Manufacturing Services Agreement

Manufacturing Agreement

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TRANSCEPT PHARMACEUTICALS INC | Patheon Inc

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Title: Manufacturing Services Agreement
Governing Law: New York Date: 2/5/2009
Industry: Recreational Products Law Firm: Venable Sector: Consumer Cyclical

Exhibit 10.11

Manufacturing Services Agreement

Between

Patheon Inc.,

and

Patheon Pharmaceuticals Inc.,

and

TransOral Pharmaceuticals, Inc.

October 6, 2006

Confidential treatment has been requested for portions of this exhibit. These portions have been omitted from this exhibit and have been filed separately with the Securities and Exchange Commission.

TransOral Patheon MSA (Cincinnati and Whitby) – EXECUTION DRAFT

Table of Contents


ARTICLE 1 INTERPRETATION		2

1.1	D EFINITIONS	2
1.2	C URRENCY	5
1.3	S ECTIONS AND H EADINGS	5
1.4	S INGULAR T ERMS	6
1.5	S CHEDULES	6

ARTICLE 2 PATHEON’S MANUFACTURING SERVICES		7

2.1	M ANUFACTURING S ERVICES	7
2.2	A CTIVE M ATERIAL Y IELD	10

ARTICLE 3 PATHEON’S SUPPLY OF PRODUCT		12

3.1	S UPPLY OF P RODUCT	12
3.2	P RODUCT	13
3.3	O RDERS AND F ORECASTS	13
3.4	M INIMUM O RDERS	14
3.5	S HIPMENTS	14
3.6	S UPPLY F AILURE	15
3.7	C OMPONENTS	16
3.8	P ATHEON A UDIT R IGHTS	18

ARTICLE 4 CLIENT’S OBLIGATIONS		18

4.1	A CTIVE M ATERIALS	18
4.2	I NVOICES AND P AYMENT	18

ARTICLE 5 CONVERSION FEES AND COMPONENT COSTS		19

5.1	F IRST Y EAR P RICING	19
5.2	P RICE A DJUSTMENTS - S UBSEQUENT Y EARS ’ P RICING	19
5.3	P RICE A DJUSTMENTS - C URRENT Y EAR P RICING	20
5.4	A DJUSTMENTS D UE TO T ECHNICAL C HANGES	21

ARTICLE 6 PRODUCT CLAIMS AND RECALLS		22

6.1	P RODUCT C LAIMS	22
6.2	P RODUCT R ECALLS AND R ETURNS	23
6.3	P ATHEON ’ S R ESPONSIBILITY FOR D EFECTIVE AND R ECALLED P RODUCTS	23
6.4	D ISPOSITION OF D EFECTIVE OR R ECALLED P RODUCTS	24
6.5	C USTOMER Q UESTIONS AND C OMPLAINTS	24
6.6	S OLE R EMEDY	25

ARTICLE 7 CO-OPERATION; REGULATORY FILINGS		25

7.1	Q UARTERLY R EVIEW	25
7.2	G OVERNMENTAL A GENCIES	26

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7.3	R ECORDS AND A CCOUNTING BY P ATHEON	26
7.4	I NSPECTION	26
7.5	A CCESS	26
7.6	R EPORTS	27
7.7	R EGULATORY F ILINGS	27

ARTICLE 8 TERM AND TERMINATION		28

8.1	I NITIAL T ERM	28
8.2	T ERMINATION FOR C AUSE	29
8.3	T ERMINATION BY C LIENT	29
8.4	O BLIGATIONS ON T ERMINATION	30

ARTICLE 9 REPRESENTATIONS, WARRANTIES AND COVENANTS		31

9.1	A UTHORITY	31
9.2	C LIENT W ARRANTIES	31
9.3	P ATHEON W ARRANTIES	31
9.4	D EBARRED P ERSONS	32
9.5	P ERMITS	32
9.6	No W ARRANTY	32

ARTICLE 10 REMEDIES ANT INDEMNITIES		33

10.1	C ONSEQUENTIAL D AMAGES	33
10.2	L IMITATION OF L IABILITY	33
10.3	P ATHEON	33
10.4	C LIENT	34
10.5	R EASONABLE A LLOCATION OF R ISK	35

ARTICLE 11 CONFIDENTIALITY		35

11.1	C ONFIDENTIAL I NFORMATION	35
11.2	C ONFIDENTIALITY	35
11.3	C ONFIDENTIAL T ERMS	36

ARTICLE 12 DISPUTE RESOLUTION		37

12.1	C OMMERCIAL D ISPUTES	37
12.2	T ECHNICAL D ISPUTE R ESOLUTION	37

ARTICLE 13 MISCELLANEOUS		38

13.1	I NVENTIONS	38
13.2	I NTELLECTUAL P ROPERTY	39
13.3	I NSURANCE	40
13.4	I NDEPENDENT C ONTRACTORS	40
13.5	N O W AIVER	40
13.6	A SSIGNMENT	40
13.7	F ORCE M AJEURE	41
13.8	A DDITIONAL P RODUCT	41

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13.9	N OTICES	41
13.10	S EVERABILITY	42
13.11	E NTIRE A GREEMENT	42
13.12	O THER T ERMS	43
13.13	N O T HIRD P ARTY B ENEFIT OR R IGHT	43
13.14	E XECUTION IN C OUNTERPARTS	43
13.15	G OVERNING L AW	43

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TransOral Patheon MSA (Cincinnati and Whitby) – EXECUTION DRAFT

MANUFACTURING SERVICES AGREEMENT

THIS MANUFACTURING SERVICES AGREEMENT (the “Agreement”) made as of the 6 ^th day of October, 2006 (the “Effective Date”)

BETWEEN:

PATHEON INC., a corporation existing under the laws of Canada;

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PATHEON PHARMACEUTICALS INC.,

a corporation existing under the laws of the State of Delaware,

(Patheon Inc. and Patheon Pharmaceuticals Inc. hereinafter shall be collectively referred to as “Patheon”),

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TRANSORAL PHARMACEUTICALS, INC.,

a corporation existing under the laws of the State of Delaware,

(hereinafter referred to as the “Client”).

(Patheon and Client may be referred to individually by name or as a “Party” or collectively as the “Parties”)

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:

TransOral Patheon MSA (Cincinnati and Whitby) – EXECUTION DRAFT

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:

“Active Materials” means the materials listed on Schedule D hereto and purchased by Patheon on behalf of the Client from Clients designee;

“Active Materials Credit Value” means the value to be attributed to the Active Materials for certain purposes of this Agreement, as set forth on Schedule D;

“Affiliate” means, with respect to a Party to this Agreement:

(a)

a business entity which controls such Party; or

(b)

a business entity which is controlled by such Party; or

(c)

a business entity which is under common control with such Party;

For the purposes of this definition, “control” means, with respect to an entity, the possession, directly or indirectly, of at least a majority of the share capital or voting rights of such entity or of the power to direct or cause the direction of the management and policies of such entity, whether through the ownership of voting securities, by contract or otherwise.

“Annual Report” means the annual report as described in Title 21 of the United States Code of Federal Regulations, Section 314.81(b)(2);

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

“Annual Volume” means the volume of Product to be manufactured in any Year of this Agreement as set forth in Schedule B hereto and subject to Section 5.3(b) below;

“Applicable Laws” means all laws, ordinances, rules and regulations of any governmental or regulatory authority that apply to the Manufacturing Services, the Products or this Agreement, including without limitation (i) all applicable federal, state and local laws and regulations; (ii) the U.S. Federal Food, Drug, and Cosmetic Act ( “FDCA” ), (iii) regulations and guidelines of the FDA and other Regulatory Authorities, and ICH guidelines and (iv) cGMPs, and if applicable, current Good Laboratory Practices promulgated by the FDA and other Regulatory Authorities.

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TransOral Patheon MSA (Cincinnati and Whitby) – EXECUTION DRAFT

“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;

“Business Day” means a day other than a Saturday, Sunday or a day that is a federal holiday in the United States;

“cGMPs” means current good manufacturing practices as described in: (i) 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 and (ii) European Community Directive 2003/94/EC (Principles and guidelines of good manufacturing practice in respect of medicinal products for human use and investigational medicinal products for human use); in each case as interpreted by the ICH Harmonized Tripartite Guideline, any U.S., European, or other applicable laws, regulations or respective guidance documents subsequently established by a governmental or regulatory authority, and any arrangements, additions or clarifications agreed from time to time between the Parties.

“Commencement Date” means the first day upon which the Manufacturing Services shall commence, which shall be on or about [***];

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

“Confidentiality Agreement” means the Confidentiality Agreement between Patheon, Inc., and the Client dated August 17,2004.

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

“FDA” means the United States government department known as the Food and Drug Administration, or any successor organization thereto with respect to the regulation and authorization of medicinal products in the United States of America, and each of its territories, districts and possessions and the commonwealth of Puerto Rico;

“Firm Orders” has the meaning specified in Section 3.3(b);

“Intellectual Property” means any or all of the following and all rights anywhere in the world in, to and arising out of: patents, patent applications, trademarks, trademark applications, trade names, trade secrets, Inventions, copyright and industrial designs;

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[***] Confidential treatment has been requested for portions of this exhibit. These portions have been omitted from this exhibit and have been filed separately with the Securities and Exchange Commission.

TransOral Patheon MSA (Cincinnati and Whitby) – EXECUTION DRAFT

“Invention” means any formula, idea, information, innovation, improvement, development, discovery, computer program, device, trade secret, method, know-how, process, technique, technology, material 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 in connection with the manufacture of the Products and in accordance with this Agreement but, for greater certainty, does not include the Active Materials;

“Manufacturing Services” means the manufacturing, quality control, quality assurance and stability testing, packaging and related services, to be performed by Patheon as contemplated in this Agreement and described in the Specifications and the Quality Agreement(s), required, to produce Products from Active Materials and Components;

“Manufacturing Site” means the facility owned and operated by Patheon Pharmaceuticals Inc. that is located at 2110 East Galbraith Road, Cincinnati, Ohio 45237-1625;

“Maximum Credit Value” means the maximum value of Active Materials that may be credited by Patheon pursuant to this Agreement, as set forth on Schedule D;

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

“Product(s)” means the products listed on Schedule A hereto, as such schedule may be amended from time to time by the mutual written agreement of the Parties;

“Quality Agreements)” means the agreement(s) to be entered into between the Parties hereto setting out the quality assurance standards to be applicable to the Manufacturing Services provided by Patheon at the Cincinnati Manufacturing Site and/or at the Whitby Secondary Manufacturing Site, which agreement(s) shall be substantially in the form attached hereto as Schedule G;

“Regulatory Authority” means the FDA and any other Authority (including the European Medicines Agency) involved in regulating any aspect of the conduct, development, manufacture, market approval, sale, distribution, packaging or use of the Products.

“Secondary Manufacturing Site” means the facility owned and operated by Patheon Inc. that is located at 111 Consumers Drive Whitby, Ontario L1N 5Z5.

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TransOral Patheon MSA (Cincinnati and Whitby) – EXECUTION DRAFT

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

(a)

specifications for Active Materials and Components;

(b)

manufacturing specifications, directions and processes;

(c)

storage requirements;

(d)

all environmental, health and safety information relating to the Product including material safety data sheets; and

(e)

the finished Product specifications and acceptance criteria, and packaging specifications and shipping requirements for each Product;

all as updated, amended and revised from time to time by the Client in writing in accordance with the terms of this Agreement, and in all cases including compliance with all Applicable Laws and the Quality Agreement(s);

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

“Territory” means worldwide;

“Third Party Rights” means the Intellectual Property owned or controlled by any third party;

“Year” means a calendar year occurring after the Commencement Date; provided, however, the first Year means the period from the Commencement Date up to and including December 31 of the same calendar year in which the Commencement Date occurs.

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.

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TransOral Patheon MSA (Cincinnati and Whitby) – EXECUTION DRAFT

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:


Schedule A	-	Product List and Specifications
Schedule B	-	Minimum Run Quantity, Annual Volume & Fees
Schedule C	-	Stability Testing & Validation Activities
Schedule D	-	Active Materials & Active Materials Credit Value
Schedule E	-	Batch Numbering & Expiration Dates
Schedule F	-	Technical Dispute Resolution
Schedule G	-	Quality Agreement(s)
Schedule H	-	Quarterly Active Materials Inventory Report
Schedule I	-	Report of Annual Active Materials Inventory Reconciliation and Calculation of Actual Annual Yield
Schedule J	-	Form of Exclusive Components Purchasing Summary

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TransOral Patheon MSA (Cincinnati and Whitby) – EXECUTION DRAFT

ARTICLE 2

PATHEON’S MANUFACTURING SERVICES

2.1

Manufacturing Services .

Commencing on the Commencement Date, Patheon shall provide the Manufacturing Services for the Territory for the corresponding fees specified in Schedules B and C in order to produce Products for the Client, all in accordance with the Specifications, Applicable Laws, Quality Agreement(s), and this Agreement. Patheon shall conduct all Manufacturing Services at the Manufacturing Site or the Secondary Manufacturing Site and may change the Manufacturing Site and the Secondary Manufacturing Site for the Products only with the prior written consent of Client, such consent not to be unreasonably withheld. As part of Patheon’s performance of the Manufacturing Services, Patheon and the Client agree that:

(a)

Active Materials . As directed by Client, (i) Client shall supply Active Materials to Patheon in accordance with the terms of Section 4.1 below; or (ii) Patheon shall purchase Active Materials on behalf of Client from third party suppliers approved in writing by Client in such quantities as the Parties agree are reasonably necessary for Patheon to perform the Manufacturing Services. For those quantities of Active Materials that Client has requested Patheon to purchase, Client shall pre-pay to Patheon the cost of the Active Materials plus an additional 15% as a handling fee. Upon receipt of all Active Materials (whether such Active Materials were supplied by Client or purchased by Patheon), Patheon shall conduct a reasonable inspection and release testing of such Active Materials in accordance with mutually agreed procedures. Patheon shall use and store all Active Materials provided hereunder in accordance with Client’s reasonable instructions, the Quality Agreement(s), cGMPs and all other Applicable Laws. Patheon shall conduct chemical identity testing for all Active Materials received at the Manufacturing Site or the Secondary Manufacturing Site, as applicable, within twenty (20) days of such receipt. Further, Patheon shall conduct full release testing of all Active Materials received at the Manufacturing Site or the Secondary Manufacturing Site, as applicable, not later than [***] after the date of receipt in accordance with the procedures and using the analytical testing methodologies set forth in the Specifications and the Quality Agreement(s). Patheon shall promptly (and in any event within [***] following completion of applicable testing) notify the Client in writing of any failure of the Active Materials to conform to the Specifications for such Active Materials, and any other problem it may identify with the Active Materials detected during the inspection and testing process. Patheon shall store the Active Materials at Patheon’s storage facility at the Manufacturing Site or the Secondary Manufacturing Site and shall ensure that the Active Materials do not become subject to any lien or other security interest. The Client shall pay Patheon

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TransOral Patheon MSA (Cincinnati and Whitby) – EXECUTION DRAFT

[***], for storing Active Materials (if Active Material is a controlled substance or requires refrigeration, the charge will be [***]) in excess of that required to support the Firm Order period. Patheon shall use all quantities of Active Materials provided hereunder for the sole purpose of performing the Manufacturing Services on behalf of Client and not for any other use or purpose. The Parties acknowledge and agree that title to all Active Materials shall at all times belong to and remain in Client. All Active Materials in Patheon’s possession shall be subject to disposition by Client upon expiration or termination of this Agreement, and in either such event, Patheon shall deliver the Active Materials to Client or its designee, at Client’s expense. Patheon agrees to reasonably cooperate with Client, at Client’s expense, in the filing of any UCC financing statements relating to the Active Materials as Client may deem necessary or useful. Patheon’s liability with respect to any lost or damaged Active Materials shall be as set forth in Sections 2.2 and 10.2(a) and Article 6.

(b)

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

(c)

Quality Control and Quality Assurance . Patheon shall perform the quality control and quality assurance testing specified in the Quality Agreement(s) and in Schedule C. Batch review and release to the Client shall be the responsibility of Patheon’s quality assurance group. Patheon shall perform its batch review and release responsibilities in accordance with the Specifications, the Quality Agreement(s) and Patheon’s standard operating procedures, which Patheon will make reasonably available to Client at the Manufacturing Site or the Secondary Manufacturing Site upon Clients request.

(d)

Components . Patheon shall purchase and test all Components, at Patheon’s expense, as specified by the Specifications and prior to using such Components to manufacture Products. Patheon shall store the Components at Patheon’s storage facility at the Manufacturing Site or the Secondary Manufacturing Site and shall ensure that the Components do not become subject to any lien or other security interest.

(e)

Stability Testing . Patheon shall conduct stability testing on the Products in accordance with the protocols set out in the Specifications and in Schedule C for the separate fees specified in Schedule C, as required by the FDA or other Regulatory Authorities or as requested by the Client and in any case on at least [***] of Product from the Manufacturing Site and [***] of Product from the Secondary Manufacturing Site at least once per calendar year following the Commencement Date or more frequently as may be specified in the Quality Agreement(s). Patheon shall not make any changes to these testing protocols without prior written approval from the Client. In the event of a

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confirmed stability test failure, Patheon will notify the Client within one (1) Business Day after such failure and 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 Patheon shall not be liable for any such costs unless there has been a failure by it to provide the Manufacturing Services in accordance with the Specifications, the Quality Agreement(s), cGMPs or Applicable Laws. Patheon will provide any and all data and results relating to the stability testing as may be specified in the Quality Agreement(s) or otherwise requested by the Client.

(f)

Packaging . Patheon shall package the Products as set out in the Specifications. The Client shall be responsible for the cost of artwork development for the Products. In addition, Patheon shall make arrangements for and implement the imprinting of batch numbers and expiration dates for each batch of 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 E 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 Regulatory Authorities from which approval of such changes is required. The Client shall be responsible for the cost of labeling obsolescence due to changes to such labeling made by the Client. Patheon’s name shall not appear on the label or anywhere else on the Products unless: (i) required by Applicable Laws; or (ii) Client submits a written request to Patheon for such use and Patheon expressly consents to such use of its name in writing.

(g)

Bill Back Items. The expenses in respect of all third party supplier fees for the purchase of columns, standards, tooling, PAPR suits (where applicable) and other project specific items necessary for Patheon to perform the Manufacturing Services, and which are not included as Components, shall be charged to the Client at Patheon’s costs, provided that, in each case, such expenses have received Client’s prior written approval.

(h)

Validation Activities . Patheon will assist in the development and approval of the validation protocols for analytical methods and manufacturing procedures (including packaging procedures) for the Products as described in Schedule C and as may be further requested by Client from time to time. The fees associated with Patheon’s assistance in providing validation development assistance are set out in Schedule C.

(i)

Samples . Patheon shall retain sufficient quantities of all shipped Product, Active Materials and Components to perform at least full duplicate quality control testing. Retained repository samples of all shipped Product, Active Materials and

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Components shall be maintained in a suitable storage facility until one (1) year after expiry or such longer period as may be required by Applicable Laws. All such samples shall be available for inspection by the Client at reasonable intervals upon reasonable notice. Client shall be responsible, at all times, for the final release of the Product.

2.2

Active Material Yield .

(a)

Reporting. Commencing on the Commencement Date, Patheon shall monitor on a quarterly basis the inventory of the Active Materials held by Patheon and shall provide the Client, within [***] following the last day of the applicable quarter, with an inventory report of the Active Materials held by Patheon in accordance with the inventory report form annexed hereto as Schedule H, which shall contain the following information for such quarter:

Quantity Received: The total quantity of Active Materials that is received at the Manufacturing Site or the Secondary Manufacturing Site, as applicable, in the applicable quarter and that complies with the Specifications at the time such Active Materials are received.

Quantity Dispensed: The total quantity of Active Materials dispensed at the Manufacturing Site or the Secondary Manufacturing Site, as applicable, during the applicable quarter. The Quantity Dispensed for each of the Manufacturing Site and the Secondary Manufacturing Site is calculated by adding the Quantity Received at such site to the inventory of Active Materials at such site that complied with the Specifications at the time such Active Materials were received by Patheon and have been held at such site at the beginning of the applicable quarter, less the inventory of Active Materials at such site that complied with the Specifications at the time such Active Materials were received by Patheon at such site and are held at the end of such quarter. The Quantity Dispensed shall only include Active Materials received and dispensed in connection with commercial manufacturing of Products and, for certainty, shall not include any Active Materials received or dispensed in connection with technical transfer activities or development activities agreed to in writing by the Parties during the applicable period, including, without limitation, any regulatory, stability, validation or test batches manufactured during such applicable period.

Quantity Converted: The total amount of Active Materials contained in the Products produced at the Manufacturing Site or Secondary Manufacturing Site, as applicable, with the Quantity Dispensed (including lab samples required by the Specifications and any additional Products produced pursuant to Section 6.1 or 6.2) at such site, delivered by Patheon, but not including Products rejected, recalled or returned in accordance with Section 6.1 or 6.2 as a result of a failure by Patheon to provide Manufacturing Services in accordance with Specifications, the Quality Agreement(s), cGMPs and Applicable Laws.

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Within [***] after the end of each Year, Patheon shall prepare an annual reconciliation of Active Materials for each of the Manufacturing Site and the Secondary Manufacturing Site in accordance with the reconciliation report form annexed hereto as Schedule I including the calculation of the “Actual Annual Yield” or “AAY” for the Product at each of the Manufacturing Site and the Secondary Manufacturing Site during the Year, which AAY is the percentage of the Quantity Dispensed that was converted to Products and is calculated as follows:

Quantity Converted during the Year

Quantity Dispensed during the Year

For each of the Manufacturing Site and the Secondary Manufacturing Site, after Patheon has produced [***] commercial production batches of Product at such site and has produced commercial production batches for at least six months at such site pursuant to this Agreement, the Parties will mutually agree on the target yield in respect of such Product at such site (each, a “Target Yield” ). Thereafter, Patheon shall strive to maintain Actual Annual Yield levels for the Product at each of the Manufacturing Site and Secondary Manufacturing Site above the Target Yield for such site. Notwithstanding the foregoing, the Target Yield for each such site will be adjusted yearly through good faith negotiations, which negotiations will take into account the Actual Annual Yield for the Product for such site over the preceding Year. For clarity, Patheon shall calculate separate Active Annual Yields and the Parties will agree on separate Target Yields, in each case as described above, for each of the Manufacturing Site and the Secondary Manufacturing Site.

(b)

Shortfall Calculation . For each of the Manufacturing Site and the Secondary Manufacturing Site, if the Actual Annual Yield falls more than [***] below the respective Target Yield for such site in a Year, then the shortfall for such site for such Year (the “Shortfall”) shall be determined based on the following calculation:

[(Target Yield – [***]) – AAY] * Active Material Reimbursement Value * Quantity Dispensed

The Shortfall for each of the Manufacturing Site and the Secondary Manufacturing Site shall be disclosed by Patheon on the reconciliation report prepared in the form annexed hereto as Schedule I.

Credit . For each of the Manufacturing Site and the Secondary Manufacturing Site, if there is a Shortfall for a Product in a Year, then Patheon shall, at Client’s sole option, either reimburse Client for the amount of any such Shortfall or credit the Client’s account for the amount of any such Shortfall, in either case not later than [***] after the end of such

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Year. Each credit or reimbursement under this Section 2.2 shall be summarized on the reconciliation report prepared in the form annexed hereto as Schedule I and shall be promptly reimbursed or credited to Client, as applicable.

(c)

Maximum Credit Notwithstanding the foregoing provisions of this Section 2.2, for both the Manufacturing Site and the Secondary Manufacturing Site together, Patheon’s liability for Active Materials calculated in accordance with this Section 2.2 for any Product in a Year shall not exceed, in the aggregate, the Maximum Credit Value set forth in Schedule D hereto.

(d)

Significant Active Materials Loss . Patheon shall notify Client in writing in the event an amount in excess of in excess of [***] of Active Materials is damaged, lost or otherwise rendered unusable (including to the extent contained in any non-conforming Product) by Patheon at any one time (a “Significant Active Materials Loss”) as soon as practicable following such incident. In addition, and notwithstanding anything in this Section 2.2 to the contrary, Patheon shall reimburse Client for such Active Materials within thirty (30) days after discovery of the Significant Active Materials Loss. For purposes of clarity, any Active Materials damaged, lost or otherwise rendered unusable in connection with a Significant Active Materials Loss shall be included in the calculation of the Quantity Dispensed and any amount paid by Patheon in accordance with this Section 2.2(d) shall be credited against the amount, if any, to be paid by Patheon to Client pursuant to Section 2.2(c).

(e)

No Material Breach . It shall not constitute a material breach of this Agreement by Patheon, for the purposes of Section 8.2(a), if the Actual Annual Yield is less that the Target Yield.

ARTICLE 3

PATHEON’S SUPPLY OF PRODUCT

3.1

Supply of Product .

Commencing on the Commencement Date and during the term of the Agreement, Patheon shall manufacture and supply all quantities of the Product ordered by Client in the Territory pursuant to this Agreement. Subject to the Clients rights to qualify a third party manufacturer under Section 3.6 and Clients rights under Section 3.6 in the event of a Supply Failure (as defined in Section 3.6), commencing on the Commencement Date and during the term of this Agreement, Client shall commit to purchase its entire requirements of Product(s) for sale in the Territory from Patheon by placing orders for at least [***] of its requirements of Products in the Territory during any Year from the Manufacturing Site and its remaining requirements in the Territory during such Year, as necessary, from the Secondary Manufacturing Site (the “Purchase Commitment” ).

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3.2

Product .

Patheon hereby covenants that all Product manufactured and supplied to Client under this Agreement: (a) shall have been manufactured, packaged, tested, stored and supplied in compliance with the Specifications, the Quality Agreement(s), cGMPs, Applicable Laws and this Agreement; and (b) shall not be adulterated, or misbranded within the meaning of the FDCA or other Applicable Laws as of the time that the Product is transferred to the carrier at Patheon’s shipping point.

3.3

Orders and Forecasts .

(a)

Rolling Forecasts . Concurrent with the execution of this Agreement, the Client shall provide Patheon with a written non-binding eighteen (18) months 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 eighteen (18) months period commencing on the Commencement Date, which forecast shall be used by Patheon solely for advisory purposes. Commencing on the Commencement Date, such forecast will be updated by the Client monthly on or before the [***] of each calendar month on a rolling eighteen (18) months basis and in any case updated forthwith upon the Client determining any time after the Effective Date that the volumes contemplated in the most recent of such forecasts has changed by more than [***]. The most recent eighteen (18) months forecast provided by the Client shall prevail.

(b)

Firm Orders . On or before the [***] of each calendar month following the Commencement Date, 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 three (3) months 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, quantity (or, if more than one shipment is requested, quantities) of Product ordered 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.

(c)

[***] Year Forecast . On or before the [***] day of [***] of each Year, the Client shall provide Patheon with a written non-binding [***] -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 [***] period, which forecast shall be used by Patheon solely for advisory purposes.

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TransOral Patheon MSA (Cincinnati and Whitby) – EXECUTION DRAFT

3.4

Minimum Orders .

The quantity of Product ordered by Client from Patheon in each shipment must be equal to or greater than the Minimum Run Quantity set out in Schedule B; provided, however, that at Client’s request, the Minimum Run Quantity may be reduced, subject to adjustments in the price of Product under Section 5.3(a) below.

3.5

Shipments .

(a)

Shipments of Products shall be made EXW (as such term is defined in INCOTERMS 2000) Patheon’s shipping point unless otherwise mutually agreed. Risk of loss or of damage to Products shall remain with Patheon until Patheon loads the Products onto the carrier’s vehicle for shipment at the shipping point at which time risk of loss or damage shall transfer to the Client or Client’s designee, as applicable. Patheon shall, in accordance with the Client’s instructions and as agent for the Client, (i) arrange for shipping to be paid by the Client and (ii) at the Client’s risk and expense, obtain any export licence or other official authorization necessary to export the Products. 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. Products shall be transported in accordance with the Specifications.

(b)

Prior to shipping (or temporarily storing, if requested by the Client) any order, Patheon shall test each batch of Product manufactured under this Agreement. Patheon shall conduct all such testing in accordance with the procedures and using the analytical testing methodologies set forth in the Specifications, Schedule C and the Quality Agreement(s). Each time Patheon ships Products to the Client’s designee, it shall provide with each shipment: (i) a certificate of analysis and certificate of compliance including a statement that the shipped batch of Product has been manufactured and tested in accordance with Specifications, the Quality Agreement(s) and Applicable Laws, and, if requested by Client, completed batch production records; and (ii) the customs documentation corresponding to such shipment and such other documentation and information as may be necessary or desirable for complying with import, export and customs laws, regulations and like requirements, as applicable. The Client will have sole responsibility for the release of Products to the market. Patheon shall not ship any Product until Client has completed its final release of such Product and has given Patheon written notice to ship such Product, such notice not to exceed seven Business Days from Client’s receipt of release documents from Patheon. All Product shipped by Patheon, including its packaging, shall meet all applicable export and customs laws, regulations and like requirements for the United States.

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3.6

Supply Failure .

(a)

During the term of this Agreement in which Patheon, for any reason, except to the extent due to Client’s failure to supply Active Materials, including, without limitation, force majeure as defined in Section 13.7, fails to supply at least [***] of the quantities of Product in any two (2) consecutive calendar quarters in a Year pursuant to Firm Orders submitted by Client pursuant to and in accordance with the terms and conditions of this Agreement within thirty (30) days of the dates specified in such Firm Orders in compliance with this Agreement, then such event shall be deemed a “Supply Failure.”

(b)

In the event of a Supply Failure, Client’s obligation under Section 3.1 to purchase the Purchase Commitment of Product from Patheon shall terminate and Client shall be free to purchase any amount of Product from any third party for any purpose without restriction, subject to the terms of Section 3.6(c) below. Notwithstanding anything to the contrary in Section 3.1 above (including the Purchase Commitment): (i) Client shall have the right, at any time, to qualify a third party manufacturer such that such third Party may manufacture and commercially supply Product to Client in the event of a Supply Failure; and (ii) as part of such qualification process, such third party may manufacture and supply for Client, at any time (including during the term of this Agreement), quantities of Product reasonably necessary for such qualification; provided , however , that, except as provided otherwise in this Section 3.6 in the event of a Supply Failure, for so long as the Purchase Commitment is in effect, Client shall only be allowed to sell (x) [***] of Product produced by such third party manufacturer, and (in addition to the amounts described in the foregoing part (x)) (y) annually, [***] of Product produced by such third party manufacturer. Patheon shall, at Client’s cost, cooperate with Client and assist in the transfer to Client of all legal and technical documents concerning Active Materials and Products, including master batch records, validation reports, stability reports and relevant manufacturer authorizations, existing retention samples and all such other documents and materials as may be reasonably necessary or useful for Client to source Products from other qualified third parties. Client shall reimburse Patheon for all of Patheon’s reasonable time, material and other costs associated with the qualification of a third party manufacturer.

(c)

In the event that a Supply Failure occurs and such Supply Failure is the first Supply Failure to occur during the term of this Agreement, at the written request of Patheon, if Patheon has taken the necessary steps to ensure that a Supply Failure will not re-occur, the Parties shall discuss in good faith reinstating Client’s obligation under Section 3.1 to purchase the Purchase Commitment from Patheon. If the Parties mutually agree in good faith that Patheon has remedied the Supply

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Failure and has taken all steps necessary to ensure that a Supply Failure will not re-occur, Client’s obligation under Section 3.1 to purchase the Purchase Commitment from Patheon shall be reinstated, effective three (3) months following the date of such agreement (such effective date of reinstatement, the “Purchase Commitment Re-instatement Date” ); provided, however, that, (i) the terms of such re-instated Purchase Commitment may be re-adjusted, as mutually agreed upon by the Parties, to increase the preparedness of Client in the event of a subsequent Supply Failure, including without limitation by initially providing for a smaller Purchase Commitment that increases over a period of Years to its original amount if there are no subsequent Supply Failures during such time; (ii) for the Year that the Client’s obligation to purchase the Purchase Commitment is re-instated, the Purchase Commitment shall be pro-rated to be only with respect to Client’s requirements for Products for the period commencing on the Purchase Commitment Re-Instatement Date and ending on the last day of such Year; and (iii) Client’s obligation to purchase the Purchase Commitment under Section 3.1 shall be subject to, and modified to the extent necessary to comply with, any obligations incurred by Client between the date of the Supply Failure and the date that the Parties agreed that the Purchase Commitment should be re-instated.

3.7

Components .

(a)

Components List . Patheon agrees that it shall purchase each Component for use in the Manufacturing Services only from the supplier designated for such Component in the Components list attached hereto in Schedule B and which may be amended by Client from time to time (the “Components List” ). Patheon agrees that it shall not amend the Components List or purchase a Component to be used in the Manufacturing Services from a supplier other than the supplier designated for such Component in the Components List without the prior written consent of the Client. The Components List shall be the Confidential Information of Client.

(b)

Reliance by Patheon . Client understands that to ensure an orderly supply of Components to meet Client’s Firm Orders, it may be desirable for Patheon to purchase such Components in sufficient volumes to meet the production requirements for the amount of Product forecasted by Client for the first [***] in the most recent forecast provided by the Client pursuant to Section 3.3(a) or to meet the production requirements of any longer period agreed to by Patheon and the Client in writing. Accordingly, the Client authorizes Patheon to purchase the Components necessary to satisfy the production requirements for Products for the first [***] contemplated in the most recent forecast provided by the Client pursuant to Section 3.3(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.

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TransOral Patheon MSA (Cincinnati and Whitby) – EXECUTION DRAFT

(c)

Client’s Responsibility for Cost of Components . If Components ordered by Patheon in accordance with Section 3.7(b) become obsolete or otherwise no longer useable in the Manufacturing Services (including, without limitation due to technical changes in the Manufacturing Services pursuant to Section 5.4 below) or the Manufacturing Services are cancelled due to a termination of the Agreement by Patheon pursuant to Section 8.2(a) or 8.2(b) or by Client pursuant to Section 8.3, Patheon shall use commercially reasonable efforts to cover the cost of excess Components by: (i) returning such Components to the vendor, (ii) utilizing such Components in manufacturing products for its other customers to the extent possible, and (iii) implementing other measures to mitigate the loss due to such excess Components. To the extent that Patheon is unable to off-set such loss fully and such loss is due to; (x) a change in the Specifications pursuant to Section 5.7; or (y) the cancellation of the Manufacturing Services due to a termination of the Agreement by Patheon pursuant to Section 8.2(a) or 8.2(b) or by Client pursuant to Section 8.3; then in each of cases (x) and (y), the Client shall reimburse Patheon for such Components and its out of pocket expenses but solely to the extent actually incurred by Patheon. Notwithstanding the foregoing, in no event shall Client be obligated to reimburse Patheon for quantities of Components that are in excess of the amounts Patheon was authorized to purchase under Section 3.7(b). Such reimbursement from the Client shall be due, where applicable, within sixty (60) days of written notification from Patheon of its failure to cover the corresponding cost.

(d)

Patheon’s Responsibility for Cost of Components . If Components expire or become obsolete or no longer useable in the Manufacturing Services because: (i) Patheon failed to manufacture and supply the quantities ordered by Client pursuant to a Firm Order, (ii) quantities of such Components are in excess of the amounts Patheon was authorized to purchase under Section 3.7(b) above or (iii) Patheon failed to store the Components as required by the Specifications, Patheon shall bear the cost of such Components.

(e)

Exclusive Component Purchasing Summary . Patheon shall provide Client, initially upon execution of this Agreement and thereafter on an annual basis, with a listing of all Components which are unique to the Client, which Patheon anticipates purchasing pursuant to the terms of this Agreement (in accordance with rolling forecasts and Firm Orders as per Section 3.3(a) and (b)) in the form as set out in Schedule J (the “Exclusive Component Purchasing Summary”). The Exclusive Components Purchasing Summary shall indicate which Components have a limited shelf-life and which are subject to minimum order quantities as specified by the supplier.

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TransOral Patheon MSA (Cincinnati and Whitby) – EXECUTION DRAFT

3.8

Patheon Audit Rights .

During the period in which the Purchase Commitment is in force, upon no less than ten (10) Business Days prior written notice to the Client, Patheon shall have the right to inspect, through a mutually acceptable designee under obligations of confidentiality substantially similar to those in Article 11, the Client’s financial records pertaining to the Products in order to verify Client’s compliance with the Purchase Commitment; provided, however, that Patheon may conduct such inspections only during Client’s business hours and no more than once annually, and agrees that its inspection rights shall only extend to those of Client’s financial records that are necessary to review in order to verify Client’s compliance with the Purchase Commitment.

ARTICLE 4

CLIENT’S OBLIGATIONS

4.1

Active Materials .

Pursuant to Section 2.1(a) above, in the event Client has determined that it will supply Active Materials to Patheon, all shipments of Active Materials made by Client or its designee to Patheon hereunder will be delivered to Patheon DDP (Incoterms 2000). The Client shall at its sole cost and expense, deliver such Active Materials to Patheon in sufficient quantities and at such times to facilitate the provision of the Manufacturing Services by Patheon, which Active Materials shall be held by Patheon on behalf of the Client on the terms and subject to the conditions contained in this Agreement (including without limitation the applicable terms of Section 2.1(a) above).

4.2

Invoices and Payment .

Pursuant to the terms of this Agreement, the Client shall pay Patheon for the provision of the Manufacturing Services and the supply of Product according to the fees specified in Schedules B and C hereto (such fees being subject to adjustment, but only in accordance with Article 5 below). Patheon shall send an invoice to Client for each Firm Order upon the date of shipment of the Product that is the subject of such Firm Order (such invoice, an “Invoice”). Invoices 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. Patheon shall also submit to the Client, with each shipment of Products, a duplicate copy of the Invoice covering such shipment. Patheon shall include in each Invoice any Inventory or Components which are to be purchased by Patheon pursuant to the terms of this Agreement. Each such Invoice shall, to the extent applicable, identify the Client Firm Order number, Product (or, if applicable, Components and/or Inventory) numbers, names and quantities, unit price, freight charges and the total amount to be remitted by the Client. The Client shall pay all such undisputed Invoices within thirty (30) days of the date of such Invoices, subject to the Client’s rights under Article 6. All taxes (and any related penalties or interest) imposed on any payment by Client to Patheon shall be the sole responsibility of Patheon.

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ARTICLE 5

CONVERSION FEES AND COMPONENT COSTS

5.1

First Year Pricing .

The fees for the Manufacturing Services and the supply of Product (which fees include the Component costs set forth on the Components List) for the first Year are listed in Schedules B and C and are subject to the adjustments set forth in Section 5.3 below.

5.2

Price Adjustments - Subsequent Years’ Pricing .

(a)

On January 1 of each Year of this Agreement, Patheon shall be entitled to an adjustment to the fees (i) for Manufacturing Services in respect of the Products to reflect inflation, which adjustment shall be in the amount of [***] unless the Parties otherwise agree in writing; and (ii) [***] provided that the fees [***].

(b)

In connection with a fee adjustment pursuant to clause (i) of Section 5.2(a), Patheon shall deliver to the Client by not later than November 1 ^st of each Year a revised Schedule B for the following Year and a statement outlining the percentage increase in the [***], upon which such fee adjustment for the following Year is based. In connection with all fee adjustments pursuant to clause (ii) of Section 5.2(a), Patheon shall deliver to the Client by not later than November 1 ^st of each Year a revised Schedule B and such budgetary pricing information or other documentation reasonably sufficient to demonstrate that a fee adjustment is justified. Fee revisions under this Section 5.2 shall be effective with respect to any Product ordered after the end of the then current Year.

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5.3

Price Adjustments - Current Year Pricing .

During any Year of this Agreement, the fees set out in Schedule B shall be subject to adjustment in accordance with the following:

(a)

Reduction in Minimum Run Quantity . If, pursuant to Section 3.4 above, Client requests that the Minimum Run Quantity for shipments of a Product ordered by Client be reduced and, as a result of such reduction, Patheon’s costs to manufacture such Product increase on a per unit basis, the Parties shall negotiate in good faith an increase in the fee for each such units of Product by an amount equal to the increase in Patheon’s costs to manufacture such units of Product.

(b)

Volume Reduction . If at any time during a given Year, but no more than once in a given Year, Patheon determines, acting reasonably and based on the forecasts and Firm Orders received from the Client for such Year, that the total quantity of Product to be ordered by Client in such Year will constitute no more than [***] of the Annual Volume specified in Schedule B hereto for such Year or, if applicable, any revised Annual Volume for such Year hereinafter agreed to by the Parties, and, as a result of such reduction, Patheon’s costs to manufacture such Product would increase on a per unit basis, the Parties shall negotiate in good faith an increase in the fee for such units of Product by an amount equal to the increase in Patheon’s costs to manufacture such units of Product. To the extent that the fee for Manufacturing Services in respect of a Product has been previously adjusted pursuant to this Section 5.3(b) to reflect reduced volumes, the adjustment provided in this Section 5.3(b) shall operate based on the fees attributed to such Product at the time the last of such adjustments were made. In the event that, following an increase in the price of Products for a given Year pursuant to this Section 5.3(b), the aggregate purchases of Product by Client from Patheon for such Year are subsequently greater than or equal to [***] of the Annual Volume agreed to by the Parties for such Product for such Year, Patheon agrees to promptly reimburse Client the total of the additional amounts paid by Client to Patheon pursuant to the increase in the Product price under this Section 5.3(b) for such Year. It is understood that the Annual Volume listed in Schedule B is for use by the Parties in calculating adjustments to the price of Products in accordance with the terms of this Section 5.3(b), and shall not be construed as a minimum purchase obligation on the part of Client.

(c)

No Overlap in Cost Accounting . The Parties agree that, for Product price increase calculations under Sections 5.3(a) and 5.3(b) above, to the extent that an increase in a Patheon cost was already accounted for in the calculation of the increase of the Product price under either Section 5.3(a) or 5.3(b), it shall not be accounted for in an increase of the Product price under the other section. For clarity, if, in a given Year, the Product price is increased under both Sections 5.3(a) and 5.3(b), to the extent an increased cost of Patheon has already been accounted for in one section, it shall not be accounted for in the other section.

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(d)

Extraordinary Increases in Component Costs . If at any time market conditions result in Patheon’s cost of Components being materially greater than the increases forecasted pursuant to Section 5.2(a) above, Patheon shall promptly notify Client in writing of such material increase, providing Client with a list of such Components and the amount of the increase in cost of each Component. For the purposes of this Section 5.3(d), for a particular Component or Component(s), changes materially greater than normal forecasted increases shall be considered to have occurred only if: (i) for a particular Component, the cost of a Component increases by [***] of the cost for that Component upon which the most recent fee quote was based; or (ii) for all Components, 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 Section 5.2(a) or this Section 5.3(d) 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 attributed to such Component (or Components) at the time the last of such adjustments were made.

In connection with a fee adjustment pursuant to this Section 5.3, Patheon shall deliver to the Client a revised Schedule B (including an updated Components List) and such budgetary pricing information, adjusted Component costs and other documentation reasonably sufficient to demonstrate that a fee adjustment is justified. Such revised fee shall be effective for Firm Orders placed by Client following Client’s receipt of a revised Schedule B.

5.4

Adjustments Due to Technical Changes .

Patheon shall implement Client’s written amendments to the Specifications and/or the Quality Agreement(s), provided that the fees specified in Schedules B or C shall be revised as mutually agreed by the Parties in writing to reflect the increase or decrease in Patheon’s costs necessitated by any such amendment. Amendments to the Specifications, the Quality Agreement(s) or the Manufacturing Site or the Secondary Manufacturing Site requested by Patheon will only be implemented following the written approval of Client, which shall be in Client’s sole discretion. Fee changes made pursuant to this Section 5.4 shall become effective only with respect to those orders of Products that are manufactured in accordance with the revised Specifications. In addition, subject to Section 3.7(c), the Client agrees to purchase, at Patheon’s out-of-pocket costs therefor, all Inventory utilized under the “old” Specifications and purchased and maintained by Patheon in accordance with this Agreement and the Specifications, in order to fill Firm Orders and in accordance with Section 3.7(b), to the extent that such Inventory can no longer be utilized due to the revisions in the 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 and in accordance with Section 3.7(b) shall be promptly cancelled where possible. Where such orders are not subject to cancellation without penalty, Patheon shall promptly provide Client notice of such orders and the amount of such penalty and, at Clients option, Client shall reimburse Patheon the amount of such penalty or, subject to Section 3.7(c), purchase such Components from Patheon.

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ARTICLE 6

PRODUCT CLAIMS AND RECALLS

6.1

Product Claims .

(a)

Product Claims . The Client has the right to reject any portion of any shipment of Products that deviates from the Specifications, cGMPs, the Quality Agreement(s) or Applicable Laws or the warranties given by Patheon in Section 9.3 and such rejection shall not invalidate any remainder of such shipment not rejected by Client. The Client or its designee shall inspect the Products manufactured by Patheon upon receipt thereof and shall give Patheon written notice (a “Deficiency Notice”) of all claims for Products that deviate from the Specifications, the Quality Agreement(s), cGMPs and Applicable Laws within [***] after the Client’s receipt thereof (or, in the case of any defects not reasonably susceptible to discovery upon receipt of the Product (such defects, “Latent Defects”), within [***] 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 [***], then the delivery shall be deemed to have been accepted by the Client on the [***] after delivery or Latent Defect discovery by Client, as applicable. Except as set out in Sections 6.2, 6.3 or 6.4, Patheon shall have no liability under this Section 6.1 for any deviations for which it has not received notice within the applicable [***] period.

(b)

Determination of Deficiency . Upon receipt of a Deficiency Notice, Patheon shall have [***] to advise the Client by notice in writing whether or not it disagrees with the contents of such Deficiency Notice. If the Client and Patheon fail to agree within [***] after Patheon’s notice to the Client as to whether any Products identified in the Deficiency Notice deviate from the Specifications, the Quality Agreement(s), cGMPs or Applicable Laws, then the Parties shall mutually select an independent laboratory to evaluate if such deviation exists. Such evaluation shall be binding on the Parties, and if such evaluation determines that any Products deviate from the Specifications, the Quality Agreement(s), cGMPs or Applicable Laws, then those Products shall be deemed to be properly rejected. If such evaluation results in a determination that there is no deviation in respect of any such Products, then the Client shall be deemed to have accepted delivery of such Products.

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TransOral Patheon MSA (Cincinnati and Whitby) – EXECUTION DRAFT

(c)

Shortages . Subject to Section 3.6 above, claims for shortages in the amount of Products shipped by Patheon shall be dealt with as may reasonably be agreed to by the Parties. Without limiting Client’s rights under Section 3.6, in the event of a shortage in the amount of Products in a given shipment by Patheon, Patheon shall include such Products in the next shipment of Products ordered by Client.

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 by Client 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. As used herein, “Recall” shall mean any action (i) by the Client to recover title to or possession of 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 governmental or regulatory 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 required 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.

6.3

Patheons Responsibility for Defective and Recalled Products.

(a)

Defective Product. In the event the Client rejects Products in accordance with Section 6.1 and Patheon agrees with Client’s rejection thereof or the Product is determined by a third-party laboratory pursuant to Section 6.1(b) above to deviate from the Specifications, the Quality Agreement(s), cGMPs or Applicable Laws, Patheon shall bear all third party laboratory reasonable testing costs with respect to such Product, if any, and shall promptly, at the Clients election, either: (i) refund the invoice price paid by Client for such defective Products; (ii) offset such

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TransOral Patheon MSA (Cincinnati and Whitby) – EXECUTION DRAFT

amount against other amounts due to Patheon hereunder; or (iii) replace such Products with conforming Products within the shortest possible time without the Client being liable for payment therefor, contingent upon the receipt from the Client of all Active Materials required for the manufacture of such replacement Products. For greater certainty, Patheon’s responsibility for any loss of Active Materials in connection with defective Product shall be captured and calculated in the Active Materials Yield under Section 2.2.

(b)

Recalled Product. T o the extent that a Recall or Product return results from, or arises out of, a failure by Patheon to provide the Manufacturing Services in accordance with the Specifications, the Quality Agreement(s), cGMPs or Applicable Laws, Patheon shall be responsible for the documented out-of-pocket expenses of such Recall or return and shall promptly, at Client’s election, either: (i) refund the invoice price paid by Client for such Products; (ii) offset such amounts against other amounts due to Patheon hereunder; or (iii) use its commercially reasonable efforts to replace the Recalled or returned Products with new Products without Client being liable for payment therefor, contingent upon Patheon’s possession or receipt from the Client of all Active Materials required for the manufacture of such replacement Products. For greater certainty, Patheon’s responsibility for any loss of Active Materials in connection with Recalled Product shall be captured and calculated in the Active Materials Yield under Section 2.2. To the extent that a Recall or return does not result from, or arise out of, a failure by Patheon to provide the Manufacturing Services in accordance with the Specifications, the Quality Agreement(s), cGMPs or Applicable Laws, Recalls, returns or other corrective actions shall be made at the Client’s cost and expense.

6.4

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 without Patheon’s prior written authorization to do so, unless otherwise required by Applicable Laws. Alternatively, Patheon may instruct the Client to return such Products to Patheon at Patheon’s expense. Patheon shall bear the cost of disposition with respect to any damaged, defective, returned or Recalled Products in relation to which it bears responsibility under Section 6.1, 6.2 or 6.3 hereof. In all other circumstances, the Client shall bear the cost of disposition with respect to any damaged, defective, returned or Recalled Products.

6.5

Customer Questions and Complaints .

The Client shall have the sole responsibility for responding to questions and complaints from the Client’s customers. Questions or complaints received by Patheon from the Client’s customers shall be promptly referred to the Client. Patheon shall co-operate as reasonably required to allow the Client to determine the cause of and resolve any customer

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TransOral Patheon MSA (Cincinnati and Whitby) – EXECUTION DRAFT

questions and complaints. Such assistance shall include follow-up investigations, including testing. In addition, Patheon shall provide the Client with all mutually agreed upon information that will enable the Client to respond properly to questions or complaints relating to the Products as provided in the Quality Agreement(s). Unless it is determined that the cause of any customer complaint resulted from a failure by Patheon to provide the Manufacturing Services in accordance with the Specifications, the Quality Agreement(s), cGMPs or Applicable Laws, all costs incurred in respect of this Section 6.5 shall be borne by the Client.

6.6

Sole Remedy .

Except for the remedies provided in Sections 2.2, 3.6 and 10.3, and subject to the limitations set forth in Sections 10.1 and 10.2, the remedies described in this Article 6 shall be the Client’s sole remedy for any failure by Patheon to provide the Manufacturing Services in accordance with the Specifications, the Quality Agreement(s), cGMPs and Applicable Laws.

ARTICLE 7

CO-OPERATION; REGULATORY FILINGS

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 (each, a “Relationship Manager”) . 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. As of the Effective Date, the names and contact information for the Relationship Managers are as follows:


For Client:		TransOral Pharmaceuticals, Inc.
		1003 W. Cutting Blvd., Suite 110
		Pt. Richmond, CA 94804
		Attn: Dennie Dyer, VP. Operations
		Tel.: 510-215-3500
		Fax: 510-215-3535
		Email: ddyer@transoral.com

For Patheon:		Barbara Waltimire
		Sr. Business Development Manager
		West Coast Region- Northern California
		4712 Hedgewick, CA 94538
		Tel.: 510-220-4282
		Fax: 510-440-0617
		Email: barbara.waltimire@patheon.com

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TransOral Patheon MSA (Cincinnati and Whitby) – EXECUTION DRAFT

7.2

Governmental Agencies .

Subject to Section 7.7, Patheon may communicate with any Regulatory Authority regarding the Products only if, in the reasonable opinion of Patheon’s counsel, such communication is necessary to comply with the terms of this Agreement or Applicable Laws; provided, however, that unless, in the reasonable opinion of Patheon’s counsel, there is a legal prohibition against doing so, Patheon shall notify Client reasonably advance of any such communication and permit the Client to accompany Patheon and take part in any communications with such Regulatory Authority, and provide the Client with copies of all such communications from such Regulatory Authority.

7.3

Records and Accounting by Patheon .

Patheon shall keep records of the manufacture, testing and shipping of the Products, and retain samples of such Products as are necessary to comply with cGMP, Applicable Laws, the Quality Agreement(s), and manufacturing regulatory requirements applicable to Patheon, 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 law at which time the Client will be contacted concerning the delivery and destruction of such documents.

7.4

Inspection .

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

Access .

(a)

Patheon shall provide the Client with reasonable access at mutually agreeable times to its Manufacturing Site and Secondary Manufacturing Site, as applicable, in which the Products are manufactured, stored, handled or shipped in order to permit the Clients verification of Patheon’s compliance with the Specifications, the Quality Agreement(s), cGMPs and 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.

(b)

Patheon shall permit the FDA and other Regulatory Authorities to conduct inspections of the Manufacturing Site and Secondary Manufacturing Site as they may request, including pre-approval inspections, and shall cooperate with such Regulatory Authorities with respect to the inspections and any related matters, in each case which is related to the Manufacturing Services or Product. Patheon shall give Client notice within one Business Day of becoming aware of any such inspections, and keep Client informed about the results and conclusions of each

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TransOral Patheon MSA (Cincinnati and Whitby) – EXECUTION DRAFT

regulatory inspection, including actions taken by Patheon to remedy conditions cited in the inspections. In addition, Patheon will provide Client with copies of any written inspection reports issued by Regulatory Authorities and all correspondence between Patheon and Regulatory Authorities, including, but not limited to, FDA Form 483, Notice of Observation, and all related correspondence, in each case relating to the Manufacturing Services, Product, or general manufacturing concerns related to the Product. Patheon agrees to promptly notify and provide Client copies of any request, directive or other communication of the FDA or other Regulatory Authority relating to the Manufacturing Services or Product and to cooperate with Client in responding to such requests, directives and communications.

7.6

Reports .

Patheon will promptly supply on an annual basis and when requested by Client from time to time, at no additional charge, all available information and data in its control that the Client reasonably requires in order to complete any filing for, or apply for, obtain or maintain, regulatory approvals under any applicable regulatory regime (including any Annual Report that the Client is required to file with the FDA), including without limitation information relating to the Manufacturing Site and Secondary Manufacturing Site, Development Report (as described in ICH guidelines), Manufacturing Services, Product or the process, methodology, raw materials and intermediates used in the manufacture, processing, or packaging of the Product, release test results, complaint test results, all investigations (in manufacturing, testing and storage), and all information required to be submitted in the CMC section of an IND or a NDA or other regulatory filings, or required or requested to be provided to any Regulatory Authority. At the Client’s request, Patheon shall provide a copy of the Annual Product Review Report to the Client at no additional cost. Any additional report requested by Client beyond the scope of what is required or recommended under cGMPs, Applicable Laws and customary FDA or other Regulatory Authority requirements shall be subject to an additional fee to be agreed upon between Patheon and the Client. In addition, Patheon shall cooperate with Client with respect to all reporting obligations relevant to the Product under Applicable Laws.

7.7

Regulatory Filings

(a)

Regulatory Authority . As between the Parties, the Client shall have the exclusive right to and sole responsibility for filing all documents with all Regulatory Authorities and taking any other actions that may be required for the receipt and/or maintenance of Regulatory Authority approval for the commercial manufacture of the Products. Patheon shall assist the Client, to the extent consistent with Patheon’s oblig

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