halo Pharmaceutical will provide analysis using USP or third-party method.

 

It is assumed that the provided analytical methods are suitable for use for all strengths.

 

Protocols (as applicable) will be generated by Halo Pharmaceutical and provided to Egalet Limited for approval prior to execution. Data Summaries and Reports (as applicable) will be provided to Egalet Limited at the completion of each analytical activity.

 

3.0 Forced Degradation

 

Drug product samples will be subjected to forced degradation conditions according to ICH guidelines. The following typical forced degradation conditions **  **  will be applied to achieve approximately **% to **% degradation. A protocol and report will be generated to support the study.

 

4.0 Microbiology Services

 

An approved third-party laboratory **  will perform validation of microbial recovery from pharmacopeial articles following USP <1227> guideline and USP Harmonized methods (USP<61> and <62>) on the Product. A harmonized specification based on USP<1111> will be followed to meet USP/EP/JP acceptance criteria for pharmaceutical preparations and substances for pharmaceutical use. The validated methods will cover USP, EP and JP compendia for Microbiological Examination of Non-Sterile Products. The fee for this service will be handled as a pass through cost and billed to Egalet Limited at actual cost. Halo Pharmaceutical will provide an estimation of the cost for microbiology services for approval by Egalet Limited prior to the execution of this work.

 

5.0 PD Services — Development Manufacturing

 

5.1 Development Batch

 

One (1) small scale non-GMP development batch of the matrix blend will be manufactured to evaluate the **  **  utilizing Halo Pharmaceutical manufacturing equipment. **  of matrix blend will be manufactured and tested for manufacturability and analytical performance. This development batch will not be film coated or injection molded.

 

 

Testing will include: (matrix)

Physical Testing for Powder Properties (bulk/tapped density, flowability, particle size distribution)

Potency (Assay by HPLC)

Physical Testing for granule properties (appearance, moisture)

 

5.2 Design of Experiments —Matrix Blend and Injection Molding

 

Halo Pharmaceutical proposes the execution of two Design of Experiment (DoE) studies to monitor and optimize design variables and their affect on selected response variables for **  and injection molding technology.

 

Through careful consideration and collaboration between Halo Pharmaceutical and Egalet Limited, a specific design space will be decided upon during the protocol planning. For the purpose of this proposal, pricing for ** batches for each technology is provided. Analytical testing for the matrix blend study considers Potency Assay, Dissolution Assay and Physical testing. Manufacturing batch size for the matrix blend study will be –**  **   Analytical testing for the injection molding study considers Physical testing and Dissolution Assay. Manufacturing batch size for the injection molding study will be –** **  .

 

Statistical analysis of the data from the DoE’s will be performed by a Halo Pharma approved third-party agency subject to pre-approval of the specific agency by Egalet. The fee for this service will be handled as a pass through cost and billed to Egalet Limited at actual cost. An estimation of the cost for the DoE Study Design, Analysis and Report has been provided for budgeting purposes.

 

Based on results from the matrix blend study, Halo Pharmaceutical will determine what the appropriate material charge (kg) should be for the **    batches in Sections 6 and 7. **   is the charge that has been estimated in this proposal to ensure that (a) more than **  tablets are generated per batch and (b) the granulator is operating in a scalable, efficient, and representative manner. The matrix blend study will determine whether the batch charge should be higher than or can be lower than **  or should remain at **  If the batch charge is higher or lower than **   , Halo Pharmaceutical’s proposal pricing will be adjusted accordingly.

 

6.0 PD Services — Engineering/Scale-up Batch Manufacturing

 

**   process for the manufacture of Hawk will be transferred to Halo Pharmaceutical’s Whippany site where the process development and scale up will be performed.

 

Halo Pharmaceutical will generate Documentation required for the manufacturing and packaging of **   . Documentation for the Engineering batch will not undergo QA review. Data generated from the Engineering Manufacturing activities will be analyzed and included in a Manufacturing Report.

 

Manufacturing Batch Record

Packaging Batch Record

Manufacturing Report

 

6.1 Engineering/Scale-up Batch

 

Halo Pharmaceutical proposes the manufacture of 1 engineering batch of Hawk matrix blend, **  Strength. This engineering batch will be used to confirm critical process parameters. The activities will include:

 

**

API and Excipients fully tested and released

Batches will be bulk packaged in doubled PE bags, bubble packed fiber drums

 

 

GMP manufacturing conditions

No QA Review

 

In-process testing:

**

Uniformity of API in the matrix blend by HPLC

**

**

 

Finished Product testing: (Blend)

**

Assay HPLC

**

**

 

6.2 **             Optimization Batch

 

Halo Pharmaceutical proposes the manufacture of 1 Optimization batch of Hawk, **   Strength. The activities will include:

 

**

API and Excipients fully tested and released

Injection molded using the **

**

**

Tablet printing

Batch will be partially packaged in HDPE bottles, 100ct

GMP manufacturing conditions

No QA Review

 

In-process testing:

**

**

**

**

**

**

 

Finished Product testing:

**

**

Assay by HPLC

**

**

**

**

 

6.3 Verification Batches

 

Halo Pharmaceutical proposes the manufacture of 4 Verification batches of Hawk (one batch of each strength). The activities will include:

 

**

 

 

API and Excipients fully tested and released

Injection molded using the **

**

**

Tablet printing

Batches will be packaged HDPE bottles, 100ct

GMP manufacturing conditions

No QA Review

 

In-process testing: (per strength)

**

**

**

**

**

**

 

Finished Product testing: (per strength)

**

**

Assay/related substances by HPLC

**

**

**

**

 

7.0 Clinical Trial Material Batch Manufacturing

 

Halo Pharmaceutical will generate Documentation required for the manufacturing and packaging of Hawk. Documentation for the Clinical batch will undergo QA review. A Manufacturing Report will be generated summarizing the results from the Clinical Trial Material Batch manufacturing.

 

Manufacturing Batch Record

Packaging Batch Record

Manufacturing Report

Halo Pharmaceutical proposes the use of the following process train equipment:

 

**

**

**

 

7.1 Clinical Batch - Placebo

 

Halo Pharmaceutical proposes the manufacture of 1 Placebo Clinical batch of Hawk. The activities will include:

 

**   batch, blend manufactured in the **  Excipients fully tested and released

**

Tablet printing

Batch will be packaged HDPE bottles, 100ct

GMP manufacturing conditions

QA Review

 

 

In-process testing:

**

**

**

**

**

 

Finished Product testing:

**

**

Absence of Active Assay by HPLC

**

**

 

A Product Specifications Document and Certificate of Analysis will be provided with each production lot of ** Placebo Tablets.

 

7.2 Clinical Batches — 30mg, 60mg, 90mg and 120mg strengths

 

Halo Pharmaceutical proposes the manufacture of 1 Clinical batch of each strength of Hawk. The activities will include:

 

**  batch size per strength, blend manufactured in the **

API and Excipients fully tested and released

**

Tablet printing

Batches will be packaged HDPE bottles, 100ct

GMP manufacturing conditions

QA Review

 

In-process testing: (per strength)

**

Uniformity of API in the matrix blend by HPLC

**

**

**

**

 

Finished Product testing: (per strength)

**

**

Assay/related substances by HPLC

**

**

**

Assay by HPLC

 

A Product Specifications Document and Certificate of Analysis will be provided with each production lot of Hawk Tablets. Halo Pharmaceutical will be responsible for product release for product used in clinical trials per provisions in the to-be-completed Quality Agreement between Egalet and Halo Pharmaceutical.

 

 

8.0 Scale-Up Batch Manufacturing (Optional)

 

Note: Section 8 is included as an option. Based on the experience gained from the **  clinical batches, this **  engineering batch may prove unnecessary.

 

Halo Pharmaceutical will generate Documentation required for the manufacturing and packaging of Hawk, 30mg strength. Documentation for the Scale-Up batch will not undergo QA review.

 

Manufacturing Batch Record

Packaging Batch Record

 

Halo Pharmaceutical proposes the use of the following process train equipment:

 

**

**

**

 

8.1 Scale-Up Batch

 

Halo Pharmaceutical proposes the manufacture of 1 Scale-up batch of Hawk, 30mg strength. This batch will be manufactured to confirm the scale-up to the **  (proposed commercial scale equipment). The activities will include:

 

**  matrix blend batch size

API and Excipients fully tested and released

**

Tablet printing

Batches will be packaged HDPE bottles, 100ct

GMP manufacturing conditions

QA Review

 

In-process testing:

**

**

**

**

**

**

 

Finished Product testing:

**

**

Assay by HPLC

**

**

**

**

 

9.0 Stability — Verification Batches

 

Halo Pharmaceutical will prepare a protocol and conduct a Stability study to monitor the quality, purity, potency and physical attributes of Hawk, 30mg, 60mg 90mg and 120mg strengths in the designated packaging configuration.  The study will consist of the pull-points:

 

 

1, 2, and 3 months, 40°C ± 2°C / 75% RH ± 5% RH

6 months, 30°C ± 2°C / 65% RH ± 5% RH

1, 3, and 6 months, 25°C ± 2°C / 60% RH ± 5% RH

 

Testing:

Potency and Related Substances Assay by HPLC

BHT Assay by HPLC

Dissolution Profile (n=6)

Physical Testing (appearance, moisture or LOD)

 

A stability report will be generated.

 

10.0 Stability — Clinical Batches

 

Halo Pharmaceutical will prepare a protocol and conduct a Stability study to monitor the quality, purity, potency and physical attributes of Hawk, 30mg, 60mg, 90mg and 120mg strengths in the designated packaging configuration.  The study will follow ICH conditions and will consist of the pull-points:

 

1, 3, and 6 months, 40°C ± 2°C / 75% RH ± 5% RH

1, 3, 6, 9 and 12 months, 30°C ± 2°C / 65% RH ± 5% RH

3, 6, 9, 12, 18, 24 and 36 months, 25°C ± 2°C / 60% RH ± 5% RH

 

Testing:

Potency and Related Substances Assay by HPLC

**

Dissolution Profile (** )

Physical Testing (**   )

Microbiology testing at times T=0, 12, 24, and 36 months

 

A stability report will be generated.

 

Halo Pharmaceutical will pull a complete back up set of stability samples sufficient to perform the full stability testing protocol out to ** months.  This back up set of samples will be stored in the appropriate stability chambers at Halo Pharmaceutical’s Montreal facility.

 

11.0 Stability — Validation Batches

 

Halo Pharmaceutical will prepare a protocol and conduct a Stability study to monitor the quality, purity, potency and physical attributes of 3 Validation Lots of Hawk, 30mg, 60mg, 90mg and 120mg strengths in the designated packaging configuration.  Due to the duration of the manufacturing process for each Validation Lot (Campaign of 4 strengths), it is assumed that the stability study will have staggered start/T=0 dates.  The study will follow ICH conditions and will consist of the pull-points:

 

1, 3, and 6 months, 40°C ± 2°C / 75% RH ± 5% RH

1, 3, 6, 9 and 12 months, 30°C ± 2°C / 65% RH ± 5% RH

3, 6, 9, 12, 18, 24 and 36 months, 25°C ± 2°C / 60% RH ± 5% RH

 

Testing:

Potency and Related Substances Assay by HPLC

**

Dissolution Profile (** )

Physical Testing (appearance, moisture or LOD)

 

 

Microbiology testing at times T=0, 12, 24, and 36 months

 

A stability report will be generated.

 

12.0 Blend Hold Stability Study

 

Halo Pharmaceutical will prepare a protocol and conduct a Stability study to monitor the quality, purity, potency and physical attributes of Hawk matrix blends stored in double polyethylene bagged, fiberboard drums.  The study duration will be 60 days, with sampling and testing at 30 and 60 days.

 

Testing:

Potency and Related Substances Assay by HPLC

Physical Testing (**   )

 

A Blend Hold stability report will be generated.

 

13.0 Validation Premium

 

Validation Activities (Master Validation Plan, Process Validation, Packaging Validation, etc) will be performed on 3 cGMP batches of each strength of Hawk.  Pricing for the manufacturing of the 3 batches for each strength will be in accordance with the proposed Commercial Pricing.  The breadth and depth of the Validation program will be decided through collaboration between Egalet Limited and Halo Pharmaceutical.  Estimated pricing for Validation Premium is provided for budgeting purposes.

 

Project Support

 

Halo Pharmaceutical, as evidenced by the table on page 5, is available to start and complete this project according to Egalet Limited’s timelines as indicated in the RFP.  Halo Pharmaceutical will provide project management support to monitor the progress of the project against established timelines and will provide Egalet Limited with frequent updates.  The project manager will coordinate regular biweekly teleconference meetings and quarterly face-to-face meetings.  The fee for project support is incorporated in the breakdown cost for each activity in the Budget Summary.

 

Part C: Capital Requirements and Commercial Pricing

Capital Requirements

 

The following table details anticipated capital expenditures required to support the project.

 

	
Equipment / Change Parts
    	
 
    	
Price Estimate
   (USD)
    	
 
    	
Lead Time
    	
 
    	
CAPEX
   Responsibility
    	
 
    
	
Booster pump and   controls for chilled water
    	
 
    	
**
    	
 
    	
3 months
    	
 
    	
Egalet
    	
 
    
	
Room and   Utility modifications
    	
 
    	
**
    	
 
    	
8 months
    	
 
    	
Egalet
    	
 
    
	
**
    	
 
    	
**
    	
 
    	
6 months
    	
 
    	
Egalet
    	
 
    
	
Hawk Injection   Molding Tooling
    	
 
    	
**
    	
 
    	
4 months
    	
 
    	
Egalet
    	
 
    
	
**  IQ/OQ
    	
 
    	
**
    	
 
    	
 
    	
 
    	
Egalet
    	
 
    
	
**  Maintenance   Agreement
    	
 
    	
**
    	
 
    	
 
    	
 
    	
Egalet
    	
 
    
	
Injection Molding   Tooling Crane
    	
 
    	
**
    	
 
    	
 
    	
 
    	
Egalet
    	
 
    
	
Tablet Printer
    	
 
    	
**
    	
 
    	
3 months
    	
 
    	
Halo
    	
 
    
	
Humidity Controls   (<**  RH), **  CFM
    	
 
    	
**
    	
 
    	
9 months
    	
 
    	
Egalet
    	
 
    

 

Total Halo funded CAPEX: ~$**  / Total Egalet funded CAPEX: ~$**

 

 

Halo Pharmaceutical is prepared to participate in capital expenditures, depending on the terms of the supply agreement and commercial pricing negotiated between the parties.

 

Timelines to install the identified CAPEX are consistent with the launch timelines for this product.

 

Phasing of CAPEX will be dependent on the commercial approval and volume ramp up foreseen by Egalet Limited.

 

Product dedicated change parts and production/laboratory equipment listed in this section of this proposal are the responsibility of Egalet Limited.

 

Room Modification and Equipment Installation

 

Halo Pharmaceutical anticipates the following activities to accommodate the installation and use of the Egalet ADPREM tablet manufacturing equipment: (costs outlined in the above table)

 

Room modifications to accept installation of the equipment

 

Floor, ceiling and wall finishes

Wall construction

Ductwork modifications

Sprinkler modifications

HVAC modifications to integrate with new desiccant dehumidifier to enable <**% rH operation

Guards during all construction

Security system(s)

 

Appropriate utilities to support operation of the granulation and molding equipment

 

Footings and/or floor reinforcement

Electrical

Plumbing (compressed air, cooling water, etc)

 

Equipment installation

 

Equipment 1Q/OQ

Equipment maintenance agreement

 

Many of the activities related to the room modifications and equipment installation will occur concurrently.  The total project lead time, excluding stability studies for clinical and validation batches, validation batch manufacturing, and Step 8.0 Scale-Up Batch Manufacturing, is anticipated to be approximately 11 months.

 

Commercial Pricing

 

Hawk Tablets will be packaged using King Slat Fillers equipped with an Omega Bottle Unscrambler, Enercon Induction Sealer, NJM Labeler and Resina Capper.  Bottles will be manually inserted into cartons with an insert and placed into shippers.

 

Criteria: (2016)

 

	
Product
    	
 
    	
Tablets
   per
   Bottle
    	
 
    	
Annual
   Forecast -
   100ct
   Bottles
    	
 
    	
Matrix

Blend
   Batch
   Size
   (Kg)
    	
 
    	
Campaign
   Run Length x
   Campaigns
   per year
    	
 
    	
Theoretical
   Bottles per

Batch
    	
 
    
	
Hawk 30mg Strength
    	
 
    	
100
    	
 
    	
**
    	
 
    	
**
    	
 
    	
**
    	
 
    	
**
    	
 
    
	
Hawk 60mg Strength
    	
 
    	
100
    	
 
    	
**
    	
 
    	
**
    	
 
    	
**
    	
 
    	
**
    	
 
    
	
Hawk 90mg Strength
    	
 
    	
100
    	
 
    	
**
    	
 
    	
**
    	
 
    	
**
    	
 
    	
**
    	
 
    
	
Hawk 120mg   Strength
    	
 
    	
100
    	
 
    	
**
    	
 
    	
**
    	
 
    	
**
    	
 
    	
**
    	
 
    

 

 

Pricing listed below includes the cost of all raw materials and packaging components, with the inclusion of API.

 

Pricing: (Unit — Bottle, 100ct)

 

	
Product
    	
 
    	
Materials per
   Unit (USD)*
    	
 
    	
Conversion
   Cost per Unit
   (USD)
    	
 
    	
Full Service
   Price per Unit
   (USD)
    	
 
    
	
Hawk 30mg Strength
    	
 
    	
**
    	
 
    	
**
    	
 
    	
**
    	
 
    
	
Hawk 60mg Strength
    	
 
    	
**
    	
 
    	
**
    	
 
    	
**
    	
 
    
	
Hawk 90mg Strength
    	
 
    	
**
    	
 
    	
**
    	
 
    	
**
    	
 
    
	
Hawk 120mg   Strength
    	
 
    	
**
    	
 
    	
**
    	
 
    	
**
    	
 
    

 

Material Pricing:

 

	
Component
    	
 
    	
Estimated Price per KG (USD}
    	
 
    
	
Morphine Sulfate,   USP
    	
 
    	
**
    	
 
    
	
**
    	
 
    	
**
    	
 
    
	
**
    	
 
    	
**
    	
 
    
	
**
    	
 
    	
**
    	
 
    
	
**
    	
 
    	
**
    	
 
    
	
**
    	
 
    	
**
    	
 
    
	
**
    	
 
    	
**
    	
 
    

 

Note: Each dosage will have a different color.  **  is included here as a proxy for **  material pricing.

 

*Includes Halo Pharmaceutical’s materials handling fee in both (a) Price per KG for excipients and (b) total Materials per Unit including API.

 

Commercial Pricing General Assumptions, Terms and Conditions

 

1)                                     Pricing is in US currency.

 

2)                                     Payment Term is net 30 days from date of invoice. Except for the Project Initiation Fee on page 10, invoices for all other project steps (e.g., “6.3 Verification Batches”) including the capex modifications will be issued by Halo Pharmaceutical upon either (a) completion of all work for that project step or (b) termination of that project step after work for that step had been authorized. Halo Pharmaceutical will invoice based on the actual scope of work that was performed; the actual scope of work that was performed for a given project step may be more or less than what has been identified in this proposal (e.g., if only needed 9 DOE blend batches vs. the 15 in the proposal, then Halo Pharmaceutical would only invoice for 9 DOE blend batches).

 

3)                                     In addition to execution by both parties of this Contract, as evidenced by valid signatures of authorized persons on page 2, project step-specific work orders (e.g., “6.3 Verification Batches” or “6.0 PD Services - Engineering/Scale-up Batch Manufacturing”) issued by Egalet will be required

 

 

to undertake work on specific project steps in this proposal. Both Egalet and Halo Pharmaceutical recognize that the scope of work for specific project steps may change as the project progresses. Both parties acknowledge that this is a fee-for-service Contract and that Egalet is not obligated to authorize (as evidenced by issuance of a work order) all of the work quoted in this Contract nor is Egalet obligated to compensate Halo Pharmaceutical for quoted work that is not authorized.

 

4)                                     In the event that Egalet’s installed injection molding equipment will be idle for an extended period of time (e.g., after clinical trial materials are made and before NDA approval), Egalet and Halo Pharmaceutical will determine whether the injection molding equipment will be stored in place in its manufacturing suite or stored in Halo Pharmaceutical’s warehouse. In either case, Egalet will not be charged storage fees or fees to relocate and re-install said equipment. Halo Pharmaceutical may only use Egalet’s injection molding equipment for projects and products that are specifically authorized by Egalet; Halo Pharmaceutical may not use this injection molding equipment for projects or products sponsored by other companies or Halo Pharmaceutical itself without Egalet’s express written permission, which Egalet is not required to give.

 

5)                                     Pricing is FOB - Whippany, NJ

 

6)                                     Post-commercial stability costs are not included in this proposal.

 

7)                                     QC Testing and Release for API and materials is included in the commercial pricing.

 

8)                                     Egalet Limited will be responsible for all artwork related costs associated with printed components.

 

9)                                     Commercial pricing is subject to review and approval of component and product specifications, tech transfer reports and product performance.

 

10)                              Manufacturing yield of **  assumed for the purpose of this quotation.

 

11)                              Packaging yield of **  assumed for the purpose of this quotation.

 

12)                              Additional terms and conditions will be specified and agreed upon in a Manufacturing and Supply Agreement.

 

13)                              A Quality Agreement will be executed before any Hawk product is produced that would be put in humans. Prior to executing a Quality Agreement, Halo will perform Technology Transfer, Development, Clinical, and other related activities governed by this Contract in compliance with both the relevant regulations and guidances governing current Good Manufacturing Practices

 

 

(“cGMPs”) of the European Union and the United States and the relevant United States regulations regarding controlled substances. In the event of conflict between cGMP regulations and guidances of the United States and the European Union, the cGMP regulations and guidances of the United States shall govern. Additionally, in the absence of an executed Quality Agreement, Halo shall allow persons designated by Egalet to audit Halo facilities and documentation related to the Services performed for Egalet. This shall include auditing facilities and documentation associated with the development, manufacture, packaging, storage, and testing of Hawk product, raw materials, and packaging components. Halo shall provide Egalet with access to its representatives involved in the development, manufacture, packaging, storage, and testing of Hawk product, raw materials, and packaging components.

 

14)                              This proposal is valid for 60 days from the date of issuance.

 

 

Part D: Standard Terms and Conditions for Pharmaceutical Development Services

 

(Should proposal be accepted a Master Services Agreement would be developed with language similar to that below)

 

1.  Services:

 

(a)              Halo agrees to perform the pharmaceutical development services described in the Protect Scope (“Services”)

 

(b)              Parties must agree on changes, deletions or additions to the Services in advance of them taking place (“Changes”).

 

(c)               Minor Changes will be confirmed by electronic matt, facsimile or other written document, Significant Changes (such as a request by Client to change the Project Scope) will be confirmed by a Change of Scope Agreement,

 

2.  Payment and Deposit:

 

A.                 Payment

 

(a)              Client will pay Halo for the Services as outlined in each Project Proposal and for any Changes which will be invoiced separately at Halo’s then prevailing hourly rates

 

(b)              Except for the Protect Initiation Fee payment under Section 2B(a) below, each Halo Invoice will be due and payable within 30 days of the date of such invoice.

 

(c)               If any portion of an invoice is disputed, then Client will pay Halo the undisputed amounts and the parties will use good faith efforts to reconcile the disputed amount as soon as practicable. Interest on past due accounts will accrue at a rate of 11.5% per month.

 

(d)              Client acknowledges that the prices as outlined in Part A, the Budget Summary, will remain in effect for 12 months from the effective date of this proposal. Thereafter, Halo reserves the right to increase the price of any remaining services under this Proposal, provided however that such Increase will only occur on an annual basis and will not exceed the percentage change of the **

 

d  , for the corresponding period.

 

B.                 Project Initiation Fee (if Applicable as per the Budget Summary]

 

(a)              Client will deliver to Halo the Protect Initiation Fee (“PIE”) set out in the Budget Summary. The invoice for the PIF will be due and payable within fifteen (15) days of the date thereof and no Services will be commenced until due payment is received by Halo,

 

(b)              The PIF will pay for (€) “**% of Halo’s capex for chilled water systems, room and utility modifications, and humidity controls per Part C and (ii) initial Technology Transfer activities

 

(c)               Halo may, at its option, suspend all Services until such time as any outstanding invoices have been paid in full.

 

3.  Supply of API and Materials:

 

(a)              Unless otherwise specified, Client will, at its expense, supply Halo with sufficient quantities of the API for Halo to perform the Services.

 

(b)              the coats of ail third party strophe’s’ fees and the purchase of project specific items (such as raw materials, excipients, packaging, special equipment, tooling, change parts, laboratory columns and reagents, reference standards including those under the applicable United States Pharmacopoeia, the National Formulary, the British Pharmacopoeia, the European Pharmacopoeia or the Japanese Pharmacopoeia) necessary for Halo to perform the Services will be purchased by Halo and charged to Client at Halo’s cost plus an additional **% as a handling charge except for certain third party suppliers’ fees specified in Part C that will be passed through to Client at Halo’s actual cost without a handling charge.

 

(c)               If Halo is required to buy any marketed product in order to complete the Services, Client acknowledges that the purchases will be made by Halo on behalf of Client and that Halo will assume no responsibility or liability whatsoever with respect to or for the marketed product.

 

(d)             If applicable, Halo and Client will cooperate arid assist each other as may be reasonably necessary to permit the import of the API and other materials into the country where the Services will be performed,

 

4.  Termination:

 

(a)              Either party may terminate this Contract if the other party is in material breach of any part of this Contract and the other party fails to remedy such breach within 30 days of the date of notice of the breach by the non- breaching party,

 

(b)              Halo may terminate the Contract if Client requests to reschedule any part of the Services beyond 120 days.

 

(c)               Upon completion or expiry of the Contract or if Client terminates the Contract for any business reason (other than for material breach by Halo) or if Halo terminates the Contract because of: (i) Client’s failure to cure any default within the 30 day notice period; or (ii) Client rescheduling any part of the Services beyond the 120 days, then Client will pay to Halo;

 

·                       any fees and expenses due to Halo for the Services rendered up to the date of completion, expiry or termination,

 

·                       all reasonable costs incurred by Halo to complete activities associated with the completion, expiry or termination and close of the Services rendered up to the date of completion, expiry or termination including, without limitation disposal fees that may be payable for any materials and supplies owned by Client to be disposed of by Halo; and any additional costs incurred by Halo in connection with the Services that are required to fulfill applicable regulatory and contractual requirements

 

(d)              Client will arrange for the pickup from the Halo site of all materials and supplies owned by Client or purchased by Halo for the Client’s project that the Client has paid for within thirty (30) days after the earlier of the completion, termination or expiration of this Contract. Halo will charge a $**  per pallet per month storage fee for all materials and supplies stored at the Halo site after the thirtieth day following the completion, termination or expiration of the Contract.

 

(e)               If termination, cancellation or postponement by Client occurs within 30 calendar days of the due start date of any manufacturing Services (the “Start Date), for any reason other than for material breath, willful negligence or misrepresentation by Halo, Client agrees to pay to Halo **% of the fees quoted for such manufacturing Services in Schedule A of this Contract, If

 

 

termination, cancellation or postponement by Client occurs within 15 calendar days of the Start Date, for any reason other than for material breath, willful negligence or misrepresentation by Halo, Client agrees to pay to Halo **% of the fees quoted for such manufacturing Services in Schedule A of this Contract, If termination, cancellation or postponement by Client occurs is within 5 calendar days of the Start Date, then other than fur termination by Client as a result of material breach, willful negligence or misrepresentation by Halo, Client agrees to pay **% of the fees quoted for such Services in Schedule A

 

5.  Intellectual Property:

 

(a)              The term “Intellectual Property” includes, without limitation, rights in patents, patent applications, formulae, trade-marks, trade-mark applications, trade-names, trade secrets, inventions, copyright, industrial designs and know-how.

 

(b)              For the term of this Contract, Client hereby grants to Halo, a non-exclusive, paid-up, royalty-free, non-transferable license of Client’s Intellectual Property which Halo must use in order to perform the Services solely for the Client. Halo shall not use Egalet Intellectual Property in the performance of services for other clients of Halo or for Halo-sponsored products.

 

(c)               All Intellectual Property generated or derived by Halo in the course of performing the Services, to the extent it is specific to the development, manufacture, use and sale of Client’s Product that is the subject of the Services, will be the exclusive property of Client-Intellectual Property, including further developments, enhancements, and improvements, developed by Halo in the course of performing the Services that relates to Egalet’s ADPREM technology and formulations will be the exclusive property of Client. Intellectual Property as defined in Part D sections 5(a) and 5(c) shall also include data, results, and associated reports, including batch production records, regarding the development, manufacture, use, and sale of Client’s Product and/or the ADPREM technology and formulations. Halo hereby assigns, by way of present and future assignment, with full title guarantee, to Client, all Intellectual Property generated or derived by Halo under this clause 5(c) and will do all acts necessary to effect title in and to such intellectual property into the name of the Client.

 

(d)              All Intellectual Property generated or derived by Halo while performing the Services which are not specific to, or dependent upon, Client’s Product or the ADPREM technology and formulations and which have application to manufacturing processes or formulation development of drug products or drug delivery systems will be the exclusive property of Halo. Halo hereby grants to Client, a non-exclusive, paid-up, royalty-free, transferable license of the Intellectual Property which Client may use for the manufacture of Client’s Product.

 

6.  Indemnity:

 

A.                 Indemnification by Client

 

Subject to Sections 6B and 6C(c), Client will defend, indemnify and hold Halo, its affiliates and their respective directors, officers, employees and agents (collectively, “Halo Indemnitees”) harmless from and against any and all third-party actions, causes of action, costs (including reasonable legal fees), claims, damages, liabilities and expenses (collectively, “Losses”) relating to or arising from

 

·                       the manufacture (except as may be contemplated by the Services) or distribution of Client’s Product or the use of Client’s Product by patients either as part of or outside of the scope of any clinical trials;

 

·                       the performance of the Services in accordance with the terms of this Contract;

 

·                       any misrepresentation, negligence or willful misconduct by Client or any of its affiliates and their respective directors, officers, employees and agents (collectively, Client Indemnitees”);

 

·                       any breach by Client of Client’s obligations or warranties under this Contract; or

 

·                       any claim of infringement or alleged infringement of any third party’s intellectual property rights in respect of Client’s Product, This indemnity will not apply to the extent that such Losses are

 

·                       determined to have resulted from the negligence or willful misconduct of Halo; or

 

·                       Losses for which Halo is obligated to indemnify Client Indemnitees under Section 6B.

 

B.                 Indemnification by Halo

 

Subject to Sections 6A and 6C(c), Halo will defend, indemnify and hold Client Indemnitees, harmless from and against any and all Losses resulting from, relating to or arising from: (i) the breach by Halo of any of its obligations or warranties under this Contract except to the extent that such Losses are:

 

·                       determined to have resulted from the negligence or willful misconduct of Client; or

 

·                       Losses for which Client is obligated to indemnify the Halo indemnities under Section 6A;(ii) the misrepresentation, negligence or willful misconduct of Halo, its affiliates, directors, officers, employees or agents; and (iii) any claim that the intellectual property of a third party is Infringed or allegedly infringed by Halo’s own products, processes or services.

 

C.                 Limitation of Liability

 

(a)              If Halo fails to materially perform any part of the Services in accordance with the terms of this Contract, then Client’s sole remedy will be to request Halo to:

 

·                       repeat that part of the Service at Halo’s costs provided that Client provides the API; or

 

·                       reimburse Client for the price for that part of the Service, excluding the cost of the API.

 

(b)              Under no circumstances whatsoever will Halo reimburse Client for the cost of the API.

 

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

 

D.                 No Warranty

 

HALO MAKES NO WARRANTY OF ANY KIND, EITHER EXPRESSED OR IMPLIED, BY FACT OR LAW, OTHER THAN THOSE EXPRESSLY SET FORTH IN THIS CONTRACT. HALO MAKES NO WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE OR WARRANTY OF MERCHANTABILITY FOR CLIENT’S PRODUCT

 

7.  Regulatory Filings:

 

(a)              Client will have the sole responsibility for filing of all documents with the applicable regulatory authority (such as the United States Food and Drug Administration (“FDA”), the Health Products and Food branch of Health Canada or the European Medicine Evaluation Agency) (the “Regulatory Authority”) and to take any other actions that

 

 

may be required for the receipt of approval from the Regulatory Authority for the commercial manufacture of Client’s Product.

 

(b)              At least 21 days prior to tiling any documents with the Regulatory Authority that incorporate data generated by Halo, Client will provide Halo with a copy of the documents incorporating such data so as to give Halo the opportunity to verify the accuracy and regulatory validity of the document; as they relate to the Halo generated data

 

(c)               If Halo is selected as the commercial site of manufacture of the Product which is the subject of the Services under this Contract, then at least 21 days prior to filing with the Regulatory Authority any documentation which is or is equivalent to the FDA’s Chemistry and Manufacturing Controls (“CMC”) portion of the New Drug Application or of the Abbreviated New Drug Application, as the case may be, Client will provide Halo with a copy of the CMC portion as well as all sup-porting documents which have been relied upon to prepare the CMC portion. This disclosure will permit Halo to verify that the CMC portion accurately describes the Services that Halo has performed and the manufacturing processes that Halo will perform under this Contract.

 

8.  Storage

 

Excluding retained samples or stability samples, and unless otherwise agreed between the parties, Client will pay the following storage costs to Halo if manufactured Product, clinical trial materials, placebo, development, feasibility, scale-up, registration, validation or any other batches, components, raw materials or supplies (collectively “Materials”) are stored at Halo for more than thirty (30) days after their release for shipment by Halo or anticipated use for the Services as the case may be:

 

(i)                  $**  per pallet per month storage fee for all Materials stored at room temperature

 

(ii)               $**  per pallet per month storage fee for all Materials stored at refrigeration temperature (2 to 8C);

 

(iii)            If Client requests storage at conditions different than those stated above (9i and ii), then this will he discussed and agreed between the parties on a separate basis.

 

Halo reserves the right to refuse to store any Materials, at its sole discretion at anytime. Client will be liable for all risk or loss of damage to the stored Material and will be Client’s responsibility to have appropriate insurance coverage in place for this risk

 

9.  Miscellaneous:

 

A.                 Assignment

 

(a)              Except as provided in subsection (b), neither party may assign or otherwise transfer as rights and obligations under this Contract without the prior written consent of the other party, which consent shall not unreasonably be withheld.

 

(b)              Unless prohibited by law, either party may assign or otherwise transfer (whether by operation of law, change of control, or otherwise) its rights and obligations under this Contract, without the prior written consent of the other party, (A) to an affiliate, provided that the assigning party remains responsible for the performance of this Contract by such affiliate or (B) in connection with a merger of Egalet or Halo, a sale of all or substantially all of the assets or equity of the business entity, division or unit, as applicable, that, in the case of Halo, provide Services or manufactures the Product, or, in the case of Egalet, owns, sponsors, markets, distributes, or sells the Product. Provided, however, that in the case of such an asset or equity aisle such assignee agrees to be bound by the terms of this Contract. Prior to of promptly after any assignment not requiring consent of the other party, the assigning party shall give the other party notice of the assignment.

 

(c)               Any attempted assignment or transfer in violation of this provision shall be null and void. All terms and conditions of this Contract shall be binding on and inure to the benefit of the successors and permitted assigns of the parties.

 

In the context of this Contract, “affiliate’ shall mean, with respect to either party, those entities controlled by, In control of, or under common control of such party

 

B.                 Force Majeure

 

Except for payment obligations, neither party will be responsible for delay or failure in performance resulting from acts beyond the reasonable control and without the fault or negligence of the party, including, but not limited to, strikes or other labor disturbances, lockouts, quarantines, communicable disease outbreaks, riots, wars, acts of terrorism, fires, floods, storms, interruption of or delay In transportation, defective equipment, lack of or inability to obtain fuel, power or components or compliance with any order or regulation of any government entity.

 

C.                 Survival

 

Any termination or expiration of this Contract will not affect any outstanding obligations or payments due hereunder prior to such termination or expiration, nor will it prejudice any other remedies that the parties may have under this Contract. The Confidentiality Agreement; sections 2, 3, and 4 on page 26 of the Contract; and sections 4, 5, 6, 7, and 9E of Part D of the Contract will survive the termination or expiration of this Contract.

 

D.                 Independent Contractors

 

The parties are independent contractors and this Contract will not be construed to create between Halo and Client any other relationship such as, by way of example only, that of employer-employee, principal, agent, joint-venturer, co-partners or any similar relationship.

 

E.                 Confidentiality

 

The Confidentiality Agreement entered into between the parties will apply to all confidential information about the parties and the Services to be conducted under this Contract and the Confidentiality Agreement is deemed to be incorporated herein by reference. If the Confidentiality Agreement expires or terminates prior to the expiration or termination of this Contract, then the terms of the Confidentiality Agreement will nonetheless continue to govern the parties’ obligations of confidentiality for the term of this Contract and for 5 years thereafter.

 

F.                  Other Terms

 

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

 

G.               Insurance

 

Each party will maintain during the term of this Contract general liability and product liability insurance. Either party may request evidence of this insurance.

 

 

H.                Entire Agreement

 

This Contract is the complete agreement between the parties with respect to this subject matter and supersedes all other prior agreements and understandings, whether written or oral. Any modifications, amendment or supplement to this Contract must be in writing and signed by authorized representatives of both parties. in the event of conflict between the terms of Parts A, B, and C with the terms of Part D, then the terms of Parts A, B, and C shall take precedence over the terms of Part D.

 

I.                     Facsimile

 

This Contract may be signed in counterparts and by facsimile.

 

J.                   Choice of Law

 

This Contract is governed by the laws of the State of New Jersey, without regard to any conflicts-of-law principle that directs the application to another jurisdiction’s law.

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