PORTIONS OF
THIS EXHIBIT MARKED “[* * *]” HAVE BEEN OMITTED
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE
24b-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND
THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY IN PAPER FORM WITH
THE SECURITIES AND EXCHANGE COMMISSION.
SOFTGEL DEVELOPMENT AND CLINICAL
SUPPLY AGREEMENT
This Softgel
Development and Clinical Supply Agreement (“Agreement”)
is made as of this 5th day of October, 2005, by and between Sytera
Inc., having its registered office at 505 Coast Boulevard South,
Suite 412, La Jolla, California 92037 (hereinafter
“Client”), and Cardinal Health PTS, LLC, a limited
liability company organized under the laws of the State of
Delaware, through its Pharmaceutical Development group with a place
of business at 14 Schoolhouse Road, Somerset, New Jersey 08873
(hereinafter “Cardinal Health”).
Client is a
pharmaceutical company that manufactures, markets, and sells
pharmaceutical products. Cardinal Health provides a complete range
of analytical, development and clinical services to the
pharmaceutical industry. Client and Cardinal Health desire to enter
into this Agreement to provide the terms and conditions upon which
Client is engaging Cardinal Health to provide services as defined
in one or more Project Plans (as defined below) specifying the
details of the services and the related terms and
conditions.
THEREFORE
, in consideration of the mutual covenants, terms and conditions
set forth below, the parties agree as follows:
The following
terms have the following meanings in this Agreement:
1.1 “
Affiliate(s) ” means any corporation, firm,
partnership or other entity that controls, is controlled by or is
under common control with a party. For purposes of this definition,
“control” shall mean the ownership of at least fifty
percent (50%) of the voting share capital of such entity or any
other comparable equity or ownership interest.
1.2 “
API ” means the active pharmaceutical ingredient of
Client referred to as Fenretinide.
1.3 “
Applicable Laws ” means all laws, ordinances, rules
and regulations applicable to a Project or any aspect thereof and
the obligations of Cardinal Health or Client, as the context
requires, under this Agreement, including, without limitation,
(a) all applicable federal, state and local laws and
regulations; (b) the U.S. Federal Food, Drug and Cosmetic Act,
and (c) the Good Manufacturing Practices (“GMPs”)
or Good Laboratory Practices (“GLPs”) promulgated by
the Regulatory Authorities, as amended from time to time, as
applicable to such Project.
1.4 “
Batch Cost ” means the fee payable by Client for the
performance of a batch manufacturing or packaging Project as
provided in Section 3.1.1.
1.5 “
Cardinal Health Indemnitees ” has the meaning set
forth in Section 9.2.
1.6 “
Cardinal Health Inventions ” has the meaning set forth
in Section 7.3.
1.7 “
Change Order ” has the meaning set forth in
Section 2.2.
1.8 “
Client Indemnitees ” has the meaning set forth in
Section 9.1.
1.9 “
Client Inventions ” has the meaning set forth in
Section 7.2.
1.10 “
Client-Supplied Materials ” means any API or other
materials provided by Client to Cardinal Health.
1.11 “
Confidential Information ” has the meaning set forth
in Section 6.2.
1.12 “
Dispute ” means any dispute, controversy or
disagreement between the parties in connection with this
Agreement.
1.13 “
Facility ” means a Cardinal Health facility identified
in a Project Plan.
1.14 “
Intellectual Property ” means all intellectual
property (whether or not registered), including without limitation,
patents, patent applications, know-how, trade secrets, copyrights,
trademarks, designs, concepts, technical information, manuals,
standard operating procedures, instructions or
specifications.
1.15 “
Losses ” has the meaning set forth in
Section 9.1.
1.16 “
Process Invention ” has the meaning set forth in
Section 7.2.
1.17 “
Product ” means the finished product or material that
is the subject of the Services to be provided pursuant to the
applicable Project Plan.
1.18 “
Project ” means each project described in a Project
Plan. For avoidance of doubt, a collection of activities to be
performed by Cardinal Health for which Cardinal Health has provided
Client one estimated cost in the applicable quotation will be
considered one Project.
1.19 “
Project Plan ” means a separate quotation or project
plan agreed to by the parties in writing, attached hereto, and
incorporated by reference into this Agreement, and which defines
the scope of the Services to be performed by Cardinal Health and
the responsibilities of the parties with respect to such
Services.
1.20 “
Regulatory Authority ” means any governmental
regulatory authority involved in regulating any aspect of the
development, manufacture, market approval, sale, distribution,
packaging or use of the Product.
1.21 “
Services ” means all work performed by Cardinal Health
for Client pursuant to the applicable Project Plan.
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1.22 “
Softgel Technology ” is a proprietary technology for
the manufacture of soft capsules (“softgels”) for the
oral administration of pharmaceutical active ingredients having
certain solubility characteristics and includes proprietary
know-how including without limitation know-how relating to
(a) the development of fill and shell formulations;
(b) the design and use of the encapsulation process to enhance
stability, solubility, bioavailability, and manufacturability of
active ingredient chemical entities in softgels; (c) the
selection and preparation of solvents, vehicles, excipients,
surfactants, stabilizers, gelatin, gelatin substitutes,
plasticizers and other components of the liquid fill and the shell;
and (d) certain encapsulation, drying and related
manufacturing techniques and machinery for making commercial
quantities of softgels. The Softgel Technology is included in
Cardinal Health’s Intellectual Property.
1.23 “
Specifications ” means all written specifications for
finished product (i.e., after completion of product development)
agreed to by the parties in a Project Plan, and applicable master
batch records, protocols, or standard operating
procedures.
1.24 “
Term ” has the meaning set forth in
Section 12.1.
2.1 Definition
of Scope . Cardinal Health will perform the Services for each
Project, which Client has authorized Cardinal Health in writing to
perform, in accordance with the specific terms set forth in the
applicable Project Plan, which shall: (a) clearly define the
Project, the Product, and the responsibilities of the parties with
respect to such Project; (b) include, as appropriate, the
scope of work, pricing and payment schedule; and (c) be
subject to all of the terms and conditions of this Agreement, in
addition to the specific details set forth in the applicable
Project Plan. Any quotation and/or set of Specifications for a
Project shall become part of the applicable Project Plan upon
written approval or acceptance of such quotation and/or set of
Specifications by the parties. The parties acknowledge and agree
that Cardinal Health Quotation No. QTE-SZU-0002.03 entitled
“Phase II Clinical Supplies of Fenretinide 100mg Softgels
(Active and Placebo)” and dated June 13, 2005, a copy of
which is attached hereto and incorporated herein by reference,
constitutes the first Project Plan hereunder. Cardinal Health
acknowledges that Client’s execution of any Project Plan is
not an authorization for Cardinal Health to perform all of the
Projects specified therein and that Cardinal Health must obtain
Client’s prior written authorization on a Project-by-Project
basis before Cardinal Health begins performing each Project. To the
extent any terms or conditions of any Project Plan conflict with
the terms and conditions of this Agreement, the terms and
conditions of this Agreement shall control, except to the extent
that such Project Plan expressly and specifically states an intent
to supersede this Agreement on a specific matter. This Agreement
shall supersede the terms of any purchase order, acknowledgement or
delivery document.
2.2 Amendments
to Scope/Change Orders . Any material change in the details of
a Project Plan or the assumptions upon which such Project Plan is
based (including, but not limited to, changes in an agreed starting
date for a Project or suspension of a Project by Client) may
require changes in the pricing and/or time lines, and shall require
a written amendment to such Project Plan (a “Change
Order”). Each Change Order shall detail the requested changes
to the applicable task, responsibility, duty, pricing, time line or
other matter. The Change Order will
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become
effective upon the execution of the Change Order by both parties,
and Cardinal Health will be given a reasonable period of time
within which to implement the changes. Both parties agree to act in
good faith and promptly when considering a Change Order requested
by the other party. Without limiting the foregoing, Client agrees
that it will not unreasonably withhold approval of a Change Order
if the proposed changes in pricing or time lines result from, among
other appropriate reasons, forces outside the reasonable control of
Cardinal Health or changes in the assumptions upon which the
initial pricing or time lines were based. Cardinal Health reserves
the right to postpone effecting material changes in the applicable
Project’s scope until such time as the parties agree to and
execute the corresponding Change Order.
ARTICLE 3
PRICING AND PAYMENT TERMS
3.l Price and
Price Changes .
3.1.1
Price . Client shall pay for the Services performed by
Cardinal Health as provided in this Agreement and the applicable
Project Plan.
3.1.2
Price Changes . Cardinal Health may revise the prices
provided in the Project Plan for a Project, with Client’s
prior written consent, which consent will not be unreasonably
withheld, to the extent the cost of performing the Services for
such Project has increased because: (a) the parties agreed to
revise a technical test protocol, (b) any information relating
to such Project that was provided by Client is inaccurate or
incomplete, (c) Client revised Cardinal Health’s
responsibilities, the Specifications, applicable test methods,
final review of test methods, procedures, assumptions, development
processes, test methods or analytical requirements, (d) Client
requested an alternate report format, or (e) Client requested
revisions to laboratory reports, (f) Client requested copies
of laboratory records (excluding a single copy of batch records
which will be provided for each batch manufactured hereunder). Any
revisions in prices proposed by Cardinal Health must be notified to
Client prior to initiating or continuing additional work on such
Project.
3.1.3
Retesting . All retesting performed at Client’s
request, that is not directly due to a Cardinal Health erroneous
action or omission will be billed to the Client. All
investigational studies performed by Cardinal Health that are
required by Applicable Laws and approved by Client or requested by
Client and that are not outlined in the applicable Project Plan
will be invoiced for the cost of performance at the current
standard hourly rate, plus any reasonable associated
fees.
3.1.4
Out Of Specification Investigations . Cardinal Health
reserves the right to expend up to 4 hours per occurrence to
complete all required investigational work (such as OOS
investigations, trouble shooting chromatographic methods, etc.)
without prior approval from the Client. If the additional work
requires going beyond 4 hours, the Client will be contacted prior
to continuation. Cardinal Health will not perform the additional
work until it receives Client’s approval in
writing.
3.1.5
Cancellations . Client may cancel any Project at any time
with or without cause, subject to the payment provisions of this
Section 3.1.5. If Client cancels any Project which
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Client has
authorized Cardinal Health to initiate, without cause, Client shall
pay Cardinal Health as described in Section 12.4 and in this
Section 3.1.5: (a) for batch manufacture or packaging,
Client shall pay a fee in accordance with the following
schedule:
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Notification
prior to Date of Compounding
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Fee (% of Total Batch
Cost)
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[* * *]
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and
(b) for any Project that is not batch manufacture or
packaging, Client shall pay (i) all costs for materials
purchased and labor for the time spent by Cardinal Health in
performing the Services up to the point of cancellation based on
the rates provided in the Project Plan for such cancelled Project,
plus (ii) [* * *]. If a Project that Client has authorized Cardinal
Health to initiate is delayed by more than [* * *] at
Client’s request, Cardinal Health, at its option, may
consider such Project cancelled without cause and will charge
Client the applicable charges. If Client cancels any Project which
Client has authorized Cardinal Health to initiate, for cause as
provided in Section 12.3(b) of this Agreement. Client shall
pay Cardinal Health the amount described in clause (b)(i), above,
and any applicable charges described in Section 12.4, below.
The fees payable by Client to Cardinal Health under this
Section 3.1.5 and Section 12.4, below, constitute
Client’s entire obligation and Cardinal Health’s sole
and exclusive remedy in the event Client cancels any Project under
this Agreement. Upon such payment being made by Client, the
materials referred to in clause (b)(i) above shall be returned by
Cardinal Health to Client, at Client’s expense.
3.2
Invoicing . Cardinal Health shall invoice Client as
follows:
3.2.1
For lot manufacture and/or packaging, Cardinal Health shall invoice
Client upon [* * *]. The invoice must itemize each completed
milestone in accordance with the milestones for the applicable
Project as described in the applicable Project Plan.
3.2.2
For any Project activity that can be completed within [* * *]
(other than lot manufacture and/or packaging), Cardinal Health
shall invoice Client upon completion of the applicable
Project.
3.2.3
For any Project activity that cannot be completed within [* * *]
(other than lot manufacture and/or packaging), Cardinal Health
shall invoice Client on a [* * *] basis but no earlier than [* * *]
for the work performed during the prior [* * *].
3.3 Payment
Terms . [* * *]
3.4 Advance
Payment . If Client has failed to timely pay any fees due on
more than [* * *] occasions in any [* * *] period, Client’s
credit shall be deemed impaired, and Cardinal Health shall have the
right to require payment in advance before making any further
shipment of the Product. If Client shall fail, within a reasonable
time, to make such payment in advance, Cardinal Health shall have
the right, at its option, to suspend any further deliveries
hereunder until such default is corrected, without thereby
releasing Client from its payment obligations accrued under this
Agreement.
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3.5 Taxes .
All taxes, duties and other amounts assessed (excluding tax based
on net income and franchise taxes) on the services, components, API
or the Product prior to or upon sale to Client and on any Client
owned tooling and equipment are the responsibility of Client, and
Client shall reimburse Cardinal Health for any such taxes, duties
or other expenses paid by Cardinal Health.
3.6
Shipments . All product, raw materials and components
shipped by Cardinal Health are shipped F.O.B., Facility. All
product, raw materials, and components will be shipped in
accordance with Client’s packing and shipping
instructions.
ARTICLE 4
ADDITIONAL TERMS FOR MANUFACTURING AND PACKAGING
4.1
Applicability of Terms . The terms set forth in this Article
shall apply only in the event that Cardinal Health is providing
pre-commercial manufacturing and packaging services pursuant to
this Agreement.
4.2
Non-Conforming Product . Client shall notify Cardinal Health
within [* * *] following delivery of Product to Client if Client
has determined that such Product does not conform to Specifications
and shall provide Cardinal Health a sample of such non conforming
Product. If Cardinal Health agrees that the batch is
non-conforming, Cardinal Health shall, at Client’s option,
promptly replace the non-conforming Product at no charge in
accordance with this Article, or credit or refund any payments made
by Client for such Product including reimbursing Client for the
cost of the API (subject to the limitations set forth in
Article 10, below), if Cardinal Health does not agree with
Client’s determination that such Product fails to meet the
Specifications, then after reasonable efforts to resolve the
disagreement, either party may submit a sample of such Product to a
mutually agreed upon independent third party laboratory to
determine whether the Product meets the Specifications. The
independent party’s results shall be final and binding.
Unless otherwise agreed to by the parties in writing, the costs
associated with such testing and review shall be borne by the
non-prevailing party.
4.3 Replacement
of Non-Conforming Product . THE OBLIGATION OF CARDINAL HEALTH
TO REPLACE NON-CONFORMING PRODUCT IN ACCORDANCE WITH THE
SPECIFICATIONS OR REFUND OR CREDIT ANY PAYMENTS MADE FOR SUCH
PRODUCT (INCLUDING REFUNDING THE COST OF THE API) SHALL BE
CLIENT’S SOLE AND EXCLUSIVE REMEDY UNDER THIS AGREEMENT FOR
PRODUCT THAT DOES NOT CONFORM AND IS IN LIEU OF ANY OTHER WARRANTY,
EXPRESS OR IMPLIED.
4.4 Supply of
Material for Defective Product . In the event Cardinal Health
is required to replace Product pursuant to Section 4.2, above,
Cardinal Health shall supply, at its sole cost, the manufacturing
and/or packaging components necessary, as applicable, to
manufacture and/or package replacement Product, and Client shall
supply sufficient quantities of the API for Cardinal Health to
complete such replacement (provided, however, that Cardinal Health
will reimburse Client, within [* * *] after Cardinal Heath receives
notice of rejection from Client, the cost of such API, subject to
the limitations of liability described in Article 10,
below).
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4.5 Loss or
Destruction of API . Title to the API will remain with Client
at all times. Cardinal Health will use diligent efforts to protect
the API in its possession from loss or damage at all times. Subject
to the limitation of liability described in Article 10, below,
Cardinal Health will be responsible for any loss or damage to API
in excess of normal manufacturing and/or packaging losses to the
extent such loss or damage is caused by any negligent or
intentional acts or omissions by Cardinal Health or its employees
or contractors. Upon receiving the API, Cardinal Health will review
the batch records and release data for the API to confirm that the
API is acceptable. If Cardinal Health fails to reject the API
within [* * *] of receiving the API, Cardinal Health will be deemed
to have accepted the API. Cardinal Health will segregate the API
from other products or inventory of third parties maintained on its
premises and indicate Client’s ownership of the API in a
prominent manner.
4.6
Non-Validated Processes . Notwithstanding any other term in
this Agreement, Client is liable to Cardinal Health for all costs
incurred and all payments due to Cardinal Health under this
Agreement even if Cardinal Health does not ultimately manufacture a
Product meeting the Specifications applicable to such Product,
including without limitation all costs for Product lots
manufactured which do not satisfy Client’s Specifications if
the non-compliance to the Specifications is solely due to
Client’s failure to deliver accurate and complete information
which impacts the production process and which failure prevented
Cardinal Health from properly manufacturing the Product.
4.7 Unlabeled
Product . If Cardinal Health is to provide Client with Product
that is not labeled, Client represents and warrants that it will
comply with all applicable regulations, including without
limitation 21 CFR § 201.150.
4.8 Failure to
Take Delivery . If Client fails to take delivery on any
scheduled delivery date, Client shall be invoiced on the first day
of each month for the stored Product and reasonable administration
and storage costs. For each such batch of undelivered Product,
Client agrees that: (a) Client has made a fixed commitment to
purchase such Product; (b) risk of ownership for such Product
passes to Client; (c) such Product shall be on a bill and hold
basis for legitimate business purposes; (d) unless the parties
mutually agree to a revised delivery date at the time of billing,
Cardinal Health shall have the right to ship the Product to Client
within four (4) months after billing; and (e) Client will
be responsible for any decrease in market value of such Product
that relates to factors and circumstances outside of Cardinal
Health’s control. Within [* * *] following a written request
from Cardinal Health, Client shall provide Cardinal Health with a
letter confirming items (a) through (e) of this Section
for each Batch of undelivered Product.
5.1 Audit .
[* * *] during the Term of this Agreement, and subject to Cardinal
Health’s obligations of confidentiality to third parties,
Cardinal Health will permit Client to conduct an audit of those
portions of the Facility where Services are being conducted upon
reasonable advance notice during regular business hours. Upon
request, Client may conduct additional audits, provided that Client
shall reimburse Cardinal Health for time and expenses incurred by
Cardinal Health in connection with any such additional audit,
unless a prior audit has
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revealed that
Cardinal Health has failed to perform in accordance with the terms
of this Agreement.
5.2
Observation . In addition to the right to audit, Client may
have up to three (3) representatives at the Facilities (but only
two (2) at a time in the encapsulation suite) to observe the
Services, provided that Client provides Cardinal Health at least
ten (10) advance written notice of the attendance of such Client
representatives. Such representatives shall comply with Cardinal
Health’s rules and regulations. Client shall indemnify and
hold harmless Cardinal Health for any action or activity of such
representatives while on Cardinal Health’s
premises.
5.3 Regulatory
Inspections . Each party shall: (a) notify the other party
promptly of any inspection or inquiry by any Regulatory Authority
concerning any Project or Product of Client; and (b) forward
to the other party copies of any correspondence from any Regulatory
Authority relating to such a Project or Product, including, but not
limited to, Form FD-483 notices, FDA refusal to file, rejection or
warning letters. Where reasonably practicable, each party will be
given the opportunity to have a representative present during an
inspection by a Regulatory Authority. Each party acknowledges that
it may not direct the manner in which the other party fulfills its
obligations to permit inspection by a Regulatory
Authority.
5.4 Record
Retention . Unless the parties otherwise agree in writing,
Cardinal Health will retain batch, laboratory and other technical
records for the minimum period required by applicable laws, rules,
regulations and guidelines.
5.5 Quality
Agreement . Any quality agreement executed by the parties
related to the Services shall in no way determine liability or
financial responsibility of the parties for the responsibilities
set forth therein. In the event of a conflict between the terms of
this Agreement and the quality agreement, this Agreement shall
con
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