MANUFACTURING SERVICES AGREEMENT

Exhibit 10.24

Execution Draft February  1, 2006

Manufacturing Services Agreement

Between

Patheon Pharmaceuticals Inc.

and

Somaxon Pharmaceuticals, Inc.

February 1, 2006

CERTAIN MATERIAL (INDICATED BY AN ASTERISK) HAS BEEN OMITTED FROM THIS DOCUMENT PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

Table of Contents

MANUFACTURING SERVICES AGREEMENT

           THIS MANUFACTURING SERVICES AGREEMENT (the “ Agreement ” ) made as of the 1st day of February 2006.

B E T W E E N:

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

ARTICLE 1.
INTERPRETATION

1.1 Definitions . The following terms shall, unless the context otherwise requires, have the respective meanings set out below and grammatical variations of such terms shall have corresponding meanings:

“ Act ” means the Federal Food, Drug, and Cosmetic Act , together with any regulation promulgated thereunder, including without limitation cGMPs, in each case as amended from time to time;

“ Active Materials ” means the materials listed on Schedule E hereto;

“ Active Materials Reimbursement Value ” means the value attributable to the Active Materials for certain purposes of this Agreement, as set forth in Schedule E hereto;

“ ANDA ” shall have the meaning ascribed thereto in Section 7.8(d);

“ Adverse Experience ” shall mean any side effect, injury, toxicity, sensitivity reaction, unexpected incidence, untoward medical occurrence or other adverse event or experience associated with the use of the Products, including, but not limited to, a “serious adverse event” within the meaning of 21 C.F.R. § 314.80(a), as amended from time to time;

“ Affiliate ” means:

“ Agreement ” shall have the meaning ascribed thereto in the preamble;

“ Applicable Laws ” means all Laws to the extent applicable to the subject matter of, or the performance by the parties of their respective obligations under, this Agreement, including, but not limited to, (i) with respect to Patheon, the Act and any other Laws of all jurisdictions where the Products are manufactured, and (ii) with respect to Client, the Laws of all jurisdictions where the Products are manufactured, distributed and marketed;

“ Annual Report” means the annual report as described in 21 CFR, Section 314.81(b)(2);

“ Annual Product Review Report ” means the annual product review report as described in 21 CFR, Section 211.180(e);

“ Authority ” means any governmental or regulatory authority, department, body or agency or any court, tribunal, bureau, commission or other similar body, whether federal, state, provincial, county or municipal, including, but not limited to, the FDA;

“ Broader Intellectual Property Rights ” shall have the meaning ascribed thereto in Section 13.1(c);

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

“ cGMPs ” means current good manufacturing practices as described in Parts 210 and 211 of Title 21 of the United States’ Code of Federal Regulations, together with the latest FDA guidance documents pertaining to manufacturing and quality control practice, all as updated, amended and revised from time to time, including, but not limited to, the FDA’s Guidance for Industry, Manufacturing, Processing or Holding Active Pharmaceutical Ingredients ;

“ CMC ” shall have the meaning ascribed thereto in Section 7.8(d);

“ Certificate of Analysis ” means (a) the certificate of analysis confirming the identity, strength, quality and purity of each batch of finished Product to which it pertains;

“ Client ” shall have the meaning ascribed thereto in the preamble;

“ Commencement Date ” means the first day upon which the Manufacturing Services shall commence;

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

“ Confidential Information ” shall have the meaning ascribed thereto in Section 11.1;

“ Deficiency Notice ” shall have the meaning ascribed thereto in Section 6.1(a);

“ Disclosing Party ” shall have the meaning ascribed thereto in Section 11.1;

“ FCA ” means free carrier, as that term is defined in INCOTERMS 2000 published by the International Chamber of Commerce;

“ FDA ” means the United States government agency known as the United States Food and Drug Administration, and any successor thereto;

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

“ Force Majeure Event ” shall have the meaning ascribed thereto in Section 13.8;

“ Indemnitor ” shall have the meaning ascribed thereto in Section 10.5(a);

“ Indemnitee ” shall have the meaning ascribed thereto in Section 10.5(a);

“ Initial Term ” shall have the meaning ascribed thereto in Section 8.1;

“ Intellectual Property ” includes, without limitation, rights in patents, patent applications, formulae, trade-marks, trade-mark applications, trade-names, Inventions, copyright and industrial designs;

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

“ Inventory ” means all inventories of Components and work-in-process produced or held by Patheon or its Affiliates in connection with the manufacture of the Products, including, but not limited to, the Active Materials;

“ Late Shipment ” shall have the meaning ascribed thereto in Section 6.1(d);

“ Laws ” means all laws, statutes, ordinances, regulations, rules, by-laws, judgments, decrees or orders of any Authority, including, but not limited to, the Act and cGMPs;

“ Manufacturing Services ” means the manufacturing, quality control, quality assurance and stability testing, packaging and related activities of Patheon, as contemplated in this Agreement, required to produce Products from Active Materials and Components;

“ Manufacturing Site ” means the facility owned and operated by Patheon that is located at 2110 East Galbraith Road, Cincinnati, Ohio, USA 45237;

“ Minimum Run Quantity ” means the minimum number of batches, bottles or blisters of a Product to be produced during the same cycle of manufacturing as set forth in Schedule C hereto;

“ NDA ” shall have the meaning ascribed thereto in Section 7.8(d);

“ Patheon ” shall have the meaning ascribed thereto in the preamble;

“ Patheon Manufacturing Responsibilities ” means Patheon’s responsibilities and obligations with respect to the provision of Manufacturing Services as set forth in Section 2.2;

“ Process Specifications ” means clauses (a), (b), (c) and (d) of the definition of Specifications;

“ Products ” means the products listed on Schedule A hereto;

“ Product Claims ” shall have the meaning ascribed thereto in Section 10.2;

“ Product Quality Complaint ” is defined as any complaint that questions the purity, identity, potency or quality of the Product, its packaging, or labeling, or any complaint that concerns any incident that causes the Product or its labeling to be mistaken for, or applied to, another article or any bacteriological contamination, or any significant chemical, physical, or other change or deterioration in the distributed Product, or any failure of one or more distributed batches of the Product to meet the Specifications therefor.

“ Quality Agreement ” means the agreement entered into between the parties hereto setting out the quality assurance standards to be applicable to the Manufacturing Services provided by Patheon, attached hereto as Schedule H;

“ Recall ” shall have the meaning ascribed thereto in Section 6.2(a);

“ Receiving Party ” shall have the meaning ascribed thereto in Section 11.1;

“ Short Shipment ” shall have the meaning ascribed thereto in Section 6.1(d);

“ Specifications ” means the file, for each Product, which is approved by the Client in accordance with the procedures listed in Schedule B hereto and which contains documents relating to such Product, including, without limitation:

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

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

“ Territory ” shall mean (i) [***] and (ii) any additional country(ies) and/or commonwealths, territories and possessions which the Client may later designate in its sole discretion in an addendum to this Agreement; provided that the Client shall bear all incremental costs, including, but not limited to labeling costs, associated with the manufacture of the Product for such additional country(ies) and/or commonwealths, territories and possessions in amounts to be agreed by the parties;

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

“ Year ” means a calendar year, except that the first “Year” of this Agreement shall be deemed to be the period from the Commencement Date up to and including December 31, 2007 ;

1.2 Currency. Unless otherwise indicated, all monetary amounts are expressed in this Agreement in the lawful currency of the United States of America.

1.3 Sections and Headings.

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

1.4 Singular Terms.

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

1.5 Schedules.

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

ARTICLE 2.
PATHEON’S MANUFACTURING SERVICES

2.1 Manufacturing Services.

          During the term of this Agreement, Patheon shall manufacture and supply, in accordance with the provisions of this Agreement, all quantities of the Products ordered by the Client consistent with Article 5, and shall provide such Manufacturing Services for the Territory for the fees specified in Schedules C and D. The Client shall purchase at least (i) [***]% of its requirement of Products of between [***] tablets per Year; and (ii) [***]% of its requirement of Products of greater than [***] tablets per Year for sale in the Territory from Patheon pursuant to the terms of this Agreement; provided, however, that such purchase requirements shall be prorated for the first Year to the extent the first Year is less than a complete calendar year. In providing the Manufacturing Services, the Client and Patheon agree that:

          (a) Conversion of Active Materials and Components . Patheon shall convert Active Materials and Components into Products.

          (b) Quality Control and Quality Assurance . Patheon shall perform the quality control and quality assurance testing specified in the Quality Agreement. Each time Patheon ships Products to the Client, it shall provide the Client with a Certificate of Analysis that sets out the test results for each batch of Products, and that certifies that such batch has been evaluated by Patheon’s Quality Control/Quality Assurance department and that the Products comply with the Specifications.

          (c) Components . Patheon shall purchase and test all Components (with the exception of those that are supplied by the Client) at Patheon’s expense and as specified by the Specifications.

          (d) Active Materials . [***] shall purchase the Active Materials in sufficient quantities and at such times as may be necessary to provide the Manufacturing Services by Patheon hereunder. [***] shall bear the risk of loss of the Active Materials while in transit from the supplier and thereafter until incorporated into Products and deemed shipped to the Client

under Section 5.4. Patheon shall test the Active Materials at [***] expense and as specified by the Specifications.

          (e) Stability Testing . Patheon shall conduct stability testing on the Products in accordance with the protocols set out in the Specifications for the separate fees specified in Schedule D. Patheon shall not make any changes to these testing protocols without prior written approval from the Client. In the event that any batch of Products fails stability testing, (i) Patheon shall investigate and confirm that all analytical methods have been properly applied and, if applicable, corrected, and (ii) Patheon and the Client shall jointly determine the proceedings and methods to be undertaken to investigate the causes of such failure, including which party shall bear the cost of such investigation, provided that, subject to Section 10.2, Patheon shall be liable for such costs if the failure is attributable to Patheon’s failure to provide the Manufacturing Services in accordance with the Specifications or cGMPs. Patheon will provide any and all data and results relating to the stability testing upon request by the Client.

          (f) Packaging . Patheon shall package the Products with labels, product inserts and other packaging as set out in the Specifications. The Client shall be responsible for the cost of artwork development. In addition, Patheon shall make arrangements for and implement the imprinting of batch numbers and expiration dates for each Product shipped. Such batch numbers and expiration dates shall be affixed on the Products and on the shipping carton of each Product as outlined in the Specifications and as required by cGMPs. The system used by Patheon for batch numbering and expiration dates is detailed in Schedule F hereto. The Client may, in its sole discretion, make changes to labels, product inserts and other packaging for the Products, which changes shall be submitted by the Client to all applicable Agencies and other third parties responsible for the approval of the Products. The Client shall be responsible for the cost of labeling obsolescence when changes occur. Patheon’s name shall not appear on the label or anywhere else on the Products unless: (i) required by any Laws; or (ii) Patheon and the Client expressly consent to such use of Patheon’s name in writing.

          (g) Storage . Until finished Products are shipped, Patheon shall store all such Products identifiably distinct from any other raw material and finished or filled product stocks and shall comply with all storage requirements set forth in the Specifications and all Applicable Laws, including, but not limited to, cGMPs. Patheon shall assume responsibility for any loss or damage to such finished Product while stored by Patheon.

          (h) Facility . Patheon will manufacture, test, perform quality control and package the Product at the Manufacturing Site. Patheon shall not manufacture, test, perform quality control or package any Product in any other facility without first obtaining the Client’s prior written consent.

          (i) Product Rejection for Process Failure . The parties acknowledge that at the time of execution of this Agreement the Product is in development. Prior to packaging any bulk

finished Product, Patheon shall test each batch of bulk finished Product for compliance with the finished Product Specifications (excluding packaging-related specifications). In the event any nonconforming Product is observed in connection with such testing procedures, Patheon shall promptly suspend the packaging of the applicable batch, notify Client in writing, and consult with Client with respect to available alternatives.

          If Patheon manufactures Products in accordance with the Process Specifications and a batch or portion of a batch does not meet a finished Product Specification, [***] shall [***] for its [***], any [***], and any [***].

2.2 Standard of Performance.

          Patheon shall provide the Manufacturing Services in accordance with the Specifications, cGMPs and Applicable Laws.

ARTICLE 3.
CLIENT’S OBLIGATIONS

3.1 Payment.

          Pursuant to the terms of this Agreement, the Client shall pay Patheon for the provision of the Manufacturing Services according to the fees specified in Schedules C and D hereto (such fees being subject to adjustment in accordance with the terms hereof).

ARTICLE 4.
CONVERSION FEES AND COMPONENT COSTS

4.1 [***] Pricing.

          The fees for the Manufacturing Services (including Component costs) for the [***] are listed in Schedules C and D and the fees for the Manufacturing Services ([***]) are intended by the parties to be [***] for the [***] of this Agreement, subject to the adjustments set forth in Section 4.3.

4.2 Price Adjustments — Subsequent Years’ Pricing.

          The fees for the Manufacturing Services provided pursuant to the terms of this Agreement for any Year beginning after the [***] Year under this Agreement shall be determined in accordance with the following:

          (a) Manufacturing and Component Costs . At the [***] and [***] of this Agreement, Patheon shall be entitled to request an adjustment to the fees (i) for Manufacturing Services in respect of the Products to reflect inflation, which adjustment shall not exceed [***],

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unless the parties otherwise agree in writing; and (ii) for Component costs to [***] any increase or decrease in such costs; provided, however, that in the event any proposed increase in the cost of a Component exceeds [***]% of the cost for that Component upon which the most recent fee quote was based, Patheon shall use its commercially reasonable efforts to locate an equivalent alternative lower cost supplier for the applicable Component. Notwithstanding the foregoing, to the extent costs for Components decrease in the [***] or any [***] of this Agreement, Patheon shall pass on to the Client [***] of any decrease in such costs.

          (b) Pricing Basis . The Client acknowledges that the fee for Manufacturing Services in respect of a Product in any Year is quoted based upon the Minimum Run Quantity per Product specified in Schedule C and is subject to change if the specified Minimum Run Quantity is revised. For greater certainty, if Patheon and the Client agree that the Minimum Run Quantity in respect of a Product shall be increased or decreased and, as a result of such increase or decrease, Patheon’s fees for services relating to such Product decrease or increase on a per unit basis, then if such revised Minimum Run Quantity is not otherwise contemplated in Schedule C, Patheon shall be entitled to a decrease or increase in the fee for Manufacturing Services in respect of such Product by an amount sufficient to pass on to the Client the cost savings or to absorb, but not exceed, such increased costs, as the case may be. When the volume reaches the upper tiers contemplated in Schedule C, the Client will need to select which option Patheon is to follow, i.e. small batch size and two (2) batches per campaign or one (1) large batch per campaign. Batch sizes will not be varied on an order by order basis.

4.3 Mid-Year Pricing

          During any Year of this Agreement, Patheon shall be entitled to request an adjustment to the fees for Component costs (i) to pass on the actual amount of any increase or decrease in such costs; and (ii) if at any time market conditions result in Patheon’s cost of Components being materially greater than normal forecasted increases, then Patheon shall be entitled to request an adjustment to the fee for Manufacturing Services in respect of any affected Product to compensate it for such increased Component costs; provided, however, that in the event any proposed increase in the cost of a Component exceeds [***]% of the cost for that Component upon which the most recent fee quote was based, Patheon shall use its commercially reasonable efforts to locate an equivalent alternative lower cost supplier for the applicable Component. For the purposes of this Section 4.3, changes materially greater than normal forecasted increases shall be considered to have occurred if: (i) the cost of a Component increases by [***]% of the cost for that Component upon which the most recent fee quote was based; or (ii) the aggregate cost for all Components required to manufacture a Product increases by [***]% of the total Component costs for such Product upon which the most recent fee quote was based. To the extent that Component costs have been previously adjusted pursuant to clause (a) of Section 4.2 or this Section 4.3 to reflect an increase in the cost of one or more Components, the adjustments provided for in (i) and (ii) above shall operate based on the costs

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attributed to such Component (or Components) at the time the last of such adjustments were made.

4.4 Fee Adjustment Procedure

          In connection with all fee adjustment requests pursuant to this Article 4, Patheon shall deliver to the Client by not later than November 1 ^st of each Year a revised Schedule C in draft form and such budgetary pricing information or other documentation (including the [***] in the case of any adjustment request pertaining to fees for Manufacturing Services and, the adjusted Component costs) reasonably sufficient to demonstrate that a fee adjustment is justified. Upon delivery of such a request, each of the Client and Patheon shall forthwith use all reasonable efforts to agree on a revised fee for the Manufacturing Services in respect of each affected Product and Schedule C shall be amended accordingly. Such revised fee shall be effective with respect to any Product delivered after the end of the then current Year.

4.5 Adjustments Due to Technical Changes.

          Amendments to the Specifications or the Quality Agreement requested by the Client will only be implemented following a technical and cost review by Patheon and are subject to the Client and Patheon reaching agreement as to revisions, if any, to the fees specified in Schedules C or D necessitated by any such amendment. If the Client accepts a proposed fee change, the proposed change in the Specifications shall be implemented, and the fee change shall become effective only with respect to those orders of Products that are manufactured in accordance with the revised Specifications. In addition, the Client agrees to purchase, at Patheon’s cost therefor (including all costs incurred by Patheon in connection with the purchase and handling of such Inventory), all Inventory utilized under the “old” Specifications and purchased or maintained by Patheon in order to fill Firm Orders or in accordance with Section 5.2, to the extent that such Inventory can no longer be utilized under the revised Specifications. Open purchase orders for Components no longer required under any revised Specifications that were placed by Patheon with suppliers in order to fill Firm Orders or in accordance with Section 5.2 shall be cancelled where possible, and where such orders are not subject to cancellation without penalty, shall be assigned to and satisfied by the Client.

4.6 Multi-Country Packaging Requirements.

          If and when the Client decides that it wishes to have Patheon manufacture the Product for countries in the Territory in addition to [***], then the Client shall inform Patheon of the packaging requirements for each new country and Patheon shall prepare a quotation for consideration by the Client of the additional Component costs, if any, and the change over fees for the Product destined for such new country. The agreed additional packaging requirements and related packaging costs and change over fees shall be set out in a written amendment to this Agreement.

ARTICLE 5.
ORDERS, SHIPMENT, INVOICING, PAYMENT

5.1 Orders and Forecasts.

          (a) Rolling Forecasts . Concurrent with the execution of this Agreement, the Client shall provide Patheon with a written non-binding 12 month forecast of the volume of each Product that the Client then anticipates will be required to be produced and delivered to the Client during each month of the 12 month period thereafter. Such forecast will be updated by the Client monthly on or before the 10 ^th day of the month on a rolling 12 month basis and updated promptly after such time as the Client determines that the volumes contemplated in the most recent of such forecasts has changed by more than [***]%. The most recent 12 month forecast shall supersede all previous forecasts.

          (b) Firm Orders . On or before the 20th day of each calendar month, the Client shall issue firm written orders (“ Firm Orders ”) for the Products to be produced and delivered to the Client on a date not less than 90 days from the first day of the calendar month immediately following the date that the Firm Order is submitted. Such Firm Orders submitted to Patheon shall specify the Client’s purchase order number, quantities by Product type, monthly delivery schedule and any other elements necessary to ensure the timely production and shipment of the Products. The quantities of Products ordered in such Firm Orders shall be firm and binding on the Client and shall not be subject to reduction by the Client. Firm Orders submitted by the Client pursuant to this Section 5.1 must be accepted by Patheon and shall be automatically firm and binding on Patheon if they are not more than [***]% of the amount most recently forecast for the delivery period specified in the Firm Order. Patheon will use commercially reasonable efforts to manufacture Product in excess of [***]% of the amount most recently forecast for the delivery period specified in the Firm Order. Firm Orders not rejected by Patheon within three Business Days of receipt by Patheon shall be deemed to have been accepted by Patheon.

          (c) Three Year Forecast . On or before the 1 ^st day of November of each Year commencing not later than six months prior to the anticipated Commencement Date (as estimated in the Client’s reasonable judgment based on clinical development timelines and regulatory activities), the Client shall provide Patheon with a written non-binding three-year forecast (broken down by quarters for the second and third years of the forecast) of the volume of each Product the Client then anticipates will be required to be produced and delivered to the Client during the three-year period, and updated on or before the 1 ^st day of May in each Year.

5.2 Reliance by Patheon.

     The Client understands and acknowledges that Patheon will rely on the first [***] months contemplated in the most recent forecast provided by the Client pursuant to Section 5.1(a) and the Firm Orders submitted pursuant to Section 5.1(b) in ordering the Components

required to meet such Firm Orders. In addition, the Client understands that to ensure an orderly supply of such Components, it may be desirable for Patheon to purchase such Components in sufficient volumes to meet the production requirements for Products during part or all of the forecasted periods referred to in Section 5.1(a) or to meet the production requirements of any longer period agreed to by Patheon and the Client. Accordingly, the Client authorizes Patheon to purchase Components in order to satisfy the production requirements for Products for the first [***] months contemplated in the most recent forecast provided by the Client pursuant to Section 5.1(a) and agrees that Patheon may make such other purchases of Components to meet production requirements during such longer periods as may be agreed to in writing from time to time by the Client at the request of Patheon or the Client. The Client shall provide Patheon with its written authorization to order Components in respect of any launch quantities of Product requested by the Client, which upon acceptance by Patheon shall constitute a Firm Order. If Components ordered by Patheon pursuant to Firm Orders or in order to satisfy the production requirements for Products for the first [***] months contemplated in the most recent forecast provided by the Client pursuant to Section 5.1(a) are not included in finished Products purchased by the Client within [***] months after the forecasted month in respect of which such purchases have been made (or such longer period as the parties may agree), then Patheon shall promptly notify Client and the Client shall pay to Patheon [***]; provided, however, that (i) the Client shall have the option but not the obligation to take title to and possession of all or any portion of such Components by written notice to Patheon, in which case Patheon shall cooperate with the Client in the surrender, delivery and transfer of such Components as promptly as is commercially reasonable, with any shipping and related expenses to be borne by the Client, or (ii) in the event such Components are incorporated into Products subsequently purchased by the Client or into third party products manufactured by Patheon and subsequently purchased by a third party, the Client will receive credit for any costs of such Components previously paid to Patheon by the Client. Patheon shall not be obligated to provide information regarding any Component which is subject to confidentiality obligations between Patheon and its supplier.

5.3 Minimum Orders.

          The Client may only order Products in multiples of the Minimum Run Quantities set out in Schedule C.

5.4 Shipments.

          Shipments of Products shall be made FCA the Manufacturing Site unless otherwise mutually agreed in writing and Patheon shall make every reasonable effort to ship finished goods within [***] months of the start of manufacture of the Products unless otherwise agreed upon in writing by both parties. Failure to ship within [***] months is not a cause for refusal of Product. Notwithstanding the foregoing, if FDA approves the Products for [***] months of shelf life, the Products must carry at least [***] months of shelf life when shipped.

Risk of loss or of damage to Products shall remain with Patheon until Products are loaded onto the carrier’s vehicle by Patheon for shipment at the shipping point at which time risk of loss or damage shall transfer to the Client. Patheon shall, in accordance with the Client’s instructions and as agent for the Client, (i) arrange for shipping, including preparing and executing a packing list, so that the Product will be delivered to the delivery address on the delivery date set forth in the applicable Firm Order, with such shipping to be paid by the Client and (ii) at the Client’s risk and expense, obtain any export license or other official authorization necessary to export the Products, including all customs formalities. The Client shall arrange for insurance and shall select the freight carrier used by Patheon to ship Products and may monitor Patheon’s shipping and freight practices as they pertain to this Agreement. Patheon shall notify Client in writing at the time of shipment as to the quantity of Product shipped, the anticipated delivery date and confirmation of the carrier. If any order is delayed and is not likely to be delivered to the carrier on time, Patheon shall immediately notify Client and Client may reasonably direct Patheon to ship such order by expedited means of transportation as designated by Client, at [***] expense. If the delay of any order results in substantial back orders to the Client and Patheon caused the delay, [***] shall pay the reasonable additional cost for the expedited transport. In all cases, Products shall be transported in accordance with the Specifications and Applicable Laws, including, but not limited to, cGMPs.

5.5 Invoices and Payment.

          (a) Invoices . Invoices for Products that are shipped to Client shall be sent by fax or email to such fax number or email address as may be provided by the Client in writing from time to time, but not earlier than the date of shipment of the corresponding Products. Patheon shall also submit to the Client, with each shipment of Products, a duplicate copy of the invoice covering such shipment. Patheon shall also provide the Client with an invoice covering any Inventory or Components which are to be purchased by Patheon pursuant to Section 5.2 hereof. Each such invoice shall, to the extent applicable, identify the Client purchase order number, Product numbers, names and quantities, unit price, freight charges and the total amount to be remitted by the Client.

          (b) Payment . The Client shall pay undisputed amounts of all invoices within [***] days of the date of postmark or confirmed facsimile or email transmission of the invoice.

          (c) Disputed Amounts . In the event that the Client disputes any amounts under any invoice for Products, such dispute shall be resolved in accordance with Section 6.1 (with respect to non-conformance of Products) or otherwise under Article 12. Pending resolution of such dispute, the Client shall be obligated to pay any amounts under such invoice that are not in dispute. Upon resolution of any such dispute in favor of Patheon, the Client shall pay all remaining amounts owing under such invoice within the later of (i) [***] Business days after such resolution or (ii) [***] days after the date of such invoice.

ARTICLE 6.
PRODUCT CLAIMS; RECALLS; ADVERSE EVENTS

6.1 Product Claims.

          (a) Product Claims . The Client has the right to reject and return, at the expense of Patheon, all or any portion of any shipment of Products that deviates from the Specifications or cGMPs, without invalidating any remainder of such shipment. The Client or its designated agent shall inspect the Products manufactured by Patheon upon receipt of such Products and related Certificate(s) of Analysis and shall give Patheon written notice (a “ Deficiency Notice ”) of all claims for Products that deviate from the Specifications or cGMPs within 30 days after the Client’s receipt of such Products and related Certificate(s) of Analysis (or, in the case of any defects not reasonably susceptible to discovery upon receipt of the Product, within 30 days after discovery thereof by the Client, but in no event after the expiration date of the Product). Should the Client fail to provide Patheon with the Deficiency Notice within the applicable 30-day period, then the delivery shall be deemed to have been accepted by the Client on the 30 ^th day after delivery or discovery, as applicable. Except as set out in Section 6.2, Patheon shall have no liability for any deviations for which Client has failed to provide notice within the applicable 30-day period.

          (b) Determination of Deficiency . Upon receipt of a Deficiency Notice, Patheon shall have 10 days to advise the Client by notice in writing that it disagrees with the contents of such Deficiency Notice. If the Client and Patheon fail to agree within 10 days after Patheon’s notice to the Client as to whether any Products identified in the Deficiency Notice deviate from the Specifications or cGMPs, then the parties shall mutually select an independent laboratory within five days from the parties’ failure to agree, which independent laboratory shall evaluate if the Products deviate from the Specifications or cGMPs. The parties shall cause the independent laboratory to conduct its evaluation as promptly as practicable, and in any event within 30 days from the date of selection of the laboratory. Such evaluation shall be binding on the parties, and if such evaluation certifies that any Products deviate from the Specifications or cGMPs, the Client may reject those Products in the manner contemplated in this Section 6.1. If such evaluation does not so certify in respect of any such Products, then the Client shall be deemed to have accepted delivery of such Products on the date the evaluation is delivered by the independent laboratory to the parties. The expenses of such testing shall be borne by Patheon if the non-conformity with the Specifications or cGMPs is confirmed by the independent laboratory, and otherwise by the Client.

          (c) Patheon Responsibility . In the event the Client rejects Products in accordance with this Section 6.1 and the deviation is determined to arise from Patheon’s failure to provide the Manufacturing Services in accordance with the Specifications or cGMPs, Patheon will, at the Client’s election, either: (i) credit the Client’s account for Patheon’s invoice price to

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the Client for such defective Products or (ii) use its commercially reasonable efforts to replace such Products with conforming Products within [***] days’ of the Client’s rejection of the non-conforming Products; provided, however, that Patheon shall [***]. If the Client shall have previously paid for such defective Products, Patheon shall, at the Client’s election, either: (i) refund the invoice price for such defective Products within [***] days’ of the Client’s rejection of the non-conforming Products; (ii) offset such amount against other amounts due to Patheon hereunder; or (iii) use its commercially reasonable efforts to replace such Products with conforming Products within [***] days’ of the Client’s rejection of the non-conforming Products without the Client being liable for payment therefor under Section 3.1. In connection with the production of any replacement Products under this Section 6.1(c), Patheon’s cost for the procurement of any additional [***] required for the manufacture of such replacement Products shall be limited to the [***]. Nothing in this Section 6.1 shall be construed to limit the rights and remedies available to the Client at law or in equity.

          (d) Shortages . Claims for shortages in the amount of Products shipped by Patheon shall be dealt with as may reasonably be agreed to by the parties. If a shipment of Products, however, contains less than [***] % of the minimum yield performance (as defined in the final Specifications and mutually agreed to by the parties) of the quantity specified in the corresponding Firm Order (the “Shortage Amount”), the Client shall notify Patheon promptly upon such discovery and, in any event, not later than 10 days after receipt of the shipment. Upon receipt of Client’s written request, Patheon shall use commercially reasonable efforts, subject to the availability of Active Materials and Components, to manufacture and ship the Shortage Amount within [***] days provided, however, that Patheon shall [***]. In the event that the Shortage Amount is less than a validated batch size as set forth in Schedule C, then Patheon shall manufacture the next highest validated batch size of the Product (“Shortage Batch”) and package the Shortage Batch, including the Shortage Amount, in accord with the Client’s written instructions. Nothing in this Section 6.1 shall be construed to limit the rights and remedies available to the Client at law or in equity.

6.2 Product Recalls and Returns.

          (a) Records and Notice . Patheon and the Client shall each maintain such records as may be necessary to permit a Recall of any Products delivered to the Client or customers of the Client. Each party shall promptly notify the other by telephone (to be confirmed in writing) of any information which might affect the marketability, safety or effectiveness of the Products and/or which might result in the Recall or seizure of the Products. Upon receiving any such notice or upon any such discovery, each party shall cease and desist from further shipments of such Products in its possession or control until a decision has been made whether a Recall or some other corrective action is necessary. The decision to initiate a Recall or to take some other corrective action, if any, shall be made and implemented by the Client. “ Recall ” shall mean any action (i) by the Client to recover title to or possession of

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quantities of the Products sold or shipped to third parties (including, without limitation, the voluntary withdrawal of Products from the market); or (ii) by any regulatory authorities to detain or destroy any of the Products. Recall shall also include any action by either party to refrain from selling or shipping quantities of the Products to third parties which would have been subject to a Recall if sold or shipped.

          (b) Recalls . In the event (i) any Authority issues a directive, order or, following the issuance of a safety warning or alert with respect to a Product, a written request that any Product be Recalled, (ii) a court of competent jurisdiction orders such a Recall, or (iii) the Client determines that any Product should be Recalled or that a “dear doctor” letter is required relating the restrictions on the use of any Product, Patheon will co-operate as reasonably requested by the Client, having regard to all Applicable Laws.

          (c) Product Returns . The Client shall have the responsibility for handling customer returns of the Products. Patheon shall provide the Client with such assistance as the Client may reasonably request to handle such returns.

          (d) Patheon’s Responsibility . To the extent that a Recall or return results from, or arises out of, a failure by Patheon to provide the Manufacturing Services in accordance with the Specifications or cGMPs, Patheon shall be responsible for the documented out-of-pocket expenses of such Recall or return and shall promptly, at the Client’s election, either: (i) refund the invoice price for such Recalled or returned Products; (ii) offset such amount against other amounts due to Patheon hereunder; or (iii) use its commercially reasonable efforts to replace such Recalled or returned Products with conforming Products within [***] days’ of the Client’s election under this clause (d) without the Client being liable for payment therefor under Section 3.1; provided, however, that Patheon shall [***]. In all other circumstances, Recalls, returns or other corrective actions shall be made at the Client’s direction and cost and expense. In connection with the production of any replacement Products under this clause (d), Patheon’s cost for the procurement of any additional [***] required for the manufacture of such replacement Products shall be limited to the [***].

6.3 Disposition of Defective or Recalled Products.

          The Client shall not dispose of any damaged, defective, returned or Recalled Products in relation to which it intends to assert a claim against Patheon unless it has given Patheon 60 days’ notice of its intention to do so, and Patheon has not, in turn, instructed the Client to return such Products to Patheon. Patheon shall bear the cost of shipping, storage and disposition with respect to any damaged, defective, returned or Recalled Products in relation to which it bears responsibility under Section 6.1 or 6.2 hereof, and shall promptly reimburse Client for any such costs which may be incurred directly by the Client. In all other circumstances, the Client shall bear the cost of disposition with respect to any damaged, defective, returned or

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Recalled Products. Notwithstanding the foregoing, the Client shall have the right at all times to retain a reasonable sample of such Products for its own archival purposes.

6.4 Customer Questions and Complaints.

          The Client shall have the sole responsibility for responding to Product Quality Complaints, subject to Patheon’s obligation of cooperation and expense reimbursement set forth below. Product Quality Complaints received by Patheon from the Client’s customers shall be referred to the Client within two Business Days from the receipt thereof by Patheon.

6.5 Adverse Event Reporting .

          Patheon shall notify the Client promptly and not later than 24 hours after it becomes aware of any Adverse Experience associated with the use of the Products, whether or not determined to be attributable to the Products, and whether or not deemed to be serious or non-serious. Such information shall be sent to the Client as set forth in the Quality Agreement.

          If the cause of any Adverse Experience results from a failure by Patheon to provide the Manufacturing Services in accordance with the Specifications or cGMPs, Patheon shall bear all costs incurred in respect of this Section 6.5. In all other circumstances, such costs shall be borne by the Client.

ARTICLE 7.
CO-OPERATION

7.1 Quarterly Review.

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

7.2 Communication with Governmental Agencies.

          The Client shall be primarily responsible for communicating with any Authority regarding such Products, including, but not limited to, the FDA and any other Authority responsible for granting regulatory approval for the Products; provided, however, that if in the opinion of Patheon’s counsel, Patheon must communicate with an Authority to comply with the terms of this Agreement or the requirements of any Applicable Laws, it may do so. Unless, in the reasonable opinion of its counsel, there is a legal prohibition against doing so, each party shall permit the other party to accompany and take part in any communications with any Authority, and to receive copies of all such communications from any Authority.

7.3 Records and Accounting by Patheon.

          Patheon shall keep records of the manufacture, testing and shipping of the Products, Active Materials and Components and retain samples of such Products, Active Materials and Components as are necessary to comply with all Applicable Laws, including, but not limited to, cGMPs and other manufacturing regulatory requirements applicable to Patheon, the Manufacturing Site, the Products, the Active Materials and/or the Components, as well as to assist with resolving Product complaints and other similar investigations. Copies of such records and samples shall be retained for a period of one year following the date of Product expiry, or longer if required by Applicable Laws after which Patheon may destroy such records or samples; provided that Patheon has first given the Client 60 days notice of its intention to do so and the Client has not, in turn, instructed Patheon to ship such records or samples to the Client at the Client’s expense.

7.4 Client’s Inspection of Reports and Records.

          The Client may inspect Patheon reports and records relating to this Agreement during normal business hours and with reasonable advance notice, provided a Patheon representative is present during any such inspection.

7.5 Client’s Access to Manufacturing Site.

          Patheon shall provide the Client with reasonable access at mutually agreeable times to its Manufacturing Site or any other facilities in which the Products are manufactured, stored, handled or shipped in order to permit the Client’s verification of Patheon’s compliance with the Patheon Manufacturing Responsibilities and with all Applicable Laws. For greater certainty, the right of access provided in this Section 7.5 shall not include a right to access or inspect Patheon’s financial records.

7.6 Government Inspection .

          Patheon shall make its internal practices, books and records relating to the manufacture of the Products available and allow access to all facilities used for manufacturing the Products to the FDA and any other Authority having jurisdiction over the manufacture of the Products for the purposes of determining Patheon’s compliance with Applicable Laws, including, but not limited to, cGMPs. Patheon shall advise the Client by telephone and facsimile within one Business Day of any proposed or announced visit, audit or inspection, and as soon as possible (but in any case within two Business Days) after any unannounced visit, audit or inspection, by the FDA or any other Authority relating to the Products. Patheon shall provide the Client with a reasonable description in writing of each such visit or inspection promptly (but in no event later than five calendar days) thereafter, and with copies of any Authority-issued inspection observation reports (including, without limitation, FDA Form 483s and equivalent

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forms from other regulatory bodies) and Authority correspondence, purged only of confidential information that is unrelated to the Products. Patheon and the Client will cooperate in resolving any concerns with any Authority, and the Client may review Patheon’s responses to any such reports and communications, and Patheon shall in its reasonable discretion incorporate into such responses any comments received from the Client. Patheon will also inform the Client of any action taken by any Authority against Patheon or any of its officers or employees which may be reasonably expected to adversely affect the Products or Patheon’s ability to supply the Products hereunder