Document:

EXHIBIT 10.1

 

SECOND AMENDMENT TO LEASE AGREEMENT

 

THIS SECOND AMENDMENT TO LEASE
AGREEMENT (this “Second Amendment”) is entered into as
of September 30, 2003 by and between SNH CHS PROPERTIES TRUST, a Maryland real
estate investment trust (“Landlord”), and FVE-CHS LLC, a Delaware
limited liability company (“Tenant”).

 

W I T N E S S E T H :

 

WHEREAS, Landlord
and Tenant are parties to that certain Lease Agreement dated as of
October 25, 2002, as amended by that certain First Amendment to Lease
Agreement dated as of May 30, 2003 (as so amended, the “Lease”),
for twelve (12) properties, as more particularly described in the Lease; and

 

WHEREAS, Landlord
and Tenant wish to amend the Lease to add one (1) additional property, subject
to and upon the terms and conditions hereinafter provided;

 

NOW, THEREFORE, in
consideration of the foregoing and for other consideration, the mutual receipt
and legal sufficiency of which are hereby acknowledged, Landlord and Tenant
hereby agree as follows:

 

1.                                       The
definition of “Agreement” set forth in Article 1 of the Lease is
hereby amended by deleting the existing definition and inserting the following
in place thereof:

 

“Agreement”
shall mean this Lease Agreement, including Exhibits A-1 through A-13
hereto, as it and they may be amended from time to time as herein provided.

 

2.                                       The
definition of “Minimum Rent” set forth in Article 1 of the Lease is
hereby amended by deleting the existing definition and inserting the following
in place thereof:

 

“Minimum
Rent” shall mean an amount equal to Eight Million One Hundred Sixty-Five
Thousand and 00/100 Dollars ($8,165,000.00) per annum.

 

3.                                       The
definition of “Leased Property” set forth in Section 2.1 of the
Lease is hereby amended by deleting subparagraph (a) thereof and replacing it
with the following:

 

 

(a)                                  those
certain tracts, pieces and parcels of land, as more particularly described in Exhibits
A-1 through A-13, attached hereto and made a part hereof (the “Land”);

 

4.                                       Exhibit
A-13 attached hereto is hereby added to the Lease as Exhibit A-13.

 

5.                                       As
amended hereby, the Lease is hereby ratified and confirmed.

 

[SIGNATURE
PAGE FOLLOWS]

 

2

 

IN WITNESS WHEREOF, the parties hereto have
executed this Second Amendment under seal as of the date first written above.

 

	
   

  	
  LANDLORD:

  
	
   

  	
   

  
	
   

  	
  SNH CHS PROPERTIES TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John R.
  Hoadley

  	
   

  
	
   

  	
   

  	
  John R. Hoadley

  	
   

  
	
   

  	
   

  	
  Treasurer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TENANT:

  
	
   

  	
   

  
	
   

  	
  FVE-CHS LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Bruce J.
  Mackey Jr.

  	
   

  
	
   

  	
   

  	
  Bruce J. Mackey Jr.

  	
   

  
	
   

  	
   

  	
  Treasurer
  and Chief Financial

  Officer

  	
   

  
							

 

3

 

Exhibit A-13

 

Rio Las PalmasExhibit 10.2

 

PARTIAL TERMINATION OF LEASE AND SUBLEASE

 

THIS PARTIAL TERMINATION OF LEASE AND
SUBLEASE, dated as of this 5th day of June, 2003, by
and among SPTIHS PROPERTIES TRUST,
a Maryland real estate investment trust (“Landlord”), FIVE STAR QUALITY CARE TRUST, a Maryland
business trust (“Tenant”) and FIVE
STAR QUALITY CARE-GA, LLC, a Delaware limited liability company (“Subtenant”).

 

WITNESSETH:

 

WHEREAS, pursuant to
the terms of that certain Master Lease Agreement, dated December 31, 2001 (the
“Master Lease”), Landlord leased to Tenant and Tenant leased from
Landlord certain premises at various locations, including those premises as
more particularly described on Exhibit A attached hereto (the “Premises”);

 

WHEREAS, pursuant to
the terms of that certain Sublease Agreement dated December 31, 2001 (the “Sublease”),
Tenant subleased certain premises at various locations, including the Premises,
to Subtenant and Subtenant subleased those certain premises from Tenant;

 

WHEREAS, Landlord,
Tenant and subtenant now wish to terminate the Master Lease and the Sublease
with respect to the Premises;

 

NOW, THEREFORE, in
consideration of the mutual covenants herein contained and other good and
valuable consideration, the mutual receipt and legal sufficiency of which are
hereby acknowledged, Landlord and Tenant hereby agree as follows:

 

1.             Tenant represents and warrants that
Tenant has not assigned the Master Lease with respect to the Premises or sublet
all or any portion of the Premises (other than pursuant to the Sublease) or
otherwise granted the right to occupy all or any portion of the Premises to any
person or entity.

 

2.             Subtenant represents and warrants
that Subtenant has not assigned the Sublease with respect to the Premises or
further sublet all or any portion of the Premises or otherwise granted the
right to occupy all or any portion of the Premises to any person or entity.

 

3.             Effective as of the date hereof,
each of the Master Lease and the Sublease is terminated with respect to the
Premises and no party shall have any further rights or

 

 

liabilities thereunder with
respect to the Premises, except those rights and liabilities which by their
terms survive termination of the Master Lease or the Sublease.

 

4.             The declaration of trust
establishing Landlord, a copy of which, together with all amendments thereto
(the “Declaration”), is duly filed with the Department of Assessments
and Taxation of the State of Maryland, provides that the name “SPTIHS
Properties Trust” refers to the Trustees under the Declaration collectively as
Trustees, but not individually or personally, and no trustee, officer,
shareholder, employee or agent of Landlord shall be held to any personal
liability, jointly or severally, for any obligation of, or claim against,
Landlord.  All persons dealing with
Landlord, in any way, shall look only to the assets of Landlord for the payment
of any sum or the performance of any obligation.  The provisions of this section shall survive the closing.

 

[Signature on following page.]

 

2

 

IN WITNESS WHEREOF,
Landlord, Tenant and Subtenant have caused this Partial Termination of Lease
and Sublease to be duly executed, as a sealed instrument, as of the date first
set forth above.

 

 

	
   

  	
  LANDLORD:

  
	
   

  	
   

  	
   

  
	
   

  	
  SPTIHS PROPERTIES
  TRUST,

  
	
   

  	
  a Maryland
  real estate investment trust

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John R.
  Hoadley

  	
   

  
	
   

  	
   

  	
  Name:  John R. Hoadley

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
  TENANT:

  
	
   

  	
   

  	
   

  
	
   

  	
  FIVE STAR
  QUALITY CARE TRUST

  
	
   

  	
  a Maryland
  business trust

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Bruce
  Mackey

  	
   

  
	
   

  	
   

  	
  Name:  Bruce Mackey

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
  SUBTENANT:

  
	
   

  	
   

  	
   

  
	
   

  	
  FIVE STAR
  QUALITY CARE-GA, LLC

  
	
   

  	
  a Delaware
  limited liability company

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Bruce
  Mackey

  	
   

  
	
   

  	
   

  	
  Name:  Bruce Mackey

  
	
   

  	
   

  	
  Treasurer

  

 

3

 

EXHIBIT A

 

The Premises

 

[See attached legal description]

 

 

Legal Description

 

(Glenwood - Wheeler County)

 

ALL THAT TRACT or parcel of
land lying and being within the City of Glenwood, Wheeler County, Georgia, and
being more particularly described as follows:

 

BEGINNING at a railroad spike
found at the intersection of the northerly right-of-way of Fourth Avenue
(having a 70 foot right-of-way) and the easterly right-of-way of Sixth Street;
thence North 22 degrees 50 minutes 53 seconds West a distance of 189.38 feet to
a railroad spike found; thence North 67 degrees 28 minutes 46 seconds East a
distance of 400.00 feet to a railroad spike found on the westerly right-of-way
of Fifth Street (having a 70 foot right-of-way); thence along the westerly
right-of-way of Fifth Street South 22 degrees 36 minutes 47 seconds East a
distance of 189.96 feet to a nail found on the northerly right-of-way of Fourth
Avenue; thence along the northerly right-of-way of Fourth Avenue South 67
degrees 33 minutes 50 seconds West a distance of 399.23 feet to a railroad
spike found and the POINT OF BEGINNING.

 

CONTAINING 1.7400 acres or
75,795.41 square feet as shown on that certain Boundary & Above Ground
“As-Built” Survey for Glenwood/SCC, Inc.; Health and Retirement Properties
Trust, its successors and assigns; Community Care of America, Inc.; First
American Title Insurance Company, prepared by Pearson & Associates, Inc.,
bearing the seal and certification of Mark A. Buckner, Georgia
Registered Land Surveyor No. 2422, dated March 26, 1996, last revised May 3,
1996.Exhibit 10.1

 

FIRST AMENDED AND RESTATED

SYNTHETIC CARDIOLIPIN SUPPLY AGREEMENT

 

THIS AGREEMENT is hereby made and entered into as of the
     day of November, 1999 (the “Effective Date”) by
and between Avanti Polar Lipids, Inc.,
an Alabama corporation having its principal place of business at 700 Industrial
Park Drive, Alabaster, Alabama 35007 (“Avanti”), and Neopharm, Inc., a Delaware corporation having a place of
business at 100 Corporate North, Suite 215, Bannockburn, Illinois 60015
(“Neopharm”) (Avanti and Neopharm being referred to hereinafter from time to
time, collectively, as the “parties”).

 

W I T N E S S E T H:

 

WHEREAS, Avanti and Neopharm have entered into that
certain Synthetic Cardiolipin Supply Agreement, effective as of May 26, 1998
(hereinafter the “Original Supply Agreement”), setting forth the terms pursuant
to which Avanti will supply synthetic cardiolipin to Neopharm in connection
with Neopharm’s efforts to commercialize Liposomal Doxorubicin and Paclitaxel;
and

 

WHEREAS, Avanti and Neopharm now wish
to amend and restate the Original Agreement to modify Section 1(a) to add
two additional fields in which Avanti will supply synthetic cardiolipin to
Neopharm and Section 5(b) to change the terms on which the Original Agreement
may be unilaterally terminated.

 

NOW THEREFORE, for good and valuable
consideration, including, the mutual covenants, agreements, representations and
warranties set forth herein, the receipt and sufficiency of which is hereby
acknowledged, Avanti and Neopharm hereby agree as follows:

 

1.                                       Supply of Synthetic Cardiolipin by Avanti.  (a) Avanti will supply Synthetic Cardiolipin to Neopharm
and/or its designated affiliates or sublicensees in the amounts and of the
quality described on Schedule 1 attached hereto and incorporated by
reference herein.  Avanti will supply
Synthetic Cardiolipin to Neopharm or its affiliates or sublicensees for
purposes of conducting research, clinical trials and obtaining government
approvals required for Neopharm and/or its designated affiliates and
sublicensees to commercialize Neopharm’s proprietary liposomal products,
Liposomal Doxorubicin and Paclitaxel. 
In addition, Avanti will supply Synthetic Cardiolipin to Neopharm or its
affiliates or sublicensees for purposes of conducting research, clinical trials
and obtaining government approvals required for Neopharm and/or its designated
affiliates and sublicensees to commercialize one or more drugs designed to
inhibit:  (i) the aging process in
humans, or (2) topoisomerase.  Avanti
will not knowingly sell Synthetic Cardiolipin to any third party using
Synthetic Cardiolipin to commercialize liposomal products which will directly
compete with Liposomal Doxorubicin and Paclitaxel.

 

 

(b)                                 All Synthetic Cardiolipin
sold by Avanti to Neopharm and/or its designated affiliates or sublicensees
pursuant to this Agreement shall be manufactured by Avanti in accordance with
the production specifications described on Schedule 1 under “good
manufacturing practices” conditions as described in the United States Code of
Federal Regulations “Good Manufacturing Practices” regulations (collectively,
the “US GMP Regulations”) and the European Community Guide to Good
Manufacturing Practices, in all events adhering to the US GMP Regulations where
conflict between the US GMP Regulations and such European Community regulations
arise (the “Avanti-GMP Production Process”). 
The price for GMP-Neopharm Products set forth on Schedule 2
hereto shall include all analytical services (other than the costs of Bioburdon
and LAL Testing), stability studies, and other similar activities required to
meet GMP standards of production. 
Avanti shall not make any changes to the production specifications
described on Schedule 1 or any material changes to test methods, batch
records or raw materials with respect to the Synthetic Cardiolipin without
Neopharm’s prior written approval, which approval shall not be unreasonably
withheld.

 

(c)                                  Neopharm and Avanti
acknowledge and agree that the initial production of Synthetic Cardiolipin in
the quantities required by Neopharm requires certain so-called “scale up” and
related activities and that Avanti may make such changes in Avanti’s processes
and procedures, including, without limitation, any enhancements or improvements
thereto, as Neopharm shall approve, which approval shall not be unreasonably
withheld.  Further, Neopharm recognizes
and agrees that Avanti has developed and created certain processes and
procedures for the production and manufacture of lipids (i) to which Avanti has
sole and exclusive ownership and which is a trade secret of Avanti, and (ii)
which Avanti previously has disclosed to Neopharm and which Neopharm has agreed
in writing to keep in strict confidence, and (iii) which Avanti may choose to
use (and which Neopharm hereby expressly permits Avanti to use) in the
manufacture and production of Synthetic Cardiolipin.  All test methodologies used by Avanti pursuant to its obligations
under this Agreement shall be validated. 
For those procedures which appear in the current USP/NF, or other
recognized standard reference, a statement indicating the reference shall
suffice.  For those test methods which
are developed by Avanti, documentation supporting the validation of the test
method shall be provided.

 

(d)                                 In order to permit Avanti to
regularly supply Neopharm with Synthetic Cardiolipin, at least thirty (30) days
before the beginning of each calendar quarter, Neopharm shall provide Avanti
with a non-binding forecast of Neopharm’s estimated requirements of Synthetic
Cardiolipin for the next twelve (12) month period.  Such updated forecast, depending upon the progress of clinical
and regulatory studies and approvals, may vary from previous projections and
shall be incorporated into Schedule 2 attached hereto.  Within thirty (30) days after receiving a
written request from Neopharm and/or its designated affiliates or sublicensees,
Avanti shall produce and ship to Neopharm and/or its designated affiliates or
sublicensees such amounts of the requested Synthetic Cardiolipin of the quality
and at the price described on Schedule 2 hereto.  The parties recognize and agree that each
order for Synthetic Cardiolipin shall not be less than the minimum amount nor
greater than the maximum amount of Synthetic Cardiolipin as set forth on Schedule
2.  Each shipment of Synthetic
Cardiolipin shall be shipped to Neopharm and/or its designated affiliates or
sublicensees at Neopharm’s Bannockburn, Illinois facility (or at such other
location as Neopharm may direct from time to time).

 

2

 

(e)                                  Neopharm and/or its
designated affiliates or sublicensees shall inspect each shipment of Synthetic
Cardiolipin and shall advise Avanti of any damage, shipping problems or delays,
or other defects in the quality or quantity of Synthetic Cardiolipin order
within thirty (30) days after receipt of such shipment.  In the event that any damage to the
Synthetic Cardiolipin has occurred in shipment or the Synthetic Cardiolipin
does not meet GMP standards, Neopharm shall return the Synthetic Cardiolipin to
Avanti, or take such other action as Avanti may reasonably direct.  Avanti shall have thirty (30) days to cure
such damage or other problem by the shipment of additional Synthetic
Cardiolipin.  Notwithstanding the
foregoing, in the case of any non-conformity which is not readily apparent or
discoverable upon reasonable inspection within such thirty (30) day period, any
claim of non-conformity with respect thereto shall not be deemed waived and
delivery of the Synthetic Cardiolipin shall not be deemed to have been accepted
if Neopharm notifies Avanti as soon as practicable, but not later than fifteen
(15) days, following the date on which Neopharm learns of such non-conformity.

 

(f)                                    Avanti shall be responsible
for performing all quality control tests and assays on raw and packaging
materials used in preparing and shipping the Synthetic Cardiolipin, as well as
the Synthetic Cardiolipin, all in a manner consistent with Avanti’s internal
quality control procedures.  Avanti
shall retain records pertaining to such testing and shall, upon written request
from Neopharm, provide Neopharm with copies of such records.  Without limiting the generality of the
foregoing, Avanti shall prepare and maintain batch records and file samples,
properly stored, from each lot or batch of Synthetic Cardiolipin supplied to
Neopharm hereunder.  Avanti shall also
be responsible for updating the U.S. Drug Master File (DMF) submitted to the
FDA to reflect Avanti’s current manufacturing process (including scale up and
commercial), facility and equipment employed, analytical methods and
specifications and stability data to support shelf life and storage
conditions.  A letter of authorization
referring to said DMF shall be provided to Neopharm.  Upon termination of this Agreement for any reason other than a
default on the part of Neopharm, Avanti shall transfer the originals or
certified true copies of the originals of such batch records and file samples
to Neopharm.

 

(g)                                 AVANTI MAKES NO
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED (i) OF COMMERCIAL UTILITY OR
(ii) OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.  NOTWITHSTANDING ANY OTHER PROVISION OF THIS
AGREEMENT, AVANTI WILL NOT BE LIABLE TO Neopharm, Neopharm’S SUCCESSORS OR
ASSIGNS, AFFILIATES, SUBLICENSEES, OR ANY THIRD PARTY WITH RESPECT TO ANY CLAIM
ARISING FROM Neopharm’S USE OF SYNTHETIC CARDIOLIPIN, OR THE USE OF SYNTHETIC
CARDIOLIPIN BY ANY SUCH SUCCESSOR, ASSIGNEE, AFFILIATE, SUBLICENSEE OR OTHER
THIRD PARTY, ANY CLAIM FOR LOSS OR PROFITS, FOR LOSS OR INTERRUPTION OF
BUSINESS OR FOR INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OF ANY KIND.

 

2.                                      Purchase of Synthetic Cardiolipin by
Neopharm.  Neopharm and its designated
affiliates and sublicensees will purchase their requirements for Synthetic
Cardiolipin exclusively from Avanti; provided,
however, that if Avanti is unable to meet Neopharm’s commercially
reasonable

 

3

 

requirements for the quantity and/or quality
of Synthetic Cardiolipin for a particular order then Neopharm or its designated
affiliates or sublicensees, as the case may be, shall be entitled to fill that
order by purchasing either a like quality or quantity of Synthetic Cardiolipin
from a third party.

 

3.                                      Reservation of Rights by Avanti.  Avanti reserves the right to license the manufacture of
Synthetic Cardiolipin for supply to Neopharm and its designated affiliates and
sublicensees.  In licensing the
manufacturing rights, Avanti will be responsible for ensuring, from information
reasonably available at the time the license or contract is granted, that the
licensee or other supplier is generally able to meet the requirements of
Neopharm and its designated affiliates and sublicensees as to quality, quantity
and delivery schedules.

 

4.                                      Payment.  Avanti shall
invoice Neopharm for each order of Synthetic Cardiolipin at the rates set forth
on Schedule 2 attached hereto, plus the costs of all shipping or
freight, packaging, insurance, sales, gross receipts, or other similar taxes
and other similar charges related to such sale, and such aggregate amounts
shall be due and payable with thirty (30) days thereafter and, if not paid by
such date, shall bear interest at the rate of one and one-half (1.5%) percent
per month (or such lesser legal interest rate, if such is required by
applicable law).

 

5.                                      Term.  (a) This Agreement shall
commence on May 1, 1998 and shall expire on May 1, 2008, unless earlier
terminated in accordance with the terms and conditions of this Agreement.  In the event that this Agreement is still in
effect on May 1, 2008, this Agreement shall thereafter automatically renew for
additional terms of two (2) years each.

 

(b)                                 This Agreement may be
terminated by the mutual agreement of the parties or upon one party giving at
least one (1) year’s prior written notice to the other party.

 

(c)                                  If, at the time of the
expiration or earlier termination of this Agreement, Neopharm and\or its
designated affiliates and sublicensees have placed orders for Synthetic
Cardiolipin which have not been filled, Avanti shall deliver such Synthetic
Cardiolipin required pursuant to such outstanding orders and this Agreement
shall continue in effect solely and exclusively for the purpose of such
activities.

 

(d)                                 In the event that Avanti
shall sell all or substantially all of its assets relating to the manufacture
of Synthetic Cardiolipin to another entity, or in the event that Avanti shall
merge (or otherwise combine) with or into another entity and shall not be the
surviving entity, Avanti agrees that it shall impose as a condition to any such
sale or combination that the obligation to supply Synthetic Cardiolipin
pursuant to this Agreement shall be a part of the assets which are transferred
and taken up by the purchaser of the assets or the obligations imposed by this
contract to supply Synthetic Cardiolipin shall be specifically assumed by any
such surviving entity purchaser.

 

(e)                                  In the event that Avanti
shall elect to terminate the manufacture of Synthetic Cardiolipin, Neopharm
shall have the right to license, on a non-exclusive basis and upon mutually

 

4

 

agreeable
terms and conditions, so much of the Avanti-GMP Production Process as is
necessary to allow Neopharm to continue the manufacture of Synthetic
Cardiolipin on an uninterrupted basis.

 

(f)                                    In the event of a
termination of this Agreement, transition of Synthetic Cardiolipin supply will
be conducted in such manner as to not cause inconvenience to either party.  In the event of notice of termination by Avanti
for any reason other than a breach of this Agreement by Neopharm, Avanti shall
provide reasonable assistance to Neopharm in connection with the transition of
the source of Synthetic Cardiolipin supply to another manufacturer.

 

6.                                      Confidentiality.  (a)
Each party recognizes and agrees that it is and shall continue to be bound by
that certain Confidentiality Agreement, dated
             ,
1998, between and among the parties and that “Confidential Information” (as
defined in such Confidentiality Agreement) shall include any information or
material disclosed or provided by one party to another pursuant to this
Agreement (including without limitation the GMP-Avanti Production
Process).  Each party shall maintain
Confidential Information in confidence and shall not disclose Confidential
Information to any third party or use Confidential Information for any purpose
not authorized under this Agreement, except as required by law or with the
written consent of the other party.

 

(b)                                 Notwithstanding Section 6(a)
hereof, Neopharm may provide Confidential Information to the FDA and/or
equivalent European regulatory authorities or to third parties for analytical
purposes only, in all events as required to support development of products
which use Liposomal Doxorubicin or Paclitaxel, provided that Neopharm first
gives Avanti written notice of such intended disclosure of Confidential
Information and takes all action necessary or appropriate in making such
disclosure to maintain such Confidential Information as required under the
Confidentiality Agreement, including requiring the execution and delivery of
written agreements in substantially the same form and effect as the
Confidentiality Agreement with respect to Confidential Information disclosed to
any third parties other than regulatory authorities.

 

7.                                      Intellectual Property.  (a) Avanti and Neopharm recognize and agree that Avanti and
Neopharm are separate and independent entities and are independently engaged in
research and in the development, either directly or indirectly, of innovations
and Intellectual Property, including without limitation, compounds and
biochemical and pharmaceutical products, and in the authorship, innovation,
development, enhancement, modification, and creation of Intellectual Property.  Each party further agrees that by executing
this Agreement, Avanti does not grant nor intend to grant to Neopharm a license
or any right, title or interest in any Intellectual Property of Avanti
including, without limitation, any Intellectual Property which relates either
directly or indirectly, to the GMP-Avanti Production Process, and that Neopharm
does not grant or intend to grant to Avanti a license or any right, title or
interest in any Intellectual Property including, without limitation to any
Intellectual Property relating, either directly or indirectly, to Liposomal
Doxorubicin or Paclitaxel, except as expressly set forth in this Agreement or
in other written agreements between the parties, as in effect from time to
time.

 

5

 

(b)                                 For the purposes of this
Agreement, the term “Intellectual Property” shall mean any and all innovations,
patents, copyrights, trade secrets, patentable ideas, copyrightable works, and
all confidential technical, scientific or business information of any party, in
whatever form or stage of completion.

 

8.                                      Representations and Warranties.  (a) Avanti hereby covenants, represents and warrants that
it has all power and authority to enter into this Agreement and to execute and
deliver this Agreement and perform its obligations hereunder; that neither the
execution, delivery, nor performance of this Agreement or any of the
transactions contemplated hereby will breach, be in conflict with, or
constitute a default under any agreement between it and any third party or
under the terms of any order, judgment or decree to which it is a party, or
result in the imposition of any lien, claim or incumbrance upon it or any of
its assets.

 

(b)                                 Neopharm hereby covenants,
represents and warrants that it is the owner by assignment of Liposomal
Doxorubicin and Paclitaxel; that Neopharm has all power and authority to enter
into this Agreement and to execute this Agreement and to perform its
obligations hereunder; that neither the execution, delivery nor performance of
this Agreement or any of the transactions contemplated hereby will breach, be
in conflict with, or constitute a default under any agreement between it and
any third party or under the terms of any order, judgment or decree to which it
is a party, or result in the imposition of any lien, claim or encumbrance upon
it or any of its assets.

 

9.                                      Indemnification.  Neopharm
and its designated affiliates and sublicensees shall indemnify, defend and hold
Avanti harmless from and against all liability, claims, actions, causes of
action, demands, damages, costs and expenses (including reasonable attorneys
fees and all court costs) brought against Avanti arising from or in connection
with (i) the use of Synthetic Cardiolipin in the development or
commercialization of Liposomal Doxorubicin or Paclitaxel, or (ii) the ownership
of or any right, title or interest in, or infringement related to or
misappropriation of Liposomal Doxorubicin and Paclitaxel, on the condition that
Avanti shall promptly notify Neopharm of any and all liability, claims, causes
of action, actions, demands, damages costs and expenses.  Avanti shall indemnify, defend and hold
Neopharm and its designated affiliates and sublicensees harmless from and
against all liability, claims, actions, causes of action, demands, damages,
costs and expenses (including reasonable attorney fees and all court costs)
brought against Neopharm which result from the gross negligence or malfeasance
of Avanti’s employees in the course of manufacturing Synthetic Cardiolipin
under the terms of this Agreement.

 

10.                               Independent Contractors.  Avanti and Neopharm hereby acknowledge and agree that each is an
independent contractor and that neither Avanti nor Neopharm shall be considered
to be the agent, representative, master or servant of the other for any purpose
whatsoever and that neither Avanti nor Neopharm has the authority to enter into
any contract or agreement, to assume any obligation, or to give or make any
guarantees, warranties, representations on behalf of the other.  Nothing in this Agreement or the
relationship described herein shall be construed or deemed to be a joint
venture, partnership, fiduciary, or other similar relationship between the
parties.

 

6

 

11.                               Insurance. 
Avanti
shall have and maintain such types and amounts of its insurance as is normal
and customary in the pharmaceutical industry generally for persons similarly
situated, and Avanti will provide Neopharm with a copy of its certificates of
insurance.  For its part, Neopharm,
after receiving approval from the FDA or other applicable regulatory authority
for the sale of any product containing Synthetic Cardiolipin to the public,
shall have and maintain product liability insurance coverage as is normal and
customary in the pharmaceutical industry for persons similarly situated and
Neopharm shall provide Avanti with a copy of its certificates of insurance.

 

12.                               General Terms and Conditions.  (a) This Agreement shall be binding upon and shall inure to the
benefit of the parties, their legal representatives, successors and
assigns.  This Agreement and any rights
granted hereunder may be assigned, transferred or conveyed by either party
without the prior written consent of the other.

 

(b)                                 This Agreement shall be
governed by and construed in accordance with the laws of the State of
Alabama.  Any modifications, changes or
amendments to this Agreement shall be effective only if in writing and signed
by a duly authorized representative of each party.  The provisions contained in Sections 6(a) and 9 hereof
shall survive the termination or expiration of this Agreement (or any renewal
or extension thereof) and remain in full force and effect.

 

(c)                                  This Agreement constitutes
the entire understanding of the parties relating to the production and sale by
Avanti to Neopharm and\or its designated affiliates and sublicensees of
Synthetic Cardiolipin.  Neither Avanti
nor Neopharm have relied on and do not rely on any representations or
statements by the other party or such party’s agents, whether verbal or
written, with respect to the subject matter of this Agreement, except as
specifically set forth herein.

 

(d)                                 Any notice, communication or
other information permitted or required to be given under this Agreement shall
be effective and deemed properly given upon sending with confirmed written
answer back, if sent by facsimile; upon delivery, return as undeliverable, or
refusal of delivery, if delivered by hand; or on the seventh (7th) day after
being placed in the United States Mail, addressed to a party at the address set
forth below or as hereinafter identified by a party, postage prepaid, return
receipt requested; in all events any such notice, communication or information
shall be sent to the parties addressed as follows:

 

	
  If to Avanti:

  	
  Avanti Polar Lipids, Inc.

  
	
   

  	
  700 Industrial Park Drive

  
	
   

  	
  Alabaster, Alabama 35007

  
	
   

  	
  Attention:  Dr. Walter A. Shaw

  
	
   

  	
  Facsimile:  205/663-0756

  

 

7

 

	
  If to Neopharm:

  	
  Neopharm, Inc.

  
	
   

  	
  100 Corporate North, Suite 215

  
	
   

  	
  Bannockburn, Illinois 60015

  
	
   

  	
  Attention:  Mr. James M.
  Hussey

  
	
   

  	
  Facsimile:  (847) 295-8678

  

 

Any party may give notice of a change of address, facsimile number,
telephone number or other pertinent mailing or delivery information from time
to time, so long as such notice is given in accordance with this Section.

 

(e)                                  Avanti and Neopharm shall
execute and deliver such other instruments and do such other acts as may be
necessary to carry out the intended purpose of this Agreement.

 

(f)                                    Whenever the context may require,
any pronouns used herein shall include the corresponding masculine, feminine,
or neuter forms and the singular form of pronouns and nouns shall include the
plural and visa versa.

 

(g)                                 This Agreement may be
executed in any number of counterparts, all executed counterparts shall
constitute one and the same agreement, notwithstanding that all signatories are
not signatories to the original or the same counterpart.

 

(h)                                 The captions contained in
this Agreement are inserted only as a matter of convenience and in no way
define, limit, extend or describe the scope of this Agreement or the intent of
any provision hereof.

 

(i)                                     If any action is necessary
to enforce or interpret the terms of this Agreement, the prevailing parties
shall be entitled to recover from the other party reasonable attorneys’ fees
and costs including appellate attorney’s fees.

 

(j)                                     The invalidity, in whole or
in part, of any covenant, promise, undertaking or any paragraph, subsection,
sentence, clause, phrase or word or any provision of this Agreement shall not
affect validity of the remaining portions thereof.  Each party acknowledges and agrees that the restrictions
contained in this Agreement are reasonable and valid in scope and in all other
respects.  If any provision of this
Agreement or the application thereof by or to any party or circumstance shall
be determined to be invalid or unenforceable to any extent, the remainder of
this Agreement and the application of such provision to other parties or
circumstances shall not be affected thereby and shall be enforced to the
maximum permitted under applicable law. 
Without limiting the generality of the foregoing, if any court of
competent jurisdiction determines that any part of this Agreement is unenforceable
because of the duration or scope of any provision, or both, the parties agree
that such duration or scope shall be reduced to the extent determined to be
reasonable by such court of competent jurisdiction and, in its reduced form,
such provisions shall then be valid and enforceable.

 

8

 

(k)                                  Neopharm shall have the
right, upon reasonable notice to Avanti, during normal business hours, no more
frequently than reasonably necessary and under appropriate confidentiality
agreements, to send authorized representatives to manufacturing facilities
where Synthetic Cardiolipin is manufactured, to audit any manufacturing and
testing operations that Neopharm deems reasonably appropriate to confirm that
production of each batch of Synthetic Cardiolipin is in compliance with
GMP.  Upon request, Avanti agrees to
notify Neopharm of the next scheduled production run of Synthetic
Cardiolipin.  Avanti agrees to cooperate
with Neopharm’s authorized representatives in their conduct of such audits.

 

(l)                                     Avanti shall address or
correct any audit deficiencies noted by Neopharm as the result of its
inspections of Avanti’s facility as soon as is reasonably possible, but in no
event more than thirty (30) days after the date such deficiencies are brought
to the attention of Avanti by Neopharm, assuming such deficiencies can
reasonably be expected to be corrected within such thirty (30) day period.

 

(m)                               Avanti shall permit
regulatory authorities from the United States and other countries to inspect
its facility in connection with product license applications submitted by
Neopharm for Liposomal Doxorubicin and Paclitaxel.  Avanti shall notify Neopharm as soon as possible of any planned
or surprise visits of Avanti’s facility by the U.S. Food and Drug
Administration.

 

9

 

IN WITNESS WHEREOF, each Party has caused the
due execution of this Agreement as of the Effective Date.

 

	
  ATTEST:

  	
  Avanti Polar Lipids, Inc.,
an Alabama corporation,

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
      /s/ Rowena C. Shaw

  	
   

  	
  By:

  	
    /s/ Walter A. Shaw,

  	
   

  
	
   

  	
   

  	
   

  	
  Walter A. Shaw, Ph.D.

  
	
  Its:

  	
  Vice-President

  	
   

  	
  Its:

  	
  President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ATTEST:

  	
  Neopharm, Inc.,
a Delaware corporation,

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
      /s/ Lewis Strauss

  	
   

  	
  By:

  	
    /s/ James M. Hussey

  	
   

  
	
   

  	
   

  	
   

  	
  James M. Hussey, R.Ph., M.B.A.

  
	
  Its:

  	
  Chief Medical Officer

  	
   

  	
  Its:

  	
  President

  
									

 

10

 

Schedule 1

 

Synthetic
Cardiolipin

GMP Production
Specifications

 

Test                                                                                                                        Specification

 

1.               Identity

 

2.               Purity

 

3.               Quality

 

4.               Documentation

 

a.                                       In general, Avanti documents
contain proprietary information of a sensitive nature and thus cannot be
disclosed to outside personnel. 
However, Avanti understands that you will need to perform quality audits
at some point in the future and proof of existence and use of batch production
records will be demonstrated.

 

b.                                      Avanti has validated the
cleaning process of equipment utilized in the production of lipids such that
the risk of cross contamination is minimized.

 

5.               General

 

a.                                       Program Schedule

 

i.                                          Development and validation
of analytical tests.

 

(1)

 

ii.                                       Production of three batches
of Synthetic Cardiolipin for evaluation.

 

(1)

 

iii.                                    Avanti’s production
facilities are available for inspection by your quality control team.  However, specific processes are proprietary
and would be screened from the inspection.

 

11

 

(1)                                  Production questions
concerning any non-proprietary process would be addressed directly with
you.  Proprietary process question would
be addressed through the filing of the drug master file with the Food and Drug
Administration.

 

12

 

Schedule 2

Production of
GMP-Synthetic Cardiolipin

 

13

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