exv10w36



 






Exhibit 10.36




Drug Product Development and Clinical Supply Agreement



THIS AGREEMENT (“Agreement”) is effective as of the 20th day of January 2006 (“Effective Date”).



BY AND BETWEEN:



OMEROS CORPORATION, a corporation organized and existing under the laws of Washington, with its
principal offices located at 1420 Fifth Avenue, Suite 2600, Seattle, Washington 98101 (hereinafter
referred to as “CLIENT”)



AND:



ALTHEA TECHNOLOGIES, INC., a Delaware corporation, with a place of business located at 11040
Roselle Street, San Diego, CA 92121 (hereinafter referred to as “ALTHEA”);



WHEREAS CLIENT has formulations and/or know-how related to each Drug Product, as defined below;



WHEREAS ALTHEA has the expertise and the manufacturing facility suitable for the Production of Drug
Product;



WHEREAS, CLIENT wishes to have ALTHEA Produce Drug Product and ALTHEA wishes to Produce Drug
Product for CLIENT;



NOW, THEREFORE, in consideration of the premises and the undertakings, terms, conditions and
covenants set forth below, the parties hereto agree as follows:



Article 1, DEFINITIONS.





	 	1.1	 	AFFILIATE of a party hereto shall mean any entity that controls or is
controlled by such party, or is under common control with such party. For purposes of
this definition, an entity shall be deemed to control another entity if it owns or
controls, directly or indirectly, at least fifty percent (50%) of the voting equity of
another entity (or other comparable interest for an entity other than a corporation).
	 
	 	1.2	 	APPLICABLE LEGAL REQUIREMENTS shall mean all laws, rules, regulations,
ordinances, guidance, guidelines, and standards of any international, national, state,
or local governmental authority that are applicable to the Development, Production, or
other services described in a particular Project Plan or to other activities or
obligations under this Agreement, including without limitation (a) cGMP, to the extent
applicable as set forth in a Project Plan, (b) all






	 		
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	 	 	 	other applicable regulations and regulatory guidance promulgated by the FDA and (c)
applicable International Conference on Harmonisation Guidance.
	 
	 	1.3	 	BATCH shall mean a specific quantity of a Drug Product comprising a number of
units mutually agreed upon between CLIENT and ALTHEA, and that (a) is intended to have
uniform character and quality within specified limits, and (b) is produced according
to a single manufacturing order during the same cycle of manufacture.
	 
	 	1.4	 	APIs shall mean the active pharmaceutical ingredients, as set forth in the
Project Plan, to be supplied by CLIENT for use in Production of Drug Product.
	 
	 	1.5	 	cGMP shall mean current Good Manufacturing Practices as defined in the FDA
rules and regulations, 21 CFR Parts 210-211.
	 
	 	1.6	 	CANCELLATION FEES shall mean the fees that may be payable by CLIENT in the
event that CLIENT cancels the Production of any Batch of Drug Product set forth in the
Project Plan, as further described and set forth in Section 3.3.
	 
	 	1.7	 	COMPONENTS shall mean all Components used by ALTHEA in Production of Drug
Product under this Agreement. Components are listed in the Project Plan and are
identified as Components supplied by CLIENT (“CLIENT Supplied Components”) or
Components supplied by ALTHEA (“ALTHEA Supplied Components”).
	 
	 	1.8	 	CONFIDENTIAL INFORMATION shall mean all information and data provided by one
party to the other party except any portion of such information and data which:






	 	(i)	 	is known to the recipient as evidenced by its
written records before receipt thereof from the disclosing party;
	 
	 	(ii)	 	is disclosed to the recipient by a third
person who has the legal right to make such disclosure;
	 
	 	(iii)	 	is or becomes part of the public domain
through no fault of the recipient; or
	 
	 	(iv)	 	the recipient can reasonably establish by its
written records is independently developed by recipient without use of
the information disclosed by the disclosing party.






	 	1.9	 	ALTHEA SOPs shall mean ALTHEA’s applicable Standard Operating Procedures
which shall be reviewed and approved by CLIENT prior to entering into each Project
Plan.





	 		
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	 	1.10	 	DEVELOPMENT shall mean studies conducted by ALTHEA to develop a process to
Produce Drug Product, in accordance with the Specifications and cGMP. Development
activities shall be identified in the Project Plan.
	 
	 	1.11	 	DRUG PRODUCT shall mean each of CLIENT’s pharmaceutical product(s) for which
CLIENT is engaging ALTHEA hereunder to Produce bulk or finished dosage form, as
further set forth in an applicable Project Plan, for development and/or clinical use
only by CLIENT or its designees.
	 
	 	1.12	 	FDA shall mean the United States Food and Drug Administration or any
successor entity thereto.
	 
	 	1.13	 	FD&C ACT shall mean the United States Federal Food, Drug and Cosmetic Act, 21
U.S.C. Section 301, et seq., as may be amended from time to time.
	 
	 	1.14	 	IND shall mean an Investigational New Drug Application for Drug Product, as
defined in the rules and regulations promulgated by FDA, including without limitation
21 CFR 312.3.
	 
	 	1.15	 	LABELING shall mean all labels and other written, printed, or graphic matter
upon: (i) Drug Product or any container, carton, or wrapper utilized with Drug Product
or (ii) any written material accompanying Drug Product.
	 
	 	1.16	 	MASTER BATCH RECORD (MBR) shall mean the formal set of instructions for
Production of Drug Product. The MBR shall be developed and maintained in ALTHEA’s
standard format by ALTHEA, using CLIENT’s master formula and technical support, and
shall be approved in writing by CLIENT.
	 
	 	1.17	 	PRODUCTION or PRODUCE shall mean the formulation, filling, packaging,
inspection, labeling, and/or testing of Drug Product by ALTHEA, as further set forth
in the applicable Project Plan and as the context requires.
	 
	 	1.18	 	PRODUCT SPECIFICATION SHEET shall mean a listing of the analytical testing
and corresponding Specifications, to be performed on the APIs and/or Drug Product in
connection with the stability program and as further described in the applicable
Project Plan.
	 
	 	1.19	 	PROJECT PLAN shall mean each document agreed upon by the parties from time to
time that contains the parameters for Production of a Drug Product by ALTHEA
hereunder. Each Project Plan shall be initially developed by ALTHEA and, if
acceptable to CLIENT, agreed to in writing by CLIENT. Each Project Plan shall include
the details of the project relating to a particular Drug Product, including without
limitation (a) the scope of work to be performed and deliverables to be delivered by
ALTHEA, (b) the Purchase Price that CLIENT will pay for the work to be performed by
ALTHEA, (c) the timeline for performance of work by ALTHEA, and (d) the Quality
Management Agreement applicable to the work to be performed by ALTHEA under the
Project Plan.






	 		
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	 	 	 	Prior to commencing Production of any Drug Product, ALTHEA shall deliver two (2)
signed originals of the Project Plan to CLIENT. CLIENT shall review the Project
Plan and, if CLIENT finds the Project Plan acceptable, shall sign both originals of
the Project Plan and return one (1) fully executed original to ALTHEA. Each fully
executed Project Plan shall be incorporated herein by reference and made a part of
this Agreement. In the event of any inconsistency between the terms within the
body of this Agreement and the terms contained in any Project Plan, including
without limitation any Quality Management Agreement within any such Project Plan,
the terms within the body of this Agreement shall govern. ALTHEA shall have no
obligation for Production of a Drug Product until CLIENT has executed and returned
the Project Plan for such Drug Product to ALTHEA.
	 
	 	1.20	 	PURCHASE PRICE shall mean the amount to be paid by CLIENT for Development,
Production, and any other services to be performed by ALTHEA as specified in each
Project Plan.
	 
	 	1.21	 	REGULATORY AUTHORITY shall mean those agencies or authorities responsible for
regulation of Drug Product in the United States and overseas, including without
limitation FDA. ALTHEA shall have no obligation to Produce Drug Product in compliance
with the requirements of a Regulatory Authority other than FDA unless specified in the
applicable Project Plan or the other terms of this Agreement.
	 
	 	1.22	 	RELEASED EXECUTED BATCH RECORD shall mean the completed batch record and
associate deviation reports, investigation reports, and Certificates of Analysis
created for each Batch of Drug Product.
	 
	 	1.23	 	SPECIFICATIONS shall mean those specifications set forth in the Product
Specification Sheet and the Master Batch Record for Drug Product, and to the extent
that ALTHEA is required to test the APIs, for the APIs.





Article 2, DEVELOPMENT AND PRODUCTION OF DRUG PRODUCT.





	 	2.1	 	General, Initiation:






	 	(a)	 	ALTHEA shall, and shall cause all permitted Subcontractors
to, perform all Development, Production, and other services hereunder (i) in a
professional manner and in accordance with high standards of care and
diligence consistent with industry practices, (ii) in compliance with the
terms and conditions of this Agreement, including without limitation the
applicable Project Plans and the schedules included therein, (iii) in
compliance with all Applicable Legal Requirements, and (iv) in compliance with
the applicable ALTHEA SOPs, and (e) in compliance with all reasonable
direction and requests of CLIENT.






	 		
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	 	(b)	 	Upon execution of this Agreement and the corresponding
Project Plan for each Drug Product, ALTHEA shall, to the extent set forth in
the Project Plan, commence Development of such Drug Product pursuant to the
timeline set forth in the Project Plan. Upon execution of this Agreement and
the corresponding Project Plan for each Drug Product, ALTHEA shall commence
Production of such Drug Product pursuant to the Project Plan.






	 	2.2	 	Documentation: The Master Batch Record shall be reviewed and approved by
ALTHEA and by CLIENT in writing (including by letter, e-mail or by signing the Master
Batch Record) prior to commencement of Production. Any material change to an approved
Master Batch Record will be reviewed and approved by ALTHEA and by CLIENT in writing
(including by letter, e-mail or by signing a change order) prior to said change being
implemented. Each Batch of Drug Product shall be Produced by using a copy of the
Master Batch Record. Each copy of the Master Batch Record for such Batch of Drug
Product shall be assigned a unique batch number. Any deviation from the manufacturing
process specified in the Master Batch Record must be documented in the copy of the
Master Batch Record for that Batch. ALTHEA shall provide CLIENT in a timely manner
with required supporting Development and Production documentation and any other
information required for regulatory filings related to the Drug Product in a form
reasonably suitable for CLIENT’s submission to the FDA or other Regulatory Authority,
including without limitation Master Batch Records, other batch records, protocols,
other written processes and procedures directly related to the CLIENT’s Drug Product
and any other documents that are reasonably necessary or useful for CLIENT to use
and/or transfer all methods and other work product resulting from the Development and
Production services performed by ALTHEA under this Agreement. Employees, consultants,
agents or contractors of CLIENT or CLIENT’s Affiliates shall have the right to
reference or submit the foregoing to the applicable Regulatory Authorities in support
of an IND or other regulatory filing related to the Drug Product, or otherwise in
support of CLIENT’s efforts to develop, conduct clinical trials for, formulate,
manufacture, test, and seek regulatory approval for the Drug Product.
	 
	 	2.3	 	APIs and Components Supply: CLIENT, at its sole cost and expense (including,
without limitation, shipping costs), shall supply to ALTHEA, in a timely manner, (a)
all APIs required to satisfy the terms of this Agreement and (b) any other CLIENT
Supplied Components, all to be delivered to ALTHEA as set forth in the applicable
Project Plan for Production of such Drug Product. Except as may specifically be set
forth in the Project Plan, on receipt of the APIs and CLIENT Supplied Components as
set forth above, ALTHEA’s sole obligation with respect to evaluation of the APIs and
CLIENT Supplied Components shall be to review the accompanying certificate of analysis
to confirm that the APIs and CLIENT Supplied Components (if applicable) conform with
the Specifications and component specifications, respectively.





	 		
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	 	2.4	 	APIs and Component Delivery Delays: ALTHEA shall have no responsibility for
delays in delivery of Drug Product caused by delays in receipt of APIs to be supplied
by CLIENT under a Project Plan or other CLIENT Supplied Components. Notwithstanding
anything in this Agreement to the contrary, in the event that ALTHEA receives the APIs
for Production of Drug Product from CLIENT with less time than set forth in the
applicable Project Plan prior to the scheduled date of Production of such Drug
Product, but within sufficient time to Produce such Drug Product on such scheduled
date as determined by ALTHEA in its reasonable discretion, ALTHEA may charge CLIENT up
to an additional fee of [†] for labor or expenses resulting from such delay incurred
by ALTHEA, which shall be paid promptly to ALTHEA prior to Production, and ALTHEA
shall Produce such Drug Product as per the original schedule. Notwithstanding
anything in this Agreement to the contrary, in the event that ALTHEA receives the APIs
for Production of Drug Product from CLIENT with less time than set forth in the
applicable Project Plan prior to the scheduled date of Production of such Drug
Product, and without sufficient time to Produce such Drug Product on the scheduled
date as determined by ALTHEA in its reasonable discretion, ALTHEA shall reschedule
Production of such Drug Product and shall charge CLIENT the applicable Cancellation
Fee, if any, as further set forth in Section 3.3.
	 
	 	2.5	 	Importer of Record: In the event any material or equipment to be supplied by
CLIENT, including without limitation CLIENT Supplied Components and APIs, is imported
into the United States for delivery to ALTHEA (“Imported Goods”), CLIENT shall be the
“Importer of Record” of such Imported Goods. As the Importer of Record, CLIENT shall
be responsible for all aspects of the Imported Goods including, without limitation (a)
customs and other regulatory clearance of Imported Goods, (b) payment of all tariffs,
duties, customs, fees, expenses and charges payable in connection with the importation
and delivery of the Imported Goods, and (c) keeping all records, documents,
correspondence and tracking information required by applicable laws, rules and
regulations arising out of or in connection with the importation or delivery of the
Imported Goods.
	 
	 	2.6	 	Material Safety Data Sheet: CLIENT shall provide ALTHEA a Material Safety
Data Sheet for APIs and, if available, for each Drug Product. ALTHEA shall
immediately notify CLIENT of any unusual health or environmental occurrence relating
to Drug Product, including, but not limited to any claim or complaint by any employee
of ALTHEA or any of its Affiliates or third party that the operations of ALTHEA
pursuant to this Agreement have resulted in any adverse health or safety effect on an
employee or third party. ALTHEA agrees to advise CLIENT immediately of any unexpected
safety or toxicity problems of which it becomes aware regarding the Drug Product.
	 
	 	2.7	 	Vendor and Supplier Audit and Certification: CLIENT shall be provided the
opportunity to and shall have the right to certify and audit all Drug Product- related
vendors and suppliers, the identity of which shall be provided to CLIENT by ALTHEA
upon request by CLIENT, and if CLIENT does not so certify and audit such vendors and
suppliers, shall be deemed to have approved ALTHEA’S





	 		
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	 	 	 	selection of vendors and suppliers by way of signing this agreement. If CLIENT has
a reasonable objection to any of ALTHEA’s vendors or suppliers, CLIENT shall so
inform ALTHEA and the parties shall work together in good faith to identify an
alternate supplier or otherwise resolve the issue. ALTHEA shall inform CLIENT in
writing of any change in ALTHEA’s suppliers and vendors used in the Production of
Drug Product. Except for the CLIENT Supplied Components identified in a Project
Plan, the cost for all materials and ALTHEA Supplied Components, including any
required testing and evaluation, which shall be performed by ALTHEA, shall be
included in the Purchase Price.
	 
	 	2.8	 	Storage; Delivery Terms: ALTHEA shall store all APIs and all Drug Product
under conditions that comply with the Specifications, any requirements set forth in
the Project Plan, and any other reasonable written instructions of CLIENT, as
applicable. Notwithstanding anything herein seemingly to the contrary, ALTHEA shall
be liable for risk of loss of APIs, CLIENT Supplied Components and Drug Product while
in the possession of ALTHEA. ALTHEA shall ship all Drug Product to CLIENT or to
CLIENT’s designated consignee under conditions that comply with the Specifications,
any requirements set forth in the Project Plan, and any other reasonable written
instructions of CLIENT, as applicable. All shipments shall be shipped FOB ALTHEA, by
a common carrier designated by CLIENT, at CLIENT’s expense; provided, however, ALTHEA
shall be responsible for the loading of the Drug Product on departure and shall bear
risk of loss and all costs of such loading. CLIENT shall procure, at its cost,
insurance covering damage or loss of Drug Product during shipping. All shipping
instructions of CLIENT shall be accompanied by the name and address of the recipient
and the shipping date.
	 
	 	2.9	 	Exporter of Record: CLIENT shall be the exporter of record for any Drug
Product shipped out of the United States, as CLIENT shall be and shall remain the
owner of the Drug Product, as between the parties. CLIENT warrants that all shipments
of Drug Product exported from the United States will be made in compliance with all
applicable United States export laws and regulations and all applicable import laws
and regulations into the country of importation.
	 
	 	 	 	CLIENT shall be responsible for obtaining and paying for any licenses or other
governmental authorization(s) necessary for the exportation from the United States.
CLIENT shall select and pay the freight forwarder who shall solely be CLIENT’s
agent. CLIENT and its freight forwarder shall be solely responsible for preparing
and filing the Shipper’s Export Declaration and any other documentation required
for the export.
	 
	 	2.10	 	Foreign Corrupt Practices Act. CLIENT acknowledges that it is not the agent
of ALTHEA and represents and warrants that it has not, and covenants that it will not,
pay anything of value to any government employee in connection with the resale of the
Product.





	 		
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	 	2.11	 	Deposits and Payment for Drug Product and Development: Promptly upon
execution of each Project Plan, CLIENT shall pay to ALTHEA [†] of the total fees of
each Project Plan, unless otherwise set forth in the Project Plan. Thereafter, ALTHEA
will invoice CLIENT monthly based on the specific services completed and/or milestones
met during the month. A payment schedule may be set forth in each Project Plan.
CLIENT shall pay all invoices within thirty (30) days of receipt by CLIENT. Any
payment due under this Agreement not received within the times noted above shall bear
interest at the lesser of (a) the maximum rate permitted by law, and (b) 1.5% per
month on the outstanding balance compounded monthly. Not withstanding the above
provisions of this Section 2.11, CLIENT may withhold until resolved payment of any
invoices that are disputed in good faith due to any Drug Product or other deliverable
failing to meet standards set forth in the applicable Project Plan.
	 
	 	2.12	 	Default in Payment Obligations: In addition to all other remedies available
to ALTHEA in the event of a CLIENT default, if CLIENT fails to make payments as
required hereunder, ALTHEA may take appropriate measures to assure prompt and full
payment, including any one of the following measures: refuse to Produce any Drug
Product until CLIENT’s account is paid in full; modify the foregoing terms of payment;
place the account on a letter of credit basis; require full or partial payment in
advance; suspend deliveries of Drug Product until CLIENT provides assurance of
performance reasonably satisfactory to ALTHEA, or take other reasonable means as
ALTHEA may determine.
	 
	 	2.13	 	Returns: Drug Product returned by third parties is the responsibility of CLIENT.
	 
	 	2.14	 	Subcontractors. ALTHEA shall not subcontract to any third parties (in such
capacity, “Subcontractors”) any Development, Production, or other services that ALTHEA
is obligated to perform under this Agreement without, in each case, CLIENT’s prior
written approval, at CLIENT’s sole discretion. If ALTHEA proposes use of
Subcontractors for particular services, CLIENT may require access to such
Subcontractors for audit purposes. If CLIENT preapproves a Subcontractor in writing,
(a) ALTHEA shall enter into an agreement with such Subcontractor that requires
Subcontractor to meet all performance standards hereunder, that contains
confidentiality and non-use terms at least as strict as those set forth in Article 9
below, that includes intellectual property rights and obligations consistent with
those set forth in Article 10 below, and that includes any other terms necessary to
ensure that ALTHEA meets its obligations under this Agreement, and (b) no such
subcontracting by ALTHEA shall relieve ALTHEA of, and ALTHEA shall remain primarily
liable for, its obligations under this Agreement. The parties may, at their
discretion, designate in a Project Plan certain Subcontractors approved by CLIENT for
services to be performed under that particular Project Plan.
	 
	 	2.15	 	Drug Product Substitution. At CLIENT’s request, from time to time, ALTHEA
shall substitute for Production that has been scheduled under a Project Plan another
Drug Product of CLIENT or its designee. ALTHEA shall accept each such






	 		
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	 	 	 	substitution unless CLIENT and ALTHEA agree, in their reasonable discretion and
after a good-faith discussion and reasonable evaluation of relevant factors, that
such particular substitution is not feasible for technical reasons. In the event
of any such substitution, the parties shall negotiate in good faith to amend the
Project Plan as appropriate, including without limitation by adjusting the dates,
deadlines and Purchase Price set forth in the Project Plan to the extent impacted
by such Drug Product substitution.





Article 3, TERM AND TERMINATION.





	 	3.1	 	Term: Unless sooner terminated pursuant to Section 3.2 herein, this Agreement
shall commence on the date first above written and will continue until one (1) year
after the satisfactory completion of Development and Production and all other services
set forth in all outstanding Project Plans, as well as the satisfactory delivery of
all deliverables set forth in all outstanding Project Plans (the “Term”).
Notwithstanding the foregoing, the parties shall be free to extend the Term by mutual
written agreement even if no Project Plans are outstanding, in contemplation of
entering into Project Plans in the future.
	 
	 	3.2	 	Termination: This Agreement may be terminated at any time upon the
occurrence of any of the following events:






	 	3.2.1	 	Termination for Breach: Either party may terminate this
Agreement upon the breach of any provision of this Agreement by the other
party if such breach is not cured by the breaching party within thirty (30)
calendar days (or such additional time reasonably necessary to cure such
default provided the breaching party has commenced a cure within the thirty
(30) day period and is diligently pursuing completion of such cure) after
receipt by the breaching party of written notice of such default. At the
option of the non-breaching party, such termination may be with respect to the
entire Agreement, or only with respect to the Project Plan that is subject to
the breach.
	 
	 	3.2.2	 	Termination for Financial Matters: This Agreement may be
terminated immediately by either party by giving the other party written
notice thereof in the event such other party makes a general assignment for
the benefit of its creditors, or proceedings of a case are commenced in any
court of competent jurisdiction by or against such party seeking (a) such
party’s reorganization, liquidation, dissolution, arrangement or winding up,
or the composition or readjustment of its debts, (b) the appointment of a
receiver or trustee for or over such party’s property, or (c) similar relief
in respect of such party under any law relating to bankruptcy, insolvency,
reorganization, winding up or composition or adjustment of debt, and such
proceedings shall continue undismissed, or






	 		
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	 	 	 	an order with respect to the foregoing shall be entered and continue
unstated, for a period of more than sixty (60) days without the entry of an
order by a court of competent jurisdiction or other action by a duly
appointed receiver or trustee that will ensure performance by such other
party.
	 
	 	3.2.3	 	Termination by Omeros: This Agreement or any Project Plan
may by terminated by CLIENT without cause by providing written notice of
termination to Althea, which action shall subject Omeros to the payment of any
penalties that may be applicable for any uncompleted Project Plan(s) as
provided in Section 3.3(b) below.






	 	3.3	 	Payment on Termination; Cancellation Fees:






	 	(a)	 	In the event of the termination of this Agreement, CLIENT
shall reimburse ALTHEA for (a) its documented, reasonable out-of-pocket costs
for all ALTHEA Supplied Components ordered prior to termination and not
cancelable at no cost to ALTHEA, (b) all work-in-process commenced by ALTHEA
that has been performed in accordance with the terms of this Agreement and
applicable Project Plan(s), and (c) all finished Drug Product produced and
delivered in accordance with the terms of this Agreement and applicable
Project Plan(s) that is delivered to CLIENT.
	 
	 	(b)	 	In the event of cancellation by CLIENT of the Production of
any Batch set forth in a Project Plan that has been scheduled by written
agreement of ALTHEA and CLIENT or in the event of termination of this
Agreement prior to completion of any such scheduled Batch, ALTHEA shall use
its best efforts to sell the manufacturing time and capacity created as a
result of such cancellation or termination to another customer and otherwise
mitigate ALTHEA’s losses. In the event that the manufacturing time and
capacity created as a result of CLIENT’s cancellation of Production of any
such scheduled Batch or the termination of this Agreement prior to completion
of any such scheduled Batch has not been sold by ALTHEA, except for any
cancellation or termination by CLIENT pursuant to Section 3.2.1, ALTHEA may at
its option charge CLIENT and CLIENT shall then pay the Cancellation Fees as
hereinafter set forth: (i) CLIENT is subject to a charge of [†] of the
budgeted Batch price if the Batch is canceled less than [†] from the scheduled
fill date, (ii) a charge of [†] of the budgeted Batch price if the Batch is
canceled less than [†] from the scheduled fill date, and (iii) a charge of [†]
of the budgeted Batch price if the Batch is canceled less than [†] from the
scheduled fill date. In addition, CLIENT must compensate ALTHEA for any
documented, reasonable out-of-pocket costs for all ALTHEA Supplied Components
ordered by ALTHEA prior to termination and not cancelable at no cost to
ALTHEA, non-cancelable materials ordered or testing completed by ALTHEA,
except to any extent such costs have been paid in accordance with Section
3.3.(a) above. For





	 		
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	 	 	 	purposes of the foregoing, one (1) week is equivalent to seven (7) days.
Following termination or upon notice that CLIENT has cancelled Production
of a Batch, as applicable, ALTHEA shall ship all completed Drug Product and
all Components and other materials for which CLIENT is obligated to
reimburse ALTHEA pursuant to the foregoing, to CLIENT at CLIENT’s cost and
per CLIENT’s instructions. CLIENT shall make payment for all expenses
described in Section 3.3 thirty (30) days from receipt of the invoice.
Notwithstanding anything herein to the contrary, CLIENT shall have no
obligation to pay any Cancellation Fees or other amounts to ALTHEA in the
event that this Agreement is terminated by CLIENT pursuant to Section 3.2.1
above.






	 	3.4	 	Survival: Termination, expiration, cancellation or abandonment of this
Agreement through any means or for any reason shall be without prejudice to the rights
and remedies of either party with respect to any antecedent breach of any of the
provisions of this Agreement. The provisions of Sections 3, 6, 9, 10, 11, 12, 13, 14,
and 15 hereof shall survive expiration or termination of this Agreement for the time
period set forth therein, or if no time period is set forth therein, then
indefinitely.





Article 4, CERTIFICATES OF ANALYSIS AND MANUFACTURING COMPLIANCE.





	 	4.1	 	Certificates of Analysis: At CLIENT’s cost and expense, as set forth in the
applicable Project Plan, ALTHEA shall test, or cause to be tested by third parties, in
accordance with the Specifications, each Batch of Drug Product Produced pursuant to
this Agreement before delivery to CLIENT. A certificate of analysis for each Batch
delivered shall set forth the items tested, Specifications, and test results. ALTHEA
shall also ensure that all batch Production and control records have been reviewed and
approved by the appropriate quality control unit and shall so indicate on the final
page of the Released Executed Batch Record. ALTHEA shall send, or cause to be sent,
such certificates and the Released Executed Batch Record to CLIENT prior to the
shipment of Drug Product (unless Drug Product is shipped under quarantine). Unless
otherwise set forth in the applicable Project Plan, ALTHEA shall also provide samples
of all Batches of Drug Product Produced under this Agreement, as further described in
Section 5.1 below. Unless otherwise set forth in the Project Plan, CLIENT shall test,
or cause to be tested, for final release, each Batch of Drug Product as meeting the
Specifications. As required by the FDA (see Section 5.2 below), CLIENT assumes full
responsibility for final release of each Batch of Drug Product. All costs associated
with ALTHEA performing testing and providing certificates of analysis and other
documentation as set forth in this Section 5.1 shall be deemed included within the
Purchase Price set forth in the applicable Project Plan and Client shall pay no
additional amounts therefore.





	 		
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	 	4.2	 	Manufacturing Compliance: ALTHEA shall advise CLIENT immediately if an
authorized agent of FDA or any other Regulatory Authority visits ALTHEA’s manufacturing
facility and makes an inquiry regarding ALTHEA’s Production of Drug Product for CLIENT
or otherwise communicates orally or in writing with ALTHEA about any Drug Product for
which services are performed hereunder. In the event of an inspection of an ALTHEA
facility relating to a Drug Product or any services performed for CLIENT hereunder,
CLIENT may send, at its own expense, representatives to the ALTHEA Facility to
participate in any portion of such inspection directed to the Drug Product or the
services performed under this Agreement. ALTHEA shall supply CLIENT with copies of any
written communications from any Regulatory Authority that relate to the Drug Product or
the services performed hereunder, whether such communications arise out of a facility
inspection or otherwise. ALTHEA shall provide CLIENT with a copy of each proposed
written response to a Regulatory Authority for CLIENT’s review and comment prior to
ALTHEA’s submission of such response. ALTHEA shall give all due consideration to any
CLIENT comments to each such proposed ALTHEA response, provided CLIENT responds in a
timely fashion. Manufacturing deviations and investigations which occur during
Production of Drug Product and which are not reasonably likely, in CLIENT’s reasonable
discretion, to cause the Production to be non-compliant with cGMP, shall not be deemed
to cause such Drug Product to be non-conforming.
	 
	 	4.3	 	Reserve Samples: CLIENT shall be responsible for obtaining and maintaining
sufficient quantities of APIs and Drug Product reserve samples pursuant to cGMP.
	 
	 	4.4	 	Annual Quality Review: CLIENT shall be responsible for evaluating, at least
annually, the quality standards of Drug Product to determine the need for changes in
Specifications, manufacturing processes, and/or controlled documents. CLIENT shall
supply ALTHEA a copy of the evaluation and recommendations, if any.
	 
	 	4.5	 	Retention of Records: ALTHEA shall maintain complete and accurate
distribution and shipment, manufacturing, analytical, validation, and other records as
specified in cGMP related to the Development, Production, and any other services
performed hereunder (collectively, the “Production Records”). ALTHEA shall retain all
Production Records in accordance with Applicable Legal Requirements, including without
limitation cGMP. ALTHEA shall, upon CLIENT’s reasonable request and at CLIENT’s
expense, make all Production Records available to CLIENT for inspection and, for
Production Records directly pertaining to CLIENT’s Drug Products, copying. ALTHEA
shall, prior to destroying any Production Records, provide written notice to CLIENT
and permit CLIENT the opportunity to take possession of such records, at CLIENT’s
expense.
	 
	 	4.6	 	Customer Complaints: CLIENT, as required by cGMP, shall maintain complaint
files. All specific CLIENT Drug Product-related complaints received by ALTHEA shall
be forwarded to CLIENT. CLIENT shall be responsible for






	 		
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	 	 	 	the review of the complaint to determine the need for an investigation or the need
to report to the FDA as required by cGMP. CLIENT shall send to ALTHEA all Drug
Product performance or manufacturing-related complaints which require
investigation. ALTHEA shall conduct an investigation for each Drug Product
performance or manufacturing-related complaint and shall report findings and
follow-up of each investigation to CLIENT in a timely manner. CLIENT shall make
these complaint files available to ALTHEA in the event they are required during an
FDA inspection.
	 
	 	4.7	 	Audits:
	 
	 	 	 	CLIENT, upon prior written notice and during normal business hours, shall have the
right to inspect ALTHEA Batch records, Production Records, and any other written
and electronic files and documentation related to Development, Production, and/or
other services performed hereunder and the portions of ALTHEA’s facility used for
Production of Drug Product. CLIENT may conduct routine audits once annually and
audits for reasonable cause with appropriate prior notice and consideration of
ALTHEA’s schedule as frequently as CLIENT reasonably deems necessary. Each party
shall bear its own costs associated with all such CLIENT audits. The Quality
Management Agreement set forth in the applicable Project Plan shall govern the
parties’ obligations with respect to the results of such audits.
	 
	 	4.8	 	Regulatory Compliance: Unless otherwise stated, ALTHEA is responsible for
compliance with all Applicable Legal Requirements related to Production of
pharmaceutical products, Development and Production of Drug Product, and any other
services performed by ALTHEA under this Agreement. CLIENT shall be responsible for
compliance with all Applicable Legal Requirements related to the use of Drug Product
after it has been Produced and delivered by ALTHEA to CLIENT hereunder, which
responsibility shall include, without limitation, all contact with the FDA regarding
the such use.
	 
	 	4.9	 	Person in the Plant. CLIENT shall have the right to designate one
representative of CLIENT to be present at any time in the ALTHEA facility during normal
business hours during the Term of this Agreement to observe the Production of Drug
Product. While at the facility, such representative of CLIENT shall be restricted to
such areas as are directly relevant to the manufacture of the Drug Product and such
other areas as may be otherwise authorized by ALTHEA, and shall comply with all
applicable ALTHEA policies and procedures and may, at ALTHEA’s option, be escorted by
ALTHEA personnel.





Article 5, ACCEPTANCE OF DRUG PRODUCT.




	 		
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	 	5.1	 	Non-Conforming Drug Product: Within fifteen (15) calendar days from the date
of Production of any Batch pursuant to the Project Plan, ALTHEA shall promptly forward
to CLIENT, or CLIENT’s designee, samples of such Batch. Within sixty (60) calendar
days after receipt by CLIENT of the samples of the Batch and the Released Executed
Batch Record for the Batch, CLIENT shall determine whether Drug Product conforms to
the Drug Product Specifications, the Master Batch Record, ALTHEA’s current SOPs, and
the Project Plan (collectively the “Product Requirements”).






	 	5.1.1	 	If (a) any Batch of Drug Product is approved by CLIENT as
conforming to the Product Requirements, or (b) CLIENT fails to notify ALTHEA
within the applicable time period set forth above, or such longer period as
may be agreed, that any Batch of Drug Product does not conform to the Product
Requirements, then CLIENT shall be deemed to have accepted the Drug Product
and waived its right to revoke acceptance.
	 
	 	5.1.2	 	If CLIENT believes any Batch of Drug Product does not
conform to the Product Requirements, it shall notify ALTHEA by telephone,
including a detailed explanation of the non-conformity, and shall confirm such
notice in writing via overnight delivery to ALTHEA. Upon receipt of such
notice, ALTHEA will investigate such alleged non-conformity, and (i) if ALTHEA
agrees such Drug Product is non-conforming, deliver to CLIENT a corrective
action plan within thirty (30) calendar days after receipt of CLIENT’s written
notice of non-conformity, or such additional time as is reasonably required if
such investigation or plan requires data from sources other than CLIENT or
ALTHEA, or (ii) if ALTHEA disagrees with CLIENT’s determination that the Batch
of Drug Product is non-conforming, ALTHEA shall so notify CLIENT by telephone
within the thirty (30) calendar day period and confirm such notice in writing
by overnight delivery.
	 
	 	5.1.3	 	If the parties dispute whether a Batch of Drug Product is
conforming or non-conforming, samples of the Batch of Drug Product will be
submitted to a mutually acceptable laboratory or consultant for resolution,
whose determination of conformity or non-conformity, and the cause thereof if
non-conforming, shall be binding upon the parties. Unless the Batch is
determined to be non-conforming as set forth in this Section 5. 3 due to the
fault of ALTHEA, CLIENT shall bear the costs of such laboratory or consultant.






	 	5.2	 	Remedies for Non Conforming Product: In the event ALTHEA agrees, or the
laboratory described in Section 5.1.3 above determines, that the Batch of Drug Product
is non-conforming as a result of the negligent or willful act or omission of ALTHEA,
[†] or ALTHEA’s breach of this Agreement, then ALTHEA, at CLIENT’s option, shall
either (i) at ALTHEA’s expense, and subject to CLIENT, at CLIENT’s expense, supplying
the replacement APIs, replace such non-conforming Drug Product within sixty (60)
calendar days from receipt of replacement APIs from CLIENT, or (ii) refund the
Purchase Price of the non-






	 		
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	 	 	 	conforming Drug Product to CLIENT (provided that CLIENT has made payment for the
non-conforming Drug Product). The remedies described in this Section 5.2 shall not
act to limit ALTHEA’s indemnification obligations to the extent provided in Section
13.2 of this Agreement.






	 	5.3	 	Non-conforming APIs: If Drug Product is rejected by CLIENT, and such Drug
Product’s failure to meet the Product Requirements is the result of non-conforming
APIs, then such non-conformity shall be deemed not to be non-conforming solely as a
result of the negligence of ALTHEA.





Article 6, DRUG PRODUCT RECALLS.





	 	6.1	 	Drug Product Recalls: In the event CLIENT shall be required to recall any
Drug Product because such Drug Product may violate local, state or federal laws or
regulations, the laws or regulations of any applicable foreign government or agency or
the Drug Product Specifications, or in the event that CLIENT elects to institute a
voluntary recall, CLIENT shall be responsible for coordinating such recall. CLIENT
promptly shall notify ALTHEA if any Drug Product is the subject of a recall and the
basis for such recall. CLIENT shall provide ALTHEA with a copy of all documents
concerning such recall that are related to the Development or Production services
provided by ALTHEA to CLIENT. ALTHEA shall cooperate with CLIENT in connection with
any recall, at CLIENT’s expense. CLIENT shall be responsible for all of the costs and
expenses of such recall, except to any extent that ALTHEA may have an obligation to
indemnify CLIENT in accordance with the provisions of Section 13.2.





Article 7, FORCE MAJEURE; FAILURE TO SUPPLY.





	 	7.1	 	Force Majeure Events: Failure of either party to perform under this
Agreement (except the obligation to make payments) shall not subject such party to any
liability to the other if such failure is caused by any cause beyond the reasonable
control of the affected party, including without limitation acts of God, acts of
terrorism, fire, explosion, flood, drought, war, riot, sabotage, embargo, strikes or
other labor trouble, or compliance with any new order or regulation of any government
entity that could not reasonably be anticipated, provided that written notice of such
event is promptly given to the other party and that the affected party resumes
performance hereunder as soon as reasonably possible.
	 
	 	7.2	 	Failure to Supply: If ALTHEA fails to supply all or any material part of
Drug Product ordered by CLIENT, CLIENT may require ALTHEA to supply the undelivered
Drug Product or a lesser quantity at a future date agreed upon by ALTHEA and CLIENT,
at no additional cost to CLIENT. The provisions of this Section 7.2 shall be without
prejudice to CLIENT’s rights under Section 3.2 and 13.2 and remedies provided for
thereunder.






	 		
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Article 8, CHANGES IN PRODUCTION.





	 	8.1	 	Changes to Master Batch Records and Product Specifications: ALTHEA agrees to
inform CLIENT within fifteen (15) days of the result of any regulatory development or
changes to Drug Product-specific SOPs that materially affect the Production of Drug
Product. ALTHEA shall notify CLIENT of and receive written approval from CLIENT for
changes to Master Batch Records and Drug Product Specifications prior to the
Production of subsequent Batches of Drug Product.
	 
	 	8.2	 	Product-Specific Changes: If facility, equipment, process or system changes
are required of ALTHEA as a result of new requirements that FDA or any other
Regulatory Authority promulgates after initiation of the Project Plan, and such
regulatory changes apply primarily to the Production and supply of one or more Drug
Products, then CLIENT and ALTHEA will review such requirements and agree in writing to
such facility, equipment, process or system changes, and CLIENT shall bear 100% of the
reasonable costs thereof. In the event that CLIENT chooses not to bear the costs of
such changes, then CLIENT may cancel any uninitiated Production of Drug Product
without incurring any Cancellation Fees or other penalties hereunder.





Article 9, CONFIDENTIALITY.





	 	9.1	 	Confidentiality: It is contemplated that in the course of the performance of
this Agreement each party may, from time to time, disclose its Confidential
Information to the other party. Except as otherwise set forth herein, (a) neither
party shall disclose the other party’s Confidential Information to any third party,
and (b) neither party shall use the other party’s Confidential Information except for
purposes consistent with this Agreement. Each party agrees to take the same measures
that it takes to protect its own Confidential Information, and at a minimum all
reasonable steps, to prevent disclosure of the other party’s Confidential Information
to third parties. No provision of this Agreement shall be construed so as to preclude
disclosure of Confidential Information as may be reasonably necessary to secure from
any governmental agency or Regulatory Authority approvals or licenses or to obtain
patents with respect to the Drug Product.
	 
	 	9.2	 	Prior Confidentiality Agreement: This Agreement, by reference, incorporates
the Confidentiality Agreement signed by CLIENT and ALTHEA on June 14, 2005, which is
made a part hereof as though fully set forth herein.






	 		
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	 	9.3	 	Third Party Disclosure: ALTHEA shall be permitted to disclose Drug Product
information to Subcontractors approved by CLIENT in accordance with Section 2.14 above
in connection with performance of by Subcontractors of their obligations with respect
to Drug Product, provided that such Subcontractors shall be subject to confidentiality
obligations at least as stringent as those set forth herein. In addition, either
party may disclose Confidential Information of the other party to those Affiliates,
agents and consultants who need to know such information to accomplish the purposes of
this Agreement (collectively, “Permitted Recipients”); provided such Permitted
Recipients are bound to maintain such Confidential Information in confidence under
written agreements with confidentiality obligations at least as stringent as those set
forth herein. Nothing in this Section 9 shall be construed to limit CLIENT’s ability
to use and disclose Confidential Information related to its Drug Product(s) as part of
any submission to FDA or other regulatory authority.
	 
	 	9.4	 	Litigation and Governmental Disclosure: Each party may disclose Confidential
Information hereunder to the extent such disclosure is reasonably necessary for (a)
prosecuting or defending litigation, (b) complying with applicable governmental
statutes or regulations or with judicial or administrative process, or (c) CLIENT’s
conduct of pre-clinical or clinical trials of Drug Product, provided that if a party
is required by law, regulation, or judicial or administrative process, or as a result
of litigation, to make any such disclosure of the other party’s Confidential
Information, the party subject to such legal requirement or litigation will, when
reasonably practicable, give reasonable advance notice to the other party of such
disclosure requirement and will use good faith efforts to assist such other party to
secure a protective order or confidential treatment of such Confidential Information
required to be disclosed.
	 
	 	9.5	 	Limitation of Disclosure: The parties agree that, except as otherwise may be
required by applicable laws, regulations, rules or judicial or administrative orders,
including without limitation the rules and regulations promulgated by the United
States Securities and Exchange Commission, and except as may be authorized in Sections
9.4 or 9.6, no information concerning this Agreement and the transactions contemplated
herein shall be made public by either party without the prior written consent of the
other.
	 
	 	9.6	 	Publicity. Except as part of any regulatory submission by CLIENT, or except
as may be otherwise required by law or regulation after first providing reasonable
advance notice to the other party, or except as otherwise expressly set forth herein,
neither party may use the other party’s name in any promotional material, advertising,
press releases, or other materials without in each case the prior written consent of
the other party. ALTHEA hereby consents to CLIENT’s disclosure of this Agreement and
ALTHEA’s name to CLIENT’s current and potential employees, consultants, directors,
professional advisors, shareholders, investors and business partners.
	 
	 	9.7	 	Return of Confidential Information. Upon the expiration or any termination
of this Agreement, each party shall, upon the request of the other party, return such





	 		
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	 	 	 	other party’s Confidential Information to such other party, provided, however, that
the party returning such Confidential Information shall be entitled to retain one
copy of all such Confidential Information to ensure its compliance with this
Agreement and/or any Applicable Legal Requirements.
	 
	 	9.8	 	Duration of Confidentiality: All obligations of confidentiality and non-use
imposed upon the parties under this Agreement shall expire ten (10) years after the
expiration or earlier termination of this Agreement.





Article 10, INTELLECTUAL PROPERTY.





	 	10.1	 	Existing Intellectual Property: Except as the parties may otherwise
expressly agree in writing or as set forth herein, each party shall continue to own
its patents, trademarks, service marks, trade dress, copyrights, trade secrets,
proprietary methods, discoveries, inventions, compositions, products, procedures,
know-how, data, reports, programs, processes, protocols, written or electronic
writings, illustrations, images, and any other form of proprietary rights
(collectively, “Intellectual Property”) that exist as of the Effective Date, without
conferring any interests therein on the other party, except as expressly provided
herein. Without limiting the generality of the preceding sentence, CLIENT shall
retain all right, title and interest arising under the United States Patent Act, the
United States Trademark Act, the United States Copyright Act and all other applicable
laws, rules and regulations in and to all Intellectual Property of Client
(collectively, “CLIENT’s Existing Intellectual Property”), including without
limitation all Drug Products, APIs (where applicable), all Labeling and trademarks
associated therewith. Neither ALTHEA nor any third party shall acquire any right,
title or interest in CLIENT’s Intellectual Property by virtue of this Agreement or
otherwise. ALTHEA shall retain all right, title and interest in and to all
Intellectual Property owned by ALTHEA (“ALTHEA’s Existing Intellectual Property”),
except as provided in Section 10.2 below.
	 
	 	10.2	 	New ALTHEA Inventions: ALTHEA shall own all right, title and interest in and
to Inventions that are conceived, reduced to practice, or created solely by ALTHEA’s
Representatives during the course of performance under this Agreement if such
Inventions are not specific to CLIENT’s Drug Products and are generally applicable to
products that are not competitive with (i.e., do not directly or indirectly reduce the
market for) CLIENT’s pharmaceutical products (“ALTHEA Inventions”). ALTHEA hereby
grants CLIENT a fully paid-up, irrevocable non-exclusive license to (a) all ALTHEA
Inventions solely to the extent necessary or beneficial for CLIENT to develop,
manufacture, commercialize and market its pharmaceutical products and (b) any of
ALTHEA’s Existing Intellectual Property that ALTHEA incorporates into the Development
or Production of CLIENT’s Drug Products, solely to the extent necessary or beneficial
for CLIENT to develop, manufacture, commercialize and market CLIENT’s Drug Products.




	 		
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	 	10.3	 	New CLIENT Inventions: For purposes of this Agreement, “Invention” shall
mean information relating to any innovation, improvement, development, discovery,
computer program, device, trade secret, method, know-how, process, technique or the
like, whether or not written or otherwise fixed in any form or medium, regardless of
the media on which contained and whether or not patentable or copyrightable. CLIENT
shall own all right, title and interest in and to Inventions that are conceived,
reduced to practice, or created solely by CLIENT’s employees, officers, consultants or
agents (“Representatives”) during the course of performance under this Agreement.
CLIENT shall also own all right, title and interest in and to (a) Inventions that are
conceived, reduced to practice, or created by ALTHEA’s Representatives, solely or
jointly with CLIENT’s Representatives or third parties, during the course of
performance under this Agreement or as a result of receiving CLIENT’s Confidential
Information, including without limitation all such Inventions that relate to any
improvement, modification or advancement of CLIENT’s Drug Products and all methods and
procedures for analyzing, testing, formulating, manufacturing, packaging or using
CLIENT’s Drug Products, but excluding all ALTHEA Inventions (as defined below), and
(b) all other work product, methods, procedures, reports and data resulting from
ALTHEA’s performance under this Agreement that directly relate to CLIENT’s Drug
Products.
	 
	 	10.4	 	Rights in Intellectual Property: The party owning Inventions or other
Intellectual Property as set forth herein above shall have the world wide right to
control the drafting, filing, prosecution, maintenance and enforcement of patents
covering the Inventions and Intellectual Property, including decisions about the
countries in which to file patent applications. Patent costs associated with the
patent activities described in this Section shall be borne by the sole owner. Each
party will cooperate with the other party in the filing and prosecution of patent
applications, including the execution of assignments to confirm title as set forth
above and further including but not be limited to, furnishing supporting data and
affidavits for the prosecution of patent applications and completing and signing forms
needed for the prosecution, assignment and maintenance of patent applications.
	 
	 	10.5	 	Confidentiality of Intellectual Property: Each Party’s Inventions and
Intellectual Property shall be deemed to be the Confidential Information of the party
owning such Intellectual Property as provided herein above. The protection of each
party’s Confidential Information is described in Article 9. Any disclosure of
information by one party to the other under the provisions of this Section 10 shall be
treated as the disclosing party’s Confidential Information under this Agreement. It
shall be the responsibility of the party preparing a patent application to obtain the
written permission of the other party to use or disclose the other party’s
Confidential Information in the patent application before the application is filed and
for other disclosures made during the prosecution of the patent application.





	 		
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Article 11, REPRESENTATIONS AND WARRANTIES.





	 	11.1	 	Mutual Representations: Each party hereby represents and warrants that (a)
the person executing this Agreement on behalf of such party is authorized to execute
this Agreement; (b) this Agreement is legal and valid and the obligations binding upon
such party are enforceable by their terms; and (c) the execution, delivery and
performance of this Agreement does not conflict with any agreement, instrument or
understanding, oral or written, to which such party may be bound, nor violate any law
or regulation of any court, governmental body or administrative or other agency having
jurisdiction over it.
	 
	 	11.2	 	ALTHEA Warranty: ALTHEA represents and warrants that Drug Product shall be
Produced in accordance with cGMP. ALTHEA further represents and warrants that it has
obtained (or will obtain prior to Producing Drug Product), and will remain in
compliance with during the term of this Agreement, all permits, licenses and other
authorizations (the “Permits”) which are required under Applicable Legal Requirements
or as specified in the Project Plan, the Master Batch Records, the Specifications or
the ALTHEA SOPs; provided, however, ALTHEA shall have no obligation to obtain Permits
relating to the sale, marketing, commercial distribution or use of APIs or Drug Product
or with respect to the Labeling of Drug Product. ALTHEA further represents and
warrants that the Drug Product supplied hereunder shall not be adulterated or
misbranded within the meaning of the FD&C Act or comparable law, provided, however,
that the warranty in this sentence shall not apply to any such adulteration or
misbranding that occurred due to information provided by CLIENT or that occurred after
the Drug Product leaves ALTHEA’s control. ALTHEA further represents and warrants that
it shall perform all Development, Production, and other services hereunder in full
compliance with all Applicable Legal Requirements and all other requirements of this
Agreement. ALTHEA makes no representation or warranty with respect to the sale,
marketing, commercial distribution or use of the APIs or as to printed materials
supplied by CLIENT or its consignee. ALTHEA further represents and warrants that all
Drug Product supplied hereunder shall be transferred free and clear of any liens or
encumbrances of any kind arising through ALTHEA or its Affiliates or their respective
agents. ALTHEA further represents and warrants that it has no knowledge of any patents
or other Intellectual Property rights that would be violated by ALTHEA’s performance
hereunder.
	 
	 	11.3	 	Disclaimer of Warranties: Except for those warranties set forth in Sections
11.1 and 11.2 of this Agreement, neither party makes any warranties, written, oral,
express or implied, with respect to Drug Product or the Development and Production of
Drug Product. ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A 
PARTICULAR PURPOSE AND NONINFRINGEMENT HEREBY ARE DISCLAIMED BY ALTHEA AND BY
CLIENT. NO WARRANTIES OF EITHER PARTY MAY BE CHANGED BY THE 





	 		
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	 	 	 	ORAL STATEMENT OF ANY REPRESENTATIVE OF SUCH PARTY. CLIENT accepts Drug Product subject
to the terms hereof.
	 
	 	11.4	 	CLIENT Warranties: CLIENT warrants that (a) it has the right to give ALTHEA
any information provided by CLIENT hereunder, and that ALTHEA has the right to use such
information for the Production of Drug Product, and (b) CLIENT has no knowledge of any
(i) patents or other Intellectual Property rights that would be infringed by ALTHEA’s
performance hereunder. CLIENT further warrants that the APIs provided to ALTHEA
hereunder (c) conforms to the APIs Specifications and (d) is not adulterated or
misbranded within the meaning of the FD&C Act.





Article 12, LIMITATION OF LIABILITY AND WAIVER OF SUBROGATION.





	 	12.1	 	Limitation of Liability: CLIENT’s sole and exclusive remedy for breach of
this Agreement is limited to those remedies set forth in Article 5, at CLIENT’s
election, to either replace the non-conforming Drug Product or reimburse CLIENT for
the Purchase Price for the non-conforming Drug Product and as provided in Article 6,
[†] (b) ALTHEA’s grossly negligent act or omission or willful misconduct, or (c) any
breach by ALTHEA of the Applicable Legal Requirements. Under no circumstances shall
either party be liable hereunder to the other party for the other party’s loss of use
or profits or other incidental, indirect, special, punitive, or consequential damages,
losses or expenses suffered by the other party, including but not limited to the cost
of cover or the cost of a recall (except as provided in Article 6) in connection with,
or by reason of the Production and delivery of Drug Product under this Agreement
whether such claims are founded in tort or contract.







 




			
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	 	12.2	 	Waiver of Subrogation: All ALTHEA Supplied Components and equipment used by
ALTHEA in the Production of Drug Product (collectively, “ALTHEA Property”) shall
remain the property of ALTHEA and ALTHEA assumes risk of loss for such property until
delivery of Drug Product to a common carrier as specified under Section 2.8, at which
point the ALTHEA Supplied Components that have been incorporated into the Drug Product
shall be deemed owned by CLIENT as further described in Section 2.8 above. ALTHEA
hereby waives any and all rights of recovery against CLIENT and its Affiliates, and
against any of their respective directors, officers, employees, agents or
representatives, for any loss or damage to ALTHEA Property to the extent the loss or
damage is covered or could be covered by insurance (whether or not such insurance is
described in this Agreement). CLIENT assumes all risk of loss for all CLIENT Supplied
Components, all APIs supplied by CLIENT, and all Drug Product (collectively, “CLIENT
Property”) while such CLIENT Property is in CLIENT’s possession. CLIENT hereby waives
any and all rights of recovery against ALTHEA and its Affiliates, and against any of
their respective directors, officers, employees, agents or representatives, for any
loss or damage to the CLIENT Property to the extent the loss of damage is covered or
could be covered by insurance (whether or not such insurance is described in this
Agreement).
	 
	 	12.3	 	Waiver of Claims: In connection with providing Development services, ALTHEA
represents only that it will use reasonable care and will comply fully with the terms
hereof in providing information solely as it relates to development studies,
formulation, primary packaging and manufacturing process development. Except as
otherwise expressly set forth herein, ALTHEA makes no representation or warranty
relating to the stability, efficacy, safety, or toxicity of Drug Product developed,
formulated, packaged or manufactured in accordance with the Development services
provided by ALTHEA.





Article 13, INDEMNIFICATION.





	 	13.1	 	CLIENT Indemnification: CLIENT shall indemnify, defend and hold harmless
ALTHEA and its Affiliates, and any of their respective directors, officers, employees,
subcontractors and agents (collectively the “ALTHEA Indemnified Parties”) from and
against any and all liabilities, obligations, penalties, claims, judgments, demands,
actions, disbursements of any kind and nature, suits, losses, damages, costs and
expenses (including, without limitation, reasonable attorney’s fees) arising out of or
in connection with property damage or personal injury (including without limitation
death) suffered by any third party (collectively “Claims”) arising directly out of (a)
CLIENT’s storage, promotion, labeling, marketing, distribution, use or sale of APIs or
Drug Product, (b) CLIENT’s negligence or willful misconduct or omission, or (c)
CLIENT’s breach of this Agreement. Notwithstanding the foregoing, CLIENT shall have
no obligations under this Section 13.1 to the extent that any such Claim arises out of
the negligence or willful misconduct or omission of any of the ALTHEA Indemnified
Parties or the breach by ALTHEA of its obligations under this Agreement.







 




			
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	 	13.2	 	ALTHEA Indemnification: ALTHEA shall indemnify, defend and hold harmless
CLIENT and its Affiliates and any of their respective directors, officers, employees,
subcontractors and agents (collectively the “CLIENT Indemnified Parties”) from and
against any and all Claims arising directly out of (a) the negligent act or omission
of any of the ALTHEA Indemnified Parties (provided that ALTHEA’s liability under this
subsection (a) only shall be limited to the amounts paid to ALTHEA by Omeros under
this Agreement), (b) the grossly negligent act or omission or intentional misconduct
of any of the ALTHEA Indemnified Parties, (c) the breach by any of the ALTHEA
Indemnified Parties of any of the Applicable Legal Requirements or (d) the breach by
any of the ALTHEA Indemnified Parties of Article 9 (Confidentiality) or Article 10
(Intellectual Property) above. Notwithstanding the foregoing, ALTHEA shall have no
obligations under this Section 13.2 to the extent that any such Claim arises out of
(i) the negligence or willful misconduct or omission of any of the CLIENT Indemnified
Parties, or (ii) the breach by CLIENT of any of its obligations under this Agreement.
	 
	 	13.3	 	Indemnitee Obligations: A party (the “Indemnitee”) which intends to claim
indemnification under this Article 13 shall promptly notify the other party (the
“Indemnitor”) in writing of any action, claim or other matter in respect of which the
Indemnitee or any of its Affiliates, or any of their respective directors, officers,
employees, subcontractors, or agents, intend to claim such indemnification; provided,
however, that failure to provide such notice within a reasonable period of time shall
not relieve the Indemnitor of any of its obligations hereunder except to the extent
the Indemnitor is prejudiced by such failure. The Indemnitee shall permit, and shall
cause its Affiliates, and their respective directors, officers, employees,
subcontractors and agents to permit, the Indemnitor, at its discretion, to settle any
such action, claim or other matter, and the Indemnitee agrees to the complete control
of such defense or settlement by the Indemnitor. Notwithstanding the foregoing, the
Indemnitor shall not enter into any settlement that would adversely affect the
Indemnitee’s rights hereunder, or impose any obligations on the Indemnitee in addition
to those set forth herein, in order for it to exercise such rights, without
Indemnitee’s prior written consent, which shall not be unreasonably withheld or
delayed. No such action, claim or other matter shall be settled without the prior
written consent of the Indemnitor, which shall not be unreasonably withheld or
delayed. The Indemnitee, its Affiliates, and their respective directors, officers,
employees, subcontractors and agents shall fully cooperate with the Indemnitor and its
legal representatives in the investigation and defense of any action, claim or other
matter covered by the indemnification obligations of this Article 13. The Indemnitee
shall have the right, but not the obligation, to be represented in such defense by
counsel of its own selection and at its own expense.
	 
	 	13.4	 	Injunction: In the event that the Production or sale of a Drug Product is
enjoined due to alleged infringement by either party of the proprietary rights of a
third party, such action shall be deemed a breach of this Agreement by CLIENT and
subject to the terms of Article 3, except to the extent that any such injunction







 




			
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	 	 	 	arises out of ALTHEA’s use of its standard methods, techniques, and processes that
ALTHEA uses generally in performing services for its customers.





Article 14, INSURANCE.





	 	14.1	 	CLIENT Insurance: CLIENT shall procure and maintain, during the Term of this
Agreement and for a period one (1) year beyond the expiration date of Drug Product,
Commercial General Liability Insurance, including without limitation, Product
Liability and Contractual Liability coverage (the “CLIENT Insurance”). The CLIENT
Insurance shall cover amounts not less than [†] combined single limit and shall be
with an insurance carrier reasonably acceptable to ALTHEA. ALTHEA shall be named as
an additional insured on the CLIENT Insurance and, upon ALTHEA’s written request,
CLIENT promptly shall deliver a certificate of CLIENT Insurance and endorsement of
additional insured to ALTHEA evidencing such coverage. If CLIENT fails to furnish
such certificates or endorsements, or if at any time during the Term of this Agreement
ALTHEA is notified of the cancellation or lapse of the CLIENT Insurance, and CLIENT
fails to rectify the same within ten (10) calendar days after notice from ALTHEA, in
addition to all other remedies available to ALTHEA hereunder, ALTHEA, at its option,
may obtain the CLIENT Insurance and CLIENT promptly shall reimburse ALTHEA for the
cost of the same. Any deductible and/or self insurance retention shall be the sole
responsibility of CLIENT.
	 
	 	14.2	 	ALTHEA Insurance: ALTHEA shall procure and maintain, during the Term of this
Agreement and for a period of one (1) year beyond the expiration date of Drug Product,
Commercial General Liability Insurance, including without limitation, Product
Liability and Contractual Liability coverage (the “ALTHEA Insurance”). The ALTHEA
Insurance shall cover amounts not less than [†] combined single limit. CLIENT shall
be named as an additional insured on the ALTHEA Insurance and, upon CLIENT’s written
request, ALTHEA promptly shall deliver a certificate of ALTHEA Insurance and
endorsement of additional insured to CLIENT evidencing such coverage. If ALTHEA fails
to furnish such certificates or endorsements, or if at any time during the Term of
this Agreement CLIENT is notified of the cancellation or lapse of the ALTHEA
Insurance, and ALTHEA fails to rectify the same within ten (10) calendar days after
notice from CLIENT, in addition to all other remedies available to CLIENT hereunder,
CLIENT, at its option, may obtain the ALTHEA Insurance and ALTHEA promptly shall
reimburse CLIENT for the cost of the same. Any deductible and/or self insurance
retention shall be the sole responsibility of ALTHEA.







 




			
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Article 15, GENERAL PROVISIONS.





	 	15.1	 	Notices: All notices hereunder shall be delivered by facsimile (confirmed by
overnight delivery), or by overnight delivery with a reputable overnight delivery
service, to the following address of the respective parties:





	 	 	 	 	 	 	 
	If to CLIENT:	 	 	 	 
	 	 	 	 	Omeros Corporation
	 	 	 	 	1420 Fifth Avenue, Suite 2600
	 	 	 	 	Seattle, WA 98101
	 

	 	 	 	Attention:
	 	Chairman & CEO
	 
	 	 	 	 	 	 
	 

	 	 	 	And copy to:
	 	General Counsel
	 
	 	 	 	 	 	 
	 	 	 	 	Fax: (206) 264.7856
	 	 	 	 	     Phone: (206) 623.4688
	 
	 	 	 	 	 	 
	 	 	If to ALTHEA:	 	Althea Technologies, Inc.
	 	 	 	 	11040 Roselle Street
	 	 	 	 	San Diego, CA 92121
	 	 	 	 	Attn: Alan Moore
	 	 	 	 	Executive Vice President and Chief Business Officer
	 
	 	 	 	 	 	 
	 

	 	 	 	Telephone:
	 	(858) 882-0123
	 

	 	 	 	Facsimile:
	 	(858) 882-0133






For specific inquiries, the following ALTHEA responsible parties may be contacted directly:




	 	 	 	 	 
	 	 	Project Manager

	 	Rick Hancock
	 	 	 
	 	 
	 	 	Quality Control and 

Quality Assurance Manager

	 	Roy Musil
	 	 	 
	 	 
	 	 	Materials Manager

	 	Melissa Rosness






For specific inquiries, the following CLIENT responsible parties may be contacted directly:




	 	 	 	 	 
	 
	 	Project Manager

	 	 
	 	 	 
	 	 
	 	 	Quality Control Manager
	 	 
	 	 	 
	 	 
	 	 	Materials Manager
	 	 
	 	 	 
	 	 
	 	 	Quality Assurance Manager
	 	 







	 	 	 	Notices shall be effective on the day following the date of transmission if sent by
facsimile, and on the second business day following the date of delivery to the
overnight delivery service if sent by overnight delivery. A party may change its
address listed above by notice to the other party given in accordance with this
section.







 




			
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	 	15.2	 	Entire Agreement; Amendment: The parties hereto acknowledge that this
Agreement, including any Project Plans executed in accordance with the terms hereof
and any other documents expressly incorporated by reference, sets forth the entire
agreement and understanding of the parties and supercedes all prior written or oral
agreements or understandings with respect to the subject matter hereof. No
modification of any of the terms of this Agreement, or any amendments thereto, shall
be deemed to be valid unless in writing and signed by an authorized agent or
representative of both parties hereto. No course of dealing or usage of trade shall
be used to modify the terms and conditions herein. In the event of any inconsistency
between the terms within the body of this Agreement and the terms contained in any
Project Plan, including without limitation any Quality Management Agreement within any
such Project Plan, the terms within the body of this Agreement shall govern.
	 
	 	15.3	 	Waiver: None of the provisions of this Agreement shall be considered waived
by any party hereto unless such waiver is agreed to, in writing, by authorized agents
of both parties. The failure of a party to insist upon strict conformance to any of
the terms and conditions hereof, or failure or delay to exercise any rights provided
herein or by law shall not be deemed a waiver of any rights of any party hereto.
	 
	 	15.4	 	Obligations to Third Parties: Each party warrants and represents that this
Agreement is not inconsistent with any contractual obligations, expressed or implied,
undertaken with any third party.
	 
	 	15.5	 	Assignment: This Agreement shall be binding upon and inure to the benefit of
the successors or permitted assigns of each of the parties and may not be assigned or
transferred by either party without the prior written consent of the other, which
consent will not be unreasonably withheld or delayed, except that no consent shall be
required in the case of a transaction involving the merger, consolidation or sale of
all or substantially all of that portion of the assigning party’s business assets to
which this Agreement relates and the resulting entity assumes all the obligations
under this Agreement. ALTHEA may, without such consent, assign this Agreement to an
Affiliate of ALTHEA, provided that all Development, Production, and other services to
be performed hereunder shall continue to be performed at the same facility at which
they were previously performed or at which it was contemplated by the parties that
they would be performed, and provided further that the assignee assumes all
obligations of ALTHEA under this Agreement. No assignment shall relieve any party of
responsibility for the performance of its obligations hereunder.
	 
	 	15.6	 	Successors and Assigns: This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto, their successors and permitted assigns.
	 
	 	15.7	 	Taxes: CLIENT shall pay all national, state, municipal or other sales, use,
excise, import, property, value added, or other similar taxes, assessments or tariffs
assessed upon or levied against the sale of Drug Product to CLIENT







 




			
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	 	 	 	pursuant to this Agreement or the sale or distribution of Drug Product by CLIENT
(or at CLIENT’s sole expense, defend against the imposition of such taxes and
expenses). ALTHEA shall notify CLIENT of any such taxes that any governmental
authority is seeking to collect from ALTHEA, and CLIENT may assume the defense
thereof in ALTHEA’s name, if necessary, and ALTHEA agrees to fully cooperate in
such defense to the extent of the capacity of ALTHEA, at CLIENT’s expense. Any
such taxes, assessment, or tariffs to be paid by CLIENT hereunder shall be
separately itemized on invoices provided to CLIENT. ALTHEA shall pay all national,
state, municipal or other taxes on the income resulting from the sale by ALTHEA of
the Drug Product to CLIENT under this Agreement, including but not limited to,
gross income, adjusted gross income, supplemental net income, gross receipts,
excess profit taxes, or other similar taxes.
	 
	 	15.8	 	Independent Contractor: ALTHEA shall act as an independent contractor for
CLIENT in providing the services required hereunder and shall not be considered an
agent of, or joint venturer with, CLIENT. Unless otherwise provided herein to the
contrary, ALTHEA shall furnish all expertise, labor, supervision, machining and
equipment necessary for performance hereunder and shall obtain and maintain all
building and other Permits and licenses required by public authorities.
	 
	 	15.9	 	Governing Law: This Agreement is being delivered and executed in the State
of California. In any action brought regarding the validity, construction and
enforcement of this Agreement, it shall be governed in all respects by the laws of the
State of California, without regard to the principals of conflicts of laws.
	 
	 	15.10	 	Attorney’s Fees: The successful party in any litigation or other dispute
resolution proceeding to enforce the terms and conditions of this Agreement shall be
entitled to recover from the other party reasonable attorney’s fees and related costs
involved in connection with such litigation or dispute resolution proceeding.
	 
	 	15.11	 	Severability: In the event that any term or provision of this Agreement
shall violate any applicable statute, ordinance, or rule of law in any jurisdiction in
which it is used, or otherwise be unenforceable, such provision shall be ineffective
to the extent of such violation without invalidating any other provision hereof.
	 
	 	15.11	 	Headings, Interpretation: The headings used in this Agreement are for
convenience only and are not part of this Agreement.
	 
	 	15.12	 	Facsimile Copies, Counterparts: This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original and all of which
shall constitute the same instrument. This Agreement shall be effective upon full
execution by facsimile or original, and a facsimile signature shall be deemed to be
and shall be as effective as an original signature.







 




			
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IN WITNESS WHEREOF, the parties hereto have each caused this Drug Product Development and Clinical
Supply Agreement to be executed by their duly-authorized representatives as of the Effective Date
above written.




	 	 	 	 	 	 	 	 	 	 	 
	OMEROS CORPORATION	 	 	 	ALTHEA TECHNOLOGIES, INC	 	 
	 
	By:

	 	/s/ Gregory A. Demopulos
	 	 	 	By:
	 	/s/ W. Alan Moore
	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	Name:

	 	Gregory A. Demopulos, M.D.
	 	 	 	Name:
	 	W. Alan Moore	 	 
	Title:

	 	Chairman & CEO
	 	 	 	Title:
	 	Executive VP and CBO	 	 







 




			
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Project Plan for cGMP Fill and

Finish and Stability Testing




Prepared for:




Wayne Gombotz, Ph.D.

Vice President, Pharmaceutical Operations

Omeros Corporation

1420 Fifth Avenue, Suite 2600

Seattle, WA 98101

206-623-4688 (phone)

206-264-7856 (fax)




 




Prepared by:




Althea Technologies 11040

Roselle Street San Diego,

CA 92121 858-882-0123

858-882-0133 (fax)











 




			
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TABLE OF CONTENTS





	1.	 	Outline of Deliverables
	 
	2.	 	Detailed Description of Deliverables and Pricing Summary
	 
	3.	 	Specifications and Stability Testing Outlines
	 
	4.	 	Quality Agreement
	 
	5.	 	Project Total
	 
	6.	 	Authorizations







 




			
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1. Outline of Deliverables




A. Timing of Deliverables




[†]




B. Summary of Deliverables to Omeros Corporation




[†]






 




			
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2. Detailed Description of Deliverables and Pricing Summary




A. Detailed Description of Fill and Finish Deliverables and Pricing Summary




	 	 	 	 	 	 	 	 	 	 	 	 	 
	Service Description	 	Units	 	Unit Price	 	Total Price
	[†]
	 	 	[†]	 	 	 	[†]	 	 	 	[†]	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	[†]
	 	 	[†]	 	 	 	[†]	 	 	 	[†]	 








 




			
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A. Detailed Description of Fill and Finish Deliverables and Pricing Summary continued



	 	 	 	 	 	 	 	 	 	 	 	 	 
	Service Description	 	Units	 	Unit Price	 	Total Price
	[†]
	 	 	[†]	 	 	 	[†]	 	 	 	[†]	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	FILL AND FINISH TOTAL
	 	 	 	 	 	 	 	 	 	 	[†]	 








 




			
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B. Detailed Description of Stability Testing and Analytical Transfer Deliverables and
Pricing Summary



	 	 	 	 	 	 	 	 	 	 	 	 	 
	Service Description	 	Units	 	Unit Price	 	Total Price
	[†]
	 	 	[†]	 	 	 	[†]	 	 	 	[†]	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	[†]
	 	 	[†]	 	 	 	[†]	 	 	 	[†]	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	[†]
	 	 	[†]	 	 	 	[†]	 	 	 	[†]	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Stability
and Analytical Transfer Total	 	 	 	 	 	 	[†]	 








 




			
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C.  Payment Schedule




[†]




	 	 	 	 	 
	Milestone	 	Invoice Amount
	[†]
	 	 	[†]	 






[†]






 




			
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3. Specifications




	 	 	 	 	 
	Assay	 	Test	 	Specification
	[†]

	 	[†]
	 	[†]








 




			
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Stability Testing Outlines




[†]






 




			
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4. Quality Agreement




[†]






 




			
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5. Summary Pricing




	 	 	 
	[†]

	 	[†]








 




			
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6. Authorizations



IN WITNESS WHEREOF, the parties hereto have each caused this Project Plan to be executed by
their duly-authorized representatives as of January 20, 2006.




	 	 	 	 	 	 	 	 	 	 	 
	OMEROS CORPORATION	 	ALTHEA TECHNOLOGIES, INC	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Gregory A. Demopulos
 

	 	 
	 	By:
	 	/s/ Rick Hancock
 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Name:

	 	Gregory A. Demopulos, M.D.
	 	 	 	Name:
	 	Rick Hancock	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Title:

	 	Chairman & CEO
	 	 	 	Title:
	 	COO	 	 








 




			
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