**Exhibit 10.28**

 

**Confidential Materials omitted and filedseparately with the Securities and Exchange Commission. Asterisks denote omissions.**

 

**COMMERCIAL MANUFACTURING AGREEMENT**

** **

This CommercialManufacturing Agreement (“Agreement”) is made this 30th day of December, 2005, by and between CardinalHealth PTS, LLC, having a place of business at 14 Schoolhouse Road, Somerset, NJ 08873 (“Cardinal Health”)and CollaGenex Pharmaceuticals, Inc. (“Client”), having its principalplace of business at 41 University Drive, Suite 200, Newtown, PA 18940.

 

**WHEREAS,** Cardinal Health provides contractpharmaceutical development, manufacturing, packaging, analytical, and sales andmarketing services to the pharmaceutical industry.

 

**WHEREAS,** Client has certain technology relatingto the certain pharmaceutical products and wants Cardinal Health to assist inthe manufacturing and testing on such products as provided in this Agreementand the attachments hereto.

 

**WHEREAS,** Client desires to engage CardinalHealth to provide certain services to Client in connection with the processingof Client’s Product (defined below); and Cardinal Health desires to providesuch services pursuant to the terms and conditions set forth in this Agreement.

 

**NOW,THEREFORE,** inconsideration of the mutual covenants, terms and conditions set forth below,the parties agree as follows:

 

# **ARTICLE 1DEFINITIONS**

# ** **

Thefollowing terms have the following meanings in this Agreement:

 

## 1.1                                 “Affiliate(s)”means any corporation, firm, partnership or other entity which controls, iscontrolled by or is under common control with a party. For purposes of thisdefinition, “control” shall mean the ownership of at least fifty percent (50%)of the voting share capital of such entity or any other comparable equity orownership interest.

##  

## 1.2                                 “API”means the active pharmaceutical ingredient set forth in Exhibit A whichhas been released by Client and provided to Cardinal Health, along with acertificate of analysis, as provided in this Agreement.

 

----

 

## 1.3                                 “ApplicableLaws” means all laws, ordinances, rules and regulations within theTerritory applicable to the Processing of the Product or any aspect thereof andthe obligations of Cardinal Health or Client, as the context requires underthis Agreement, including, without limitation, (A) all applicable federal,state and local laws and regulations of each Territory; (B) the U.S.Federal Food, Drug and Cosmetic Act, and (C) the Good ManufacturingPractices promulgated by the Regulatory Authorities, as amended from time totime (“GMPs”). Applicable Laws shall also include all laws, ordinances, rules andregulations applicable in Territories added to this Agreement in an amendment to this Agreement, solely to the extentClient or its designee has provided written copies of such laws to CardinalHealth prior to Cardinal Health’s Processing Product under this Agreement. Copiesof all laws shall be in the English language.

##  

## 1.4                                 “Batch”means defined quantity of formulated bulk drug product which is Manufacturedand Packaged in accordance with the Specifications.

##  

## 1.5                                 “CalendarQuarter” means a period of three (3) consecutive months commencing on January 1,April 1, July 1 or October 1 of any calendar year.

##  

## 1.6                                 “CardinalHealth Materials” shall have the meaning set forth in Article 12.

##  

## 1.7                                 “ChangeOrder” shall have the meaning set forth in Section 4.5(A).

##  

## 1.8                                 “CommencementDate” means the first date upon which a Regulatory Authority approves CardinalHealth as a manufacturer of one of the Products.

##  

## 1.9                                 “ConfidentialInformation” is as defined in Section 11.2.

##  

## 1.10                           “ContractYear” means each consecutive twelve (12) month period beginning on theCommencement Date.

##  

## 1.11                           “ClientMaterials” shall have the meaning set forth in Article 12.

##  

## 1.12                           “DefectiveProduct” shall have the meaning set forth in Section 5.2.

##  

## 1.13                           “Dispute”shall have the meaning set forth in Section 18.9.

##  

## 1.14                           “DosageContainer” means any final dosage form container(s) the parties may agreeupon in writing from time to time.

##  

## 1.15                           “EffectiveDate” means the date this Agreement was fully executed.

##  

## 1.16                           “Facilities”means Cardinal Health’s facilities located in Winchester, Kentucky, USA or suchother facility as agreed by the parties.

##  

## 1.17                           “FDA”means the United States Food and Drug Administration.

##  

## 1.18                           “FirmCommitment” shall have the meaning set forth in Section 4.2.

##  

## 1.19                           “Minimum Requirement” shall have the meaningset forth in Section 4.1.

 

2

----

 

## 1.20                           “Process”or “Processing” means themanufacturing and/or packaging of the API and Raw Materials into Product inaccordance with the Specifications and the terms and conditions set forth inthis Agreement.

##  

## 1.21                           “Processing Date,” means the day on which theProduct is to be compounded by Cardinal Health.

##  

## 1.22                           “Product” means the fully compounded bulkdrug product Processed and packaged in accordance with the Specifications.

##  

## 1.23                           “Purchase Order” shall have the meaning setforth in Section 4.3.

##  

## 1.24                           “Raw Materials” means all raw materials,supplies, components and packaging necessary to manufacture and ship theProduct in accordance with the Specifications, as provided in Exhibit A,but not including the API.

##  

## 1.25                           “Regulatory Approval” shall have the meaningset forth in Section 7.4.

##  

## 1.26                           “Regulatory Authority” means any governmentalregulatory authority within a Territory involved in regulating any aspect ofthe development, manufacture, market approval, sale, distribution, packaging oruse of the Product.

##  

## 1.27                           “Rolling Forecast” shall have the meaning setforth in Section 4.2.

##  

## 1.28                           “Specifications” means the procedures,requirements, standards, quality control testing and other data and the scopeof services as set forth in Exhibit A, which are herebyincorporated by reference into this Agreement, along with any valid amendmentsor modifications thereto, subject to the terms and conditions set forth in Article 8.

##  

## 1.29                           “Term” shall have the meaning set forth in Section 15.1.

##  

## 1.30                           “Territory” means the United States ofAmerica and any other country which the parties agree in writing to add to thisdefinition of Territory in an amendment to this Agreement.

##  

## 1.31                           “Unit Pricing” shall have the meaning setforth in Section 7.1.

##  

## 1.32                           “Validation Batches” shall mean each Batch ofProduct manufactured by Cardinal Health which is necessary to support thevalidation portion of Client’s NDA or ANDA submission to the FDA.

##  

# **ARTICLE 2VALIDATION, PROCESSING & RELATED SERVICES**

# ** **

## 2.1                                 ValidationServices. Cardinal Health shall perform the qualification, validationand stability services described in Exhibit A and Exhibit Bof this Agreement for the prices specified therein.

 

3

----

 

## 2.2                                 Supplyand Purchase of Product. During the Term, Cardinal Health shall Process theProducts in accordance with the Specifications, the Applicable Laws and theterms and conditions of this Agreement. Client shall purchase the Product fromCardinal Health in accordance with the terms and conditions of this Agreement.

##  

## 2.3                                 OtherRelated Services. Cardinal Health shall provide other services upon termsand conditions agreed to by the parties in writing from time to time.

##  

# **ARTICLE 3MATERIALS**

# ** **

## 3.1                                 API.Client shall supply to Cardinal Health for Processing, at Client’s sole cost,the API and applicable reference standards in quantities sufficient to meetClient’s requirements for each Product as further set forth in Article 4. Priorto delivery of any of the API or reference standard to Cardinal Health forProcessing, Client shall provide to Cardinal Health a copy of the API MaterialSafety Data Sheet (“MSDS”), as amended, and any subsequent revisions thereto. Clientshall supply the API, reference standards, and Certificate of Analysis FOB theFacility no later than sixty (60) days before the scheduled Processing Dateupon which such API will be used by Cardinal Health. Upon receipt of the API,Cardinal Health shall conduct identification testing of the API. CardinalHealth shall use the API solely and exclusively for Processing under thisAgreement.

##  

## 3.2                                 RawMaterials. Cardinal Health shall be responsible for procuring, inspectingand releasing adequate Raw Materials as necessary to meet the Firm Commitment,unless otherwise agreed to by the parties in writing. In certain instances,Client may require a specific supplier to be used for Raw Material. Insuch an event, the suppliers will be specified in the Specifications, andClient shall be responsible for the timeliness, quantity and quality of supplyof such Raw Materials. If the cost of any such Raw Material is greater thanCardinal Health’s costs for the same raw material of equal quality from othersuppliers, Cardinal Health shall add the difference between Cardinal Health’scost of the Raw Material and Client’s mandated supplier’s cost to the UnitPrice of the Product. Client will be responsible for all costs associated withqualification of a new supplier of a Raw Material not previously qualified byCardinal Health. Unless a particular Raw Material can be replaced with the sameraw material from another supplier, Cardinal Health shall not be liable for anydelay in delivery of Product if (A) Cardinal Health is unable to obtain,in a timely manner, a particular Raw Material necessary to Process the Product,and (B) Cardinal Health placed orders for such Raw Materials promptly followingreceipt of Client’s Firm Commitment.

##  

## 3.3                                 Artworkand Packaging. If applicable, Client shall provide or approve, prior to theprocurement of applicable components, all artwork, advertising and packaginginformation necessary to Process the Product. Such artwork, advertising andpackaging information is and shall remain the exclusive property of Client, andClient shall be solely responsible for the content thereof. Such artwork,advertising and packaging information or any reproduction thereof may notbe used by Cardinal Health following the termination of this Agreement, orduring the Term of this Agreement in any manner other than solely for thepurpose of performing its obligations hereunder.

 

4

----

 

## 3.4                                 Reimbursementfor Materials. In the event of (A) a Specification change for anyreason, (B) termination or expiration of this Agreement; or (C) obsolescenceof any Raw Material, Client shall bear the cost of any unused Raw Materials,provided that Cardinal Health purchased such Raw Materials in quantitiesconsistent with Client’s most recent Firm Commitment and the supplier’s minimumpurchase obligations.

##  

# **ARTICLE 4MINIMUM COMMITMENT, PURCHASE ORDERS & FORECASTS**

# ** **

## 4.1                                 MinimumRequirement. During each Contract Year, the parties acknowledge that Clientis not obligated to buy any specific amount of Product under this Agreement,except for the quantities that Client shall actually order through such bindingpurchase orders, as specified in Section 4.3 below, and in minimum orderquantities as specified in Exhibit B.

##  

## 4.2                                 Forecast.On or prior to the tenth (10th) calendar day of each month, beginning at leastfour months prior to the anticipated Commencement Date, Client shall furnish toCardinal Health a written commercially reasonable rolling forecast of Productquantities for the twelve months following the month in which such forecast issubmitted, that reflects both (a) quantities subject to Purchase Orderspursuant to this Agreement and (b) additional quantities of Product thatClient reasonably expects to order from Cardinal Health during such period (“RollingForecast”). The first three (3) months of each Rolling Forecast shallconstitute a firm order for Product and binding commitment to submit PurchaseOrders for the quantities of Product specified therein (“Firm Commitment”) andthe following nine (9) months of the Rolling Forecast shall benon-binding, good faith estimates for planning purposes only and shall notconstitute binding commitments by Client to purchase Product.

##  

## 4.3                                 PurchaseOrders. At least 90 days prior to the desired delivery date, Client shallsubmit a firm, binding, non-cancelable purchase order for that latest month’sFirm Commitment portion of the Rolling Forecast, (“Purchase Order”) specifyingrequested delivery dates for each Batch. In the event of a conflict between theterms of any Purchase Order and this Agreement, this Agreement   shall  control. Notwithstanding  the   foregoing,   Cardinal  Health   shall   use commercially reasonable efforts tosupply Client with quantities of Product which are in excess of the quantitiesspecified in the Firm Commitment, subject to Cardinal Health’s other supplycommitments and manufacturing and equipment capacity.

##  

## 4.4                                 CardinalHealth’s Cancellation of Purchase Orders. Notwithstanding the terms andconditions set forth in Section 4.5 below, Cardinal Health reserves theright to cancel all, or any part of, a Purchase Order upon written noticeto Client, and Cardinal Health shall have no further obligations or liabilitywith respect to such Purchase Order if Client refuses or fails to makescheduled deliveries of the API.

##  

## 4.5                                 Client’sModification or Cancellation.

##  

### A.                                   Clientmay modify the delivery date, Specifications or quantity of Product in suchPurchase Order only by submitting a written change order (“Change Order”) toCardinal Health at least thirty (30) business days in advance of the earliestscheduled Processing Date for the Processing covered by the change order. Suchchange order shall be effective and binding

 

5

----

 

### against Cardinal Health only upon the written approvalof Cardinal Health, and notwithstanding the foregoing, Client shall remainresponsible for the Firm Commitment portion of the Rolling Forecast.

###  

### B.                                     Notwithstandingany amounts due to Cardinal Health under section 4.4 or Section 4.1,if Client fails to place Purchase Orders sufficient to satisfy the FirmCommitment, Client shall, within thirty (30) days of receipt of invoice, pay toCardinal Health the Unit Price for all Units that would have been Processed ifClient has placed Purchase Orders sufficient to satisfy the Firm Commitment.

###  

## 4.6                                 UnplannedDelay or Elimination of Processing. Cardinal Health shall use commerciallyreasonable efforts to meet the Purchase Orders, subject to the terms andconditions of this Agreement. Cardinal Health shall provide Client with as muchadvance notice as possible (and will use its best efforts to provide at leastfifteen (15) days advance notice where possible) if Cardinal Health determinesthat any Processing will be delayed or eliminated for any reason.

##  

## 4.7                                 Inspectionof Processing. Client may base up to two (2) representatives atthe Facilities to observe the Processing provided that Client provide CardinalHealth at least ten (10) days advance written notice of the attendance ofsuch Client representatives. Client shall indemnify and hold harmless CardinalHealth for any action or activity of such representatives while on CardinalHealth’s premises.

##  

# **ARTICLE 5TESTING; SAMPLES; RELEASE**

# ** **

## 5.1                                 DiscrepantTest Results. In the event of a disagreement between the parties regardingwhether the Product meets the warranty in Section 10.1, the parties shallcause a mutually agreeable independent third party to review records, test dataand to perform comparative tests and/or analyses on samples of the allegeddefective Product. The independent party’s results shall be final and binding. Unlessotherwise agreed to by the parties in writing, the costs associated with suchtesting and review shall be borne by the party found responsible.

##  

## 5.2                                 Replacementof Defective Product. In accordance with the terms set forth in thisAgreement, Cardinal Health shall replace, as soon as practicable and at itssole expense, all Product that does not comply with the warranty in Section 10.1(“Defective Product”) or credit any payments made by Client for such Batch ofDefective Product. THE OBLIGATION OF CARDINAL HEALTH TO (A) REPLACEDEFECTIVE PRODUCT IN ACCORDANCE WITH THE SPECIFICATIONS OR CREDIT PAYMENTS MADEBY CLIENT FOR DEFECTIVE PRODUCT AND (B) REIMBURSE CLIENT FOR API LOST INTHE DEFECTIVE BATCH, SUBJECT TO THE LIMITATIONS IN SECTION 16.1 SHALL BECLIENT’S SOLE AND EXCLUSIVE REMEDY UNDER THIS ARTICLE FOR DEFECTIVEPRODUCT AND IS IN LIEU OF ANY OTHER WARRANTY, EXPRESS OR IMPLIED.

##  

## 5.3                                 Supplyof Material for Defective Product. In the event Cardinal Health reprocessesProduct pursuant to Section 5.2, above, Client shall supply, at its solecost, Cardinal Health with sufficientquantities of the Drug Substance in order for Cardinal  Health complete  such reprocessing.

 

6

----

 

# **ARTICLE 6DELIVERY**

# ** **

## 6.1                                 Delivery.Cardinal Health shall tender the Product for delivery, F.O.B. the Facility onceCardinal Health’s Certificate of Analysis for such Batch designates the Batchmeets the Specifications. Client shall be responsible for all costs and risk ofloss associated with shipment of the Product. Client shall qualify at leastthree (3) carriers to ship the Product and then designate the priority ofsuch qualified carriers to Cardinal Health.

##  

## 6.2                                 Failureto Take Delivery. If Client fails to take delivery on any scheduleddelivery date, Client shall be invoiced on the first day of each month for thestored Product and reasonable administration and storage costs. For each suchbatch of undelivered Product, Client agrees that:  (A) Client has made a fixed commitmentto purchase such Product, (B) risk of ownership for such Product passes toClient, (C) such Product shall be on a bill and hold basis for legitimatebusiness purposes, (D) if no delivery date is determined at the time ofbilling, Cardinal Health shall have the right to ship the Product to Clientwithin four months after billing, and (E) Client will be responsible forany decrease in market value of such Product that relates to factors andcircumstances outside of Cardinal Health’s control. Within five (5) daysfollowing a written request from Cardinal Health, Client shall provide CardinalHealth with a letter confirming items (A) through (E) of this Section foreach Batch of undelivered Product.

##  

# **ARTICLE 7PRICING AND PAYMENT**

# ** **

## 7.1                                 UnitPricing. Client shall pay to Cardinal Health the unit pricing set forth on Exhibit B(“Unit Pricing”) for all Product. In the event Client requests services otherthan Processing Product, Cardinal Health shall provide a written quote of thefee for such additional services and Client shall advise Cardinal Healthwhether it wishes to have such additional services performed by CardinalHealth.

##  

## 7.2                                 PriceIncrease. The Unit Pricing shall be adjusted on an annual basis, effectiveon each January 1st, upon at least sixty (60) days writtennotice from Cardinal Health to Client.

##  

## 7.3                                 Taxes;Duty. All taxes, duties and other amounts assessed on the Raw Materials,API or the Product prior to or upon sale to Client are the responsibility ofClient, and Client shall reimburse Cardinal Health for any such taxes, dutiesor other expenses paid by Cardinal Health.

##  

## 7.4                                 ProductApproval. Notwithstanding the terms set forth above, Client shall use itsbest efforts to expedite and obtain all regulatory approvals necessary forCardinal Health to commence production at the Facility (“Regulatory Approvals”).

##  

## 7.5                                 PaymentTerms. Cardinal Health shall invoice Client for all Product as shipped inaccordance with Section 6.1, and payment for such invoices shall be duewithin thirty (30) days after the dateof such invoice. In the event payment is not received by Cardinal Health on orbefore the thirtieth (30th) day after the date of the invoice, thensuch unpaid amount shall accrue interest at the rate of one percent (1%) permonth until paid in full.

 

7

----

 

# **ARTICLE 8CHANGES TO SPECIFICATIONS**

# ** **

All Specifications andany changes thereto agreed to by the parties from time to time shall be inwriting, dated and signed by the parties. No change in the Specifications shallbe implemented by Cardinal Health, whether requested by Client or requested orrequired by any Regulatory Authority, until the parties have agreed in writingto such change, the implementation date of such change, and any increase ordecrease in costs, expenses or fees associated with such change. CardinalHealth shall respond promptly to any request made by Client for a change in theSpecifications, and both parties shall use commercially reasonable, good faithefforts to agree to the terms of such change in a timely manner. As soon aspossible after a request is made for any change in Specifications, CardinalHealth shall notify Client of the costs associated with such change and shallprovide such supporting documentation as Client may reasonably require. Clientshall pay all costs associated with such agreed upon changes. If there is aconflict between the terms of this Agreement and the terms of theSpecifications, this Agreement shall control.

 

# **ARTICLE 9RECORDS; REGULATORY MATTERS**

# ** **

## 9.1                                 BatchRecords and Data. Within thirty (30) days following the completion ofProcessing of each batch, Cardinal Health shall provide Client with properlycompleted copies of Batch records prepared in accordance with theSpecifications; provided, however, that if testing reveals anout-of-Specification result, Cardinal Health shall provide such Batch recordswithin 10 days following resolution of the out-of Specification result.

##  

## 9.2                                 Recordkeeping.Cardinal Health shall maintain true and accurate books, records, test andlaboratory data, reports and all other information relating to Processing underthis Agreement, including all information required to be maintained by allApplicable Laws. Such information shall be maintained in forms, notebooks andrecords for a period of at least two (2) years from the relevant finishedProduct expiration date or longer if required under Applicable Laws.

##  

## 9.3                                 RegulatoryCompliance. Client shall be solely responsible for all permits and licensesrequired by any regulatory agency with respect to the Product and theProcessing under this Agreement, including any product licenses, applicationsand amendments in connection therewith. Cardinal Health will be responsible tomaintain all permits and licenses required by any Regulatory Authority withrespect to the Facility. During the Term, Cardinal Health will assist Clientwith all regulatory matters relating to Processing under this Agreement, atClient’s request and at Client’s expense. Each party intends and commits tocooperate to satisfy all Applicable Laws relating to Processing under thisAgreement.

##  

## 9.4                                 GovernmentalInspections and Requests. Cardinal Health shall immediately advise Clientif an authorized agent of any Regulatory Authority visits the Facilityconcerning the Processing of the Product. Cardinal Health shall furnish toClient a copy of the report by such Regulatory Authority, if any, within ten (10) daysof Cardinal Health’s receipt of such report. Further, upon receipt of aRegulatory Authority request to inspect the Facilities or audit

 

8

----

 

## Cardinal Health’s books and records with respect toProcessing under this Agreement, Cardinal Health shall immediately notifyClient, and shall provide Client with a copy of any written document receivedfrom such Regulatory Authority.

##  

## 9.5                                 Recall.In the event Cardinal Health believes a recall, field alert, Product withdrawalor field correction may be necessary with respect to any Product providedunder this Agreement, Cardinal Health shall immediately notify Client inwriting. Cardinal Health will not act to initiate a recall, field alert,Product withdrawal or field correction without the express prior writtenapproval of Client, unless otherwise required by Applicable Laws. In the eventClient believes a recall, field alert, Product withdrawal or field correction may benecessary with respect to any Product provided under this Agreement, Clientshall immediately notify Cardinal Health in writing and Cardinal Health shallprovide all necessary cooperation and assistance to Client. The cost of anyrecall, field alert, Product withdrawal or field correction shall be borne byClient unless such recall, field alert, Product withdrawal or field correctionis caused solely by Cardinal Health’s breach of its obligations under thisAgreement or Applicable Laws or its negligence or willful misconduct, then suchcost shall be borne by Cardinal Health. For purposes hereof, such cost shall belimited to reasonable, actual and documented administrative costs incurred byClient for such recall, withdrawal or correction, and replacement of theDefective Product to be recalled, in accordance with Article 5.

##  

## 9.6                                 QualityAgreements. Within six (6) months following the execution of thisAgreement, the parties shall execute a Quality Agreement in substantially the form attachedto this Agreement as Exhibit C. The Quality Agreement shall in noway determine liability or financial responsibility of the parties for theresponsibilities set forth therein. In the event of a conflict between theterms of this Agreement and the Quality Agreement, this Agreement shallcontrol.

##  

# **ARTICLE 10REPRESENTATIONS AND WARRANTIES**

# ** **

## 10.1                           CardinalHealth. Cardinal Health represents and warrants to Client that at the timeof delivery of the Product as provided in Section 6.1, such Product willconform to and will have been Processed in conformance with the ProductSpecifications and Applicable Laws. THE LIMITED WARRANTY SET FORTH IN THIS SECTION 10.1IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTYOF MERCHANTABILITY, WARRANTY OF NON-INFRINGEMENT AND ANY WARRANTY OF FITNESSFOR A PARTICULAR PURPOSE. EXCEPT FOR THE WARRANTY EXPRESSED IN THIS SECTION 10.1,CARDINAL HEALTH MAKES NO OTHER WARRANTY, EITHER EXPRESS OR IMPLIED, WITHRESPECT TO THE PROCESSING OR THE PRODUCT.

##  

## 10.2                           Client.Client represents, warrants and covenants to Cardinal Health that:

##  

### A.                                   TheClient-Supplied Materials will comply with all applicable Specifications, willhave been produced in compliance with the Applicable Laws, and will be providedin accordance with the terms and conditions of this Agreement and theapplicable Project Plan;

 

9

----

 

### B.                                     Ithas all necessary authority and all right, title and interest in and to anyIntellectual Property related to each Product that is the subject of thisAgreement and any Project Plan;

###  

### C.                                     Nospecific safe handling instructions are applicable to the Product or to and anyClient-Supplied Materials, except as disclosed to Cardinal Health in writing bythe Client in sufficient time for review and training by Cardinal Health priorto delivery;

###  

### D.                                    AllProduct delivered to Client by Cardinal Health will be held, used and/ordisposed of by the Client in accordance with all applicable laws, rules andregulations;

###  

### E.                                      Clientwill comply with all laws, rules, regulations and guidelines applicable toClient’s performance under this Agreement and its use of any materials orProducts provided by Cardinal Health under this Agreement or any Project Plan;and

###  

### F.                                      Clientwill not release any Batch of Product if the required Certificates of Analysisindicate that the Product does not comply with the Specifications;

###  

### G.                                     Thecontent of all artwork provided to Cardinal Health complies with all ApplicableLaws;

###  

### H.                                    Clienthas all necessary authority and right, title and interest in and to anycopyrights, trademarks, trade secrets, patents, inventions and developmentsrelated to the Product, the manufacture thereof, and any Product artwork; and

###  

### I.                                         Thework to be performed by Cardinal Health under this Agreement will not violateor infringe upon any trademark, tradename, copyright, patent or other rightsheld by any person or entity.

###  

## 10.3                           Mutual.Each party hereby represents and warrants to the other party that:

##  

### A.                                   Suchparty (1) is duly organized, validly existing and in good standing underthe laws of the state in which it is organized, (2) has the power andauthority and the legal right to own and operate its property and assets, andto carry on its business as it is now being conducted, and (3) is in compliancewith all requirements of applicable law, except to the extent that anynoncompliance would not materially adversely affect such party’s ability to perform itsobligations under the Agreement;

###  

### B.                                     Suchparty (1) has the power and authority and the legal right to enter intothis Agreement and to perform its obligations hereunder and thereunder and(2) has taken all necessary action on its part to authorize theexecution and delivery of the Agreement and the performance of its obligationshereunder;

###  

### C.                                     ThisAgreement has been duly executed and delivered on behalf of such party, andconstitutes a legal, valid, binding obligation, enforceable against such partyin accordance with its terms;

 

10

----

 

### D.                                    Allnecessary consents, approvals and authorizations of all agencies and otherpersons required to be obtained by such party in connection with the Agreementhave been obtained; and

###  

### E.                                      Theexecution and delivery of this Agreement and the performance of such party’sobligations hereunder (1) do not conflict with or violate any requirementof applicable laws or regulations or any material contractual obligation ofsuch party and (2) do not materially conflict with, or constitute amaterial default or require any consent under, any material contractualobligation of such party.

###  

# **ARTICLE 11CONFIDENTIAL INFORMATION**

# ** **

## 11.1                           MutualObligation. Cardinal Health and Client agree that they will not disclosethe other party’s Confidential Information (defined below) to any third partywithout the prior written consent of the other party except as required by lawor regulation; provided, however, that prior to making any such legallyrequired disclosure, the party making such disclosure shall give the otherparty as much prior notice of the requirement for and contents of suchdisclosure as is practicable under the circumstances. Notwithstanding theforegoing, each party may disclose the other party’s ConfidentialInformation to any of its affiliates which (A) need to know such ConfidentialInformation for the purpose of performing under this Agreement, (B) areadvised of the contents of this Section, and (C) agree to be bound by theterms of this Section, provided, however, that only an affiliate to which suchConfidential Information is actually disclosed and received will be bound bythe terms of this Section.

##  

## 11.2                           Definition.As used in this agreement, the term “Confidential Information” includes allsuch information furnished by Cardinal Health or Client, or any of their respectiverepresentatives or affiliates, to the other or its representatives oraffiliates, whether furnished before, on or after the date of this agreementand furnished in any form, including but not limited to written, verbal,visual, electronic or in any other media or manner. Confidential Informationincludes all proprietary technologies, know-how, trade secrets, discoveries,inventions and any other intellectual property (whether or not patented),analyses, compilations, business or technical information and other materialsprepared by either party, or any of their respective representatives,containing or based in whole or in part on any such information furnishedby the other party or its representatives. Confidential Information alsoincludes the existence of this agreement and its terms.

##  

## 11.3                           Exclusions.Confidential Information does not include, however, information concerningCardinal Health or Company which (A) is or becomes generally available tothe public or within the industry to which such information relates other thanas a result of a breach of this agreement, or (B) is already known by thereceiving party at the time of disclosure as evidenced by the receiving party’s written records, or (C) becomes availableto the receiving party on a non-confidential basis from a source that isentitled to disclose it on a non-confidential basis, or (D) was or isindependently developed by or for the receiving party without reference to theConfidential Information, as evidenced by the receiving party’s writtenrecords.

 

11

----

 

## 11.4                           Survival.The obligations of this Article 11 will terminate five (5) years fromthe expiration of this Agreement.

##  

## 11.5                           ProprietaryInformation. The party receiving Proprietary Information will obtain noright of any kind or license under any patent application or patent by reasonof this Agreement. All Proprietary Information will remain the sole property ofthe party disclosing such information or data.

##  

## 11.6                           Returnof Confidential Information. Upon termination of this Agreement, the partyto which Proprietary Information has been disclosed will, upon request,promptly return within thirty (30) days all such information, including anycopies thereof, and cease its use or, at the request of the party transmittingsuch Proprietary Information, will promptly destroy the same and certify suchdestruction to the transmitting party; except for a single copy thereof which may beretained for the sole purpose of determining the scope of the obligationsincurred under this Agreement.

##  

# **ARTICLE 12INTELLECTUAL PROPERTY**

# ** **

## 12.1                           Improvementsetc. to Product. All improvements, developments, derivatives ormodifications to the Product, all results from any process development orvalidation concerning Product or any stability studies of Product, and allrights to any methods concerning Product which are developed or validated underthis Agreement, shall in every case be owned exclusively by Client.

##  

## 12.2                           Improvementsetc. to Cardinal Health Materials. Subject to Section 12.1, allCardinal Health Materials, and all improvements, developments, derivatives ormodifications to the Cardinal Health Materials, shall be owned exclusively byCardinal Health.

##  

## 12.3                           Improvementsetc. to Client Materials. Subject to Sections 12.1 and 12.2, all ClientMaterials, and all improvements, developments, derivatives or modifications tothe Client Materials, shall be owned exclusively by Client, provided, however,that Client hereby grants to Cardinal Health a non-exclusive, royalty-freelicense to use any and all right, title, and interest in the Client Materialsas may be necessary for Cardinal Health to perform its obligationsunder this Agreement.

##  

## 12.4                           FurtherAssurance. In relation to intellectual property arising under thisAgreement, each party agrees to assist the other party, at the other party’srequest and expense, in preparing and prosecuting patent applications andpatent extensions or in obtaining or maintaining other forms of protection onany such intellectual property which the other party owns pursuant to this Article 12.Each party warrants that all persons (including without limitation itsemployees and sub-contractors)performing activities in relation to the Project will be engaged on termsconsistent with the provisions of this Article 12.

##  

## 12.5                           Definitionof “Cardinal Health Materials”. For purposes hereof, “Cardinal HealthMaterials” means all Cardinal Health proprietary information, intellectualproperty, and developments, including without limitation, all patents, patentapplications, know-how, inventions, designs, concepts, improvements, technicalinformation, manuals, instructions or

 

12

----

 

## specifications, which are owned, licensed or used byCardinal Health (except where licensed by, or originating from, Client or itsAffiliates) in developing, formulating, manufacturing, filling, processing orpackaging of liquid solutions or pharmaceuticals and the packaging equipment,processes or methods of packaging, or any improvements to any of the foregoing,including any container, pouch, vial, ampoule or other form of liquidcontainer developed by Cardinal Health.

##  

## 12.6                           Definitionof “Client Materials”. For purposes hereof, “Client Materials” means allproprietary information, intellectual property, and developments, includingwithout limitation, all patents, patent applications, know-how, inventions,designs, concepts, improvements, technical information, manuals, instructionsor specifications, which are owned, licensed or used by the Client (exceptwhere licensed by, or originating from Cardinal Health or its Affiliatesrelating to the Product or the active ingredient or formulation therof).

##  

# **ARTICLE 13INDEMNIFICATION**

# ** **

## 13.1                           Indemnificationby Cardinal Health. Cardinal Health shall indemnify and hold harmlessClient, its Affiliates, directors, officers, employees and agents from andagainst any suits, claims, losses, demands, liabilities, damages, costs andexpenses (including costs, reasonable attorney’s fees and reasonableinvestigative costs) in connection with any suit, demand or action by any thirdparty arising out of or resulting from any negligence, willful misconduct orbreach of this Agreement by Cardinal Health, except to the extent that any ofthe foregoing arises out of or results from the breach of this Agreement byClient or the negligence or willful misconduct of Client.

##  

## 13.2                           Indemnificationby Client. Client shall indemnify and hold harmless Cardinal Health, itsAffiliates, directors, officers employees and agents from and against allsuits, claims, losses, demands, liabilities, damages, costs and expenses(including costs, reasonable attorney’s fees and reasonable investigativecosts) in connection with any suit, demand or action by any third party arisingout of or resulting from (A) any breach of its representations, warrantiesor obligations set forth in this Agreement; (B) any manufacture, sale,promotion, distribution or use of or exposure to the Product, including,without limitation, product liability or strict liability; (C) Client’sexercise of control over the Processing under this Agreement, to the extentthat Client’s instructions or directions violate applicable law or regulation; (D) anyactual or alleged infringement or violation of any patent, trade secret,copyright, trademark or other proprietary rights provided by Client; or (E) anynegligence or willful misconduct by Client, except to the extent that any ofthe foregoing arises out of or results from the breach by Cardinal Health of thisAgreement, or the negligence or willful misconduct of Cardinal Health.

##  

## 13.3                           IndemnificationProcedures. All indemnification obligations in this Agreement areconditioned upon the party seeking indemnification promptly notifying theindemnifying party of any claim or liability of which the party seekingindemnification becomes aware (including a copy of any related complaint,summons, notice or other instrument), cooperating with the indemnifying partyin the defense of any such claim or liability (at the indemnifying party’sexpense), and not compromising or settling any claim or liability without priorwritten consent of the indemnifying party.

 

13

----

 

# **ARTICLE 14INSURANCE**

# ** **

## 14.1                           CardinalHealth. Cardinal Health shall, at its own cost and expense, obtain andmaintain in full force and effect the following insurance during the term ofthis Agreement:  (A) CommercialGeneral Liability insurance with per-occurrence and general aggregate limits ofnot less than $1,000,000; (B) Products and Completed Operations LiabilityInsurance with per- occurrence and general aggregate limits of not less than$5,000,000; (C) Workers’ Compensation and Employer’s Liability Insurancewith statutory limits for Workers’ Compensation and Employer’s Liabilityinsurance limits of not less than $1,000,000; (D) Professional ServicesErrors & Omissions Liability Insurance with per claim and aggregatelimits of not less than $1,000,000 covering sums that Cardinal Health becomeslegally obligated to pay as damages resulting from claims made by Client forerrors or omissions committed in the conduct of the services outlined in theAgreements. In lieu of insurance, Cardinal Health may self-insure any or aportion of the above required insurance. In the event that any of the requiredpolicies of insurance are written on a claims made basis, then such policiesshall be maintained during the entire term of this Agreement and for a periodof not less than three (3) years following the termination or expirationof this Agreement. Cardinal Health shall obtain a waiver from any insurancecarrier with whom Cardinal Health carries Workers’ Compensation insurancereleasing its subrogation rights against Client. Client shall be named as anadditional insured under the Commercial General Liability and Products andCompleted Operations Liability insurance policies as respects the manufacturingservices outlined in this Agreement. Cardinal Health shall furnish certificatesof insurance for all of the above noted policies and required additionalinsured status to Client as soon as practicable after the Effective Date of theAgreement and upon renewal of any such policies. Each insurance policy that isrequired under this Section shall be obtained from an insurance carrierwith an A.M. Best rating of at least A- VII.

##  

## 14.2                           ClientInsurance. Client shall, at its own cost and expense, obtain and maintainin full force and effect the following insurance during the term of thisAgreement:  (A) Products andCompleted Operations Liability Insurance with per-occurrence and generalaggregate limits of not less than $10,000,000; (B) Workers’ Compensationand Employer’s Liability Insurance with statutory limits for Workers’Compensation and Employer’s Liability insurance limits of not less than$1,000,000; (C) All Risk Property Insurance, including transit coverage,in an amount equal to full replacement value covering Client’s property whileit is at Cardinal Health’s facility or in transit to or from Cardinal Health’sfacility. In the event that any of the required policies of insurance arewritten on a claims made basis, then such policies shall be maintained duringthe entire term of this Agreement and for a period of not less than three (3) yearsfollowing the termination or expiration of this Agreement. Client shall obtaina waiver from any insurance carrierwith whom Client carries Workers’ Compensation insurance releasing itssubrogation rights against Cardinal Health. Client shall obtain a waiver fromany insurance carrier with whom Client carries Property Insurance releasing itssubrogation rights against Cardinal Health. Client shall not seek reimbursementfor any property claim, or portion thereof, that is not fully recovered fromClient’s Property Insurance policy. Cardinal Health and its Subsidiaries andParent Corporation shall be named as additional insureds under the Products andCompleted Operations Liability insurance policies as respects the products andcompleted operations outlined in this Agreement. Client shall furnishcertificates of insurance for all of the above noted policies and requiredadditional insured status to Cardinal Health as soon as

 

14

----

 

## practicable after theEffective Date of the Agreement and upon renewal of any such policies. Eachinsurance policy that is required under this Section shall be obtainedfrom an insurance carrier with an A.M. Best rating of at least A- VII.

##  

# **ARTICLE 15TERM AND TERMINATION**

# ** **

## 15.1                           Term.This Agreement shall commence on the Effective Date and shall continue for aperiod of four (4) Contract Years, unless earlier terminated under Section 15.2below (the “Term”).

##  

## 15.2                           Terminationby Either Party.

##  

### A.                                   MaterialBreach. Either party may terminate this Agreement effective upon sixty(60) days prior written notice to the other party, if the other party commits amaterial breach of this Agreement and fails to cure such breach by the end ofsuch sixty (60) day period; provided, however, that failure to pay amounts dueunder this Agreement within fifteen (15) days after such payments are due (asset forth in Section 7.5) shall constitute cause for immediate terminationof this Agreement, or at Cardinal Health’s discretion, Cardinal Health shall berelieved of any further obligation to perform under this Agreement untilall outstanding payments are brought current.

###  

### B.                                     Bankruptcy.Either party may terminate this Agreement effective upon written notice tothe other party, if the other party becomes insolvent or admits in writing itsinability to pay its debts as they become due, files a petition for bankruptcy,makes an assignment for the benefit of its creditors or has a receiver, trusteeor other court officer appointed for its properties or assets.

###  

## 15.3                           Effectof Termination. Expiration or termination of this Agreement shall bewithout prejudice to any rights or obligations that accrued to the benefit ofeither party prior to such expiration or termination. The rights andobligations of the parties shall continue under Sections 5, 7, 9, 10, 11, 12,13, 16, 17 and 18, and Sections 3.4, 6.2, 15.3, notwithstanding expiration ortermination of this Agreement.

##  

# **ARTICLE 16LIMITATIONS OF LIABILITY**

# ** **

## 16.1                           CARDINALHEALTH SHALL HAVE NO LIABILITY UNDER THIS AGREEMENT FOR ANY AND ALL CLAIMS FORLOST, DAMAGED OR DESTROYED API OR OTHER CLIENT-SUPPLIED MATERIALS WHETHER ORNOT SUCH API OR CLIENT-SUPPLIED MATERIALS ARE INCORPORATED INTO FINISHEDPRODUCT.

##  

## 16.2                           CARDINALHEALTH’S TOTAL LIABILITY UNDER THIS AGREEMENT SHALL IN NO EVENT EXCEED THE TOTALFEES PAID BY CLIENT TO CARDINAL HEALTH FOR THE SERVICES OR BATCH OF PRODUCTGIVING RISE TO SUCH LIABILITIES, CLAIMS OR OBLIGATIONS.

 

15

----

 

## 16.3                           NEITHERPARTY SHALL BE LIABLE TO THE OTHER PARTY FOR INDIRECT, INCIDENTAL ORCONSEQUENTIAL DAMAGES ARISING OUT OF PERFORMANCE UNDER THIS AGREEMENT,INCLUDING WITHOUT LIMITATION LOSS OF REVENUES, PROFITS OR DATA, WHETHER INCONTRACT OR TORT, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OFSUCH DAMAGES.

##  

# **ARTICLE 17NOTICE**

# ** **

Any notice from eitherparty to the other party will be effective upon receipt and must be personallydelivered to such party, sent to such party by deposit in the United Statesmail, first class, postage prepaid or telecopy transmission (with writtenconfirmation copy to follow via United States mail) or delivered by a reliableovernight delivery service, to the address for such party below or such otheraddress as a party may designate from time to time:

 
| To Client:           |   | CollaGenex  Pharmaceuticals, Inc.  41 University Drive, Suite 200  Newtown, PA 18940  Attn:                                                                                  |
|----------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |   |                                                                                                                                                                                   |
| With a copy to:      |   |                                                                                                                                                                                   |
|                 |   |                                                                                                                                                                                   |
| To Cardinal  Health: |   | Cardinal Health  PTS, LLC  14 Schoolhouse Road  Somerset, NJ 08873  Attn:  Vice President, Business  Development, Solid Oral Pharmaceuticals  Facsimile:  (732) 537-6493     |
|                 |   |                                                                                                                                                                                   |
| With a copy to:      |   | Cardinal Health, Inc.  7000 Cardinal Place  Dublin, Ohio 43017  Attn:  Associate General Counsel,  Pharmaceutical Technologies and Services  Facsimile:  (614) 757-5051 |

# ** **

# **ARTICLE 18MISCELLANEOUS**

# ** **

## 18.1                           EntireAgreement; Amendments. This Agreement is the entire understanding betweenthe parties and supersedes any contracts, agreements or understanding (oral orwritten) of the parties with respect to the subject matter hereof. No term ofthis Agreement may be amended except upon written agreement of bothparties, unless otherwise provided in this Agreement.

 

16

----

 

## 18.2                           Captions.The captions in this Agreement are for convenience only and are not to beinterpreted or construed as a substantive part of this Agreement.

##  

## 18.3                           FurtherAssurances. The parties agree to execute, acknowledge and deliver suchfurther instruments and to take all such other incidental acts as may bereasonably necessary or appropriate to carry out the purpose and intent of thisAgreement.

##  

## 18.4                           NoWaiver. Failure by either party to insist upon strict compliance with anyterm of this Agreement in any one or more instances will not be deemed to be awaiver of its rights to insist upon such strict compliance with respect to anysubsequent failure.

##  

## 18.5                           Severability.If any term of this Agreement is declared invalid or unenforceable by a courtor other body of competent jurisdiction, the remaining terms of this Agreementwill continue in full force and effect.

##  

## 18.6                           IndependentContractors. The relationship of the parties is that of independentcontractors, and neither party will incur any debts or make any commitments forthe other party except to the extent expressly provided in this Agreement. Nothingin this Agreement is intended to create or will be construed as creatingbetween the parties the relationship of joint ventures, co-partners,employer/employee or principal and agent.

##  

## 18.7                           Successorsand Assigns. This Agreement will be binding upon and inure to the benefitof the parties, their successors and permitted assigns. Neither party may assignthis Agreement, in whole or in part, without the prior written consent of theother party, except that either party may, without the other party’s consent,assign this Agreement to an affiliate or to a successor to substantially all ofthe business or assets of the assigning company.

##  

## 18.8                           GoverningLaw. This Agreement shall be governed by and construed under the laws ofthe State of New Jersey, excluding its conflicts of law provisions.

##  

## 18.9                           AlternativeDispute Resolution. If a dispute, controversy or disagreement (“Dispute”)arises between the parties in connection with this Agreement, then the Disputeshall be presented to the respective presidents or senior executives ofCardinal Health and Client for their consideration and resolution. If suchparties cannot reach a resolution of the Dispute, then such Dispute shall beresolved by binding alternative dispute resolution in accordance with the thenexisting commercial arbitration rules of The CPR Institute for DisputeResolution (“CPR”), 366 Madison Avenue, New York, NY 10017. Arbitration shallbe conducted in the jurisdiction of the defendant party.

##  

## 18.10                     PrevailingParty. In any dispute resolution proceeding between the parties inconnection with this Agreement, the prevailing party will be entitled to itsreasonable attorney’s fees and costs in such proceeding.

##  

## 18.11                     Counterparts.This Agreement may be executed in one or more counterparts, each of whichwill be deemed an original but all of which together will constitute one andthe same instrument.

 

17

----

 

## 18.12                     Setoff.Without limiting Cardinal Health’s rights under law or in equity, CardinalHealth and its affiliates, parent or related entities, collectively orindividually, may exercise a right of set-off against any and all amountsdue to Cardinal Health from Client. For purposes of this Section, CardinalHealth, its affiliates, parent or related entities shall be deemed to be asingle creditor.

##  

## 18.13                     ForceMajeure. Neither party will be liable for any failure to perform orfor delay in performance resulting from any cause beyond its reasonablecontrol, including without limitation, acts of God, fires, floods, or weather;strikes or lockouts, factory shutdowns, embargoes, wars, hostilities or riots,shortages in transportation; provided, however, that if Cardinal Health cannotcomplete an order within ninety (90) days due to any such cause, Client may terminatethis Agreement without liability to Cardinal Health.

##  

## 18.14                     Publicity.Neither party will make any press release or other public disclosure regardingthis Agreement or the transactions contemplated hereby without the other party’sexpress prior written consent, except as required under applicable law or byany governmental agency, in which case the party required to make the pressrelease or public disclosure shall use commercially reasonable efforts toobtain the approval of the other party as to the form, nature and extent of thepress release or public disclosure prior to issuing the press release or makingthe public disclosure.

##  

**IN WITNESS WHEREOF**, the parties have caused their dulyauthorized representative to execute this Agreement effective as of the date firstwritten above.

 
| **CARDINAL HEALTH PTS, LLC** | ** **                                                   | **COLLAGENEX PHARMACEUTICALS INC.** |
|------------------------------|--------------------------------------------------------------|-------------------------------------|
|                         |                                                         |                                |
| By:                          |       /s/ David Wood           |                                | By: |       /s/ Colin Stewart |
| Name:                        |  David Wood                                             |                                | Name: |  Colin Stewart |
| Its:                         |       VP/GM Controlled Release |                                | Its: |       President and CEO |
|                         |       2-21-06                  |                                |   |       3-1-06 |
|                              |                                                              |                                     |  |  |  |  |  |

 

18

----

** **

** EXHIBIT A**

** **

**SPECIFICATIONS**

 

19

----

 

Specification#:  TBDEffective Date:  TBD Revision #:  01 Date Revised:  11/15/05

 

**ORACEA Controlled Release 40 mg Capsules SPECIFICATIONS:**US ReleaseSpecifications

** **
| **A.** |   | **Test** |                                                              | **Specifications** |
|--------|--------|----------|-------------------------------------------------------------------|--------------------|
|   |   |     |                                                              |               |   |
|   |   | 1.       | Appearance: Visual Inspection of 10  capsules                     |               | [**] |
|   |   | 2.       | Average Content – Doxycycline:                               |               | [**] |
|   |   | 3.       | Non-parent peaks:                                                 |               | [**] |
|   |   | 4.       | Identification (HPLC):                                            |               | [**] |
|   |   | 5.       | Identification (TLC):                                             |               | [**] |
|   |   | 6.       | Uniformity of Dosage Units                                        |               | [**] |
|   |   | 7.       | Loss on Drying:USP <731>1-2g, 105°C, 4 (±l) hours |               | [**] |

 
| ** ** | 8.         | Dissolution: |   | ** **        |   | ** **            |
|------------|------------|--------------|--------|-------------------|--------|-----------------------|
| ** ** | ** ** | ** **   |   | ** **        |   | ** **            |
| ** ** | ** ** | ** **   |   | **Time  (hours)** |   | **Percent Dissolved** |
|       |       |         |   | 2.0               |   | [**]% [**]            |
|       |       |         |   | 4.0               |   | [**]% [**]            |

 

20

----

 

Specification#:  TBD Effective Date:  TBD Revision #:  01 Date Revised:  11/15/05

 

**B.****                                    SamplingPlan:**

 

One representative sample of the lot shall besubmitted to the Cardinal Health Winchester Analytical Laboratory of the testslisted.

 

**C.****                                    References:**

 

1.                                       Current USP/NF

 

2.                                       CardinalHealth Test Methods:  ATM-CFD-M0001.00, ATM-CFD-M0002.00, andATM-CFD-M0003.00.

 

21

----

 

Specification#:  TBD Effective Date:  TBD Revision #:  01 Date Revised:  11/15/05

 

**ORACEA Controlled Release 40 mg CapsulesSPECIFICATIONS: **European UnionRelease Specifications

 
| **B.** |   | **Test** |                                                                | **Specifications** |
|--------|--------|----------|---------------------------------------------------------------------|--------------------|
|   |   |     |                                                                |               |   |
|   |   | 1.       | Appearance: Visual Inspection of 10  capsules                       |               | [**] |
|   |   | 2.       | Average Content – Doxycycline:                                 |               | [**] |
|   |   | 3.       | Non-parent peaks:                                                   |               | [**] |
|   |   |     |                                                                |               |   |
|   |   | 4.       | Identification (HPLC):                                              |               | [**] |
|   |   | 5.       | Identification (TLC):                                               |               | [**] |
|   |   | 6.       | Uniformity of Dosage Units                                          |               | [**] |
|   |   | 7.       | Loss on Drying:USP <731>  1-2g, 105°C, 4 (±l) hours |               | [**] |

 
| ** ** | 8.         | Dissolution: | ** ** | ** **        | ** ** | ** **            |
|------------|------------|--------------|------------|-------------------|------------|-----------------------|
| ** ** | ** ** | ** **   | ** ** | ** **        | ** ** | ** **            |
| ** ** | ** ** | ** **   | ** ** | **Time  (hours)** | ** ** | **Percent Dissolved** |
|       |       |         |       | 2.0               |       | [**]% [**]            |
|       |       |         |       | 4.0               |       | NLT [**]% [**]        |

 

22

----

 

Specification#:  TBD Effective Date:  TBD Revision #:  01 Date Revised:  11/15/05

 

**B.****                                    SamplingPlan:**

 

One representative sample of the lot shall besubmitted to the Cardinal Health Winchester Analytical Laboratory of the testslisted.

 

**C.****                                    References:**

 

1.                                       Current USP/NF, European Pharmacopoeia

 

2.                                       CardinalHealth Test Methods:  ATM-CFD-M0001.00, ATM-CFD-M0002.00, andATM-CFD-M0003.00.

 

23

----

 

Specification#:  TBD Effective Date:  TBD Revision #:  01 Date Revised:  11/15/05

 

**ORACEA SPECIFICATIONS:**

** **

**(Doxycycline ImmediateRelease Pellets)**

 
|       |   | **Test**                       |                                                                | **Specifications** |
|------------|--------|--------------------------------|---------------------------------------------------------------------|--------------------|
| ** ** |   | ** **                     |                                                                | ** **         |
| **A.**     |   | **Immediate Release Pellets:** |                                                                |               |
| ** ** |   |                           |                                                                |               |   |
|       |   | 1.                             | Appearance: Visual Inspection                                       |               | [**] |
|       |   | 2.                             | Average Content – Doxycycline:                                 |               | [**] |
|       |   | 3.                             | Identification:                                                     |               | [**] |
|       |   | 4.                             | Loss on Drying:USP <731>  1-2g, 105°C, 4 (±l) hours |               | [**] |
|       |   |                           |                                                                |               |   |
|       | 8.     | Dissolution:                   |                                                                |               | Time:  30 minutes: |
|       |   |                           |                                                                |               | % Dissolved:  [**]% |

 

24

----

 

Specification#:  TBD Effective Date:  TBD Revision*:  01 Date Revised:  11/15/05

 

**B.****                                    SamplingPlan:**

 

One representative sample of the lot shall besubmitted to the Cardinal Health Winchester Analytical Laboratory of the testslisted.

 

**C.****                                    References:**

 

1.                                       Current USP/NF, European Pharmacopoeia

 

2.                                       CardinalHealth Test Methods:  ATM-CFD-M0001.00, ATM-CFD-M0002.00.

 

25

----

 

Specification#:  TBD Effective Date:  TBD Revision#:  01 Date Revised:  11/15/05

 

**ORACEA SPECIFICATIONS:**

** **

**(Doxycycline DelayedRelease Pellets)**

 
| **C.** |   | **Test** |                                                               | **Specifications** |
|--------|--------|----------|--------------------------------------------------------------------|--------------------|
|   |   |     |                                                               |               |   |
|   |   | 1.       | Appearance: Visual Inspection                                      |               | [**] |
|   |   | 2.       | Average Content – Doxycycline:                                |               | [**] |
|   |   | 3.       | Identification (HPC):                                              |               | [**] |
|   |   | 4.       | Loss on Drying:USP<731>  1-2g, 105°C, 4 (±l) hours |               | [**] |

 
|   | 8. | Dissolution: |   |   |   |
|--------|----|--------------|--------|--------|--------|

 
| ** ** |   | ** ** |   | **Time  (hours)** |   | **Percent Dissolved** |
|------------|--------|------------|--------|-------------------|--------|-----------------------|
|       |   |       |   | 2.0               |   | [**]% [**]%           |
|       |   |       |   | 4.0               |   |                  |

 

26

----

 

Specification#:  TBD Effective Date:  TBD Revision #:  01 Date Revised:  11/15/05

 

**B.****                                    SamplingPlan:**

 

One representative sample of the lot shall besubmitted to the Cardinal Health Winchester Analytical Laboratory of the testslisted.

 

**C.****                                    References:**

 

1.                                       Current USP/NF, European Pharmacopoeia

 

2.                                       CardinalHealth Test Methods:  ATM-CFD-M0001.00, ATM-CFD-M0002.00.

 

27

----

** **

**EXHIBIT B**

** **

**UNIT PRICING, FEES AND MINIMUMREQUIREMENT**

** **

 
| **UNIT PRICING**        |
|-------------------------|
|                    |
| **Product**             | ** ** | **Dosage  Form** | ** ** | **Minimum  Campaign Size** | ** ** | **Minimum Annual  Requirement** | ** ** | **Initial Unit Price** |
| Doxycycline Monohydrate |   | Capsule |   | 8mm units |   | [**] |   | $ | [**] per thousand capsules |
| Doxycycline Monohydrate |   | Capsule |   | 12mm units |   | [**] |   | $ | [**] per thousand capsules |
| Doxycycline Monohydrate |   | Capsule |   | 20mm units |   | [**] |   | $ | [**]per thousand capsules |

 

The above pricing includesall raw material ingredients, processing and testing. It does not include thecost of the Active Pharmaceutical Ingredient (“API”) or the cost of productstability analytical testing.

 
| **ADDITIONAL FEES**      |
|--------------------------|
|                     |
| Annual Stability Testing |   | TBD |
|                     |   |   |
|                     |   |   |

 

28

----

 

**EXHIBIT C**

** **

**FORM OF QUALITYAGREEMENT**

** **

**To Be Attached**

 

29

----