CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. MANUFACTURING AGREEMENT

 

definition, unless said ownership is of a majority of the outstanding securities entitled to vote of such person, organization, or entity.

 

1.3                                “ Allos Indemnitees ” has the meaning set forth in Section 13.1 .

 

1.4                                “ API Improvements ” means inventions, discoveries or improvements related to the API (including API Related Compounds) or API Manufacturing (including analytical methods, manufacturing processes, API formulations and packaging) that Hovione invents, develops or discovers, conceives, reduces to practice, in connection with or arising from its activities under this Agreement (including during the period since the effective date of the Term Sheet) or from its access to the Allos Confidential Information, whether patentable or not and whether alone or jointly with others.

 

1.5                                “ API Related Compound(s) ” means the API and any other compound covered by patents owned or licensed to Allos, including their salts, acids, esters, and non-covalent derivative ( e.g., complex, chelate, or clathrate of such compound).

 

1.6                                “ API ” means the proprietary compound known as RSR-13 (efaproxiral), Chemical Name:  2-[-[[(3,5-Dimethylanilino)carbonyl]methyl]phenoxy]-2-methylpropionic acid] and its sodium salt.

 

1.7                                “ Applicable Laws and Regulations ” means collectively all laws, regulations, ordinances, decrees, judicial and administrative orders, policies and other requirements of each of the Regulatory Authorities applicable to the manufacture, sale, labeling, use, marketing, distribution, import, export, price or reimbursement of the Services or API.  Applicable Laws and Regulations shall include, but are not limited to, the U.S. Federal Food, Drug & Cosmetic Act and regulations administered by the FDA (specifically including, but not limited to 21 C.F.R. Parts 11, 210 and 211) and the following to the extent not in conflict with any laws or regulations that are issued or enforced by the FDA and other Regulatory Authorities as in effect during the provision of and applicable to API Manufacturing and Services:  (a) USP/NF/EP and other applicable compendia standards; (b) guidance documents (including Guidelines, Points to Consider, Inspection Technical Guides, International Conference on Harmonization “Step 4 and 5” documents), and (c) current good manufacturing practices as accepted without object in the pharmaceutical industry for the manufacture of a sterile API.

 

1.8                                “ Benchmark Rate ” means [ * ] Euro per 1.00 U.S. dollar.

 

1.9                                “ Campaign Plan ” has the meaning set forth in Section 4.1 .

 

1.10                         “ CIF ” means “Cost, Insurance and Freight” as provided for under Incoterms 2000 promulgated by the International Chamber of Commerce.

 

1.11                         “CMC” means the Chemistry, Manufacturing and Controls portion of an IND, NDA or Drug Master File.

 

1.12                         “ Commercial Supply Phase ” means all activities and API lots manufactured after the Launch Phase.

 

CONFIDENTIAL

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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1.13                         “Confidential Information” has the meaning set forth in the Nondisclosure Agreement.

 

1.14                         “ Corporate Partner ” means any organization to whom Allos grants the right, whether by license or otherwise, to manufacture and sell the Product.

 

1.15                         “ Delivery Failure ” has the meaning set forth in Section 6.1(e) .

 

1.16                         “ Delivery Forecast ” has the meaning set forth in Section 4.2 .

 

1.17                         “ Drug Master File ” means a confidential submission by one Party describing the Specifications (including composition and methods of manufacture) for a product or activity made or performed by one Party that is made available for confidential review by a Regulatory Authority in connection with its review or approval of a Regulatory Submission for the other Party where disclosure of such information in the Regulatory Submission of that Party is undesired.

 

1.18                         “ Effective Date ” has the meaning assigned to such term in the preamble.

 

1.19                         “ Equivalent Third Party ” means a third party contract manufacturer that:  (a) is registered with the FDA as an Active Pharmaceutical Ingredient manufacturing facility; (b) has had experience in the manufacture of injectable grade Active Pharmaceutical Ingredients; and (c) has successfully completed a pre-approval inspection with the FDA for an injectable grade Active Pharmaceutical Ingredient.

 

1.20                         “ Exchange Rate ” means the three (3) month average exchange rate of the Euro per U.S. dollar, as published in The Wall Street Journal on the last business day of each calendar quarter.

 

1.21                         “ Exclusivity Period ” has the meaning set forth in Section 12.5 .

 

1.22                         “ Facility ” means the specific premises identified in Attachment B under “ 8. Facilities .”

 

1.23                         “ FDA ” means the United States Food and Drug Administration, or any successor thereto.

 

1.24                         “ FD&C Act ” means the United States Food, Drug and Cosmetic Act, as amended from time to time.

 

1.25                         “ Force Majeure ” has the meaning set forth in Section 16.4 .

 

1.26                         “ Forecast ” means a written statement of Allos’s anticipated purchase requirements prepared and delivered to Hovione as provided in Sections 3.1 , 4.1 or 4.2(a) .

 

1.27                         “ Generic Methods ” has the meaning set forth in Section 12.5 .

 

CONFIDENTIAL

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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1.28                         “ Hovione Indemnitees ” has the meaning set forth in Section 13.2 .

 

1.29                         “ Hovione Quality System ” means the procedures and controlled documentation that HOVIONE has in place at its Facility during the Term that are necessary to evidence compliance with FDA current good manufacturing Practices requirements and all ICH guidelines, as well as any other requirements necessary to Manufacture API.

 

1.30                         “ Hovione References ” has the meaning set forth in Section 9.5 .

 

1.31                         “ Hovione Regulatory Documents ” has the meaning set forth in Section 9.5 .

 

1.32                         “ IND ” means an investigational new drug application filed with the FDA, in order to commence human clinical testing of a drug. 

 

1.33                         “ In-Process API ” means partially synthesized API, which includes compounds in the intermediate manufacturing steps subsequent to the first modification of the Raw Materials and before the final modification to the API.

 

1.34                         “ Intellectual Property Rights ” means without limitation all proprietary rights under any and all patent, patent applications, trade secret, copyright, trademark trade dress, and other proprietary rights, in any discoveries, inventions, ideas, improvements, works, compilations and all interests and title in the materials, information, technology, methods, processes, specifications, data, records, results, and documentation.

 

1.35                         “ Launch Phase ” means all activities and API lots manufactured after the Effective Date and prior to the [ * ] of Allos’ receipt of Marketing Approval by the FDA or European Medicines Agency.

 

1.36                         “ Loss ” and “ Losses ” means any and all claims, liabilities, losses, costs, damages and expenses (including, without limitation, reasonable attorneys’ fees and legal and court costs) together with any related interest, fines and penalties.

 

1.37                         “ Lot ” means one (1) discrete quantity of API as that term is defined under 21 CFR §210(b)(10).

 

1.38                         “ Manufacturing ” means any pharmaceutical procedures conducted to produce the API, including processing, packing, labeling, holding, testing, and quality control of the API, the Raw Materials and In-Process API, and actions taken to comply with Applicable Laws and Regulations and this Agreement ( e.g., validation of process, facilities, equipment, methods and operations).

 

1.39                         “ Manufacturing Forecast ” has the meaning set forth in Section 4.1 .

 

1.40                         “ Marketing Approval ” means an approval by the FDA to commence commercial marketing and distribution for the Product, and comparable foreign equivalents, including amendments and supplements to such Marketing Approvals.

 

CONFIDENTIAL

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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1.41                         “ Master Batch Record ” means the then-current procedures to be followed by Hovione with respect to the manufacture of API, and the handling and storage of API, as separately set forth and agreed upon by the parties from time to time during the term of this Agreement.

 

1.42                         “ Material Safety Data Sheet ” or “ MSDS ” means the written description of safety information on the API for use by persons engaged in API Manufacturing.

 

1.43                         “ Methods of Analysis ” means the analytical methods to be used in testing API for compliance with the API Specifications as set forth in the Quality Agreement, as amended from time to time.

 

1.44                         “ NDA ” means a New Drug Application for Marketing Approval filed in the United States.

 

1.45                         “ Nondisclosure Agreement” has the meaning set forth in Section   12.1.

 

1.46                         “ Out of Specification ” or “ OOS ” means failure of the API to meet the Specifications.

 

1.47                         “ Planning Forecast ” has the meaning set forth in Section 4.1 .

 

1.48                         “ Product ” means the human pharmaceutical product containing the API.

 

1.49                         “ Production Fee ” means the fees charged by Hovione in connection with API Manufacturing and Services, including, without limitation, the disposal of Wastes.

 

1.50                         “ Production Materials ” has the meaning set forth in Section 9.3 .

 

1.51                         “ Project Manager” means the individuals identified in Attachment A as the Project Managers for Hovione and Allos.

 

1.52                         “ Purchase Order ” means a written order for Hovione to manufacture and/or deliver and Allos to purchase a specific quantity of API.

 

1.53                         “ Quality Agreement ” means the document mutually agreed upon by the Parties, pursuant to Section 9.2 , as may be amended from time to time, containing the policies, procedures, and standards by which the Parties will coordinate and implement the operational and quality assurance activities needed to efficiently achieve regulatory compliance objectives. 

 

1.54                         “ Quality Control Release Date ” has the meaning set forth in Section 7.3 .

 

1.55                         “ Raw Material ” means the compounds, water, solvents, reagents and other materials and supplies, including disposable manufacturing equipment and labeling and packaging materials used in Manufacturing.

 

CONFIDENTIAL

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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1.56                         “ Record ” means all documents, reports, data, data listings, charts, process control/monitoring commands and data summaries, logs, notes, standard operating procedures, Master Batch Records, lot batch records, analyses, correspondence, notes, memorandum, (including, without limitation, production and quality assurance and quality control documentation) and other items containing information or data related to API Manufacturing and Services, whether in paper or electronic form, including originals and copies, including without limitation all items that would be considered “records” under any Applicable Laws and Regulations.

 

1.57                         “ Regulatory Authority ” means the multinational, federal, regional, state and local government authorities (including public, quasi-public and private bodies contracted, certified or authorized by such governmental bodies) in a country or other jurisdiction with authority to regulate, approve, license, inspect, review or otherwise control or supervise the manufacture, sale, labeling, use, marketing, distribution, import, export, price or reimbursement for the Services or API, including but not limited to the FDA and its counterparts in the European Union and Japan.

 

1.58                         “ Regulatory Submission ” means any document, correspondence, data, article, certifications, physical samples that are, or that are required to be, delivered or made available for inspection or review by any Regulatory Authority in connection with any Service or otherwise in connection with the activities carried out by either Party relating to this Agreement, specifically including but not limited to applications, dossiers or reports supporting the manufacture or use of the Product for investigational or commercial use, including any INDs, NDAs, Drug Master Files, field reports, annual reports, adverse event and corrective action reports, and export approvals, change being effected reports, information packages for meetings with the Regulatory Authorities and any amendments, supplements, corrections, and updates.

 

1.59                         “ Services ” mean, collectively unless context indicates otherwise, all formulation and process development, regulatory, manufacturing, testing and other services provided, and to be provided by Hovione under this Agreement.

 

1.60                         “ Specifications ” mean the characteristics and qualities established by the Parties in writing and with which a API Lot or Service (including reference standards, In-Process API, and Raw Materials) must conform including but not limited to all conditions of and procedures to be used in its Manufacture, ( e.g., Master Batch Records, production, sampling, testing, packaging, storage and shipment standard operating procedures , production environment standards, chemical names, formulas, and other instructions, approved vendors/SKUs/grades, release criteria and associated analytical methods).  Where no Specification has been established by the Parties, the Specifications may be those that that are reasonably established in compliance with Applicable Laws and Regulations and the Quality Agreement.

 

1.61                         “ Technology Transfer Fee ” means the fees to be paid to Hovione in connection with a technology transfer.

 

1.62                         “ Term ” means the period commencing on the Effective Date and ending as provided in this Agreement (unless extended as otherwise provided in this Agreement).

 

CONFIDENTIAL

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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1.63                         “ Term Sheet ” has the meaning assigned to such term in the preamble.

 

1.64                         “ Waste ” means all waste, as defined by Applicable Laws and Regulations and all non-hazardous waste, to the extent arising out of API Manufacturing and Services, including without limitation, rejected or unusable Raw Materials, In-Process API or API, disposable manufacturing equipment and materials (including chromatography matrix, solvents, excess buffers or rinses, filters, gowns and other consumables).

 

2.                                       PROJECT MANAGEMENT

 

2.1                                Project Managers.   Each Party shall designate a representative with authority as to technical matters to serve as the primary contact for the other Party about the API and the Parties’ relationship under this Agreement.  Each Project Manager shall be responsible for obtaining cooperation and input from other individuals within such Project Manager’s organization whose expertise and ability may be required from time to time to maximize the potential for successful collaboration under this Agreement.  The Project Managers shall develop procedures to optimize communication and collaboration between the Parties.  The Project Managers will communicate regularly during the Term at mutually agreeable times, and, when necessary, hold meetings at mutually agreeable places, to review project management and status. The Project Manager shall be a member of the Steering Committee described in Section 2.2 below.

 

2.2                                Steering Committee.   A Steering Committee, consisting of the Project Managers and at least one (1) senior management representative from each Party, shall meet periodically during the Term, but on at least an annual basis.  The Steering Committee shall:  (a) oversee and provide management direction for the achievement of the objectives of this Agreement; (b) review the Services to be performed and API to be provided under this Agreement; (c) review requests by Regulatory Authorities, or a Party, to changes in or additions to the Services to be performed, to the extent not addressed by the Project Managers; (d) provide guidance regarding planned or anticipated events in each Party’s business or operations that might affect the work conducted under the contract changes; (e) review of any materially adverse regulatory matters affecting this Agreement, the Services or API; (f) review and resolve all matters not satisfactorily addressed by the Project Managers; and (g) review production reports periodically prepared by Hovione pursuant to Section 2.3 , and recommend to the Parties corrective actions as necessary.  Hovione shall implement in accordance with this Agreement such changes as may be recommended by the Steering Committee following its review of Hovione’s periodic production reports.

 

2.3                                Monthly Progress & Budget Reports.   Each month, Hovione shall provide Allos with a written production status report describing the following:

 

(a)                                   Activity Progress .  Progress on completion of outstanding obligations ( e.g., production runs, process development, validation, stability data, Regulatory Submissions, and pending corrective actions).  The status report shall indicate Hovione’s progress toward task or delivery milestones relative to planned completion schedules.

 

CONFIDENTIAL

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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(b)                                   Inventories .  Current inventory of API, In-Process API, Raw Materials, safety stock and reference standards. 

 

(c)                                   Computer Access .  Notwithstanding Hovione’s written reporting obligations set forth in subsections (a) and (b) above, Hovione and Allos acknowledge the benefit of and will work towards Allos having on-going, on-line access to a secure part of Hovione’s computer systems that shall enable Allos to obtain the information described above under subsections (a) and/or (b).  If computer access is made available to Allos, Hovione will provide reasonable assistance and training to Allos to ensure that:  (i) on-line access is adequately established and maintained at Allos’s facilities; and (ii) the appropriate Allos personnel are able to access such information.

 

2.4                                Adverse Issues & Corrective Actions .  Hovione shall inform Allos promptly of any events that might materially affect the ability of Hovione to timely and fully perform and/or deliver any Services or API or otherwise affect the established schedule or budgets, including any unexpected adverse final or interim results or data from validation, stability or other studies.  The status report also shall fully describe all Out of Specification (“ OOS ”) and out of trend events, failure investigations, process deviations, batch failures and similar matters, as well as the corrective or other actions to be taken by Hovione.  Hovione shall conduct periodic review of production records, on at least an annual basis, including trend analysis of batch production records and other process data, and prepare a report for submission to the Steering Committee summarizing Hovione’s findings, conclusions and recommendations. 

 

3.                                       LAUNCH PHASE

 

3.1                                Forecasts and Orders.  During the Launch Phase, Allos shall provide Hovione with Forecasts of its expected requirements of API, on a regular basis, but in no event updated less frequently than once every [ * ] months.  Allos may submit Purchase Orders for such quantities of API indicated in such Forecasts no less than [ * ] months prior to the requested delivery date or as may be agreed upon by the Parties.  Within ten (10) days of receipt of a Purchase Order from Allos, Hovione shall notify Allos in writing of Hovione’s acceptance of such Purchase Order.  The minimum campaign size requirement as set forth in Attachment B under “ 3. Minimum API Lot Sizes for Pricing ,” for the Launch Phase Purchase Orders shall apply.

 

3.2                                Order Fulfillment.  Following payment by Allos of a non-refundable pre-payment amount equal to [ * ] of the applicable Purchase Order value, Hovione shall be obligated to deliver the required quantity of API indicated in such Purchase Order within a [ * ] month period thereafter; provided that the amount ordered does not exceed [ * ] .  If the amount of API ordered is greater than [ * ] , then Hovione shall only be obligated to deliver an initial [ * ] within [ * ] months and not less than [ * ] thereafter until the total quantity of the Purchase Order has been fulfilled.  Allos shall be free to cancel all or part of any outstanding Purchase Order prior to Allos’ payment of the [ * ] pre-payment amount by providing written notice to Hovione of such cancellation.  Hovione shall be free to Manufacture and deliver the API from any Facility that has been approved by Allos and validated.  If Allos requests in writing that Hovione use its best efforts to deliver any ordered quantities of API earlier than the agreed [ * ] delivery delay

 

CONFIDENTIAL

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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period, Hovione will be entitled to receive an additional amount equal to [ * ] of the invoice value of such quantity for each [ * ] that early delivery occurs prior to the original [ * ] lead time delivery date.

 

3.3                                Order Cancellation.   Allos may cancel all or part of any outstanding Purchase Order submitted under Section 3.1 by providing Hovione written notice; provided, however , that if such cancellation occurs after Allos has paid the [ * ] pre-payment amount, Hovione shall be entitled to retain the pre-payment amount. 

 

4.                                       COMMERCIAL PHASE FORECASTS AND PURCHASE ORDERS

 

4.1                                Planning Forecasts.  On or before July 31 of each year during the Commercial Supply Phase, Allos shall submit to Hovione (a) a forecast of Allos’s estimated requirements for API for each of the next [ * ] (each, a “ Planning Forecast ”) and (b)  [ * ] forecast projecting estimated quantities that will be ordered by Allos during the following [ * ] (each, a “ Manufacturing Forecast ”) split over [ * ] calendar quarters.  All estimates set forth in Planning Forecasts and Manufacturing Forecasts shall not constitute a contractual commitment by Allos for such quantities; however , such estimates shall constitute Allos’s anticipated maximum level of demand and utilization of capacity for API production, subject to Section 4.3(c) , and Hovione may use such estimates for facilities, personnel, production and campaign scheduling and budget planning purposes.  The Parties agree that each annual Manufacturing campaign undertaken by Hovione shall be no smaller than that stated in Attachment B under “ 3. Minimum API Lot Sizes for Pricing ,” and that Hovione may produce a campaign of any amount that is supported by Allos’ Planning and Manufacturing Forecasts.  No less than [ * ] prior to the start of the annual campaign, Hovione shall inform Allos of its proposed format, quantity and calendar (“ Campaign Plan ”).  Should Allos require that the campaign be any different than proposed, it shall notify Hovione in writing no less than [ * ] prior to its planned conclusion and Hovione will use good faith efforts to adjust the campaign in accordance with Allos’ request.  If requested by Hovione, Allos shall promptly issue Purchase Orders in amounts that justify the requested changes to the Campaign Plan.

 

4.2                                Delivery Forecast.   [ * ] before each [ * ] during the Commercial Supply Phase, Allos shall provide Hovione with an [ * ] written rolling Forecast of the estimated total amount of API that Allos anticipates it will order from Hovione (“ Delivery Forecast ”).

 

(a)                                   The first [ * ] of each Delivery Forecast shall be firm commitments as to quantities and month for delivery.  The [ * ] of a Delivery Forecast shall be non-binding estimates for informational purposes only.  Allos may revise the estimated portions of Delivery Forecast [ * ] as and when it deems appropriate.  Pricing shall be based on the first [ * ] of the Delivery Forecast submitted for the beginning of each [ * ] , with corrections made upon the delivery of the Purchase Order for the [ * ] , unless annual pricing thresholds are exceeded by earlier Purchase Orders.

 

(b)                                   Allos shall provide to Hovione the first Planning Forecast for the Commercial Supply Phase within [ * ] after the date Allos first submits a Regulatory Submission to apply for Marketing Approval in any country. 

 

CONFIDENTIAL

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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(c)                                   No later than [ * ] after receipt of either a Manufacturing Forecast or Planning Forecast from Allos, Hovione shall inform Allos in writing if it will be able to furnish the estimated quantities of API in the manner and schedule set forth in said Forecasts, and if unable to fulfill the Forecasts the reasons why the Forecasts cannot be fulfilled.

 

4.3                                Purchase Orders.

 

(a)                                   During the Term, Allos shall purchase and Hovione shall supply at least the percentage of Allos’s annual API requirements stated in Attachment B under “ 1. API Purchase/Supply Minimums .”

 

(b)                                   During the Commercial Supply Phase, Allos shall provide Hovione with Purchase Orders on Allos’s forms for [ * ] at least [ * ] before the start of such [ * ] .  Each Purchase Order shall be formally accepted by Hovione within [ * ] of its transmission, and shall not be rejected unless Allos has either not observed the [ * ] of each Delivery Forecast (subject to Section 4.3(c) ) or materially breached the Agreement and despite written notice from Hovione has failed to cure such breach.  Any Purchase Order not rejected by Hovione within [ * ] shall be deemed accepted.  If there is a conflict between the terms contained in this Agreement and the terms contained in any of Allos’s standard form Purchase Orders, any delivery documents or in Hovione’s acceptance documents, the terms of this Agreement shall govern.

 

(c)                                   Each Purchase Order submitted to Hovione by Allos shall state the specific quantities of API requested by Allos, which shall be based on API batch sizes, the expected minimum size of which is provided in Attachment B under “ 3. Minimum API Lot Sizes for Pricing ,” and shall include the expected delivery date(s) for such quantity of API ordered.  Subject to Hovione’s written consent, which shall not be unreasonably withheld, the aggregate Purchase Orders for a [ * ] shall not be less than [ * ] nor more than [ * ] of the amount estimated for that [ * ] in the most recent Delivery Forecast for that quarter; provided , that Hovione shall use its commercially reasonable efforts to timely supply Purchase Orders in excess of [ * ] of the applicable Delivery Forecast.  Deliveries against Purchase Orders shall be made on the dates specified in the Purchase Order.

 

(d)                                   During the Commercial Supply Phase, Allos shall notify Hovione if Allos desires to cancel or reduce the quantities of API ordered in a Purchase Order that has been accepted by Hovione.  If such notification is provided to Hovione less than [ * ] prior to the requested delivery date for API contained in such Purchase Order, Allos shall be solely liable to Hovione for:  (i) losses actually incurred (as evidenced by written documentation) because of the underutilization of the operational portion of the Facility that would have ordinarily been used in API Manufacturing but could not be rescheduled for other uses, and (ii) the costs of Raw Materials purchased by Hovione to Manufacture that Purchase Order (including Waste disposal costs) that could not be returned for credit or refund by Hovione or that could not be used by Hovione for other purposes, including subsequent API Manufacturing.  Such losses for each cancelled kilogram of API shall not exceed the amount set forth in Attachment B for that quantity of API.

 

CONFIDENTIAL

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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(e)                                   If, in Allos’ sole discretion, at the time of placing a Purchase Order, Allos pays to Hovione a non-refundable pre-payment equal to [ * ] of the value of such Purchase Order, then Hovione will be deemed to have expressly waived the Commercial Phase minimum campaign size requirement set forth in Attachment B under “3 . Minimum API Lot Sizes for Pricing ,” in connection with such Purchase Order and Allos shall have the right to cancel all or part of such Purchase Order; provided, however , that in no event shall Hovione be required to produce any campaign smaller than the minimum Launch Phase campaign size requirement set forth in Attachment B under “ 3. Minimum API Lot Sizes for Pricing ,” in connection with any other Purchase Order.  If Allos cancels the quantities of API ordered in a Purchase Order, Hovione will retain the pre-payment amount and the payment obligations contained under Section 4.3(d)  above will not apply.  Notwithstanding the foregoing, Hovione retains the right to cancel the terms of this Section 4.3(e)  upon [ * ] prior written notice to Allos.

 

(f)                                     Hovione, on at least a monthly basis, shall provide Allos with a written schedule of all then-outstanding accepted Purchase Orders for API, including the expected delivery date(s).  If the Parties establish access to Hovione’s computer systems as provided in Section 2.3(c)  above, Allos will also be able to obtain on-line information on the then-outstanding accepted Purchase Orders for API, including the expected delivery date(s).  If such computer access is made available to Allos, Hovione will provide reasonable assistance and training to Allos to ensure that:  (i) on-line access is adequately established and maintained at Allos’s facilities; and (ii) the appropriate Allos personnel are able to access such information.

 

5.                                       FEES, INVOICING & PAYMENT

 

5.1                                Pre-Commercial Projects.   In satisfaction of Allos’s payment obligations under the Term Sheet for Services and API provided by Hovione to Allos prior to the Effective Date, Allos shall pay to Hovione a final amount equal to [ * ] .  Such payment shall be made by Allos within fifteen (15) days of the successful response by the Parties to any and all inquiries from the FDA regarding the CMC. 

 

5.2                                API Supply.   During the Launch Phase and Commercial Supply Phase, Hovione shall be paid for the Services and API Manufacturing in accordance with the price schedule provided in Attachment B under “ 2. API Pricing .”  All amounts specified in Attachment B are for supply of API by Hovione delivered pursuant to Section 6.1(b)  below. 

 

5.3                                Invoicing.                                            Hovione may invoice Allos for all released API Lots upon shipment as per the delivery dates indicated in the applicable Purchase Order.  Any API Lots Manufactured but not shipped because such API Lots are to be maintained as safety stock pursuant to Section 7.3 , shall be invoiced, at Hovione’s option, either on (a) one hundred and eighty (180) days of the Quality Control Release Date or (b) one hundred and eighty (180) days after the delivery date(s) set out in the applicable Purchase Order.

 

5.4                                Payment.   Subject to Section 5.1 , payment of all Purchase Order pre-payments and undisputed invoices shall be delivered by wire transfer in U.S. dollars to the accounts provided in Attachment B  under “ 7. Wire Instructions .”  Payment of undisputed amounts shall be made within thirty (30) days of the invoice date.  Payment shall be considered received once

 

CONFIDENTIAL

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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funds become available to Hovione, or Hovione’s agent, at its bank account in a USA located bank.  Except for the fault of Allos, payment delivery shall be deemed to occur no later than 24-hours after the transmission of the Allos payment.  In the case one invoice is in dispute, its payment shall not affect settlement of other outstanding and due invoices.  Repeated delay in settlement of invoices will entitle Hovione to only ship against confirmed letter of credit terms.

 

5.5                                No Liens.   Hovione shall ensure that all API Lots are delivered free of any liens.  Hovione has the option to arrange invoicing by any company of the Hovione group or by its agents if Allos first provides its written consent to such invoicing arrangement, which consent shall not be unreasonably withheld.  Any person seeking payment from Allos shall be subject to all defenses, claims and rights that Allos might have against Hovione, and Hovione shall be responsible for the actions of such other person.  Hovione shall have no set-off rights or remedy against Allos in the event that Hovione’s agent fails to remit payments received from Allos.

 

5.6                                Change In Circumstance.   The costs and fees provided in this Agreement are based on current experience and do not take into account items that are unforeseeable (such as unexpected issues in the API development, materials changes in the regulations, FDA’s views, toxicity of the API or the process, or legislation ( e.g., health, safety or environment).  The Parties shall negotiate in good faith any changes to the pricing set out in Attachment B should unforeseen dramatic changes occur that cause a substantial hardship to either Party.

 

5.7                                Currency & Taxes.   All shipments of API shall be invoiced in United States dollars and all payments therefore shall be made in United States dollars.  Hovione shall be responsible for all Portuguese and Macau taxes (including, but not limited to, VAT, sales, income, export duties, income, social security and withholding taxes) and workers’ compensation and unemployment insurance with respect to the Manufacturing of API and performance of Services in Portugal or in Macau under this Agreement.  Allos shall be responsible for all taxes applicable in the USA and in the other markets where the API is exported to (including, but not limited to, VAT, sales, income, import duties, income, social security and withholding taxes) with respect to this Agreement.

 

5.8                                Exchange Rate Risk.   To share the exchange rate risk, Allos and Hovione agree that the API prices set forth in Attachment B under “ 2. API Pricing ” shall be subject to adjustment as follows:

 

(a)                                   If the Exchange Rate determined at the end of any calendar quarter and the Benchmark Rate differ by more than [ * ] , the API prices set forth in Attachment B under “2. API Pricing” shall be increased or decreased, as appropriate, by an amount equal to [ * ] of the percentage increase or decrease, as appropriate, in the Exchange Rate relative to the Benchmark Rate, and such API prices, as adjusted, shall apply to all invoices issued by Hovione pursuant to Section 5.3 during the immediately succeeding calendar quarter.

 

(b)                                   If the Exchange Rate determined at the end of any calendar and the Benchmark Rate differ by [ * ] or less, then no adjustment will be made to the API prices set forth in Attachment B under “ 2. API Pricing ”, and such API prices, as set forth in Attachment B

 

CONFIDENTIAL

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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under “2. API Pricing” , shall apply to all invoices issued by Hovione pursuant to Section 5.3 during the immediately succeeding calendar quarter.

 

The following table sets forth representative examples of the impact of various Exchange Rates:

 

Exchange Rate			% Change from Benchmark Rate		API Price Adjustment
$1 =	€ [ * ]		[ * ]		[ * ]
	€ [ * ]		[ * ]		[ * ]
	€ [ * ]		[ * ]		[ * ]
	€ [ * ]		[ * ]		[ * ]
	€ [ * ]		[ * ]		[ * ]
	€ [ * ]		[ * ]		[ * ]
	€ [ * ]		[ * ]		[ * ]
	€ [ * ]		[ * ]		[ * ]
	€ [ * ]		[ * ]		[ * ]
	€ [ * ]		[ * ]		[ * ]
	€ [ * ]		[ * ]		[ * ]
	€ [ * ]		[ * ]		[ * ]
	€ [ * ]		[ * ]		[ * ]

 

6.                                       DELIVERY AND ACCEPTANCE

 

6.1                                Delivery Instructions.

 

(a)                                   Release Confirmation Testing .  Hovione shall be responsible for conducting all testing required as set forth in the Quality Agreement prior to the release of any API for shipment as provided in this Section 6.1 .  Allos has the right to review all release testing data as provided in the Quality Agreement and to approve the release of any API for shipment. 

 

(b)                                   Shipment .  Each API Lot shall be shipped by Hovione CIF to Allos’s designated Product manufacturer; provided, however , that (i) API Lots shall be shipped in the mode of transport provided in the delivery instructions included in each Purchase Order, which will be air for international and truck for inland shipment, and (ii) Hovione shall be responsible for all risks and additional normal transport costs that occur prior to arrival of any shipment at Allos’s designated Product manufacturer.  API shall be shipped in accordance with the shipping conditions and procedures established under the Quality Agreement.  Each API Lot shall be accompanied by certificates of analysis in a form specified in the Quality Agreement.

 

CONFIDENTIAL

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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(c)                                   Acceptance .  Allos, or its Product manufacturer, shall promptly initiate acceptance testing of API Lots upon physical receipt of API Lots.  An API Lot shall be deemed accepted upon successful completion of acceptance testing, subject to revocation upon subsequent determination of any latent defects ( e.g., subsequent testing, inspections or audits, stability data, or failure investigations).  However, if the defect would have been detected by reasonable physical inspection and acceptance testing, and notice of the defect is not received within ninety (90) days of physical receipt (as indicated by the airway bill), Hovione will be under no obligation to replace the Lot.  Allos (and the Product manufacturer) shall be entitled to rely on the accuracy and validity of Hovione certificates of analysis and compliance provided with each delivered API Lot.  Allos shall notify Hovione in writing of any deficiencies of a received API Lot within five (5) business days of Allos’s receipt of final test reports for all testing performed on such Lot by either Allos or its Product manufacturer.

 

(d)                                   Dispute .  At the request of either Party, unresolved disputes regarding the conformance of an API Lot with its applicable Specifications will be referred to a mutually acceptable third party referee laboratory.  The referee laboratory will conduct testing in accordance with the methods established for testing as set forth in the agreed Master Batch Record for the API as reflected in the applicable NDA, CMC or Drug Master File filing, if any.  The costs of the referee testing will be charged to the Party in error.  Hovione, if at fault, shall be solely responsible for the prompt replacement of each non-conforming API Lot, provided that a replacement lot which meets Allos specification requirements is available for prompt shipment. In the event conforming API is not then available, Allos may, at it election, require Hovione to refund the amounts paid or incurred by Allos on account of such rejected API Lot(s).

 

(e)                                   Delivery Failure .  Following a failure by Hovione to deliver the amounts of API specified in a Purchase Order, where such failure results in Allos incurring additional costs to obtain the undelivered amounts of API from an Equivalent Third Party to cover Allos’ requirements (“ Delivery Failure ”), then, in addition to any of Allos’s other rights and remedies, Hovione shall reimburse Allos in an amount equal to the increased cost incurred by Allos in purchasing such non-delivered API from other vendors.  The quantity not delivered, and the amount that Allos would have paid Hovione if it had been delivered shall be included in determining the annual quantity of API purchased by Allos for purposes of pricing, requirements purchasing and other matters set forth in Attachment B .

 

6.2                                Title to In-Process and Finished API.  Title to all In-Process API shall at all times remain in Hovione, and title to all finished API shall remain in Hovione until its delivery to Allos’s designated Product manufacturer pursuant to Section 6.1(b) , subject to Section 7.3 .  Hovione shall keep all In-Process API and finished API stored in accordance with the applicable Specifications, the Quality Agreement and Applicable Laws and Regulations.  Hovione shall bear the risk of loss, contamination or damage to the API until it is delivered to Allos pursuant to Section 6.1(b) .

 

7.                                       SUPPLY ASSURANCE

 

7.1                                Production Site & Commercial Capacity Assurance.   All Manufacturing of API (including all testing, filing and packaging activities) shall occur at the Facility, except as

 

CONFIDENTIAL

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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approved by the Parties in writing.  No work shall be subcontracted except with Allos’s written approval, which shall not be unreasonably withheld; provided, however , that in the event Allos approves of any subcontracted Services, Hovione shall be responsible for the work of the subcontractor as if it was performed by Hovione directly.  Hovione shall maintain the ability to deliver at least thirty thousand kilograms (30,000 kg) per year during the Commercial Supply Phase, and shall provide assurances of secure primary and contingent supplies of Raw Materials.

 

7.2                                Change Control.   Without Allos’s prior written consent, Hovione shall make no change to:  (a) the Specifications of the API (as the Specifications are defined in the applicable Regulatory Submission made by Allos for the Product); (b) any validated analytical methods used to test critical Raw Materials, In-Process API, and the API; (c) the Manufacturing of the API; (d) any Regulatory Submission made by Hovione for the API;