INDEMNIFICATION TERM SHEET — PROPOSED STRUCTURE
Master Clinical Trial Agreement Between Penterra Pharmaceuticals Corp. and Veridian Health Research Network, Inc.
Protocol PPC-4871-III (CLARION) Clinical Assessment of Response with Longitudinal Investigation in ONcology
Investigational Product: Penterafenib (PPC-4871)
May 5, 2023
CONFIDENTIAL — FOR DISCUSSION PURPOSES ONLY
This term sheet is a non-binding proposal prepared by Calderwood & Harkness LLP on behalf of Penterra Pharmaceuticals Corp. It is intended solely as a basis for negotiation and does not create, and shall not be construed to create, any legally enforceable rights or obligations. Definitive terms governing the indemnification, subject-injury, insurance, and related provisions described herein will be set forth exclusively in the fully executed Master Clinical Trial Agreement and its applicable exhibits. This document is subject to the protections of Federal Rule of Evidence 408 and its state-law equivalents. Distribution is limited to the addressees identified below and their authorized representatives.
Prepared by:
Calderwood & Harkness LLP 280 Park Avenue, 34th Floor New York, NY 10017 On behalf of Penterra Pharmaceuticals Corp.
Circulated to:
Whitmore, Jansen & Callahan LLP Counsel to Veridian Health Research Network, Inc. 1500 Market Street, Suite 3200 Philadelphia, PA 19102
Attention: Allison Whitmore, Esq.
Matter Number: 1018-00004
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Section 1: Background and Purpose
Penterra Pharmaceuticals Corp. ("Sponsor" or "Penterra"), a corporation organized and existing under the laws of the State of Delaware, with its principal offices located at 200 Biopharma Boulevard, Suite 1400, Princeton, New Jersey 08540 (Nasdaq: PTRA), is currently in advanced negotiations with Veridian Health Research Network, Inc. ("Veridian" or "Site Network"), a Delaware non-stock corporation exempt from federal income taxation under Section 501(c)(3) of the Internal Revenue Code, with its principal offices located at 750 Research Parkway, 8th Floor, Philadelphia, Pennsylvania 19104, to enter into a Master Clinical Trial Agreement (the "MCTA") governing the conduct of a multi-center clinical trial.
The MCTA will govern the conduct of Protocol PPC-4871-III (CLARION — Clinical Assessment of Response with Longitudinal Investigation in ONcology), a Phase III, randomized, double-blind, placebo-controlled clinical trial evaluating the safety and efficacy of penterafenib (PPC-4871), Penterra's oral multi-kinase inhibitor, for the treatment of advanced hepatocellular carcinoma ("HCC") in adult patients who have progressed on or are intolerant to at least one prior line of systemic therapy. The CLARION trial is being conducted under Investigational New Drug Application No. IND 157823, as filed with the United States Food and Drug Administration ("FDA"), and has been registered on the ClinicalTrials.gov platform under Identifier NCT05928174.
The CLARION trial will be conducted across thirty-eight (38) participating clinical sites within the Veridian Health Research Network, located across fourteen (14) states in the United States. The trial is designed to enroll a total of approximately 1,200 study subjects, randomized on a 2:1 basis (800 subjects randomized to penterafenib; 400 subjects randomized to matching placebo) over a projected enrollment period of forty-two (42) months. The total value of the engagement under the MCTA, inclusive of per-patient site fees, investigator grants, operational pass-through costs, and ancillary study support, is approximately $80,000,000 over the course of the trial.
The purpose of this Indemnification Term Sheet is to set forth Penterra's proposed indemnification framework for incorporation into the MCTA. This term sheet addresses the following principal areas: (i) Sponsor indemnification of participating sites and investigators for Claims arising from the conduct of the CLARION trial; (ii) reciprocal indemnification of Sponsor by Veridian and the participating site institutions; (iii) Sponsor obligations with respect to the medical care of study subjects who sustain injuries in connection with the trial; (iv) coordination of indemnification obligations with clinical trial liability insurance maintained by the respective Parties; (v) notice, procedural, and cooperation requirements applicable to indemnification Claims; and (vi) related provisions governing the duration, survival, and interaction of the indemnification framework with other provisions of the MCTA.
This term sheet is intended solely as a basis for discussion and negotiation between the Parties and their respective legal counsel. It does not constitute a binding agreement, and no Party shall be bound by the terms described herein until such terms are incorporated into, and reflected in, a definitive MCTA duly executed by authorized representatives of both Penterra and Veridian. All terms and conditions set forth below remain subject to further negotiation, revision, and the resolution of open business and legal points in the broader MCTA.
Section 2: Defined Terms
For purposes of this Indemnification Term Sheet, and as proposed for incorporation into the definitive MCTA, the following capitalized terms shall have the meanings set forth below. Additional defined terms may be added or modified in connection with the negotiation and finalization of the MCTA, and in the event of any inconsistency between the definitions set forth herein and those ultimately adopted in the executed MCTA, the definitions in the executed MCTA shall control.
"Sponsor" means Penterra Pharmaceuticals Corp., a Delaware corporation, together with its successors and permitted assigns.
"Site Network" means Veridian Health Research Network, Inc., a Delaware 501(c)(3) corporation, together with its successors and permitted assigns.
"Participating Site" or "Site Institution" means each academic medical center, hospital, or affiliated research institution within the Veridian Health Research Network that executes an Individual Site Agreement (in the form of a Joinder Agreement to the MCTA) and is authorized to conduct study activities under the Protocol. Participating Sites include, without limitation, Graystone University Medical Center (designated as Site 001, located in Philadelphia, Pennsylvania) and Lakemont Medical Center (designated as Site 002, located in Chicago, Illinois). The complete list of Participating Sites will be set forth in Schedule A to the MCTA, as such schedule may be amended from time to time upon the addition or removal of sites in accordance with the MCTA's site activation and closure procedures.
"Investigator" means each principal investigator, co-principal investigator, and sub-investigator at a Participating Site who is qualified by training, education, and experience to conduct study activities under the Protocol and who has been identified on Form FDA 1572 (Statement of Investigator) for the applicable site. The term Investigator includes the Global Principal Investigator for the CLARION trial, Dr. Catherine Aldridge, M.D., Ph.D., of Graystone University Medical Center, and the Co-Principal Investigator, Dr. Howard Matsuoka, M.D., of Lakemont Medical Center, as well as all other principal investigators and sub-investigators listed on the applicable Forms FDA 1572 for the Participating Sites.
"Site Personnel" means the research coordinators, study nurses, pharmacists, laboratory technicians, and other staff members at a Participating Site who are delegated study-related responsibilities under the Protocol and who are listed on the site's delegation of authority log, as maintained in accordance with ICH E6(R2) Good Clinical Practice Guidelines.
"Indemnified Site Parties" means, collectively, Veridian, each Participating Site, each Investigator, and all Site Personnel, together with their respective officers, directors, trustees, employees, agents, and, solely in the case of academic medical center Participating Sites, the applicable governing board members, faculty, and staff, in each case acting in their capacity as such.
"Indemnified Sponsor Parties" means Penterra, together with its officers, directors, employees, agents, affiliates, and subsidiaries, including without limitation Meridian Contract Research Organization, Inc. (the Sponsor's contracted CRO for the CLARION trial), in each case acting in their capacity as such.
"Investigational Product" means penterafenib (PPC-4871), the oral multi-kinase inhibitor that is the subject of Protocol PPC-4871-III, in all dosage forms, strengths, and formulations supplied by or on behalf of Penterra for use in the CLARION trial, together with matching placebo supplied by or on behalf of Penterra.
"Protocol" means Protocol PPC-4871-III (CLARION — Clinical Assessment of Response with Longitudinal Investigation in ONcology), as approved by the FDA under IND 157823, including all amendments thereto that have been approved by the FDA, the applicable Institutional Review Board(s), and Penterra.
"MCTA" means the Master Clinical Trial Agreement to be entered into between Penterra and Veridian governing the conduct of the CLARION trial across the Veridian Network, together with all exhibits, schedules, appendices, and Individual Site Agreements (Joinder Agreements) executed thereunder.
"Subject Injury" means any bodily injury, illness, disease, disability, or adverse health effect (including death) experienced by a study subject that arises out of or in connection with: (a) the administration of the Investigational Product; (b) the performance of Protocol-required study procedures (including, without limitation, biopsies, blood draws, imaging studies, and other diagnostic or therapeutic interventions specified in the Protocol); or (c) any other activity conducted as part of the study subject's participation in the CLARION trial pursuant to the Protocol.
"Claims" means any and all claims, demands, actions, suits, causes of action, proceedings (whether at law or in equity, and whether civil, criminal, administrative, or regulatory), losses, damages (including compensatory, consequential, incidental, punitive, and exemplary damages), liabilities, judgments, settlements, penalties, fines, costs, and expenses (including reasonable attorneys' fees, expert witness fees, costs of investigation, and costs of defense), in each case whether asserted by a third party or arising from a Party's own losses.
"Product Defect" means any defect, flaw, inadequacy, or nonconformity in the design, manufacture, formulation, compounding, labeling, packaging, storage, handling, or shipping of the Investigational Product, to the extent such defect, flaw, inadequacy, or nonconformity is attributable to Sponsor or its agents, contractors, or suppliers (including the contract manufacturer and any third-party logistics providers engaged by Sponsor), and which exists at or prior to the time of delivery of the Investigational Product to the Participating Site.
"Protocol Deviation" means any departure from the Protocol, whether classified as a major (significant) deviation or a minor (non-significant) deviation, as such terms are defined and classified under ICH E6(R2) Good Clinical Practice Guidelines, the Protocol's deviation management plan (Protocol Appendix G), and applicable standard operating procedures of the Sponsor and the Site Network.
"Medically Necessary Protocol Deviation" means a Protocol Deviation that is undertaken by an Investigator in good faith and in the exercise of reasonable medical judgment for the purpose of protecting the life, safety, or well-being of a study subject in an emergent or urgent clinical situation, and that is reported to the Sponsor's medical monitor within twenty-four (24) hours of its occurrence, with a complete written report submitted within seventy-two (72) hours in accordance with the Protocol's deviation reporting procedures.
Section 3: Sponsor Indemnification of Indemnified Site Parties
3.1 Scope of Sponsor Indemnification
Subject to the carve-outs and exclusions set forth in Section 3.2 below, Penterra shall defend, indemnify, and hold harmless each of the Indemnified Site Parties from and against all Claims arising out of or resulting from any of the following:
(a) Subject Injury Caused by Investigational Product. Any injury, illness, adverse health effect, disability, or death sustained by a study subject that is caused by or attributable to the Investigational Product (PPC-4871 or matching placebo), including but not limited to adverse drug reactions, drug-drug interactions not identified in the Investigator's Brochure, unanticipated adverse events, and long-term or latent effects of the Investigational Product, in each case where the Investigational Product was administered to the study subject in accordance with the Protocol and applicable regulatory requirements, including the dosing schedule, administration instructions, and concomitant medication restrictions specified in the Protocol and the current version of the Investigator's Brochure (Edition 7, dated March 15, 2023).
(b) Product Defect. Any defect in the Investigational Product, including without limitation defects in design, molecular formulation, synthesis, manufacture, compounding, quality control, labeling, packaging, storage, or handling, to the extent such defect is attributable to Sponsor, its contract manufacturer, its contracted CRO (Meridian Contract Research Organization, Inc.), or any other agent, subcontractor, or supplier engaged by Sponsor in connection with the production, distribution, or supply chain management of the Investigational Product. For purposes of this Section 3.1(b), a Product Defect shall be deemed attributable to Sponsor if the defect existed at or prior to the point of delivery of the Investigational Product to the Participating Site's research pharmacy, regardless of whether the defect was discoverable by the Participating Site at the time of receipt.
(c) Sponsor Breach. Any breach by Penterra of its obligations, representations, warranties, or covenants under the MCTA, including but not limited to: (i) failure to provide accurate and complete safety information regarding the Investigational Product; (ii) failure to notify Investigators and IRBs of new safety findings or changes to the risk-benefit profile of penterafenib in a timely manner; (iii) failure to comply with IND safety reporting requirements under 21 C.F.R. § 312.32; (iv) breach of the confidentiality provisions of the MCTA with respect to subject-identifiable information; and (v) failure to supply the Investigational Product in a timely and adequate manner as required by the Protocol's supply plan.
(d) Sponsor Negligence or Willful Misconduct. Any negligent act or omission, reckless conduct, or willful misconduct of Penterra or its employees, officers, directors, agents, or subcontractors (including Meridian Contract Research Organization, Inc.) in connection with the planning, design, conduct, monitoring, oversight, or management of the CLARION trial, including without limitation negligence in the selection or training of clinical research associates, negligence in the design of the Protocol, and negligent or willful failure to implement corrective actions in response to identified safety signals or data integrity concerns.
The indemnification obligations set forth in this Section 3.1 extend to all costs and expenses incurred by the Indemnified Site Parties in connection with the defense, investigation, and resolution of any indemnified Claim, including reasonable attorneys' fees, expert witness fees, costs of litigation or arbitration, and costs of regulatory proceedings, and shall apply regardless of whether such Claims are asserted by study subjects, their legal representatives, governmental or regulatory authorities, or any other third party.
3.2 Carve-Outs and Exclusions from Sponsor Indemnification
Notwithstanding the foregoing, Penterra's indemnification obligations under Section 3.1 shall not apply to the extent that Claims arise from or are attributable to any of the following circumstances:
(i) Negligence or Willful Misconduct of Site Parties. The negligence, gross negligence, recklessness, or willful misconduct of any Indemnified Site Party, including without limitation any Investigator, Site Personnel member, or employee of Veridian or a Participating Site Institution, in the performance of study-related activities under the Protocol. For purposes of this carve-out, negligence shall be assessed under the standard of care applicable to clinical trial investigators and research personnel in the relevant jurisdiction and medical specialty, and shall include but not be limited to: errors in the administration of the Investigational Product; failure to obtain or document informed consent as required by the Protocol and 21 C.F.R. Part 50; failure to comply with inclusion/exclusion criteria; failure to report adverse events to the Sponsor, the IRB, or regulatory authorities in a timely manner; and failure to maintain adequate source documentation.
(ii) Unauthorized Protocol Deviations. Protocol Deviations committed by any Investigator, Site Personnel member, or Participating Site that were not authorized in advance by Penterra (or its authorized designee, including the Sponsor's medical monitor) and that do not qualify as Medically Necessary Protocol Deviations as defined in Section 2 above. For the avoidance of doubt, a Protocol Deviation that qualifies as a Medically Necessary Protocol Deviation and that is reported to the Sponsor's medical monitor within twenty-four (24) hours of occurrence, with a complete written report submitted within seventy-two (72) hours, shall not trigger this carve-out, and Claims arising from or in connection with such Medically Necessary Protocol Deviations shall remain within the scope of Sponsor's indemnification obligations under Section 3.1.
(iii) Site Breach. Breach by Veridian, any Participating Site, any Investigator, or any Site Personnel member of the MCTA, any Individual Site Agreement (Joinder Agreement), the Protocol (including Protocol amendments), applicable federal, state, or local laws, or applicable regulations, including but not limited to: 21 C.F.R. Part 50 (Protection of Human Subjects); 21 C.F.R. Part 56 (Institutional Review Boards); 21 C.F.R. Part 312 (Investigational New Drug Application regulations); ICH E6(R2) Good Clinical Practice Guidelines; the Health Insurance Portability and Accountability Act of 1996 ("HIPAA") and its implementing regulations at 45 C.F.R. Parts 160 and 164, as applicable to protected health information generated or maintained in connection with the CLARION trial; and applicable state privacy and research ethics laws and regulations.
In circumstances where both Sponsor conduct and Site Party conduct contributed to the events giving rise to a Claim (i.e., cases of concurrent or comparative fault), the allocation of liability and indemnification responsibility as between Penterra and the applicable Indemnified Site Party(ies) shall be determined on the basis of comparative fault principles. Penterra proposes that the definitive MCTA include a proportional allocation provision, under which each Party's share of liability for a concurrent-fault Claim shall be determined in proportion to such Party's relative degree of fault, as determined by agreement of the Parties or, in the absence of agreement, by the dispute resolution mechanism set forth in Section 9 below. The Parties acknowledge that the comparative fault allocation methodology is a point for further negotiation and that Veridian may propose alternative allocation approaches for consideration.
3.3 Uncapped Indemnification for Product Defect Claims
Penterra's indemnification obligations with respect to Claims arising from Product Defects under Section 3.1(b) shall be uncapped. No per-subject limitation, per-occurrence limitation, per-site limitation, or aggregate monetary cap shall apply to Penterra's obligation to defend, indemnify, and hold harmless the Indemnified Site Parties from and against Claims attributable to Product Defects.
The rationale for this provision is straightforward: the Participating Sites, Investigators, and Site Personnel have no role in and no control over the design, development, manufacture, formulation, quality control, labeling, packaging, storage, or handling of the Investigational Product prior to its delivery to the site research pharmacy. Accordingly, the Indemnified Site Parties should bear no financial risk whatsoever for Claims that arise from defects in the Investigational Product, and Penterra accepts full and unlimited responsibility for all such Claims. This approach reflects the fundamental principle that the entity with exclusive control over the Investigational Product's chain of custody and quality assurance processes should bear the corresponding indemnification risk, and is consistent with prevailing industry standards for sponsor indemnification in multi-center Phase III clinical trials involving novel investigational agents.
Section 4: Subject-Injury Medical Care Obligations
4.1 Scope of Medical Care Obligation
In addition to, and independent of, the indemnification obligations set forth in Section 3, Penterra shall pay or reimburse the reasonable and customary medical costs incurred in connection with the diagnosis and treatment of Subject Injuries that are directly attributable to: (a) the administration of the Investigational Product (PPC-4871 or matching placebo) to a study subject; or (b) the conduct of Protocol-required study procedures (including biopsies, blood draws, electrocardiograms, imaging studies, pharmacokinetic sampling, and other diagnostic or therapeutic interventions mandated by the Protocol).
Penterra's obligation under this Section 4.1 shall apply to the extent that such medical care costs are not covered by, or reimbursable under, any of the following sources:
(a) The study subject's own health insurance, managed care plan, or other third-party medical coverage, including employer-sponsored health plans, individual market plans, and any supplemental or secondary insurance coverage available to the subject; or
(b) Any federal, state, or local governmental health care program for which the subject is eligible and enrolled, including but not limited to Medicare (Title XVIII of the Social Security Act), Medicaid (Title XIX of the Social Security Act), the Children's Health Insurance Program (CHIP), TRICARE, or Veterans Administration health benefits.
The medical care obligation set forth in this Section 4 applies only to Subject Injuries sustained in connection with study activities conducted in accordance with the Protocol. This obligation is a direct contractual commitment of Penterra to the Indemnified Site Parties, intended to address the financial exposure that Participating Sites and Investigators may face when study subjects sustain injuries in the course of trial participation and seek medical care at the Participating Site or its affiliated facilities. This obligation is separate from and in addition to the defense and indemnification obligations set forth in Section 3, and shall not be construed to limit or reduce Penterra's indemnification obligations.
4.2 Per-Subject Cap
Penterra's obligation to pay or reimburse medical care costs under this Section 4 with respect to any individual study subject shall not exceed Five Hundred Thousand Dollars ($500,000) per subject. This per-subject cap encompasses all medical care costs incurred in connection with any and all Subject Injuries sustained by such individual subject during the course of the subject's participation in the CLARION trial, including the screening period, the treatment period, the post-treatment follow-up period, and any extended follow-up or survival follow-up periods specified in the Protocol.
Once the aggregate medical care costs attributable to a given subject reach the $500,000 per-subject cap, Penterra's obligation to pay or reimburse further medical care costs for that subject under this Section 4 shall be deemed satisfied and discharged. For the avoidance of doubt, the exhaustion of the per-subject cap with respect to a particular subject shall not affect or limit Penterra's indemnification obligations under Section 3 with respect to Claims arising from Subject Injuries sustained by that subject, which are governed by the separate provisions and limitations (if any) set forth in Section 3.
4.3 Aggregate Cap
Penterra's aggregate obligation to pay or reimburse medical care costs under this Section 4 across all study subjects at all Participating Sites shall not exceed Fifteen Million Dollars ($15,000,000) in the aggregate for the entire duration of the CLARION trial and any post-trial follow-up period. This aggregate cap is calculated across all thirty-eight (38) Veridian Network sites and all approximately 1,200 planned study subjects.
The aggregate cap represents the maximum total financial exposure that Penterra is willing to assume under this Section 4 for subject-injury medical care costs across the entire trial. Penterra notes that the aggregate cap is designed to be proportionate to the size, scope, and risk profile of the CLARION trial, taking into account the known safety profile of penterafenib as documented in the current Investigator's Brochure, the anticipated rate of serious adverse events based on Phase II data, and the per-patient fees being paid under the MCTA.
4.4 Relationship to Insurance
Subject-injury medical care payments made by Penterra under this Section 4 shall be coordinated with Penterra's clinical trial liability insurance maintained through Briarcliff Mutual Insurance Company under Policy No. BM-CTL-2023-04182. As described in greater detail in Section 7 below, the Briarcliff policy includes a subject-injury sublimit of $10,000,000 per occurrence and $50,000,000 in the aggregate. Penterra may seek reimbursement from Briarcliff Mutual for medical care costs paid under this Section 4, to the extent such costs fall within the coverage terms of the Briarcliff policy.
Notwithstanding the foregoing, the medical care obligations set forth in this Section 4 are direct contractual obligations of Penterra to the Indemnified Site Parties and apply irrespective of whether Penterra's insurance coverage is available, adequate, or responsive to any particular Subject Injury. The availability or unavailability of insurance proceeds shall not affect the timing, amount, or scope of Penterra's obligations under this Section 4, and the Indemnified Site Parties shall not be required to exhaust or pursue any insurance claims as a condition to receiving medical care payments from Penterra.
4.5 Exclusions from Medical Care Obligation
Penterra shall have no obligation to pay or reimburse medical care costs under this Section 4 to the extent that the Subject Injury in question results from any of the following circumstances:
(a) Pre-existing conditions. Pre-existing medical conditions, injuries, illnesses, or health effects of the study subject that are unrelated to, and not exacerbated by, the subject's participation in the CLARION trial, the administration of the Investigational Product, or the conduct of Protocol-required study procedures. For purposes of this exclusion, a pre-existing condition shall be deemed "unrelated to" study participation only if the condition existed prior to the subject's enrollment in the trial and was not aggravated, accelerated, or otherwise worsened as a result of the Investigational Product or any study procedure.
(b) Site-party negligence or willful misconduct. The negligence, gross negligence, or willful misconduct of the Participating Site, any Investigator, or any Site Personnel member in the conduct of study activities, including but not limited to dosing errors, administration errors, failure to adhere to eligibility criteria, and failure to comply with concomitant medication restrictions.
(c) Unauthorized Protocol Deviations. Protocol Deviations committed by the Participating Site, any Investigator, or any Site Personnel member that were not authorized by Penterra and that do not qualify as Medically Necessary Protocol Deviations. For the avoidance of doubt, Subject Injuries resulting from Medically Necessary Protocol Deviations that are timely reported in accordance with the Protocol's deviation reporting procedures shall not be excluded under this provision.
(d) Subject non-compliance. The study subject's failure to comply with the requirements of the study, including but not limited to the subject's failure to attend scheduled study visits, failure to take study medication as directed, failure to comply with lifestyle and dietary restrictions specified in the Protocol, or use of prohibited concomitant medications; provided, however, that this exclusion shall not apply if the subject's non-compliance was caused by, or was a direct result of, the Investigational Product (e.g., non-compliance resulting from adverse effects of penterafenib that impaired the subject's ability to adhere to the study schedule) or a Protocol-required study procedure.
Section 5: Reciprocal Site/Investigator Indemnification of Sponsor
5.1 Scope of Site Indemnification
As a reciprocal obligation, Veridian and each Participating Site Institution shall, jointly and severally as to Claims arising at or in connection with the activities of such Participating Site, defend, indemnify, and hold harmless the Indemnified Sponsor Parties from and against all Claims arising out of or resulting from any of the following:
(a) Negligence or Willful Misconduct of Site Parties. The negligence, gross negligence, recklessness, or willful misconduct of any Investigator, Site Personnel member, or employee or agent of the Participating Site Institution or Veridian in the conduct of the CLARION trial, including but not limited to: errors in the screening, enrollment, treatment, or follow-up of study subjects; failure to obtain or properly document informed consent; failure to report serious adverse events, suspected unexpected serious adverse reactions (SUSARs), or other safety data to the Sponsor, the IRB, or the FDA in a timely manner; medication errors; breaches of subject confidentiality; and failure to maintain adequate source documentation or case report forms.
(b) Unauthorized Protocol Deviations. Protocol Deviations committed by the Participating Site, any Investigator, or any Site Personnel member that were not authorized in advance by Penterra (or its authorized designee) and that do not qualify as Medically Necessary Protocol Deviations as defined in Section 2. This includes but is not limited to unauthorized modifications to the dosing regimen, enrollment of subjects who do not meet the Protocol's eligibility criteria, performance of study procedures not specified in the Protocol, and failure to perform Protocol-required safety assessments.
(c) Site/Veridian Breach. Breach by Veridian, any Participating Site, any Investigator, or any Site Personnel member of the MCTA, any Individual Site Agreement (Joinder Agreement), the Protocol (including all approved amendments), or applicable federal, state, or local laws and regulations, including the regulatory requirements identified in Section 3.2(iii) above.
The indemnification obligations set forth in this Section 5.1 are intended to be reciprocal in nature and to allocate to the site network and its member institutions the financial responsibility for Claims arising from the conduct of the Indemnified Site Parties, in the same manner that Section 3 allocates to Penterra the financial responsibility for Claims arising from the Sponsor's conduct and from the characteristics of the Investigational Product.
5.2 Cap on Site Indemnification Obligations
In recognition of Veridian's status as a Section 501(c)(3) tax-exempt research organization and the limited financial resources available to academic medical center sites participating in sponsored clinical research, Penterra proposes the following caps on the indemnification obligations of Veridian and the Participating Sites under this Section 5:
Per-Site / Per-Occurrence Cap. The indemnification obligation of each individual Participating Site (and Veridian, as applicable, with respect to Claims arising at or in connection with such Participating Site) shall not exceed Five Million Dollars ($5,000,000) per site per occurrence. For purposes of this cap, "per occurrence" means per event, incident, or series of related events giving rise to one or more Claims, as determined in accordance with customary insurance industry principles for occurrence-based coverage.
Aggregate Cap Across All Veridian Sites. The total aggregate indemnification obligation of Veridian and all Participating Sites collectively under this Section 5 shall not exceed Twenty Million Dollars ($20,000,000) for all Claims arising at all sites for the entire duration of the MCTA, including any wind-down or post-termination period. Once the aggregate cap has been exhausted, neither Veridian nor any Participating Site shall have any further indemnification obligation to the Indemnified Sponsor Parties under this Section 5, without prejudice to any other rights or remedies available to Penterra under the MCTA or applicable law.
Penterra acknowledges that these caps reflect its understanding of industry norms and customary practice for reciprocal site indemnification obligations in multi-site Phase III clinical trials conducted through academic medical center networks. Penterra further acknowledges that the proposed caps are intended to provide a commercially reasonable and proportionate allocation of risk between the Parties, taking into account the relative financial resources, risk-bearing capacity, and degree of control exercised by each Party over the activities giving rise to potential Claims.
5.3 No Investigator Personal Indemnification Obligation
Individual Investigators and Site Personnel shall not be required to provide personal indemnification to Penterra or any other Indemnified Sponsor Party under the MCTA. The indemnification obligations set forth in this Section 5 are institutional obligations of Veridian and the Participating Site Institutions only, and no individual physician, researcher, coordinator, nurse, pharmacist, or other natural person shall be personally liable to Penterra under the indemnification provisions of the MCTA.
Nothing in this Section 5 shall be construed to limit, waive, or otherwise affect Penterra's rights to seek contribution, subrogation, or direct recovery from any individual Investigator or Site Personnel member under applicable statutory or common law in cases involving gross negligence or intentional misconduct by such individual; provided, however, that the exercise of any such rights shall be subject to the terms and conditions of the MCTA and shall require Penterra to provide prior written notice to Veridian and the applicable Participating Site Institution. Penterra further acknowledges that any such claims against individual Investigators may be subject to sovereign immunity, charitable immunity, statutory damage caps, or other limitations on liability applicable to employees of academic medical centers or state institutions, and nothing in this term sheet is intended to abrogate or waive any such protections.
Section 6: Notice Requirements and Procedural Provisions
6.1 Notice of Claims
Any Indemnified Party (whether an Indemnified Site Party or an Indemnified Sponsor Party) seeking indemnification under Sections 3 or 5 of this term sheet must provide written notice to the Indemnifying Party within thirty (30) calendar days of the date on which the Indemnified Party first becomes aware of any Claim, threatened Claim, or set of circumstances reasonably likely to give rise to a Claim for which indemnification may be sought under the MCTA.
Written notice shall be delivered in accordance with the notice provisions of the MCTA (to be finalized) and shall include, at a minimum, the following information:
(a) A reasonably detailed description of the nature and factual basis of the Claim or threatened Claim, including identification of the study subject(s), Participating Site(s), and Investigator(s) involved, to the extent known;
(b) The factual basis for the Claim, including a summary of the relevant events, dates, and circumstances giving rise to the Claim;
(c) The amount of damages, losses, or other relief sought or estimated, to the extent known or reasonably ascertainable at the time of the notice; and
(d) Copies of all relevant documents then in the possession of the Indemnified Party, including but not limited to complaints, summonses, demand letters, regulatory inspection reports, FDA Form 483 observations, Warning Letters, IRB correspondence, adverse event reports (including MedWatch forms and IND safety reports), and any other written communications relating to the Claim.
Supplemental notices shall be provided promptly upon the Indemnified Party's receipt of additional material information regarding the Claim, including subsequent pleadings, discovery requests, expert reports, and settlement demands.
6.2 Effect of Late Notice
Failure by an Indemnified Party to provide timely written notice within the thirty (30) calendar-day period specified in Section 6.1 shall not relieve the Indemnifying Party of its indemnification obligations under the MCTA, except to the extent that the Indemnifying Party demonstrates that it has been materially prejudiced by such failure to provide timely notice. Material prejudice may include, but is not limited to, the loss of the ability to investigate the underlying facts while evidence and witnesses are available, the loss of the ability to participate in or influence early-stage resolution of the Claim, and the incurrence of additional costs or liabilities that would not have been incurred had timely notice been provided.
The burden of demonstrating material prejudice rests solely on the Indemnifying Party. The mere fact that notice was provided after the thirty (30) calendar-day period shall not, standing alone, constitute evidence of material prejudice.
6.3 Defense and Control of Claims
Upon receipt of a notice of Claim, the Indemnifying Party shall have the right, but not the obligation, to assume control of the defense of any Claim for which indemnification is sought under the MCTA. If the Indemnifying Party elects to assume control of the defense, it shall do so by providing written notice to the Indemnified Party within fifteen (15) business days of its receipt of the notice of Claim, and shall retain defense counsel that is reasonably acceptable to the Indemnified Party. The Indemnified Party's approval of defense counsel shall not be unreasonably withheld, conditioned, or delayed.
The Indemnified Party shall cooperate fully with the Indemnifying Party in the defense of any such Claim, including but not limited to: (i) providing timely access to relevant records, documents, data, and correspondence; (ii) making available Investigators, Site Personnel, and other witnesses for interviews, depositions, and trial testimony; (iii) executing authorizations, declarations, and other documents reasonably requested by the Indemnifying Party's counsel; and (iv) complying with reasonable litigation holds and document preservation obligations.
The Indemnified Party shall retain the right, at its own expense, to participate in the defense of any Claim with counsel of its own choosing. Such participation shall not constitute a waiver of the Indemnified Party's rights to indemnification, and the Indemnified Party's counsel shall have the right to attend depositions, hearings, mediations, and other proceedings, subject to applicable rules of procedure and court orders.
The Indemnifying Party shall not enter into any settlement, consent order, or other resolution of a Claim without the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld, conditioned, or delayed) if the proposed settlement, consent order, or resolution:
(a) Imposes any non-monetary obligation on the Indemnified Party, including but not limited to injunctive relief, corrective action obligations, reporting requirements, or restrictions on the Indemnified Party's future conduct;
(b) Does not include a full, unconditional, and irrevocable release of the Indemnified Party from all liability and Claims arising out of the subject matter of the Claim; or
(c) Involves any admission of fault, liability, wrongdoing, or regulatory non-compliance by the Indemnified Party, whether express or implied.
6.4 Cooperation and Mitigation
Each Party shall use commercially reasonable efforts to mitigate damages and losses arising from any Claim for which indemnification may be sought under the MCTA. The duty to mitigate shall include, without limitation, taking reasonable steps to minimize the severity and duration of Subject Injuries, cooperating with insurance carriers in the investigation and adjustment of Claims, and pursuing available third-party recoveries.
Both Parties shall cooperate in good faith in the investigation of any incidents, events, or circumstances giving rise to potential Claims, including but not limited to: (i) participation in root-cause analyses conducted in accordance with the Protocol's safety management plan; (ii) implementation of corrective and preventive action (CAPA) plans as may be required by the Protocol, the Sponsor's standard operating procedures, applicable FDA regulations, or the applicable Institutional Review Board(s); (iii) cooperation with any FDA inspections, audits, or investigations related to the CLARION trial; and (iv) participation in joint safety review meetings convened by the Sponsor's Drug Safety Monitoring Board or the trial's independent Data Safety Monitoring Board.
Section 7: Insurance Coordination
7.1 Sponsor Insurance
Penterra currently maintains clinical trial liability insurance through Briarcliff Mutual Insurance Company, as follows:
Policy Number: BM-CTL-2023-04182
Policy Period: April 1, 2023 through March 31, 2024 (subject to annual renewal)
Per-Occurrence Limit: $25,000,000
Aggregate Limit: $75,000,000
Subject-Injury Sublimit: $10,000,000 per occurrence / $50,000,000 aggregate
Deductible/Self-Insured Retention: $250,000 per occurrence (for Penterra's own account)
Coverage Territory: United States, including all U.S. states and territories in which Participating Sites are located
Penterra shall cause Briarcliff Mutual Insurance Company to name Veridian and each Participating Site as additional insureds under Policy No. BM-CTL-2023-04182, with coverage extending to Claims arising out of or in connection with the conduct of the CLARION trial at such sites. Additional insured status shall be evidenced by endorsement to the policy and copies of such endorsements shall be provided to Veridian upon request.
Penterra shall maintain clinical trial liability insurance at no less than the coverage levels set forth above for the entire duration of the MCTA and for a period of three (3) years following the earlier of: (a) the completion of the CLARION trial (including the final database lock and submission of the clinical study report to the FDA); or (b) the termination of the MCTA for any reason. If the Briarcliff policy is issued on a claims-made basis, Penterra shall obtain and maintain tail coverage (extended reporting period coverage) for a period of not less than three (3) years following the expiration or termination of the policy.
7.2 Site Insurance
Veridian and each Participating Site shall maintain general liability insurance and professional liability (medical malpractice) insurance coverage with limits of at least:
Per-Occurrence Limit: $5,000,000
Aggregate Limit: $10,000,000
Such coverage shall be maintained for the duration of the MCTA and for a period of three (3) years following the completion or termination of the CLARION trial at the applicable Participating Site. Participating Sites that are state institutions or governmental entities that self-insure or participate in state risk pools shall provide evidence of equivalent self-insurance or risk pool coverage meeting the minimum coverage levels specified herein, or shall provide a written explanation of applicable sovereign immunity protections.
Evidence of insurance coverage, in the form of certificates of insurance issued by the applicable insurance carrier or broker, shall be provided to Penterra within fifteen (15) business days of the execution of the MCTA (or, for sites added after MCTA execution, within fifteen (15) business days of the execution of the applicable Individual Site Agreement) and annually thereafter on each anniversary of the MCTA effective date.
7.3 Certificate Exchange
The Parties shall exchange certificates of insurance evidencing the coverage required under Sections 7.1 and 7.2 within fifteen (15) business days of the execution of the MCTA, and annually on each anniversary of the MCTA effective date for the duration of the required coverage periods. Certificates shall identify the carrier, policy number, coverage limits, policy period, and the named insured and additional insured parties.
Each Party shall provide the other Party with at least thirty (30) days' prior written notice of any cancellation, material reduction in coverage limits, non-renewal, or other material change in the terms of the required insurance coverage. If a Party's insurance coverage is cancelled, materially reduced, or not renewed, such Party shall use commercially reasonable efforts to obtain replacement coverage meeting the minimum requirements set forth in this Section 7 and shall notify the other Party promptly of the status of such efforts.
7.4 Indemnification as Primary; Insurance as Supplemental
The indemnification obligations set forth in Sections 3, 4, and 5 of this term sheet are primary obligations of the respective Indemnifying Parties and are not contingent upon, limited by, or conditioned on the availability, adequacy, or responsiveness of any insurance coverage maintained by either Party. An Indemnified Party shall not be required to exhaust or make claim against any insurance policy as a precondition to seeking or receiving indemnification under the MCTA.
Insurance coverage maintained by the Parties as described in this Section 7 is intended to provide a supplemental source of financial protection in support of the indemnification framework established by the MCTA, but shall not serve as a substitute for, or limitation on, the direct contractual indemnification commitments of the respective Parties. In the event that a Claim is covered by both the indemnification provisions of the MCTA and an applicable insurance policy, the Indemnifying Party's direct indemnification obligation shall apply first, and the Indemnifying Party may thereafter seek reimbursement from its own insurance carrier in accordance with the terms of its policy.
Section 8: Regulatory Framework and Compliance Context
The indemnification, subject-injury medical care, and related provisions set forth in this term sheet have been designed to be consistent with the regulatory requirements applicable to the conduct of the CLARION trial, including the following:
FDA Regulations. The CLARION trial is conducted under an Investigational New Drug Application (IND 157823) and is subject to the requirements of the Federal Food, Drug, and Cosmetic Act and the FDA's implementing regulations, including:
• 21 C.F.R. Part 50 — Protection of Human Subjects (informed consent requirements, additional protections for vulnerable populations);
• 21 C.F.R. Part 56 — Institutional Review Boards (IRB review and approval, continuing review, reporting requirements);
• 21 C.F.R. Part 312 — Investigational New Drug Application regulations (IND requirements, sponsor and investigator obligations, safety reporting, record-keeping, and inspection requirements);
• 21 C.F.R. Part 11 — Electronic Records; Electronic Signatures (as applicable to electronic data capture systems used in the CLARION trial).
ICH Guidelines. The CLARION trial is conducted in accordance with the International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use (ICH) Guideline E6(R2) — Guideline for Good Clinical Practice, which establishes the international ethical and scientific quality standards for the design, conduct, performance, monitoring, auditing, recording, analysis, and reporting of clinical trials.
HIPAA. To the extent that protected health information ("PHI") as defined under the Health Insurance Portability and Accountability Act of 1996 and its implementing regulations at 45 C.F.R. Parts 160 and 164 is generated, maintained, transmitted, or disclosed in connection with indemnification Claims, subject-injury medical care obligations, or the investigation and resolution of incidents arising under the MCTA, such PHI shall be handled in accordance with the HIPAA Privacy Rule, the HIPAA Security Rule, and the HIPAA Breach Notification Rule, as well as any applicable state privacy laws.
Institutional Review Board Approvals. Each Participating Site must have obtained and must maintain Institutional Review Board (IRB) approval prior to enrolling study subjects in the CLARION trial. The lead Participating Sites have the following IRB arrangements:
• Graystone University Medical Center (Site 001) — IRB of Record: Graystone University IRB, IORG Number: IRB00012847;
• Lakemont Medical Center (Site 002) — IRB of Record: Veridian Central IRB (serving as the single IRB of record for Veridian Network sites in accordance with the NIH sIRB Policy).
The informed consent documents approved by the applicable IRBs for the CLARION trial shall include a description of the Sponsor's commitment to provide medical care for study-related injuries, consistent with the terms set forth in Section 4 of this term sheet and in accordance with the requirements of 21 C.F.R. § 50.25(a)(6).
Anti-Kickback Statute and Physician Payments Sunshine Act. The indemnification payments, subject-injury medical care payments, and all other payments made by Penterra under the MCTA, including per-patient fees (currently proposed at $52,000 per subject), investigator grants, and operational cost reimbursements, are structured to comply with the federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)) and its implementing safe harbor regulations at 42 C.F.R. § 1001.952. All payments under the MCTA are intended to reflect fair market value for bona fide clinical research services rendered by the Participating Sites and Investigators, as determined by an independent fair market value assessment. Payments to physician Investigators that are required to be reported under the Physician Payments Sunshine Act (Section 6002 of the Affordable Care Act, codified at 42 U.S.C. § 1320a-7h) shall be reported by Penterra through the Centers for Medicare & Medicaid Services (CMS) Open Payments system in accordance with applicable requirements.
Section 9: Relationship to Other MCTA Provisions
This Indemnification Term Sheet is intended to be read in conjunction with, and incorporated into, the broader framework of the MCTA. The definitive indemnification provisions will be set forth in the body of the MCTA and in Exhibit D thereto (Subject-Injury Indemnification Provisions). The following cross-references to other anticipated MCTA provisions are provided for context and to ensure that the indemnification framework is consistent with the overall contractual structure:
Termination and Wind-Down. The MCTA will include provisions governing termination for cause, termination for convenience, and termination upon occurrence of specified triggering events (e.g., FDA clinical hold, material safety concern, withdrawal of IND). Upon termination, the Parties will observe a one hundred twenty (120)-day wind-down period during which subjects in active treatment must be either transitioned to appropriate alternative care or permitted to complete their current treatment cycle, as determined by the Investigator in consultation with the Sponsor's medical monitor and the applicable IRB. The indemnification obligations set forth in this term sheet shall survive termination of the MCTA with respect to all Claims arising out of events or circumstances that occurred prior to or during the wind-down period, regardless of when such Claims are first asserted.
Confidentiality. All information relating to Claims, indemnification proceedings, settlement negotiations, and subject-injury medical care obligations shall be subject to the confidentiality provisions of the MCTA, which will include a confidentiality term of ten (10) years from the date of disclosure. Notwithstanding the foregoing, either Party may disclose such information to the extent required by applicable law, regulation, court order, or regulatory authority, subject to providing prior written notice to the other Party and using commercially reasonable efforts to obtain confidential treatment of the disclosed information.
Dispute Resolution. Disputes arising out of or relating to the indemnification provisions of the MCTA, including disputes regarding the applicability of indemnification obligations, the allocation of comparative fault, the amount of damages or medical care costs, and the adequacy of notice, shall be resolved through the MCTA's multi-tiered dispute resolution mechanism, which will provide for:
(1) Designated Representative Negotiation. The Parties' designated senior representatives (to be identified in the MCTA) shall attempt to resolve the dispute through direct negotiation for a period of thirty (30) days following written notice of the dispute.
(2) Mediation. If the dispute is not resolved through negotiation, the Parties shall submit the dispute to non-binding mediation conducted in accordance with the American Arbitration Association ("AAA") Commercial Mediation Rules, with mediation to be completed within sixty (60) days of the commencement of mediation proceedings.
(3) Binding Arbitration. If the dispute is not resolved through mediation, either Party may submit the dispute to final and binding arbitration administered by the AAA in accordance with its Commercial Arbitration Rules. The arbitration shall be conducted in New York, New York, before a panel of three (3) arbitrators, each of whom shall have experience in pharmaceutical or life sciences transactions. The arbitrators' award shall be final, binding, and non-appealable (except on the limited grounds set forth in the Federal Arbitration Act), and judgment on the award may be entered in any court of competent jurisdiction.
Notwithstanding the foregoing, either Party shall retain the right to seek temporary restraining orders, preliminary injunctive relief, or other equitable remedies in the state or federal courts located in New York County, New York, to preserve the status quo or prevent irreparable harm pending the resolution of any dispute through the foregoing dispute resolution procedures.
Governing Law. The MCTA, including the indemnification provisions set forth herein, shall be governed by and construed in accordance with the laws of the State of New York, without regard to its conflict-of-laws principles.
Data Ownership. Penterra shall retain exclusive ownership of all clinical trial data generated in connection with the CLARION trial, including efficacy data, safety data, biomarker data, pharmacokinetic data, and quality-of-life data. In the event that clinical trial data is relevant to the investigation, defense, or resolution of any Claim for which indemnification is sought under the MCTA, such data shall be made available to both Parties and their respective legal counsel, subject to the confidentiality protections of the MCTA, applicable HIPAA requirements, and any applicable court orders or protective orders.
Section 10: Duration and Survival
The indemnification, subject-injury medical care, insurance, notice, and related obligations set forth in this term sheet shall survive the following events:
• The expiration of the MCTA upon completion of all obligations thereunder;
• The early termination of the MCTA for any reason, whether by mutual agreement, termination for cause, termination for convenience, or termination upon occurrence of a specified triggering event;
• The completion, suspension, or discontinuation of the CLARION trial;
• The closure, withdrawal, or deactivation of any individual Participating Site within the Veridian Network.
Survival Period. The indemnification obligations set forth in this term sheet shall remain in full force and effect until the later of:
(a) The expiration of the applicable statute of limitations (including any tolling, extension, or revival thereof) for the underlying Claims giving rise to the indemnification obligation, as determined under the governing law of the applicable jurisdiction; or
(b) The final resolution (by judgment, settlement, arbitration award, or other definitive disposition) of all pending Claims for which timely notice was provided to the Indemnifying Party in accordance with Section 6.1, including the exhaustion of all appeals and the satisfaction of all judgments, awards, or settlement obligations arising therefrom.
For purposes of clarity, the survival provisions set forth herein are intended to ensure that no indemnification obligation expires or lapses while a viable Claim remains outstanding or the statute of limitations for asserting such a Claim has not yet expired. The Parties acknowledge that statutes of limitations for personal injury, product liability, medical malpractice, and related Claims vary by jurisdiction and may be subject to discovery rules, minority tolling, and other equitable tolling doctrines that could extend the limitations period well beyond the conclusion of the CLARION trial.
Document Retention. In support of the indemnification framework, each Participating Site shall retain all source documents, case report forms, regulatory correspondence, IRB records, informed consent forms, adverse event reports, and other study-related records for a minimum period of fifteen (15) years following the completion of the CLARION trial at such site, or for such longer period as may be required by applicable federal, state, or institutional record-retention requirements. Penterra shall retain all Sponsor-held trial records, including monitoring visit reports, safety database records, statistical analysis datasets, and regulatory submission documents, for a period consistent with ICH E6(R2) guidelines and applicable FDA regulations. Both Parties acknowledge that the availability of complete and accurate records is essential to the investigation, defense, and resolution of indemnification Claims and agree to cooperate in good faith in the preservation and production of such records as may be necessary in connection with any Claim.
Section 11: Summary Table of Key Indemnification Parameters
The following table summarizes the principal terms of the proposed indemnification framework for ease of reference. In the event of any inconsistency between this summary table and the detailed provisions set forth in the body of this term sheet, the detailed provisions shall control.
Section 12: Signatures and Acknowledgment
This Indemnification Term Sheet is a non-binding proposal submitted by Penterra Pharmaceuticals Corp. for purposes of facilitating negotiation with Veridian Health Research Network, Inc. regarding the indemnification provisions to be included in the Master Clinical Trial Agreement for Protocol PPC-4871-III (CLARION). This ter