Toll Manufacturing Agreement: Definition & Sample

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What is a Toll Manufacturing Agreement?

A toll manufacturing agreement is a legal contract between two parties, typically a company and an outside contractor. The toll manufacturing agreement covers the terms and conditions between the company and the supplier of raw materials or partially finished products to a third party. Typically that third party will provide services that allow for the finishing of the product or goods for the company.

Toll manufacturing agreements are a good option if the raw materials or partially finished products or goods are worth hiring a third party to finish the product on behalf of the company. These agreements cover control and quality of the materials or partial product, exclusivity rights, and pricing or payment terms.

Common Sections in Toll Manufacturing Agreements

Below is a list of common sections included in Toll Manufacturing Agreements. These sections are linked to the below sample agreement for you to explore.

Toll Manufacturing Agreement Sample

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Under 17 C.F.R. §§ 200.80(b)(4)

TOLL MANUFACTURING AGREEMENT

THIS TOLL MANUFACTURING AGREEMENT (the “ Agreement ”), signed on September 30 th , 2010, is made and entered into by and among Agro Industrie Recherches et Développements, S.A., a French entity (“ ARD ”), Bioamber, S.A.S., a French entity (“ Bioamber ”) and DNP Green Technology, Inc., a Delaware corporation (“ DNP Green ”).

WHEREAS DNP Green, ARD and Bioamber have signed a Transitional Work Plan Agreement as of September 30 th , 2010 (the “Transitional Work Plan Agreement” ) providing for the possible entry into force of a Toll Manufacturing Agreement;

WHEREAS, Bioamber agrees to grant, for the duration of this Agreement, to ARD a non-exclusive, worldwide, royalty free license to any intellectual property rights (“IP”) (i.e. any required licensed patents and licensed know-how granted by DNP Green to Bioamber as defined in the License Agreement between DNP Green and Bioamber dated 25 September 2008, with the exclusion of the Derivative Products) required solely for ARD to perform its obligations as defined in this Agreement. ARD shall have the right to sublicense any of the aforementioned rights to third parties. ARD’s permitted use of the rights granted pursuant to the aforementioned license or sub-licenses shall be solely limited to the performance by ARD of its obligations provided in this Agreement.

WHEREAS DNP Green accepts to warrant the performance by Bioamber of all its obligations mentioned in this Agreement.

WHEREAS ARD and Bioamber now wish to agree on the terms and conditions of such Toll Manufacturing Agreement;

NOW, THEREFORE , in consideration of the mutual covenants and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by each party, and intending to be legally bound hereby, the parties agree as follows:

STATEMENT OF AGREEMENT

Bioamber hereby agrees to retain the services of ARD for the production of succinic acid (the “ Product ”), at ARD’s succinic acid demonstration plant, possessing an initial annual production capacity of [***] and located at Pomacle,

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ARD shall provide such services to Bioamber on an exclusive basis, and ARD agrees that, for the term of this Agreement, no other activity will be conducted at the Demonstration Plant without the prior written approval of Bioamber. In the event that the Demonstration Plant is not operating at full capacity, ARD will have the ability to propose to a third-party manufacturing services in the Demonstration Plant to produce non-succinic acid related products, in order to reduce labor costs for Bioamber. Such third party manufacturing services shall be at Bioamber’s sole discretion and Bioamber shall be under no obligation to accept the production of non-succinic acid related products. For the avoidance of doubt, in the event that ARD does not find a third- party duly approved by Bioamber accepting to enter into a manufacturing contract in the Demonstration Plant to produce non-succinic acid related products, Bioamber shall have to pay to ARD all the labor costs borne by ARD as provided in this Agreement resulting directly from the Demonstration Plant not operating at full capacity. DNP Green shall also have the right to propose a third party for manufacturing services to reduce labor costs, subject to the approval of ARD; should ARD not give its approval, Bioamber shall have to pay ARD according to the provisions hereinabove.

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A Steering Committee will be put in place following the entry into force of this Agreement, consisting of one representative designated by Bioamber from time to time and one representative designated by ARD from time to time. Such committee (i) will oversee the application of this Agreement and any process development or optimization work and (ii) shall remain in force until the termination of this Agreement. In the event of any disagreement, the parties undertake to cooperate with diligence and good faith in order to find an amicable solution to any dispute that may arise between them, it being understood that Bioamber, as exclusive beneficiary of the Demonstration Plant and the party liable for the operational cost of the Demonstration Plant during the term of this Agreement, shall make the final decision. If an amicable solution is not found and agreed to between the members of the Steering Committee with respect to any disagreement within a period of two (2) weeks from its occurrence, Bioamber shall have the sole authority to make a final decision regarding the concerned disagreement. In the event that Bioamber imposes a decision that ARD does not agree with, and ARD notifies Bioamber of its objection in writing, indicating the

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Bioamber is to pay any undisputed invoice submitted by ARD concerning the Product within fifteen (15) days of receipt of such invoice.

The acceptance of the Product and the payment thereof (as provided in Section above), by Bioamber, shall at all times take place under reserve of inspection and approval by Bioamber that shall be completed by Bioamber no later than ten (10) business days after having received the analytical data from the Demonstration Plant and the ARD analytical labs that is needed to prepare a certificate of

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In the event of any disagreement between ARD and Bioamber stemming from the refusal by Bioamber to approve any Product in connection with Bioamber’s right of inspection and approval provided in this subsection 9.2, ARD and Bioamber agree to jointly designate a qualified third party analytical lab who shall proceed with another analysis of the concerned Product and shall determine if such Product is in accordance or not with the Purchase Order. Such jointly designated third party shall have the authority to make a final decision with respect to such disagreement.

If ARD does not comply with the provisions stipulated in the preceding paragraph, it shall not be able to rely on any event of force majeure.

A force majeure event means an event beyond the control of the party which has not performed its obligation, such as strikes, natural disaster, social unrest, war, unavailability of means of transport, embargo.

The performance of obligations shall resume its normal course as soon as the force majeure event has ceased.

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If the force majeure event lasts longer than a period of three months, each party shall have the option of automatically terminating this Agreement without damages due from either side.

Title of ownership and the risks involved in the loss of the Product shall be transferred from ARD to Bioamber when the Product have been reviewed by Bioamber according to the provisions of section 9 and Bioamber is satisfied that such Product meets the Product Specifications and Packaging Specifications. Upon Bioamber’s written notification to ARD that such Product is in accordance with the Product Specifications and Packaging Specifications, the Product will be released from quarantine. ARD will then affix the seals on the bags in order to prevent any modification of the Product and Bioamber will therefore assume title of ownership as well as any risk associated with such ownership (“ QC Release ”). No Product shall leave the warehousing facility within the Demonstration Plant or be delivered to the designated carrier as provided in Section 9.1 prior to having

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For the avoidance of doubt, this article 13 does not apply to any claim made pursuant to 9.2 when ARD has remedied the reservation and claims made by Bioamber in accordance with section 9.2 of this Agreement.

No party shall, in any case, be liable to the other party for any indirect consequential, consecutive, pecuniary and/or punitive damages suffered by such other party upon execution of the Agreement.

The amount of the indemnification for which ARD may be liable with respect to any damage suffered by Bioamber will be calculated after deducting, if any, the amount of the benefit resulting from an immediate tax savings benefiting to Bioamber as a result of the tax deductibility of said damages.

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Once Bioamber has become aware of events that are likely to give rise to Claims under this article 13, Bioamber must give notice of such Claims within 20 (twenty) Business Days from the date at which Bioamber has become aware of the events that were likely to give rise to such Claim. Failure to provide such Claim Notice within such time period will not operate to relieve ARD of any liability for such claim.

ARD shall be deemed to accept any Claim made by Bioamber and shall be liable to indemnify Bioamber Party for the amount of damages requested in such Claim (subject to the limitations set out in this article 13) unless ARD have given Bioamber a notice within 30 days following the Claim Notice substantially evidencing that ARD is not in breach. For the avoidance of doubt, shall ARD not reply within 30 days, this lack of reply shall be regarded as an acceptance of the Claim by ARD. If the notice to Bioamber following the Claim Notice is not given within 30 days or if said notice does not substantially evidence that ARD is not in breach, Bioamber shall be entitled to ask to ARD for payment of the indemnities within twenty (20) business days as from the expiration of the above 30-day period.

Parties shall in good faith discuss any and all Claims with a view to reaching agreement on whether and to what extent ARD is liable for the damage.

If ARD and Bioamber are unable to reach agreement within a period of two (2) months on the amount of the damage to be indemnified by ARD, the matter may be referred to arbitration.

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If the cumulative levels of the usage factors required for the production of crystalline succinic acid remain higher, after June 30 th , 2011, than the Target Usage Factors listed in Schedule Y upon execution by the Parties, Bioamber may solely terminate this Agreement without damages by giving written notice to this effect to ARD.

Following the termination of this Agreement:

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ARD and Bioamber shall, and shall cause their respective Affiliates to, have and maintain such type and amounts of liability insurance covering the performance of this Agreement as it is normal and customary in this industry generally for parties similarly situated, and shall upon request provide the other Party with a coverage certificate in that regard, along with any amendments and revisions thereto.

20.3.1. Bioamber and DNP or any of the successors of their business shall grant to ARD a non-exclusive, worldwide, free license to any intellectual property rights (“ IP ”) required for ARD to perform this Agreement.

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Subject to sections below, BIOAMBER AGREES TO DEFEND, INDEMNIFY AND HOLD ARD HARMLESS FROM AND AGAINST ANY AND ALL OUT-OF-POCKET COSTS, DAMAGES AND LOSSES (INCLUDING WITHOUT LIMITATION REASONABLE ATTORNEY’S FEES AND COSTS) ARISING OUT OF OR RESULTING FROM THIRD PARTY CLAIMS BASED ON ALLEGED INFRINGMENT OF ANY OF THE BIOAMBER’S INTELLECTUAL PROPERTY LICENSED TO ARD PURSUANT TO SECTION 20.3.1 HEREOF INCLUDING THE CONSEQUENCES TRIGERRED BY THE CONSEQUENT TERMINATION OF THE AGREEMENT.

SPECIAL DAMAGES. EXCEPT IN CIRCUMSTANCES OF GROSS NEGLIGENCE OR INTENTIONAL MISCONDUCT BY A PARTY OR ITS AFFILIATES , NEITHER PARTY SHALL BE RESPONSIBLE TO THE OTHER FOR SPECIAL, INCIDENTAL, EXEMPLARY, OR CONSEQUENTIAL DAMAGES THAT MAY BE INCURRED PURSUANT TO THIS AGREEMENT OR PERFORMANCE HEREUNDER.

HEALTH AND SAFETY. BIOAMBER WARRANTS OR GUARANTEES THAT THE EXERCISE OF THE RIGHTS GRANTED PURSUANT TO THIS AGREEMENT AND THE USE OF ANY PRODUCTS MADE PURSUANT TO THE PRACTICE OF SUCH RIGHTS WILL NOT RESULT IN SAFETY OR HEALTH HAZARDS TO WORKERS, THE ENVIRONMENT, OR TO PURCHASERS OF SUCH PRODUCTS.

INDEMNIFICATION BY BIOAMBER. SUBJECT TO ARD LIABILITY AS MANUFACTURER ON BEHALF OF BIOAMBER AND UNDER BIOAMBER INSTRUCTIONS, BIOAMBER HAS SOLE DISCRETION AND RESPONSIBILITY FOR ITS DESIGN, MAKING, MANUFACTURE, AND SALE OF PRODUCTS PURSUANT TO THIS AGREEMENT. ACCORDINGLY, TO THE EXTENT PERMITTED BY THE LAW OF FRANCE, OR ANY OTHER LAW APPLICABLE, BIOAMBER SHALL INDEMNIFY, DEFEND, AND HOLD ARD AND ITS AFFILATES HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, SUITS, OBLIGATIONS, CAUSES OF ACTION, LIABILITY, COSTS AND DAMAGES (INCLUDING, WITHOUT LIMITATION, ALL CLAIMS, AWARDS FOR DAMAGES, ATTORNEY FEES, COURT COSTS, INTEREST, PENALTIES, ETC), INJURIES TO PERSONS (INCLUDING DEATH) OR PROPERTY (INCLUDING, WITHOUT LIMITATION, LOSS OF USE), PRODUCT LIABILITY CLAIMS, CLAIMS FOR IP INFRINGEMENT AND CLAIMS FOR DAMAGE TO THE ENVIRONMENT (COLLECTIVELY, “LIABILITIES”), WHATEVER THE CAUSE MAY BE, BASED UPON, ARISING OUT OF, OR RELATED TO THE ACTS OR OMISSIONS OF BIOAMBER AND ITS AFFILIATES AND/OR ANY OF THEIR EMPLOYEES, OFFICERS, EMPLOYEES, AND CONSULTANTS, SUBLICENSEES OR OTHER PERSONS ACTING ON THEIR BEHALF OR UNDER THEIR CONTROL, IN CONNECTION WITH BIOAMBER’S EXECUTION,

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DELIVERY AND PERFORMANCE OF, OR FAILURE TO PERFORM, THIS AGREEMENT, EXCLUDING LIABILITIES ARISING OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ARD, SUCH LIABILITIES HAVING BEEN OR NOT ESTABLISHED IN A COURT OF LAW AS HAVING BEEN CAUSED SOLELY AND DIRECTLY BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT ON THE PART OF ARD.

INDEMNIFICATION BY ARD. TO THE EXTENT PERMITTED BY THE LAW OF FRANCE, OR ANY OTHER LAW APPLICABLE, ARD SHALL INDEMNIFY, DEFEND, AND HOLD BIOAMBER AND ITS AFFILATES HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, SUITS, OBLIGATIONS, CAUSES OF ACTION, LIABILITY, COSTS AND DAMAGES (INCLUDING, WITHOUT LIMITATION, ALL CLAIMS, AWARDS FOR DAMAGES, ATTORNEY FEES, COURT COSTS, INTEREST, PENALTIES, ETC), INJURIES TO PERSONS (INCLUDING DEATH) OR PROPERTY (INCLUDING, WITHOUT LIMITATION, LOSS OF USE), AND CLAIMS FOR DAMAGE TO THE ENVIRONMENT (COLLECTIVELY, “LIABILITIES”), WHATEVER THE CAUSE MAY BE, BASED UPON, ARISING OUT OF, OR RELATED TO THE ACTS OR OMISSIONS OF ARD AND ITS AFFILIATES AND/OR ANY OF THEIR EMPLOYEES, OFFICERS, EMPLOYEES, AND CONSULTANTS, SUBLICENSEES OR OTHER PERSONS ACTING ON THEIR BEHALF OR UNDER THEIR CONTROL, IN CONNECTION WITH ARD’S EXECUTION, DELIVERY AND PERFORMANCE OF, OR FAILURE TO PERFORM, THIS AGREEMENT, NAMELY IN CONNECTION WITH ARD’S MANUFACTURE OF PRODUCTS PURSUANT TO THE TERMS OF THIS AGREEMENT, EXCLUDING LIABILITIES ARISING OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF BIOAMBER, SUCH LIABILITIES HAVING BEEN OR NOT ESTABLISHED IN A COURT OF LAW AS HAVING BEEN CAUSED SOLELY AND DIRECTLY BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT ON THE PART OF BIOAMBER.

The parties hereby agree to treat the transactions contemplated hereby and all information received in connection therewith in the strictest confidence and more particularly, ARD hereby agrees to comply will all provisions of the Confidentiality and Non-competition Agreement signed by ARD and effective as of July 1 st , 2010, and DNP Green hereby agrees to comply will all provisions of the Confidentiality Agreement signed by DNP Green and effective as of July 1 st , 2010.

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