EXHIBIT 10.45

 

CONFIDENTIAL PORTIONS HAVE BEEN OMITTED BASED UPON A REQUEST

FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24b-2 OF THE

SECURITIES EXCHANGE ACT OF 1934 AND HAVE BEEN SEPARATELY FILED

WITH THE COMMISSION.

 

SUPPLY AGREEMENT

 

THIS SUPPLY AGREEMENT (this “Agreement”) is made and entered into as of August
30, 2004 (the “Effective Date”), by and between ISTA Pharmaceuticals, Inc., a
Delaware corporation (“Purchaser”), and Alliance Medical Products, Inc., a
California corporation (“Supplier”) (each a “Party” and collectively the
“Parties”).

 

RECITALS

 

1. Purchaser is engaged in the development, manufacture, promotion, sale, and
distribution of pharmaceutical products.

 

2. Purchaser desires for Supplier to manufacture and supply to Purchaser the
Product (as defined below).

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties to this Agreement agree as follows:

 

ARTICLE 1

 

DEFINITIONS

 

1.1. Defined Terms. As used herein, the following terms shall have the following
meanings:

 

(a) “Adverse Event” means any adverse event associated with the use of any
Product in humans, whether or not considered drug-related, including an adverse
event occurring in the course of the use of a Product in professional practice,
in studies, in investigations or in tests or an adverse event occurring from
Product overdose (whether accidental or intentional), from Product abuse, or
from Product withdrawal, as well as any toxicity, sensitivity, failure of
expected pharmacological action, or laboratory abnormality that is, or is
thought by the reporter to be, serious or associated with relevant clinical
signs or symptoms.

 

(b) “Affiliate” of a Party means (i) any Person (as defined below) which
directly or indirectly owns, is owned by, or under common ownership with such
Party to the extent of more than fifty percent (50%) of the equity (or such
lesser percentage which is the maximum allowed to be owned by a foreign
corporation in a particular jurisdiction) having the power to vote on or direct
the affairs of the entity and (ii) any Person actually controlled by,
controlling or under common control with such party.

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(c) “API” means the active pharmaceutical ingredient(s) in bulk form used to
manufacture the Product as identified in the API Specifications.

 

(d) “API Specifications” means the specifications for the API as described in
the API Specifications attached hereto as Exhibit A (as such may be revised from
time to time at Purchaser’s sole discretion by delivery of written notice to
Supplier setting forth the revised API Specifications).

 

(e) “Applicable Laws” means all applicable laws, rules, regulations and
guidelines that may apply to the manufacture of the Product or the performance
of either Party’s obligations under this Agreement to the extent applicable and
relevant, and including GMPs or similar standards or guidelines promulgated by
the FDA or other Competent Authorities.

 

(f) “Competent Authorities” means collectively the entities in each country
responsible for the regulation and/or pricing of medicinal products intended for
human use.

 

(g) “Competing Product” means [    *    ].

 

(h) “Confidential Information” means, with respect to a Party, all information
of any kind whatsoever (including without limitation, data, compilations,
formulae, models, patent disclosures, procedures, processes, projections,
protocols, results of experimentation and testing, specifications, strategies,
techniques and all non-public Product Intellectual Property Rights, as
hereinafter defined), and all tangible and intangible embodiments thereof of any
kind whatsoever (including without limitation, apparatus, compositions,
documents, drawings, machinery, patent applications, records and reports), which
is disclosed by such Party to the other Party and is marked, identified as or
otherwise acknowledged to be confidential at the time of disclosure to the other
Party. Notwithstanding the foregoing, Confidential Information of a Party shall
not include information which the other Party can establish by written
documentation (a) to have been publicly known prior to disclosure of such
information by the disclosing Party to the other Party, (b) to have become
publicly know, without fault on the part of the other Party, subsequent to
disclosure of such information by the disclosing party to the other Party, (c)
to have been received by the other Party at any time from a source, other than
the disclosing Party, rightfully having possession of and the right to disclose
such information, (d) to have been otherwise lawfully known by the other Party
prior to disclosure of such information by the disclosing Party to the other
Party as demonstrated by contemporaneous written records, or (e) to have been
independently developed by employees or agents of the other Party without the
use of such information disclosed by the disclosing Party to the other Party, as
demonstrated by contemporaneous written records. Notwithstanding anything herein
to the contrary, and for the avoidance of doubt, all Confidential Information
shall be in writing and marked “Confidential” (or words of similar import) or
summarized in a writing and marked “Confidential” (or words of similar import)
within thirty (30) days after oral disclosure; provided that, any written or
oral disclosures by Purchaser pertaining to the Product (including its
manufacture and production) or Purchaser’s business plans shall be deemed
Confidential Information of Purchaser without the requirement that it be marked
“Confidential” or, if orally disclosed, that it be summarized in writing as
provided above.

 

(i) “FDA” means the United States Food and Drug Administration or successor
agency thereto.

 

(j) “GAAP” means U.S. generally accepted account principles.

 

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(k) “GMP” means current Good Manufacturing Practices promulgated by the FDA, and
their equivalent promulgated by the Competent Authorities of any other country
in which the Product is sold by Purchaser.

 

(l) “Intellectual Property Rights” means all (i) patent applications,
continuation patent applications, continuation in-part patent applications,
divisional patent applications, any corresponding foreign patent applications
that may claim priority date of the patent application referred to above, and
patents that may have been granted on any of the above, including reissue
patents, reexamined patents and patent extensions based on those applications;
(ii) all know-how, trade secrets, inventions, data, processes, techniques,
procedures, compositions, devices, methods, formulas, protocols and information,
whether or not patentable, including, without limitation, all chemical,
biochemical and scientific research information, (iii) copyrightable works,
copyrights and applications, registrations and renewals in connection therewith,
(iv) mask works and applications, registrations and renewals in connection
therewith, (v) other proprietary rights, and (vi) copies or tangible embodiments
of any one or more of the foregoing.

 

(m) “Label,” “Labeled” or “Labeling” means all labels and other written, printed
or graphic matter upon (i) the Product or any container or wrapper utilized with
the Product, or (ii) any written material accompanying the Product, including,
without limitation, package inserts.

 

(n) “Master Batch Records” means the master product and control records for the
Product as approved in writing by Purchaser.

 

(o) “NDA” means a New Drug Application filed with the FDA, or other similar
filing with the appropriate Competent Authority in other countries in the
Territory.

 

(p) “Packaging” means all primary containers, including vials, cartons, shipping
cases or any other like matter used in packaging or accompanying the Product.

 

(q) “Person” means an individual, corporation, partnership, limited liability
company, firm, association, joint venture, estate, trust, governmental or
administrative body or agency, or other entity.

 

(r) “Product” means a finished liquid dosage form of ovine hyaluronidase,
meeting the Product Specifications, for use by Purchaser, its Affiliates or its
sublicensees in clinical development, commercial sale or distribution as
promotional samples, as applicable.

 

(s) [    *    ]

 

(t) “Product Specifications” means the specifications for the finished Product
as specified by Purchaser for the Product and as otherwise set forth in Exhibit
B, including (as applicable) statements of pharmaceutical manufacturing,
labeling, filling, packaging, storage and quality control procedures, and
Labeling and Packaging specifications (as such may be revised from time to time
in accordance with the terms of this Agreement by written agreement executed by
the Parties).

 

(u) “Raw Materials” means the ingredients and materials necessary for processing
of the Product, other than the API.

 

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(v) “Regulatory Approvals” means any approvals, product, and/or establishment
licenses, registrations or authorizations (including approvals under the NDA) of
any federal (including the FDA), state or local regulatory agency, department,
bureau or other governmental entity or other Competent Authorities worldwide,
which are necessary for the commercial manufacture, use, storage, importation,
transport, promotion, pricing or sale of the Product.

 

(w) “Regulatory Filings” means all filings required for or regarding the
Regulatory Approvals, including correspondence, records, applications,
supplements, approvals, annual reports, adverse event reports, clinical studies
and pre-clinical studies to the extent related to the Product.

 

(x) “Territory” means all the countries in the world.

 

1.2. Interpretation. Unless the context of this Agreement otherwise requires,
(i) words of any gender include each other gender; (ii) words using the singular
or plural number also include the plural or singular number, respectively; (iii)
the terms “hereof,” “hereby,” and derivative or similar words refer this entire
Agreement; (iv) the terms “Article,” “Section” and Exhibit” refer to the
specified Article, Section and Exhibit of this Agreement, and (v) the terms
“include,” “includes” or “including” shall be deemed to be followed by the words
“without limitation” unless otherwise indicated. Whenever this Agreement refers
to a number of days, unless otherwise specified, such number shall refer to
calendar days. The headings in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.

 

ARTICLE 2

 

PRODUCT TECHNICAL TRANSFER

 

2.1. Manufacturing, Packaging and Testing Procedures. Supplier agrees to perform
the manufacturing, packaging and testing procedures and equipment and
sterilization validation for the [    *    ] filling process of the Product as
set forth in [    *    ] attached hereto as Exhibit C-1 (the “[    *    ]
Purchase Order”). In addition, Supplier agrees to perform the manufacturing,
packaging and testing procedures for the [    *    ] filling process pursuant to
an additional purchase order, to be mutually agreed to in writing by the Parties
(the “[    *    ] Production Purchase Order”). Upon execution, the [    *    ]
Production Purchaser Order shall be attached hereto Exhibit C-2. If there is a
conflict between the terms of either the [    *    ] Purchase Order or the
[    *    ] Production Purchase Order and this Agreement, the terms of this
Agreement shall control.

 

2.2. Validation Batches. Supplier agrees to perform the Product validation
procedures set forth in [    *    ], such procedures to be mutually agreed to in
writing by the Parties (the “Validation Purchase Order”). Upon execution, the
Validation Purchase Order shall be attached hereto as Exhibit C-3. If there is a
conflict between the terms of the Validation Purchase Order and this Agreement,
the terms of this Agreement shall control. Each batch of Product manufactured
pursuant to the Validation Purchase Order shall be considered an “Experimental
Batch” until Supplier has manufactured [    *    ] batches of the Product that
meet the Product Specifications, at which time such consecutive batches shall be
considered “Validation Batches.” If any Experimental Batch fails to meet the
Product Specifications (“batch failure”) due to Supplier’s gross negligence, the
failure of Supplier’s equipment or Supplier’s failure to adhere to the batch
records, validation protocols or other similar documentation, Supplier shall at
its own expense (excluding the costs of

 

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API which shall be borne by Purchaser), manufacture additional Experimental
Batches until the successful completion of a total of [    *    ] batches of the
Product meet the Product Specifications. Supplier shall not be responsible for
any batch failure directly caused by the Product formulation as provided by
Purchaser, the failure of equipment provided by Purchaser or testing methods
developed by Purchaser or provided by Purchaser (“Purchaser Failures”). If
Purchaser requests that Supplier manufacture additional batches of Product
attributable to such Purchaser Failures, such additional batches shall be at
Purchaser’s expense. The Parties shall cooperate in good faith to resolve any
problems causing a batch to fail to meet the Product Specifications. Purchaser
shall pay to Supplier the price per batch of Product for the Validations Batches
as set forth in the Validation Purchase Order. Supplier acknowledges and agrees
that the Validation Batches may, upon Purchaser’s receipt of written FDA
approval of the Product, be sold as commercial Product subject to the
warranties, indemnification provisions and the other terms of this Agreement.

 

2.3. Analytical Methods, Manufacturing Methods and Data Transfer. During the
term of this Agreement and for [    *    ] after termination or expiration of
this Agreement, upon Purchaser’s request, Supplier will (i) assist Purchaser in
the transfer of all analytical methods and manufacturing procedures developed
under [    *    ] or that have been assigned or licensed to Purchaser pursuant
to Section 11.3(b) to another manufacturing site or manufacturing entity
selected by Purchaser and (ii) transfer to Purchaser all data reasonably
requested by Purchaser for use in the preparation of FDA filings for the
Product. Purchaser shall bear the cost of any transfer pursuant to item (i) by
paying Supplier [    *    ] for Sr. Professional, [    *    ] per engineer or
professional for engineering-related costs and [    *    ] per technician for
technician-related costs. Without limiting the foregoing, Supplier shall deliver
to Purchaser copies of all documentation within Supplier’s control (including
without limitation, formulations, manufacturing procedures and protocols,
quality control procedures and data, vendor lists, and manufacturing equipment
documentation) that evidence or embody the Intellectual Property Rights assigned
or licensed to Purchaser pursuant to Section 11.3(b) or as otherwise agreed to
in writing by the Parties, subject to Purchaser’s (and all employees,
consultants, affiliates and agents of Purchaser) obligation to preserve the
confidential nature of Supplier’s Confidential Information as set forth in
Section 9.1 of this Agreement. Supplier shall make such deliveries from time to
time and at Purchaser’s sole expense, so that Purchaser shall have all current
manufacturing information relating to the Product.

 

ARTICLE 3

 

SUPPLY AND PURCHASE

 

3.1. Supply and Purchase Obligations. During the term of this Agreement,
Supplier shall manufacture and supply the Product to Purchaser and Purchaser
shall purchase the Product from Supplier in accordance with this Agreement. By
way of clarification, Purchaser may purchase the Product during the term of this
Agreement from sources other than Supplier.

 

3.2. Exclusivity. During the term of this Agreement, Supplier shall not, and
shall cause its Affiliates to not, develop, make, have made, sell, offer for
sale, distribute or otherwise make available (nor contract with a third party to
do any of the foregoing) the Product or any Competing Product to any Person in
the Territory other than Purchaser and its Affiliates. Notwithstanding the
foregoing, in the event Purchaser has secured and is purchasing commercial
supplies of Product from a qualified source other than Supplier, then the
provisions of this Section 3.2, solely with respect to Competing Product, shall
no longer apply to Supplier.

 

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3.3. Manufacturing Practices.

 

(a) Product Specifications. Supplier shall manufacture and supply the Product in
conformity with the Product Specifications and in accordance with all Applicable
Laws, and Supplier shall not change, improve or modify the Product
Specifications as such changes relate to the manufacturing and supply of the
Product without the prior written consent of Purchaser.

 

(b) GMP. Supplier shall manufacture the Product in material compliance with
GMPs. Purchaser or its designee shall have the right, at its sole expense, to
audit Supplier for compliance with GMPs on reasonable notice during normal
business hours once in each calendar year, during the term of this Agreement and
more often in Purchaser’s reasonable discretion. If the services of Supplier’s
Engineers/Professionals or Technicians are required or utilized during any audit
in excess of once per year (excluding any services responding to deficiencies
noted from Purchaser’s first annual audit), such cost will be separately charged
to Purchaser in accordance with the pricing set forth in Section 2.3 hereof, at
Supplier’s reasonable discretion and upon written notice to Purchaser.
Notwithstanding the foregoing, until the occurrence of a successful pre-approval
inspection (“PAI”) by the FDA of Supplier’s manufacturing facility with respect
to the Product that results in no material deficiencies in Purchaser’s
reasonable judgment, Purchaser may review with Supplier its compliance with
cGMPs and its PAI preparations on reasonable notice during normal business
hours, as often as Purchaser may wish in its reasonable discretion, and Supplier
shall cooperate, at Supplier’s sole expense, with Purchaser’s reasonable
requests in connection with such reviews.

 

(c) Quality Requirements. The Parties shall enter into a quality agreement (the
“Quality Agreement”) in such form and containing such terms as mutually agreed
upon by the Parties. Each of Supplier and Purchaser is responsible for ensuring
that the terms stated in the Quality Agreement are understood and satisfied by
its respective employees, consultants, affiliates, and agents at all times. To
the extent any of the terms of the Quality Agreement conflict with the terms of
this Agreement, the terms of this Agreement shall control.

 

(d) Right of Inspection. Upon reasonable notice during normal business hours,
Purchaser shall have the right to inspect Supplier’s manufacturing to determine
and assess Supplier’s compliance with the provisions of this Agreement, such
inspection to be performed at no unreasonable disturbance to Supplier, and at
Purchaser’s expense. If the services of any of Suppliers Engineers/Professional
or Technicians are utilized or required, the cost shall be separately charged to
Purchaser as set forth in Section (b) above.

 

3.4. API.

 

(a) API Supply to Supplier. Purchaser shall use commercially reasonable efforts
to supply, or cause its designated API supplier (the “API Supplier”) to supply,
Supplier with sufficient quantities of API, the costs of which shall be borne by
Purchaser, consistent with Purchaser’s forecasts and purchase orders for the
Product as described in Section 3.6. All such API shall be sent to Supplier at
Purchaser’s expense, F.O.B. Supplier’s manufacturing facility. Except for the
API, all Raw Materials required for the production, packaging and shipping of
the Product for Purchaser shall be supplied by Supplier, and the Parties
acknowledge that the cost of such Raw Materials is included in the Purchase
Price for the Product set forth in Section 4.1 hereof.

 

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(b) Supplier’s Acceptance of API. Supplier shall receive API from Purchaser or
the API Supplier along with a certificate of analysis from Purchaser and/or the
API Supplier (the “API Certification”) confirming that the API complies with the
API Specifications. If for any reason Supplier knows or suspects that the
shipment of API is defective, Supplier shall promptly provide written notice to
Purchaser of such alleged defect. In no event shall Supplier use such allegedly
defective API for production of Product without the prior written authorization
of Purchaser.

 

3.5. Labeling and Packaging. Supplier shall acquire and provide all Labeling and
Packaging for the Product and such Labeling and Packaging shall be in accordance
with Purchaser’s specifications. Purchaser shall provide Supplier with press
ready artwork that has been approved by Supplier, and shall provide Supplier
with an approved printer for processing the Labels. Purchaser shall make all
commercially reasonable and necessary arrangements to print the pre-approved
Labels and shall provide approved printer’s proofs to Supplier for review and
approval. Supplier shall promptly provide Purchaser with any necessary
corrections thereto or notify Purchaser of its approval of such proofs.
Purchaser shall bear all costs of preparing the printer’s proofs and Supplier
shall bear all costs of the Labeling and Packaging for production lots. Any
approval rights of Supplier with respect to Labeling and Packaging shall be
limited to approving only information pertaining solely to Supplier contained in
such Labeling and Packaging. Except for information pertaining solely to
Supplier and approved by Supplier for which Supplier shall be responsible,
Purchaser agrees and acknowledges that Supplier is not responsible for the
content or information provided regarding the Product either on the label, the
packaging or in inserts included in the packaging. Labeling shall be pantome
management system (PMS), unless Supplier and Purchaser otherwise agree in
writing.

 

3.6. Forecasts and Orders.

 

(a) Monthly Forecasts. Beginning not less than [    *    ] prior to Purchaser’s
anticipated commercial launching of the Product in the United States, and
thereafter on the [    *    ], Purchaser shall deliver to Supplier a rolling
forecast of its estimated needs for Product for the following [    *    ] period
(each a “Rolling Forecast”). Each Rolling Forecast is a non-binding estimate and
shall not obligate Purchaser to purchase the volume of Product set forth in it.
If Supplier becomes aware of any circumstances that may cause Supplier to be
unable to deliver quantities of the Product to meet the projected demand
identified in the Rolling Forecast, Supplier shall give Purchaser prompt written
notice describing such circumstances, together with a proposed course of action
to remedy such matter. Supplier shall provide such notice as soon as practicable
after receiving Purchaser’s Rolling Forecast, but in no event later than
[    *    ] after receiving such Rolling Forecast. In the event Supplier does
not provide such notice with the prescribed time period above, Supplier agrees
to maintain sufficient manufacturing capacity to manufacture and fill the
estimated needs for Product as set forth in the then current Rolling Forecast.
In the event Supplier orders or purchases Raw Materials based on a then current
Rolling Forecast and Purchaser subsequently does not order Product in accordance
with such Rolling Forecast or reduces its estimated needs for Product in a
subsequent Rolling Forecast, Supplier may charge Purchaser for Supplier’s actual
and non-cancelable costs of any Raw Materials, plus handling, for which Supplier
can not use for the production of Product hereunder as a result of
aforementioned actions of Purchaser; provided that, Supplier may not charge
Purchaser more than the costs of Raw Materials, plus handling, that would be
reasonably required by Supplier for the production of Product in accordance with
[    *    ] of the Rolling Forecast that existed at the time Supplier ordered or
purchased such Raw Materials for which it seeks reimbursement and Supplier may
not charge Purchaser for any Raw Materials that are not then in a good and
usable condition for the production of Product. Upon payment for any Raw
Materials for which Supplier seeks reimbursement as provided above, Purchaser
shall own such materials.

 

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(b) Product Purchase Orders. Purchaser shall initiate an order for Product by
sending to Supplier a purchase order for Product (a “Product Purchase Order”) at
least ninety [    *    ] prior to the requested delivery date for the Product
covered by the Product Purchase Order. Supplier shall deliver to Purchaser such
quantities of Product as Purchaser orders so long as such quantities do not
exceed [    *    ] of the quantity set forth in the Rolling Forecast for such
time period. Purchaser shall have no minimum purchase requirements for Product
hereunder; provided that, Purchaser shall order Product in no less than the
increments set forth in Exhibit E. Purchaser may submit Product Purchase Orders
for Product in excess of the quantities specified in the Rolling Forecasts.
Supplier shall use its commercially reasonable efforts to accept and fill such
orders. Once placed, Product Purchase Orders may be amended or cancelled by
Purchaser at its discretion and at no charge, except as expressly provided in
this Section 3.6(b). If Purchaser amends or cancels a Product Purchase Order at
any time more than [    *    ] before scheduled delivery of the ordered Product,
Supplier may charge Purchaser only for Supplier’s actual and non-cancelable
costs of any Raw Materials, plus handling, that Supplier ordered or purchased to
fulfill such amended or cancelled Product Purchase Order, except for Raw
Materials that Supplier can use to fulfill any then pending Product Purchase
Order or any Raw Materials that are not then in good and usable condition for
the production of Product. Upon payment therefor, Purchaser shall own such Raw
Materials. Purchaser cannot amend or cancel any order [    *    ] or less before
the scheduled delivery of the ordered Product. Notwithstanding the foregoing,
orders for Product for the initial launch, consisting of approximately
[    *    ], may be amended or cancelled within [    *    ] or less from the
scheduled delivery, and upon such cancellation Supplier may charge Purchaser for
expenses incurred, as well as a reasonable cancellation charge. In ordering and
delivering the Product pursuant hereto, Purchaser and Supplier may use their
standard forms (including, but not limited to, the Product Purchase Orders and
invoices), but nothing in those forms shall be construed to modify, amend or
supplement the terms of this Agreement and, in case of any conflict herewith,
the terms of this Agreement shall control, and any additional or modified terms
contained in any such Product Purchase Order or other form shall be null and
void and shall not be binding upon the receiving party, unless signed by both
parties and it includes an express reference that it is an amendment to this
Agreement.

 

3.7. Product Testing.

 

(a) Supplier’s Testing Obligations. Supplier shall deliver concurrently to each
of the Quality Control Groups of Supplier and Purchaser, respectively, test
samples of the Product from each new batch of Product including the Validation
Batches (“Release Test Samples”), for contemporaneous testing to be conducted by
Supplier as set forth in this Section 3.7(a) and Purchaser as set forth in
Section 3.7(b) below. Supplier shall test each batch in accordance with the
specifications and requirements set forth on Exhibit D-1 hereto (the “Supplier
Testing”).

 

(b) Purchaser’s Testing Obligations. Upon receipt of any Release Test Samples,
Purchaser shall test the Release Test Samples in accordance with the
specifications and requirements set forth on Exhibit D-2 (the “Purchaser
Testing”).

 

3.8. Batch Release and Delivery.

 

(a) Supplier Batch Release. If the results of the Supplier Testing indicate that
a Product batch meets the Product Specifications applicable to the Supplier
Testing and the Product

 

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has been manufactured according to the approved manufacturing specifications (as
described in the Master Batch Records), then Supplier shall have the right to
ship [    *    ]; provided that, Supplier has delivered to Purchaser the
documentation set forth in subsections 3.8(a)(i)-(v) (the “Batch Release
Documents”). Notwithstanding anything herein to the contrary, [    *    ] except
for any loss or damage to the extent attributable to Supplier’s gross negligence
or willful misconduct or its failure to fulfill its obligations under Section
3.8(b) [    *    ], Supplier shall deliver to Purchaser the following documents:

 

(i) notice confirming the Product Hold (a “Notice of Hold”);

 

(ii) a certificate of analysis (a “Certificate of Analysis”) confirming that the
Product meets specifications and requirements of the Supplier Testing (the
results of such testing shall accompany each Certificate of Analysis);

 

(iii) a certificate of compliance (a “Certificate of Compliance”) confirming
that the Product subject to Product Hold has been manufactured in accordance
with the approved Master Batch Records and the terms hereof and that all
deviations and investigations related to the batch are completed in compliance
with Supplier’s quality control procedures;

 

(iv) copies of the executed Master Batch Records and a summary of any deviations
and the results from the investigation of any deviations; and

 

(v) an invoice for the Purchase Price of the applicable batch of Product, which
shall be paid by Purchaser in accordance with Section 4.4. The invoice date
shall reflect the date the Product was placed on Product Hold.

 

(b) Product and API Storage and Protection. Supplier shall (i) store any Product
in Product Hold and API it receives from Purchaser or its API Supplier in
material compliance with Applicable Laws, the Product Specifications with
respect to Product and the API Specifications with respect to the API, and any
other instructions provided by Purchaser or the API Supplier, (ii) label or
otherwise identify the Product in Product Hold and the API as the property of
Purchaser, (iii) keep the Product in Product Hold and API free of any and all
liens or encumbrances, (iv) allow Purchaser at its request to enter Supplier’s
premises upon reasonable notice and during normal business hours to inspect or
take possession of the Product [    *    ] or API [    *    ]. Except for loss
or damage to the extent attributable to Supplier’s gross negligence or willful
misconduct or its failure to fulfill its obligations under this Section 3.8(b),
Purchaser shall be solely responsible for loss or damage to [    *    ].

 

(c) Rejection and Cure. Purchaser or its representative shall have [    *    ]
from receipt of the Batch Release Documents to enter Supplier’s facilities upon
reasonable notice and during normal business hours to physically inspect, at its
own expense [    *    ]. If inspection or testing (including but not limited to
Purchaser Testing) demonstrates that any Product [    *    ] fails to conform to
the applicable Product Specifications, then Purchaser shall notify Seller of
such nonconforming Product within the aforementioned [    *    ] period (such
notice to be accompanied by the results of the Purchaser Testing of such
Product) and the following provisions shall apply:

 

(i) If (A) the nonconforming Product meets the specifications and requirements
of the Supplier Testing, (B) the nonconforming Product has been manufactured
according to the approved manufacturing specifications (as described in the
Master Batch Records)

 

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and (C) the failure of the nonconforming Product to meet the Product
Specification is not attributable to Supplier’s gross negligence or willful
misconduct or its failure to fulfill its obligations under Section 3.8(b), then
Supplier shall be entitled to full payment of the Purchase Price for such
nonconforming Product and shall dispose of such nonconforming Product, at
Purchaser’s direction and expense.

 

(ii) If (A) the nonconforming Product fails to meet the specifications and
requirements of the Supplier Testing, (B) the results of either Purchaser
Testing or Supplier Testing of the nonconforming Product identify manufacturing
deviations, (C) the nonconforming Product has not been manufactured according to
the approved manufacturing specifications (as described in the Master Batch
Records), or (D) the failure of the nonconforming Product to meet the Product
Specifications is attributable to Supplier’s gross negligence or willful
misconduct or its failure to fulfill its obligations under Section 3.8(b), then
delivery of such nonconforming Product shall be deemed rejected by Purchaser. In
such event, Supplier shall dispose of and shall replace the nonconforming
Product, at Supplier’s expense (other than the API). Purchaser shall not be
required to pay the Purchase Price for such rejected nonconforming Product and
if already paid shall, at its election, be entitled to either an immediate
refund of the amount of the Purchase Price for such rejected nonconforming
Product or a credit in amount of such Purchase Price against outstanding or
future invoices for Product supplied hereunder.

 

(iii) Notwithstanding Sections 3.8(c)(i) and (ii), if either Party disputes the
results of the other’s testing, the cause of any Product failure or the evidence
of such testing is uncertain, the Parties shall jointly conduct an investigation
to determine the cause of the Product failure and shall negotiate a settlement
in good faith with the costs of such investigation to be borne jointly by each
Party and the cost of any replacement batch to be borne by each Party in
proportion to such Party’s contribution to the Product failure. Any Product
which is the subject of an investigation shall remain on Product Hold pending
completion of the investigation and the Parties’ determination of the cause of
the Product failure. Notwithstanding any dispute under this Section, Purchaser
shall be required to pay the invoice tendered by Supplier under Section 3.8 (a)
(v), subject to Purchaser’s rights under Section 3.8(c) (iv) below.

 

(iv) Notwithstanding anything herein to the contrary, if Purchaser remits
payment to Supplier for a batch of Product, but subsequent testing or
investigation identifies a Product failure pursuant to Section 3.8(c)(ii) above,
Supplier shall replace the batch and the cost of the replacement batch (other
than the API) shall be borne by Supplier and, Purchaser shall, at its election,
be entitled to either (i) an immediate refund of the amount of the Purchase
Price paid by Purchaser for such batch or (ii) a credit in amount of such
Purchase Price against outstanding or future invoices for Product supplied
hereunder.

 

(v) To the extent Supplier has an obligation to replace nonconforming Product
under this Section 3.8, Supplier shall use its commercially reasonable efforts
to replace such conforming Product with conforming quantities of the Product as
soon as reasonably practicable after receipt of notice of rejection thereof, and
in any event shall do so within [    *    ] after receipt of notice of rejection
thereof.

 

(d) Product Release and Shipment. On or prior to the expiration of the
[    *    ] referenced in Section 3.8 above, unless Purchaser has notified
Seller that such Product fails to conform to the applicable Product
Specifications pursuant to Section 3.8 above, Purchaser shall deliver a
certificate (a “Release Certificate”) authorizing the release of such Product
from Product

 

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Hold. Purchaser shall coordinate and pay all freight, insurance charges, taxes,
import and export duties, inspection fees and other charges applicable to the
sale and transport of the released Product. The delivery of Release Certificate
shall not constitute a waiver or otherwise modify any warranty or indemnity set
forth in this Agreement.

 

3.9. Warranty. Supplier warrants that (a) the Product supplied to Purchaser
hereunder shall conform to the Product Specifications and shall not be
adulterated or misbranded within the meaning of Applicable Laws at the time such
Product is released to Product Hold pursuant to Section 3.8(a) hereof; and (b)
the Product shall be manufactured in accordance with the Master Batch Records,
Product Specifications, the Quality Agreement, and in material compliance with
all Applicable Laws (the “Limited Warranty”). In making the Limited Warranty,
Supplier may rely, to the extent applicable, upon any API Certificate solely
with respect to its certification that the relevant API conforms to the API
Specifications at the time of shipment of such API to Supplier and any Release
Certificate solely with respect to its certification that the relevant batch of
Product conforms to those specific Product Specifications that are the subject
of Purchaser’s tests under Section 3.7, unless, under either case, Supplier
knows information that would make it unreasonable for Supplier to rely on such
API Certificate or Release Certificate as set forth above. EXCEPT AS OTHERWISE
PROVIDED HEREIN, SUPPLIER MAKES NO OTHER WARRANTIES, EXPRESS OR IMPLIED, WITH
RESPECT TO THE PRODUCT INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF
MERCHANTABILITY OR WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE.

 

ARTICLE 4

 

PRICE AND PAYMENT TERMS

 

4.1. Purchase Price. The purchase price [    *    ] of Product to be paid by
Purchaser to Supplier shall be in accordance with the terms of the price
schedule set forth in Exhibit E hereto, as adjusted pursuant to Section 4.2
below (the “Purchase Price”).

 

4.2. [      *      ].

 

4.3. [       *      ]

 

4.4. Invoicing. Purchaser shall pay any invoice delivered pursuant to Section
3.8(a)(v) within [    *    ] after the date of receipt of the invoice. All
payments shall be made in U.S. Dollars. [    *    ]

 

ARTICLE 5

 

FURTHER OBLIGATIONS AND RIGHTS OF THE PARTIES

 

5.1. Facility Qualification. Supplier shall, at no cost to Purchaser, take, or
cause, all such actions to qualify and maintain qualification of the facility
(or facilities) at which Supplier manufactures the Product for supply to
Purchaser hereunder, as required under Applicable Laws.

 

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5.2. Recall.

 

(a) Cooperation. If Purchaser initiates a recall, product withdrawal, field
correction or other similar action of any Product (collectively, a “Recall”),
whether or not such Recall has been requested or ordered by any government
agency, Purchaser shall notify Supplier, and Supplier shall fully cooperate with
Purchaser with respect to the return of all such Product and will follow any
other reasonable instructions provided by Purchaser. If Supplier believes that a
Recall is appropriate, Supplier shall promptly notify Purchaser in writing and
obtain approval from Purchaser prior to taking any action and the Parties shall
cooperate with each other in determining the necessity and nature of such action
(it being understood and agreed however that the final decision as to any Recall
shall be made by Purchaser).

 

(b) Coordination of Recall Activities. In any event, with respect to any Recall,
Purchaser, and not Supplier, shall make all contacts with customers,
distributors and all Competent Authorities and shall be responsible for
coordinating all of the necessary activities in connection with such Recall.

 

(c) Liability for Recall Costs. If a Recall is necessary for any reason,
Supplier and Purchaser shall bear the costs of the Recall in proportion to each
Party’s responsibility for the error underlying the Recall. In the event that
Supplier is found to be liable for some or all of the Recall costs, Purchaser,
at its sole discretion, may: (i) withhold from Supplier any invoiced amounts or
other amounts payable to Supplier to cover such costs, or (ii) receive credit
from Supplier to cover all such costs, or (iii) receive payment in full of
Supplier’s portion of Recall costs. Supplier shall be liable for Recall costs
associated only with field replacement costs, including manufacturing, testing
and shipping costs necessary to replace Recalled product and the transportation
costs associated with the return of Recalled product. The cost of replacing API
will not be borne by Supplier. Supplier shall be liable only for Recall costs
that result from an error or omission by Supplier which occurred during
Supplier’s manufacture, labeling, packaging storage (including storage of API)
or preparation of Product for shipment, but not for any problem that arose
during the storage of Product [    *    ], except to the extent such problem is
attributable to Supplier’s gross negligence or willful misconduct or its failure
to fulfill its obligations under Section 3.8(b).

 

5.3. [    *    ]

 

5.4. Further Obligations of Supplier. During the term of this Agreement,
Supplier shall:

 

(a) at its own expense, promptly respond to all reasonable inquiries from
Purchaser pertaining to the supply of the Product;

 

(b) without limiting the other provisions of this Agreement, use its
commercially reasonable efforts at all times to minimize Product delivery time;
and

 

(c) maintain manufacturing or supply capabilities sufficient to meet Supplier’s
supply obligations under Section 3.6(b).

 

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ARTICLE 6

 

REPRESENTATIONS AND WARRANTIES

 

6.1. Representations and Warranties. Each Party hereby represents and warrants
to the other Party as follows:

 

(a) Corporate Existence. Such Party is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated.

 

(b) Authorization and Enforcement of Obligations. Such Party (a) has the
corporate power and authority and the legal right to enter into this Agreement
and to perform its obligations hereunder, and (b) has taken all necessary
corporate action on its part to authorize the execution and delivery of this
Agreement and the performance of its obligations hereunder. This Agreement has
been duly executed and delivered on behalf of such Party, and constitutes a
legal, valid, binding obligation, enforceable against such Party in accordance
with its terms.

 

(c) Consents. All necessary consents, approvals and authorizations of all
governmental authorities and other Persons required to be obtained by such Party
in connection with its performance of this Agreement have been obtained.

 

(d) No Conflict. The execution and delivery of this Agreement and the
performance of such Party’s obligations hereunder (a) do not conflict with or
violate any requirement of Applicable Laws, and (b) do not conflict with, or
constitute a default under, any material contractual obligation of such Party.

 

6.2. Insurance. Supplier shall maintain comprehensive general liability
insurance, including product liability insurance against claims regarding the
manufacture of the Product under this Agreement, in such amounts as it
customarily maintains for similar products and activities, but in amounts not
less that [    *    ] per occurrence and [    *    ] in the aggregate. Supplier
shall maintain such insurance during the term of this Agreement with respect to
the Product. Supplier shall cause Purchaser to be named as an additional insured
under such insurance and shall provide Purchaser proof of such insurance upon
request. Supplier shall notify Purchaser [    *    ] notice of any cancellation,
termination or change in such insurance. Supplier may substitute a self
insurance program on notice to Purchaser with information demonstrating the
adequacy of such program. Purchaser shall maintain comprehensive general
liability insurance, including product liability insurance against claims
regarding the manufacture of the Product under this Agreement, in such amounts
as it customarily maintains for similar products and activities, but in amounts
not less that [    *    ] per occurrence and [    *    ] in the aggregate for
product liability claims and [    *    ] per occurrence and [    *    ] in the
aggregate for other covered claims. Purchaser shall also maintain insurance for
Product released to Product Hold, in such amounts as it customarily maintains
for Product in its possession. Purchaser shall maintain such insurance during
the term of this Agreement with respect to the Product. Purchaser shall cause
Supplier to be named as an additional insured under such insurance and shall
provide Supplier proof of such insurance upon request. Purchaser shall notify
Supplier within [    *    ] notice of any cancellation, termination or change in
such insurance. Purchaser may substitute a self insurance program on notice to
Supplier with information demonstrating the adequacy of such program.

 

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ARTICLE 7

 

INDEMNIFICATION; LIMITATION OF LIABILITY

 

7.1. Supplier’s Indemnity Obligations. Supplier shall defend, indemnify and hold
harmless Purchaser, its Affiliates and their respective successors and permitted
assigns (and the respective officers, directors, stockholders, partners and
employees of each) from and against any and all losses, liabilities, claims,
actions, proceedings, damages and expenses (including without limitation
reasonable attorneys’ fees and expenses) (herein “Damages”) relating to or
arising from (a) any breach by Supplier or its Affiliates of this Agreement,
including without limitation, the failure of the Product to meet the Limited
Warranty, or (b) any claim that Supplier’s entering into, or performing the
terms of, this Agreement breach or violate any third party rights or Applicable
Laws, or (c) the gross negligence or willful misconduct of Supplier.
Notwithstanding the foregoing, Supplier shall not indemnify Purchaser for damage
or loss to Product released to Product Hold, except for damage or loss to the
extent attributable to Supplier’s gross negligence or willful misconduct or its
failure to fulfill its obligations under Section 3.8(b).

 

7.2. Purchaser’s Indemnity Obligations. Purchaser shall defend, indemnify and
hold harmless Supplier and its Affiliates, and their respective successors and
permitted assigns (and the respective officers, directors, stockholders,
partners and employees of each) from and against any and all Damages arising out
of (a) any breach by Purchaser or its Affiliates of this Agreement, or (b) any
claim that Purchaser’s entering into or performing the terms of this Agreement
breach or violate any third party rights or Applicable Laws or (c) the gross
negligence or willful misconduct of Purchaser or (d) any product liability
claims related to the Product, except in each case to the extent such Damages
arise from any matter for which Supplier has agreed to indemnify Purchaser for
pursuant to Section 7.1 above.

 

7.3. Procedures for Control of Third Party Claims. The Party entitled to make a
claim for indemnification under this Article 7 shall be referred to as the
“Indemnified Party” and the Party required to indemnify such claim shall be
referred to as the “Indemnifying Party.” In order for an Indemnified Party to be
entitled to any indemnification provided for under this Agreement in respect of,
arising out of or involving a claim or demand, made by any third party against
the Indemnified Party (a “Third Party Claim”), such Indemnified Party must
notify the Indemnifying Party in writing of the Third Party Claim within
[    *    ] after receipt by such Indemnified Party of written notice of the
Third Party Claim; provided, however, that failure to give such notification
shall not affect the indemnification provided hereunder except to the extent the
Indemnifying Party shall have been actually materially prejudiced as a result of
such failure. If a Third Party Claim is made against an Indemnified Party, the
Indemnifying Party shall be entitled to participate in the defense thereof and,
upon notice to the Indemnified Party, to assume the defense thereof; provided,
that (i) the Indemnifying Party’s counsel is reasonably satisfactory to the
Indemnified Party and (ii) the Indemnifying Party shall thereafter consult with
the Indemnified Party upon the Indemnified Party’s reasonable request for such
consultation from time to time with respect to such suit, action or proceeding.
If the Indemnifying Party assumes such defense, the Indemnified Party shall have
the right (but not the duty) to participate in the defense thereof and to employ
counsel, at its own expense, separate from the counsel employed by the
Indemnifying Party. The Indemnifying Party shall be liable for the fees and
expenses of counsel employed by the Indemnified Party for any period during
which the Indemnifying Party has not assumed the defense thereof, but the
Indemnifying Party shall not be liable to the Indemnified Party for any legal
expenses subsequently incurred by the Indemnified Party in connection with the
defense thereof. Whether or not the Indemnifying Party

 

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defends or prosecutes any Third Party Claim, the Parties hereto shall cooperate
in the defense or prosecution thereof. Such cooperation shall include the
retention and (upon the Indemnifying Party’s request) the provision to the
Indemnifying Party of records and information which are reasonably relevant to
such Third Party Claim, and making employees or any other Indemnified Party
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Whether or not the Indemnifying
Party shall have assumed the defense of a Third Party Claim, the Indemnified
Party shall not admit any liability with respect to, or settle, compromise or
discharge, such Third Party Claim without the Indemnifying Party’s prior written
consent, which shall not be unreasonably withheld. In no event shall the
Indemnifying Party settle any Third Party Claim if such settlement would impose
any obligation or burden on the Indemnified Party, without the prior written
consent of the Indemnified Party.

 

7.4. Limitation of Liability.

 

(a) Liability Limitation of Supplier. NOTWITHSTANDING ANYTHING HEREIN TO THE
CONTRARY, IN THE EVENT THAT ANY PRODUCT DOES NOT MEET THE LIMITED WARRANTY
THEREFOR, OR SUPPLIER HAS OTHERWISE BREACHED THIS AGREEMENT, THEN THE LIABILITY
OF SUPPLIER HEREUNDER TO PURCHASER (INCLUDING ANY LIABILITY FOR RECALL COSTS
UNDER SECTION 5.2(c) OR ANY LIABILITY UNDER THE INDEMNIFICATION PROVISIONS OF
SECTION 7.1) SHALL NOT EXCEED $1 MILLION PER OCCURRENCE AND $2 MILLION IN THE
AGGREGATE ANNUALLY; PROVIDED THAT, THE ABOVE LIMITATION SHALL NOT APPLY TO ANY
LIABILITY TO EXTENT ATTRIBUTABLE TO SUPPLIER’S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.

 

(b) Liability Limitation of Parties. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO
THE OTHER PARTY FOR LOSS OF PROFITS OR INDIRECT, INCIDENTAL, SPECIAL,
CONSEQUENTIAL OR PUNITIVE DAMAGES RESULTING FROM THIS AGREEMENT.

 

ARTICLE 8

 

RELATIONSHIP BETWEEN THE PARTIES

 

8.1. Independent Contractor Status. It is expressly agreed and understood that
Supplier, including its employees and/or subcontractors, is performing services
under this Agreement as an independent contractor for Purchaser and neither
Supplier nor any of its employees or subcontractors is an employee or agent of
Purchaser. All liability to the persons actually providing services under this
Agreement or related to the providing of such services, including but not
limited to, payment of wages or other compensation, withholding of taxes and
similar charges related to such wages or other compensation, and worker’s
compensation, shall be the sole responsibility of Supplier.

 

8.2. Non-Solicitation. Supplier and Purchaser agree that during the term of this
Agreement and for [ * ] after the expiration or termination of this Agreement,
Supplier and Purchaser shall not solicit or induce any employee of the other
Party to leave their employment or cease doing business with the other Party,
unless such Party is specifically authorized in writing to do so by the other
Party.

 

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ARTICLE 9

 

CONFIDENTIALITY AND PUBLIC DISCLOSURE

 

9.1. Confidentiality. Each Party will treat as confidential the Confidential
Information acquired from the other Party, and will take all necessary
precautions to assure the confidentiality of such information. Each Party agrees
to return to the other Party upon the expiration or termination of this
Agreement all, Confidential Information acquired from such other Party, except
as to such information it may be required to retain under Applicable Law, and
except for one copy of such information to be retained by such Party solely to
maintain its compliance with the terms of this Article 9. During the term of
this Agreement and for a period of [    *    ] thereafter, neither Party shall,
without the other Party’s express prior written consent, use or disclose any
such Confidential Information for any purpose other than to carry out its
obligations hereunder. Each Party, prior to disclosure of such Confidential
Information to any employee, consultant or advisor shall ensure that such person
is bound in writing to observe the confidentiality provisions of this Agreement.
The obligations of confidentiality shall not apply to information that the
receiving Party is required by law or regulation to disclose, provided however
that the receiving Party shall so notify the disclosing Party of its intent and
cooperate with the disclosing Party on reasonable measures to protect the
confidentiality of the information.

 

9.2. Public Disclosure. Except for such disclosure as is deemed necessary, in
the reasonable judgment of a Party, to comply with Applicable Laws, no public
announcement, news release, statement, publication, or presentation relating to
the existence of this Agreement, the subject matter hereof, or either Party’s
performance hereunder will be made without the other Party’s prior written
approval, which approval shall not be unreasonably withheld or delayed.

 

ARTICLE 10

 

TERM AND TERMINATION

 

10.1. Term. The initial term of this Agreement shall commence on the date hereof
and continue unless and until terminated pursuant to Section 10.2 below.

 

10.2. Termination.

 

(a) By Either Party. A Party shall have the right to terminate this Agreement
upon or after the breach of any material provision of this Agreement by the
other Party if the other Party has not cured such breach within [    *    ]
after receipt of written notice thereof from the non breaching Party or upon a
bankruptcy, insolvency, receivership, reorganization or arrangement for the
benefit of creditors of dissolution of the other Party.

 

(b) By Purchaser. Purchaser shall have the right to terminate this Agreement on
[    *    ] prior written notice to Supplier for any or no reason.

 

(c) By Supplier.

 

(i) Supplier shall have the right to terminate this Agreement on [    *    ]
prior written notice to Purchaser for any or no reason.

 

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(ii) If Purchaser fails to make a payment to Supplier when due [    *    ], then
in the event any such payment default is continuing or upon or after any
subsequent payment default hereunder, Supplier shall have the right to terminate
this Agreement if Purchaser has not cured any such payment defaults within
[    *    ] after receipt of written notice thereof from Supplier.
Notwithstanding the foregoing, Supplier shall have no right to terminate this
Agreement pursuant to this Section 10.2(c)(ii) if Purchaser has paid all amounts
owing to Supplier on or prior to their respective due dates for [    *    ]
prior to any payment default for which Supplier seeks termination of this
Agreement in accordance with this Section 10.2(c)(ii).

 

(d) Effect of Expiration and Termination. Expiration or termination of this
Agreement shall not relieve the Parties of any obligation accruing prior to such
expiration or termination. The provisions of Sections 3.9, 5.2, 6.2, 8.2 10.2(d)
and 12.1 and Articles 1, 7, 9, 11 and 13 shall survive any expiration or
termination of this Agreement. Upon termination or expiration, each Party shall
immediately deliver to the other (and cause any of its employees, agents or
representatives to so deliver), at such Party’s expense, all Confidential
Information of the other Party, including without limitation any and all copies,
duplications, summaries and/or notes thereof or derived therefrom, regardless of
the format. Upon expiration or termination of this Agreement, Supplier shall
manufacture and ship, and Purchaser shall purchase from Supplier in accordance
with the terms and conditions of this Agreement, any and all amounts of the
Product ordered by Purchaser hereunder (subject to Section 3.6(b)) prior to the
effective date of such expiration or termination. In addition, any API in
Supplier’s possession or control upon termination or expiration of this
Agreement shall be promptly returned to Purchaser at Purchaser’s expense or
destroyed by Supplier at the written election of Purchaser. In addition, upon
termination of this Agreement, Purchaser shall purchase all of Supplier’s then
existing and usable Raw Materials, work-in-progress, materials for the Product
in Supplier’s possession or control upon any termination or expiration;
provided, however, that, the foregoing obligation shall be at Purchaser’s
election if this Agreement is terminated by Purchaser due to breach by Supplier
pursuant to Section 10.2(a); provided, further, that in no event shall such
purchase price paid to Supplier exceed the aggregate value of Raw Materials,
work-in-progress, and labeling and packaging materials for Purchaser’s
forecasted Product needs for the twelve (12) month period beginning on the date
of cancellation. Such payment shall be due within thirty (30) days of the
effective date of cancellation.

 

ARTICLE 11

 

INTELLECTUAL PROPERTY RIGHTS

 

11.1. Existing Intellectual Property Rights. Except as expressly provided below,
neither Party shall have any rights in or to any Intellectual Property Rights of
the other Party.

 

11.2. License Rights of Supplier. During the term of this Agreement, Purchaser
hereby grants Supplier a non-exclusive license under Purchaser’s Intellectual
Property Rights solely to enable Supplier to manufacture, test and package the
Product for Purchaser and otherwise perform Supplier’s obligations to Purchaser
hereunder.

 

11.3. Supplier’s Intellectual Property Rights Related to Product.

 

(a) No Development Unless Authorized by Purchaser. Supplier agrees that it will
not knowingly develop any Intellectual Property Rights specifically related to
the Product or its manufacture or testing or the Product’s vial, stopper or
crimp cap (the “Primary Packaging”) unless authorized in writing by Purchaser.

 

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(b) Product Intellectual Property Rights Developed by Supplier. Notwithstanding
Section 11.3(a) above, Purchaser shall have the following rights in any
Intellectual Property Rights developed or owned (in whole or in part) by
Supplier, or to which Supplier otherwise has rights, related to the Product or
its manufacture, testing or Primary Packaging:

 

(i) In accordance with Section 11.3(c), Supplier hereby assigns to Purchaser,
and Purchaser shall be the sole and exclusive owner of, any Intellectual
Property Rights developed or owned (in whole or in part) by Supplier, or to
which Supplier otherwise has rights, that relate to any process, procedure or
other matter described in any Master Batch Record and identified with a document
number beginning with [    *    ]. Supplier agrees that all Product specific
documents and procedures will be numbered beginning with [    *    ].

 

(ii) Supplier hereby grants to Purchaser a perpetual, irrevocable, fully-paid,
non-exclusive worldwide license (with the right to sublicense) to make, have
made, use, sell, and offer to sell the Product and otherwise practice any
Intellectual Property Rights developed or owned (in whole or in part) by
Supplier, or to which Supplier otherwise has rights, that are used by Supplier
in the manufacture, testing, or Primary Packaging of the Product hereunder and
are not specifically or exclusively related to the Product; provided that,
Purchaser’s rights under this clause (ii) shall be limited to processes,
procedures or other matters described in the Master Batch Records (or that
should be described in the Master Batch Records in accordance with GMPs) and
shall exclude any processes, procedures or other matters not so described but
only referenced in the Master Batch Records.

 

As used herein, the Intellectual Property Rights described in Section 11.3(b)(i)
shall be deemed the “Assigned Intellectual Property Rights”.

 

(c) Assignment. To the extent that ownership of all right, title and interest in
any Assigned Intellectual Property Rights are not vested in Purchaser by
operation of law, for no additional consideration, Supplier will assign, and
does hereby assign, to Purchaser all Supplier’s right, title, and interest in
and to the Assigned Intellectual Property Rights. Supplier agrees that it will
promptly make full written disclosure to Purchaser, and will hold in trust for
the sole right and benefit of Purchaser, all such rights in any Assigned
Intellectual Property Rights.

 

(d) Records. Supplier agrees to keep and maintain adequate and current written
records of all Assigned Intellectual Property Rights. Such records will be in
the form of laboratory notebooks, notes, sketches, drawings and any other format
that may be specified by Purchaser. Such records will be available to and remain
the sole property of Purchaser at all times. Supplier agrees that its obligation
to execute documents requested by Purchaser and otherwise assist Purchaser to
obtain United States or foreign patents, copyright registrations or the
statutory protections covering the Assigned Intellectual Property Rights shall
continue beyond the termination or expiration of this Agreement, but Purchaser
shall compensate Supplier at a reasonable rate for time actually spent by it at
Purchaser’s request on such assistance. Supplier hereby waives and quitclaims to
Purchaser any and all claims, of any nature whatsoever, which it now or may
hereafter have for infringement of any patents, copyright or other proprietary
rights resulting from such application for such patents, copyright registrations
or statutory protection. Purchaser shall have sole control of all such
applications and registrations, and Supplier shall not take any action or make
any communication

 

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with a third party or governmental entity in connection with such applications
and registrations without the prior written consent of Purchaser. Supplier
agrees to execute any proper oath or verify any proper document or other
otherwise execute any documents requested by Purchaser to carry out the terms of
this Agreement, including this Article 11.

 

(e) Employees and Subcontractors. Supplier shall cause all of its Affiliates and
the respective employees and contractors of Supplier and its Affiliates to
execute and deliver to Supplier (and, upon request by Purchaser, to Purchaser)
an agreement covering the matters set forth in this Article 11 and Section 9.1
of this Agreement.

 

ARTICLE 12

 

REGULATORY

 

12.1. Adverse Event Reporting; Product Complaints. Purchaser shall be
responsible for all reporting to regulatory authorities Adverse Events
associated with the use of Product supplied by Supplier hereunder. Purchaser
shall advise Supplier promptly after Purchaser becomes aware of any such Adverse
Events. If Supplier becomes aware of any Adverse Events associated with the use
of the Product, it shall report all information in its possession regarding such
event to Purchaser as soon as practicable after becoming aware of such
information, and shall cooperate with Purchaser as necessary to report such
event under Applicable Laws. Purchaser shall also notify Supplier on a quarterly
basis of any complaints related to the manufacturing of the Product of which it
becomes aware regarding problems with the Product other than those associated
with Adverse Events, and Purchaser shall meet and confer with respect to its
responses to such complaints and whether any remedial actions by Supplier are
indicated by the pattern of complaints.

 

12.2. Regulatory Compliance. Supplier shall comply in all material respects with
all regulatory requirements with respect to Product imposed by Applicable Laws
upon Supplier as the manufacturer of the Product. Purchaser shall comply in all
material respects with all regulatory requirements with respect to Product that
are imposed by Applicable Law upon Purchaser as the holder of the Product NDA
and any other Regulatory Approvals. Supplier shall, on a timely basis, provide
Purchaser with information in Supplier’s possession relevant to its role as the
manufacturer of the Product, that is reasonably necessary for and relevant to
Purchaser’s obligations hereunder in complying with such regulatory requirements
as required by Applicable Laws.

 

12.3. Cooperation. Supplier will provide to Purchaser such documentation, data
and other information relating to Product as Purchaser may require for
submission to the FDA or other Competent Authorities or as required by
Applicable Laws. Supplier shall also provide, upon request by Purchaser,
information concerning its production processes and quality control procedures
with respect to Product.

 

12.4. Regulatory Inspections. Supplier agrees to inform Purchaser within
[    *    ] of any regulatory inquiry, communication or inspection, which
directly relates to the manufacture of the Product. In the event Supplier
receives a notice of inspection or an inspection visit by the FDA or other
Competent Authority which involves the Product, Supplier shall notify Purchaser
within [    *    ]. Purchaser, at its option, shall have the right to have its
representatives present at any such inspection by the FDA or other Competent
Authority, if the inspection pertains to the Product. In the event there are
written observations (or any other written communication) by the FDA or other
Competent Authority that involve the Product or could impact Supplier’s ability
to produce Product,

 

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or any proposed written response by Supplier to any such inspection, Purchaser
shall be informed within [    *    ] and be provided with copies of all
documentation within [    *    ], and shall have a reasonable opportunity to
review and comment on the proposed response. If Purchaser elects to provide
input to the response, such input shall be provided by Purchaser as promptly as
possible and Supplier shall in good faith incorporate such input into the
response.

 

12.5. Incidents or Accidents. Supplier shall immediately notify Purchaser in
writing of any incident or accident experienced by Supplier that may affect the
quality of Product or its ability to meet delivery date obligations hereunder.
Such incident or accident shall be immediately investigated by Supplier, and
Supplier shall provide a written report within [    *    ] of the results of the
investigation of such incidence or accident to Purchaser.

 

12.6. Ownership of Regulatory Approvals and Filings. The Parties acknowledge and
agree that Purchaser shall be the sole and exclusive owner of all Regulatory
Approvals and Regulatory Filings related to the Product. For no additional
consideration, Supplier will assign, and does hereby assign, to Purchaser all
Supplier’s right, title, and interest in and to such Regulatory Approvals and
Regulatory Filings related to the Product.

 

ARTICLE 13

 

MISCELLANEOUS

 

13.1. Dispute Resolution.

 

(a) The Parties recognize that disputes as to certain matters may from time to
time arise which relate to either Party’s rights and/or obligations hereunder.
It is the objective of the Parties to establish procedures to facilitate the
resolution of such disputes in an expedient manner by mutual cooperation and
without resort to litigation. To accomplish this objective, the Parties agree to
follow the procedures set forth below if and when such a dispute arises between
the Parties.

 

(b) If any dispute arises between the Parties relating to the interpretation,
breach or performance of this Agreement upon request of either Party, the
Parties agree to hold a meeting, attended by the Chief Executive Officer or
President of each Party, or their executive level designees, to attempt in good
faith to negotiate a resolution of the dispute prior to pursuing other available
remedies. If, within [ * ] after such written request, the Parties have not
succeeded in negotiating a resolution of the dispute, such dispute shall be
submitted by either Party for mediation and final and binding arbitration under
the then current commercial rules and regulations of the Judicial Arbitration
and Mediation Services (“JAMS”). The mediation/arbitration proceedings shall be
held in Orange County, California. Mediation shall be before [    *    ]
selected by mutual agreement of the parties. If not selected within [    *    ]
of the notice for mediation, JAMS shall provide a list of [    *    ] names and
each Party may strike one. If not resolved by mediation then the dispute shall
be resolved by binding arbitration through JAMS and if the dispute involves a
claim for damages in excess of [    *    ] such arbitration shall be before
[    *    ] arbitrators. Each party shall each select [    *    ] arbitrator
from the list of available retired judges provided by JAMS, and shall mutually
agree upon the [    *    ] arbitrator. If they are unable to agree on the
[    *    ] arbitrator, JAMS will provide a list of [    *    ] available
retired judges, and each Party may strike [    *    ] and the [    *    ] judge
will serve as the [    *    ] arbitrator. Punitive or exemplary damages will not
be permitted under any circumstances. Judgment upon the award rendered by the
arbitrators will be final and binding on the Parties and may be entered in any
court having

 

20

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jurisdiction. Each Party shall initially bear its own costs and legal fees
associated with such arbitration. The prevailing Party in any such arbitration
shall be entitled to recover from the other Party the reasonable attorney’s
fees, costs and expenses incurred by such prevailing Party in connection with
such arbitration. The decision of the arbitrator shall be final and binding on
the Parties. Judgment on the award may be entered in any court having competent
jurisdiction thereof and shall be enforceable under the Federal Arbitration Act.

 

13.2. Expenses. Except as otherwise expressly provided herein, each Party to
this Agreement shall pay its own expenses in connection with the negotiation of
this Agreement, the performance of its obligations hereunder, and the
consummation of the transactions contemplated herein.

 

13.3. Force Majeure. The obligations of either party hereunder are contingent
upon, and each party shall not be liable for, acts of God, war, terrorist
activities, riots, floods, fires, storms, strikes, catastrophes or any other
acts of force majeure, beyond the reasonable control of a party (but excluding
acts or omissions of subcontractors) to the extent that the same prevent or
delay the performance of the obligations herein contained, always provided that
such party shall use its best efforts in the event of force majeure to fulfill
the obligations under this Agreement and provide the other party with prompt
notice of the occurrence of any such event of force majeure.

 

13.4. Amendment; Modification. No amendment, modification or supplement of any
provision of this Agreement shall be valid or effective unless made in writing
and signed by a duly authorized officer of each party.

 

13.5. Waiver. No provision of this Agreement shall be waived by any act,
omission, or course of dealing or knowledge of a Party or its agents except by
an instrument in writing expressly waiving such provision and signed by a duly
authorized officer of the waiving party.

 

13.6. Notices. All notices to be given hereunder shall be in writing, shall be
effective when received, and shall be delivered personally (including delivery
by courier), by facsimile transmission (receipt verified), mailed by registered
or certified mail (return receipt requested), postage prepaid, or sent by
express courier service, to the Parties at the following addresses (or at such
other address for a Party as shall be specified by like notice, also effective
only upon receipt thereof):

 

Notices to Purchaser:

  

ISTA Pharmaceuticals, Inc.

15279 Alton Parkway

Suite 100

Irvine, California 92618

Attention: Kirk McMullin

Telephone: (949) 788-5317

Facsimile: (949) 788-6010

With a Copy to:

  

Stradling Yocca Carlson & Rauth

660 Newport Center Drive

Suite 1600

Newport Beach, CA 92660

Attention: Robert Funsten

Telephone: (949) 725-4000

Facsimile: (949) 725-4100

 

21

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Notices to Supplier:

  

Alliance Medical Products, Inc.

9342 Jeronimo Road

Irvine, California 92618

Attention: Juan C. Valdes

Telephone: (949) 454-4599

Telecopy: (949) 454-4441

With a Copy to:

  

Jackson, DeMarco & Peckenpaugh

2030 Main Street, Suite 1200

Irvine, California 92614

Attention: Ruth Mijuskovic

Telephone: (949) 752-8585

Facsimile: (949) 752-0597

 

13.7. Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the Parties hereto and their respective
successors and permitted assigns. Neither Party may assign any of its rights,
liabilities or obligations hereunder without the prior written consent of the
other Party and any assignment without such consent shall be void.
Notwithstanding anything to the contrary in this Section 13.7, Either Party may
assign its rights, liabilities and obligations hereunder without the consent of
the other Party in connection with a sale of all or substantially all of the
business to which this Agreement relates or to its Affiliate.

 

13.8. No Strict Construction. The language used in this Agreement shall be
deemed to be the language chosen by the Parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against either
party.

 

13.9. Complete Agreement. This Agreement contains the complete agreement between
the Parties and supersedes any prior understandings, agreements or
representations by or between the Parties, written or oral, which may have
related to the subject matter hereof in any way.

 

13.10. Governing Law. The internal laws (without regard to the conflicts of law
provisions) of the State of California shall govern all questions concerning the
construction, validity and interpretation of this Agreement and the performance
of the obligations imposed by this Agreement.

 

13.11. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original, and all of which shall be
considered one and the same instrument.

 

13.12. Severability. If any provision of this Agreement shall be held invalid,
illegal or unenforceable, the validity, legality or unenforceability of the
other provisions of this Agreement shall not be affected thereby, and there
shall be deemed substituted for the provision at issue a valid, legal and
enforceable provision as similar as possible to the provision at issue.

 

[SIGNATURES ON FOLLOWING PAGE]

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their respective duly authorized officers as of the date first above written.

 

PURCHASER:

ISTA PHARMACEUTICALS, INC.

By:

 

 

--------------------------------------------------------------------------------

Name:

 

 

--------------------------------------------------------------------------------

Title:

 

 

--------------------------------------------------------------------------------

SUPPLIER: ALLIANCE MEDICAL PRODUCTS, INC.

By:

 

 

--------------------------------------------------------------------------------

Name:

 

 

--------------------------------------------------------------------------------

Title:

 

 

--------------------------------------------------------------------------------

 

23

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SCHEDULE OF EXHIBITS

 

Exhibit A API Specifications

 

Exhibit B Product Specifications

 

Exhibit C-1 [    *    ] Purchase Order

 

Exhibit C-2 [    *    ] Production Purchase Order

 

Exhibit C-3 Validation Purchase Order

 

Exhibit D-1 Supplier’s Testing Obligations

 

Exhibit D-2 Purchaser’s Testing Obligations

 

Exhibit E Pricing

--------------------------------------------------------------------------------

Exhibit A

 

API Specifications (Hyaluronidase, Ovine)

 

[    *    ]

 

A-1

--------------------------------------------------------------------------------

Exhibit B

 

Product Specifications

 

[    *    ]

 

B-1

--------------------------------------------------------------------------------

Exhibit C-1

 

[    *    ] Purchase Order

 

[    *    ]

 

C-1-1

--------------------------------------------------------------------------------

Exhibit C-2

 

[    *    ] Production Purchase Order

 

[    *    ]

 

C-2-1

--------------------------------------------------------------------------------

Exhibit C-3

 

Validation Purchase Order

 

[    *    ]

 

C-3-1

--------------------------------------------------------------------------------

Exhibit D-1

 

Supplier’s Testing Obligations

 

[    *    ]

 

 

D-1-1

--------------------------------------------------------------------------------

Exhibit D-2

 

Purchaser’s Testing Obligations

 

[    *    ]

 

D-2

--------------------------------------------------------------------------------

Exhibit E

 

Minimum Order Sizes; Pricing

 

I. Minimum Order Sizes

 

Although Purchaser has no obligation to purchase any Product hereunder, to the
extent Purchaser orders Product hereunder, Product Purchase Orders shall be in
no less than the following increments:

 

[    *    ]

 

II. Product Pricing

 

[    *    ]

 

III. Annual Revalidation Fees

 

[    *    ]

 

E-1