Exhibit 10.52

 

PharmAthene, Inc.

Confidential Materials Omitted and Filed Separately with the Securities and
Exchange Commission

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TECHNOLOGY TRANSFER AND DEVELOPMENT SERVICES SUBCONTRACT THIS TECHNOLOGY
TRANSFER AND DEVELOPMENT SERVICES SUBCONTRACT (the “Subcontract”) is made as of
September 17, 2009 (the “Effective Date”) by and between Diosynth RTP Inc., a
Delaware corporation, located at 101 J. Morris Commons Lane, Morrisville, North
Carolina 27560 (“Diosynth”), and PharmAthene, Inc., a Delaware corporation,
located at One Park Place, Suite 450, Annapolis, MD 21401 (“PharmAthene”). Each
of Diosynth and PharmAthene may be referred to herein separately as a “Party”
and collectively as the “Parties.” WHEREAS, PharmAthene owns rights to a
recombinant protective antigen for anthrax vaccine (rPA) product (the
“Product”); WHEREAS, PharmAthene has been awarded a prime contract in respect of
the development of an anthrax vaccine, numbered NO-A1-30052 with the National
Institutes of Health (“NIH”), an agency of the U.S. Government, which contract
was recently transferred from NIH to the Biomedical Advanced Research and
Development Authority (“BARDA”) within the Department of Health and Human
Services (as amended from time to time, and together with any successor or
replacement contract (s), collectively the “Prime Contract”); WHEREAS,
PharmAthene anticipates further funding of its development of recombinant
protective antigen (rPA) for anthrax (rPA); WHEREAS, Diosynth is a contract
manufacturing organization (“CMO”) providing a range of services related to the
development and manufacture of biopharmaceutical products; WHEREAS, prior to the
date hereof, another CMO provided certain development and manufacturing services
to PharmAthene related to the supply of the bulk drug substance for the Product
(“Drug Substance”); WHEREAS, PharmAthene desires to transfer the technology
related to, among other things, the development, scale-up and manufacture of the
Drug Substance from the prior CMO to Diosynth (the “Technology Transfer”);
WHEREAS, Diosynth desires to assist PharmAthene with the Technology Transfer to
its organization and facilities and to begin development work related to the
manufacturing process for the Drug Substance in support of the Prime Contract
(all of the foregoing, including the Technology Transfer and all other services
included in the Scope, collectively, the “CMO Services”); WHEREAS, PharmAthene
and Diosynth may in the future decide to amend this Subcontract to add
additional development services and provisions relating to the Drug Substance,
including without limitation validation, verification and conformance
manufacturing;

 

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2 WHEREAS, PharmAthene and Diosynth are also in discussions regarding entering
into a separate subcontract (a “Development and Supply Subcontract”) under which
Diosynth would supply Drug Substance in support of any future prime contract
awarded to PharmAthene for the advanced development and procurement of the
Product; and WHEREAS, Diosynth wishes to be hired by PharmAthene and to assist
PharmAthene with the CMO Services (collectively the “Program”) under the terms
of this Subcontract. NOW, THEREFORE, in consideration of the foregoing premises
and the promises, benefits, rights and obligations set forth below, the Parties
agree as follows: 1. CMO Services. 1.1 Statement of Work. (a) Diosynth shall
perform the CMO Services described in the Statement of Work attached hereto as
Exhibit A (the “Scope”), in accordance with the terms and conditions of this
Subcontract and all exhibits attached hereto, including without limitation the
Quality Agreement, all of which are incorporated herein by reference. In
exchange, PharmAthene shall pay Diosynth the fixed prices specified in the
Program Price and Payment Schedule attached hereto as Exhibit B (“Program
Price”). In addition, Process Consumables (as defined in the Scope), Raw
Materials (as defined in the Scope) and Third Party Analytical Testing (as
defined in the Scope) purchased for the CMO Services will be invoiced separately
as pass-through costs as such costs are incurred by Diosynth (such pass-through
costs and the Program Price, collectively the “Total Program Price”).
PharmAthene agrees to pay Diosynth’s actual cost (inclusive of necessary
testing) for the Process Consumables, Third Party Analytical Testing and Raw
Materials (collectively, the “Pass-Through Costs”) purchased for the CMO
Services Diosynth represents that such mark-up represents its mark-up on Process
Consumables, Third Party Analytical Testing and Raw Materials, customarily
offered to Diosynth’s customers. Amounts payable for Process Consumables, Third
Party Analytical Testing and Raw Materials will be invoiced as they are incurred
by Diosynth, but in no event shall Diosynth invoice PharmAthene more than once
monthly. Subject to the accuracy of applicable Assumptions, the total price
(including mark-up) charged to PharmAthene for the Pass-Through Costs shall not
exceed the “not to exceed” price for such items set forth in the Scope. (b)
PharmAthene shall perform its obligations as set forth in this Subcontract, the
Scope and the Quality Agreement, and shall support and cooperate with Diosynth
in its performance of the CMO Services. However, the foregoing shall not require
PharmAthene to incur any material burden, cost or obligation not its
responsibility under this Subcontract. 1.2 Sponsor Deliverables.

 

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3 (a) As further set forth in the Scope, PharmAthene will timely provide
Diosynth with Sponsor Deliverables (as defined in the Scope). A failure by
PharmAthene to provide Sponsor Deliverables within the timeframes set forth in
the Scope or as otherwise agreed to by the Parties in writing that delays
performance of the CMO Services could result in additional charges to
PharmAthene and a delay in meeting the objectives of this Subcontract. Claims
for any such charges and delays must be pursued in accordance with Section 2.2
hereof. (b) Title to Sponsor Deliverables shall remain with PharmAthene.
Diosynth shall not sell, pledge, hypothecate, dispose of, or otherwise transfer
any interest in Sponsor Deliverables except as otherwise provided in this
Subcontract, and shall use Sponsor Deliverables solely for purposes of
performing the CMO Services. Diosynth shall provide safe and secure storage
conditions for Sponsor Deliverables while they are at Diosynth’s Facility. 1.3
Entire Agreement; Conflicts. This Subcontract (together with the exhibits
attached hereto), the Quality Agreement, and the Scope collectively constitute
the Parties’ entire agreement for the CMO Services. Terms defined in this
Subcontract shall have same meaning when used in the Scope or the Quality
Agreement except as otherwise provided. In the event of any conflict among the
components of this Subcontract, the following order of precedence shall apply:
(i) “flow down” requirements of the Prime Contract attached hereto as Exhibit C;
(ii) the terms set forth in this Subcontract; (iii) the Quality Agreement; and
(iv) the Scope. References to this Subcontract herein shall, unless the context
clearly indicates otherwise, be deemed to include the Scope, the exhibits, and
Change Orders. 1.4 Facility. Diosynth shall perform the CMO Services at
Diosynth’s manufacturing facilities in Morrisville, North Carolina, or at such
other place(s) as are mutually agreed upon by the Parties (the “Facility” or
“Facilities”). 1.5 Shipping and Packaging. The delivery point for all items to
be delivered by Diosynth under this Subcontract shall be FCA, Diosynth’s
Facility. Diosynth shall package for shipment and ship all items at
PharmAthene’s expense and in accordance with PharmAthene’s written instructions,
with PharmAthene bearing all packaging, shipping and insurance charges during
transit. Diosynth shall retain representative samples for record keeping,
testing and regulatory purposes. Diosynth shall notify PharmAthene in writing
when each lot of Product Deliverables is ready to be released as described in
Article 10 of the Quality Agreement, and PharmAthene shall arrange for each lot
of Product Deliverables to be shipped within thirty (30) days after PharmAthene
provides release documentation such as a Certificate of Conformance, or similar,
as described in Article 10 of the Quality Agreement. In the event of any delay
by PharmAthene in providing release documentation or shipping for one or more
lots of Product Deliverables that is not the fault of Diosynth, the Parties
acknowledge and agree that title and risk of loss for each such lot of Product
Deliverables shall automatically transfer to (and be assumed by) PharmAthene
effective upon expiration of the applicable thirty (30) day period. 1.6
Additional Manufacturing Activities. The Parties acknowledge that this Agreement
does not currently contemplate additional production of the Drug Substance at
commercial production levels beyond the one (1) cGMP manufacturing run
contemplated by the Scope. At

 

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4 PharmAthene’s request, Diosynth agrees to negotiate in good faith the terms
and conditions of an agreement to manufacture and supply additional amounts of
Drug Substance, including without limitation a Development and Supply
Subcontract, that provides for additional manufacturing capacity; provided
however that the foregoing shall not require Diosynth to reserve or set aside
additional manufacturing capacity for PharmAthene unless such reservation or
set-aside is mutually agreed upon in such negotiations. 2. Performance
Standards; Covenants; Changes to Scope and Other Responsibilities. 2.1
Performance Standards and Related Matters. (a) Diosynth shall at all times
perform the CMO Services in accordance with: (i) the Scope, (ii) this
Subcontract, including without limitation the Quality Agreement and the “flow
down” requirements of the Prime Contract attached hereto as Exhibit C (iii) cGMP
as defined in the Quality Agreement (“cGMP”), (iv) with respect to matters not
addressed by cGMP, reasonable and professional care and in a good and
workmanlike manner, and (v) all applicable federal and state laws, rules and
regulations (collectively, “Applicable Law”). The Parties acknowledge that they
have jointly designed the Scope to be consistent with current U.S. regulatory
requirements and guidelines. Notwithstanding the foregoing, Diosynth does not
warrant that compliance with the requirements of this Subcontract will satisfy
the requirements of any regulatory agencies at the time of submission of the
results to such agencies. (b) Except as otherwise provided herein, all
warranties in this Subcontract shall survive inspection, test and Acceptance of,
and payment for, the CMO Services. All warranties shall run to PharmAthene and
its successors, assigns, and customers and shall extend for a period of one (1)
year after PharmAthene’s final Acceptance of the CMO Services. (c) Subject to
each Party’s contractual obligations under this Subcontract, PharmAthene shall
have the right and responsibility for determining regulatory strategy, decision
and actions to the extent relating to the Program or Product and Diosynth shall
have the right and responsibility for determining regulatory strategy, decision
and actions to the extent relating to (i) the Facility, or its utilities,
equipment or personnel; (ii) Diosynth’s quality systems; (iii) any requirement
imposed on Diosynth by a Regulatory Authority or (iv) any other commitments made
by Diosynth prior to the Effective Date of this Subcontract. In the event of
dispute concerning the appropriate division of the foregoing rights and
responsibilities, the Parties agree to negotiate in good faith to resolve such
dispute and, in the event that such dispute is not resolved through negotiation,
either party may submit such dispute to arbitration pursuant to Article 26. 2.2
Change Orders; Changes to the Scope. (a) The Program Price and Payment Schedule
for the CMO Services are fixed, subject to the assumptions set forth in Section
3.0 of the Scope (“Assumptions”). This Section 2.2 describes the exclusive means
by which the Program Price and Payment Schedule, the

 

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5 Scope, or associated Program timeline may be changed. As used herein, “Change
Order” means a written document signed by both Parties describing in reasonable
detail a change in the Program Price and Payment Schedule, the Scope, and/or
associated Program timeline. (b) Change Orders must be agreed by both Parties in
writing, and consent to a Change Order shall not be unreasonably withheld,
conditioned or delayed by either Party. Either Party may propose in writing a
change to the Program Price and Payment Schedule, the Scope and/or associated
Program timeline, which shall contain the terms of such proposed change in
reasonable detail. In such event, Diosynth shall prepare and deliver to
PharmAthene within ten (10) days a proposed Change Order which shall include a
statement of all effects on the Program Price and Payment Schedule, the Scope
and/or associated Program timeline. The proposed Change Order shall include (i)
cost information in reasonable detail for all Pass- Through Costs and (ii) a
fixed price for all other services related to the proposed change(s). Diosynth
agrees that such Pass-Through Costs and fixed price quote will be commercially
reasonable. Within ten (10) days thereafter, PharmAthene shall respond to
Diosynth indicating whether it approves or rejects the proposed Change Order,
and if the Change Order is approved the Parties shall promptly execute same,
whereupon the Change Order shall be effective to modify the Program Price and
Payment Schedule, the Scope and/or associated Program timeline. In the event
that the Parties cannot agree on the terms of any Change Order and the Parties
do not resolve same promptly through good faith negotiations, then the dispute
procedures of Article 26 hereof shall apply. Unless directed otherwise by
PharmAthene, Diosynth shall continue to perform all work not affected by the
proposed Change Order in accordance with this Subcontract during the pendency of
any dispute regarding such proposed Change Order, provided that PharmAthene
shall continue to comply with its payment obligations hereunder. Notwithstanding
the preceding sentence, Diosynth shall not be required to continue performance
of the CMO Services during the pendency of any dispute to the extent that
performance of such work would be impossible in the absence of such a Change
Order. Except in the case of a stop work order as described in Section 2.3
below, each Party shall notify the other within fifteen (15) days after first
becoming aware of the existence of circumstances giving rise to a Change Order.
(c) Except as otherwise provided herein, all notices to be furnished by Diosynth
shall be sent to PharmAthene’s Director of Contracts at the address set forth in
Article 20 with a copy to PharmAthene’s General Counsel at the same address. 2.3
Stop-Work Orders. (a) PharmAthene may, at any time, by written order to
Diosynth, require Diosynth to stop all, or any part, of the work called for by
the Scope for a period of ninety (90) days after the order is delivered to
Diosynth, and for any further period to which the Parties may agree. The order
shall be specifically identified as a stop-work order issued under this Section
2.3. Upon receipt of the order, Diosynth shall immediately comply with its terms
and take all reasonable steps to minimize the incurrence of costs allocable to
the work covered by the order during the period of work stoppage. Within a
period of 90 days after a stop-work

 

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6 order is delivered to Diosynth, or within any extension of that period to
which the Parties shall have agreed, PharmAthene shall either: (i) cancel the
stop-work order, or (ii) terminate the work covered by the order as provided in
Section 4.2. (b) If a stop-work order issued under this Section 2.3 is canceled
or the period of the order or any extension thereof expires, Diosynth will use
all commercially reasonable efforts to resume work as soon as possible
thereafter. Diosynth may request an equitable adjustment via the Change Order
process in accordance with Section 2.2, within thirty (30) days after the end of
the period of work stoppage, to the extent that (i) its direct costs were, or
are reasonably expected to be, increased thereby or (ii) actual delay to its
ability to perform was, or is reasonably expected to be, incurred. (c) If a
stop-work order is not canceled and the work covered by the order is terminated
for the convenience of PharmAthene pursuant to Section 4.2 (b), PharmAthene
shall pay Diosynth the amounts, if any, specified in Section 4.2 (b). 2.4
Allocation of Resources. If delays in the agreed commencement or performance of
the CMO Services occur because of (i) a stop-work order issued under Section
2.3, or (ii) PharmAthene’s failure to supply Diosynth with Sponsor Deliverables
as required by this Subcontract within thirty (30) days of the timeframes set
forth in the Scope or as otherwise agreed to by the Parties in writing, that is
not the fault of Diosynth, Diosynth may, after providing ten (10) business days’
prior written notice to PharmAthene, temporarily reallocate resources being held
for performance of the Scope without incurring liability to PharmAthene. In
addition, in such event Diosynth’s obligation to perform the CMO Services as set
forth in the Scope shall be suspended to the extent that such performance has
been stopped by a stop-work order, or is prevented by a failure to provide a
Sponsor Deliverable, but only during and for so long as Diosynth’s performance
is actually stopped or prevented thereby. 2.5 Support for Regulatory
Submissions. (a) Except as otherwise provided herein or as required by
Applicable Law, PharmAthene shall be the sole communicator with the Food and
Drug Administration (“FDA”) or other applicable regulatory authority (each a
“Regulatory Authority”) regarding the Drug Substance and the Product or any
regulatory approvals therefor. Except as otherwise provided herein or as
required by Applicable Law, Diosynth shall not initiate contact with any
Regulatory Authority without PharmAthene’s prior written approval. (b) If
PharmAthene is required to submit to a Regulatory Authority any information
concerning the CMO Services, Diosynth will provide PharmAthene copies of such
documentation, data and other information as shall be necessary or reasonably
desirable for such submission to the Regulatory Authorities and such other
information in such form as PharmAthene may reasonably request, provided that
such assistance shall be subject to the terms of the Quality Agreement. Diosynth
shall also cooperate and consult as reasonably requested by PharmAthene and/or
required by the Regulatory Authorities for development of additional data or
performance of studies concerning the Product beyond the Scope, and

 

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7 PharmAthene shall pay Diosynth’s reasonable costs therefor. Diosynth shall
also provide, if required by the Regulatory Authorities, information concerning
its laboratory, manufacturing, and quality control procedures with respect to
the CMO Services. If requested, Diosynth shall use reasonable best efforts to
provide PharmAthene all documentation, data and information referred to in this
Section 2.5 reasonably in advance of their required submission to allow for
PharmAthene’s review and comments. Diosynth shall endeavor in good faith to
satisfactorily resolve all PharmAthene comments prior to submission if such
submission is to be made by PharmAthene. 2.6 SAFETY Act and PREP Act Compliance.
The Parties acknowledge and agree that the Product is intended to prevent or
deter acts of terrorism and/or to limit the harm such acts might otherwise cause
and mitigate, treat, or cure a pandemic or epidemic, and to limit the harm such
pandemic or epidemic might otherwise cause. Diosynth shall provide reasonable
assistance to PharmAthene in its efforts to secure certification and designation
of the Drug Substance and the Product as a Qualified Anti-Terrorism Technology
(“QATT”) under U.S. law, and specifically under the Support Anti-terrorism by
Fostering Effective Technologies Act of 2002 (the “SAFETY Act”), sections
441-444 of title 6, United States Code. The Parties acknowledge and agree that
the Drug Substance and/or Product is intended to qualify as a “covered counter
measure” within the meaning of the Public Readiness and Emergency Preparedness
Act (the “PREP Act”) and that each is a “covered person” as therein defined. 2.7
Quality Agreement. On the Effective Date, PharmAthene and Diosynth entered into
the Quality Agreement attached hereto as Exhibit D, which shall be used by both
Parties to assign certain of the day-to-day responsibilities and manage the
operations of both the PharmAthene and Diosynth Quality Assurance groups with
respect to the CMO Services. 2.8 Project Manager. Each Party shall appoint a
project manager for this Subcontract (the “Project Managers”). Diosynth’s
project manager for this Subcontract is Dr. Bernard Adkins. The Diosynth Project
Manager shall be considered a “key” employee and so long as the Diosynth Project
Manager remains in the employ of or under contract with Diosynth, said person
shall not be replaced in the performance of this Subcontract or have their
responsibilities materially reduced or altered, unless an equally qualified
replacement approved by PharmAthene is assigned. Such approval shall not be
unreasonably denied. Notwithstanding the foregoing, PharmAthene shall be
permitted to request the replacement of the Diosynth Project Manager at any time
by written notice, whereupon Diosynth shall designate and assign a qualified
replacement subject to approval by PharmAthene, such approval not to be
unreasonably withheld, conditioned or delayed. In the event that the Diosynth
Project Manager terminates his/her relationship with Diosynth, or is unable or
unwilling, for any reason, to continue with or complete the work effort, then
Diosynth may propose a new Project Manager for PharmAthene’s consideration. Any
increase in the cost of performing the Scope due to the addition of the new
Project Manager shall be the sole responsibility of Diosynth. The Project
Managers will oversee the day-to-day activities of the Parties with respect to
the Program and will be the primary point of contact between the

 

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1 Parties with respect to the Program. The Project Managers shall report to the
Joint Steering Committee. 2.9 Additional Diosynth Responsibilities. Diosynth
shall be responsible for all necessary education and training of its employees
and contractors with respect to the Facilities, equipment and processing methods
used in providing the CMO Services. 3. Invoicing and Payment. 3.1 Payment.
PharmAthene shall pay Diosynth for the CMO Services provided in accordance with
this Subcontract on the terms and conditions and in the amounts set forth in the
Program Price and Payment Schedule, as modified by any Change Orders, which
amounts shall include all expenses, taxes and other charges whatsoever except as
otherwise specified in this Section 3.1. All invoices for CMO Services shall
contain all supporting data and other information required under this
Subcontract and as otherwise reasonably requested by PharmAthene. PharmAthene
shall pay Diosynth for Process Consumables, Raw Materials and Third Party
Analytical Testing in accordance with Section 1.1 (a) and for packaging,
shipping and insurance charges in accordance with Section 1.5. All invoices
shall contain a summary of activities completed during the invoice period,
including activities completed and an indication of Process Consumables and Raw
Materials purchased, cost of Third Party Analytical Testing and any packaging,
shipping or insurance charges incurred. Diosynth shall invoice PharmAthene
monthly not later than the fifth (5th) day of each month. Separate invoices
shall be submitted according to the activities described in the Scope. Unless
otherwise provided in any Scope, PharmAthene shall pay Diosynth all undisputed
amounts invoiced within thirty (30) days after the date of receipt of a proper
invoice for such fees and expenses provided that such invoice is received by the
fifth (5th) day of the month. If such invoice is received after the fifth (5th)
day of any month, such invoice shall be treated as if received before the fifth
(5th) day of the month after the month in which it is actually received and
shall be paid in the next payment cycle. If PharmAthene disputes the amount due,
then PharmAthene shall notify Diosynth of such dispute by the payment due date
provided that Diosynth has timely provided such supporting documentation as
PharmAthene reasonably requests. Both parties will act in good faith to promptly
resolve such dispute. Late payments are subject to an interest charge of one
percent (1%) per month. Unless within thirty (30) days of the date of
PharmAthene’s receipt of the invoice PharmAthene has advised Diosynth in good
faith and in writing of the specific basis for disputing an invoice, failure to
pay an undisputed invoice within ninety (90) days from the date of invoice may,
at Diosynth’s election, constitute a material breach of this Subcontract. 3.2
Form of Invoice. The Parties shall mutually agree on an acceptable form of
invoice, consistent with the requirements of this Subcontract, the Prime
Contract and Applicable Law. No amounts set forth on an invoice shall be due and
payable to Diosynth hereunder unless such invoice is accurate and complete. 3.3
Address for Invoicing. Invoices shall be submitted to PharmAthene at:
PharmAthene, Inc.

 

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2 Attn: Accounts Payable One Park Place, Suite 450 Annapolis, MD 21401 and to
Diosynth at: Diosynth RTP Inc. 101 J Morris Commons Lane Morrisville, North
Carolina 27560. or to such other addresses provided to the other Party in
writing in accordance with the terms of Article 20 of this Subcontract. 3.4
Acceptance. “Acceptance” shall mean that deliverables as set forth in the Scope
conform to all applicable requirements and the agreed upon acceptance criteria
for such deliverable as provided in this Subcontract. (a) With respect to
protocols, reports, study plans and reports, PharmAthene-specific analytical
test methods and other written deliverables that are identified as Diosynth
Deliverables in the Scope (collectively, the “Written Deliverables”), the
Parties shall engage in review and revision of such deliverable in a timely
manner in accordance with the principles provided in the Scope to generate a
final Written Deliverable. PharmAthene shall review and, if acceptable in all
reasonable respects, accept final Written Deliverables within ten (10) days
after receipt, unless specified otherwise in the Quality Agreement. (b) With
respect to a shipment of Drug Substance (the “Product Deliverable”), Acceptance
shall occur on the date of delivery of the Certificate of Conformance by
PharmAthene in accordance with Article 10 of the Quality Agreement. Diosynth
shall not deliver any Product Deliverable to PharmAthene until such deliverable
has been released in accordance with Article 10 of the Quality Agreement. (c)
PharmAthene shall have the right to reject any Deviating Product in accordance
with Article 9 of the Quality Agreement and this Section 3.4 (c). PharmAthene
shall promptly (and, in any event, no later than thirty (30) days following
delivery of any Product Deliverables (pursuant to Section 3.4 (b))) notify
Diosynth in writing that such Product Deliverables are Deviating Product due to
a suspected defect that is known to PharmAthene or that was readily
ascertainable through reasonable inspection. “Deviating Product” shall mean
Product Deliverables that (i) were not processed in accordance with the process
set forth in the Scope; (ii) were not processed, handled or stored in accordance
with cGMP, or (iii) are damaged or defective. Notwithstanding anything to the
contrary contained herein, in the case of suspected defects that are not readily
ascertainable through reasonable inspection, PharmAthene shall notify Diosynth
of such defect within ten (10) days from the date of discovery of such defect,
or earlier if required by the Quality Agreement..

 

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3 (i) As soon as practicable after PharmAthene provides Diosynth with a notice
of rejection, the Parties shall undertake an investigation of such Product
Deliverables in accordance with Article 9 of the Quality Agreement. Upon
commencement of the investigation, PharmAthene shall immediately deliver to
Diosynth all potentially Deviating Product. The Parties shall cooperate in good
faith during such investigation and use reasonable best efforts to complete the
investigation. Diosynth shall notify PharmAthene within five (5) days of the
conclusion of such investigation, whether Diosynth accepts or disputes
PharmAthene’s assertion(s) that certain Product Deliverables are a Deviating
Product. (ii) After the completion of such investigation (or earlier, if agreed
to by the Parties), at PharmAthene’s request, whether or not Diosynth accepts
PharmAthene’s assertion that certain Product Deliverables are Deviating Product,
Diosynth shall process and deliver replacement Product Deliverables
(“Replacement Product”) as soon as reasonably possible, provided that Diosynth
shall not be required to cease, interrupt or otherwise disturb campaigns in
progress. If Diosynth disputes in writing whether the Product Deliverables are
Deviating Product or whether such Deviating Product was caused by the failure of
Diosynth, PharmAthene shall pay Diosynth, within thirty (30) days of such
Replacement Product request: (A) for such Replacement Product in accordance with
the prices set forth in the Program Price and Payment Schedule and (B) for all
Pass-Through Costs purchased for such Replacement Product, plus a fee equal to
seven and one half percent (7.5%) of such actual costs. Following completion of
an investigation and dispute resolution if any pursuant to this Section 3.4 (c),
Diosynth shall reimburse PharmAthene such payment, in accordance with Section
3.4 (c)(iv), to the exent such Deviating Product is agreed or determined to be
caused by the failure of Diosynth. (iii) If Diosynth disputes PharmAthene’s
assertion that certain Product Deliverables are Deviating Product or Diosynth
believes that the Deviating Product was not caused by any failure of Diosynth,
then the Parties shall work together in good faith to resolve the dispute. If
the Parties are unable to resolve such a dispute through good faith negotiation,
then the dispute procedures of Article 26 hereof shall apply. (iv) If Diosynth
accepts PharmAthene’s assertion or if it is determined through the dispute
procedures of Article 26 hereof that such Deviating Product was caused by the
failure of Diosynth and PharmAthene previously paid for the Replacement Product,
then Diosynth shall, within thirty (30) days of such acceptance or
determination, reimburse PharmAthene for the price of the Replacement Product to
the extent that such Deviating Product was caused by the failure of Diosynth

 

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4 (v) if it is determined through the dispute procedures of Article 26 hereof,
or if PharmAthene acknowledges the same in writing, that such Product
Deliverable was not a Deviating Product or such Deviating Product was not caused
by the failure of Diosynth, then Diosynth shall be entitled to retain the
payment made by PharmAthene pursuant to Section 3.4(c)(ii) for such Replacement
Product. Such purchase price for the Replacement Product shall be in addition to
the purchase price for the original shipment of the allegedly Deviating Product.
PharmAthene’ liability for such Deviating Products shall be limited to that
stated in this Section 3.4(c). (d) If any CMO Services other than Written
Deliverables and Product Deliverables (collectively, the “Service Deliverables”)
do not comply with the standards set forth in Section 2.1(a) and such failure is
not the fault of PharmAthene, Diosynth shall promptly, upon notice, re-perform
such Service Deliverables in accordance with the standards set forth in Section
2.1(a) for no additional costs to PharmAthene. (e) Provided that Diosynth
re-performs its obligations with respect to Deviating Product or non-conforming
Service Deliverables in accordance herewith and the timeframe for cure provided
in Section 4.2(a)(i)(1) or (2) as applicable, the initial failure of such
Deviating Product or Service Deliverable to comply with the standards set forth
herein shall not be considered a default under this Subcontract (unless such
failure resulted from gross negligence, bad faith or intentional misconduct).
3.5 Payment Not Acceptance. Payment by PharmAthene for any CMO Services
performed under this Subcontract shall not be deemed to constitute acceptance of
such CMO Services nor waive any rights, warranties or remedies available to
PharmAthene under this Subcontract or Applicable Law. 4. Term and Termination
4.1 Term. The term of this Subcontract shall begin on the Effective Date and
continue until completion of all CMO Services and as long as reasonably
necessary to settle all accounts and for such additional period thereafter as
may be necessary to make any payments due and fulfill any post-termination
obligations. The Parties acknowledge that PharmAthene is required to complete
performance under the Prime Contract by March December 31, 2011 and Diosynth
agrees to use reasonable best efforts to (i) demonstrate consistent progress
towards completion of this Subcontract by December 31, 2010, and (ii) complete
this Subcontract by such date, subject to the terms of this Subcontract.
Diosynth will provide regular reports, as described in this Subcontract,
indicating progress towards milestones in reasonable detail, and such further
information as PharmAthene may reasonably request. 4.2 Termination. This
Subcontract is terminable only as follows: (a) Default.

 

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5 (i) If Diosynth is in default of its material obligations under this
Subcontract, then PharmAthene may notify Diosynth in writing of any such
default. (1) Diosynth shall have a period of twenty (20) days from the date of
receipt of such notice within which to cure such default, and shall diligently
pursue efforts to cure such default at all reasonable times. If Diosynth fails
to cure within such twenty (20) day period, then PharmAthene shall have the
right to immediately terminate all or any part of this Subcontract by providing
written notice to Diosynth. In the event of such termination, PharmAthene shall
not be liable to pay for any work not Accepted; provided however that
PharmAthene’s Acceptance shall not be unreasonably withheld, conditioned or
delayed. Notwithstanding the foregoing, Diosynth shall upon request deliver to
PharmAthene any supplies and materials, manufacturing materials, and
manufacturing information that Diosynth has specifically produced or acquired
for this Subcontract and PharmAthene shall compensate Diosynth for the
reasonable cost of such supplies, materials and/or information and any costs
associated with these deliverables. (2) With respect to production runs or other
activities that are not capable of being cured in twenty (20) days from the date
of receipt of such notice, Diosynth shall initiate actions during such twenty
(20) day period that are reasonably anticipated to cure the default within a
reasonable period (not to exceed one hundred and fifty (150) days), and
thereafter cure such default within a reasonable period (not to exceed one
hundred and fifty (150) days). If Diosynth fails to cure within such period,
then PharmAthene shall have the right to immediately terminate all or any part
of this Subcontract by providing written notice to Diosynth in accordance with
Section 4.2(a)(i)(1). (ii) If PharmAthene is in default of its material
obligations under this Subcontract, Diosynth shall promptly notify PharmAthene
in writing of any such default. PharmAthene shall have a period of twenty (20)
days from the date of receipt of such notice within which to cure such default
provided that it diligently continues efforts to cure such default at all
reasonable times. With respect to non-monetary performances that are not capable
of being cured in twenty (20) days from the date of receipt of such notice,
PharmAthene shall initiate actions during such twenty (20) day period that are
reasonably anticipated to cure the default within a reasonable period (not to
exceed sixty (60) days), and thereafter cure such default within a reasonable
period (not to exceed sixty (60) days). If PharmAthene fails to so cure, then
Diosynth shall have the right to immediately terminate this Subcontract by
providing written notice to Diosynth.

 

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6 (iii) NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, UNDER NO CIRCUMSTANCES
SHALL EITHER PARTY BE ENTITLED TO INCIDENTAL, INDIRECT, CONSEQUENTIAL OR SPECIAL
DAMAGES ARISING IN CONNECTION WITH THE DEFAULT OR BREACH OF ANY OBLIGATION OF
THE OTHER PARTY UNDER THIS SUBCONTRACT, THE SCOPE OR ANY DOCUMENTS OR APPENDICES
RELATED THERETO. (iv) EXCEPT IN THE EVENT OF GROSS NEGLIGENCE, WILFUL
MISCONDUCT, OR BAD FAITH, DIOSYNTH’S MAXIMUM LIABILITY FOR DAMAGES IN CONNECTION
WITH A CLAIM RELATED TO THIS SUBCONTRACT, REGARDLESS OF THE CAUSE OF ACTION,
WILL NOT EXCEED THREE MILLION, THREE-HUNDRED THOUSAND DOLLARS ($3,300,000.00).
(v) If after termination by PharmAthene under Section 4.2(a)(i), it is later
determined by binding arbitration pursuant to Article 26 or otherwise that
Diosynth was not in default, such termination shall be deemed a termination for
convenience under Section 4.2(b) hereof. (b) Termination for Convenience.
PharmAthene reserves the right to terminate this Subcontract, or any part
hereof, for its sole convenience at any time. In the event of such termination,
Diosynth shall immediately stop all work on the terminated effort hereunder and
shall use all reasonable best efforts to minimize the incurrence of costs
allocable to the terminated effort. Subject to the terms of this Subcontract and
the Scope, in the event that PharmAthene terminates this Subcontract pursuant to
this Section 4.2(b), PharmAthene shall pay Diosynth within forty (40) days after
receipt of Diosynth’s termination invoice, the following amounts: (i) all
amounts owed for CMO Services milestones completed (as defined by the line items
in Exhibit B) but not yet invoiced and/or paid; plus (ii) with respect to the
CMO Services terminated, the percentages of unbilled amounts set forth in the
Program Price and Payment Schedule for CMO Services to be performed in
accordance with the following chart (but without duplication and only to the
extent of CMO Services terminated under this Section 4.2(b) which result in loss
of revenue to Diosynth): Time from the date of termination until the date on
which such CMO Services are scheduled to be performed as provided in the
then-current Program Price and Payment Schedule Percentage of Unbilled Amounts
More than 12 months from date of termination Between 6 and 12 months from date
of termination

 

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7 Between 3 and 6 months from date of termination Less than 3 months from date
of termination  provided, however than in no event shall PharmAthene’s liability
for such termination exceed the total price set forth in the Program Price and
Payment Schedule less all amounts paid to Diosynth prior to the date of
termination. In no event shall PharmAthene be liable for any additional amounts,
including without limitation, lost or anticipated profits or unabsorbed indirect
costs or overhead. Diosynth’s termination invoice shall be submitted within
ninety (90) days from the effective date of the termination and must satisfy all
requirements of a regular invoice. In the event of a partial termination for
convenience, Diosynth shall continue all CMO Services not terminated. (c)
Bankruptcy or Insolvency. Either Party at its sole option may immediately
terminate this Subcontract upon written notice, but without prior advance
notice, to the other Party in the event that (i) the other Party is declared
insolvent or bankrupt by a court of competent jurisdiction, (ii) a voluntary
petition of bankruptcy is filed in any court of competent jurisdiction by such
other Party, or (iii) this Subcontract is assigned by such other Party for the
benefit of creditors (each, an “Insolvency Event”). Notwithstanding the
foregoing, PharmAthene shall retain all rights under Section 365(n) of the
Bankruptcy Code if an Insolvency Event occurs with respect to Diosynth. 4.3
Winding Down and Mitigation. Upon early termination of this Subcontract or any
Scope for any reason, at PharmAthene’s request Diosynth shall inform PharmAthene
of the extent to which it expects work in progress to be completed as of the
termination date and Diosynth shall (unless otherwise instructed by PharmAthene)
take reasonable steps to wind down work in progress in an orderly fashion and
mitigate any losses and costs. Upon early termination or expiration of any
Scope, each party shall return all Confidential Information, files and other
materials in its possession related to such Scope to PharmAthene. Each party
shall be permitted to retain one copy of such materials solely for archival
purposes to ensure compliance with the provisions of this Subcontract or with
the requirements of regulatory authorities, subject to Article 5. 4.4 Technology
Transfer Upon Termination. (a) Upon expiration or sooner termination of this
Subcontract for any reason Diosynth shall on an expedited basis transfer to
PharmAthene any and all PharmAthene Intellectual Property Rights (as defined in
Article 8), and shall provide to PharmAthene any and all Diosynth Intellectual
Property Rights that may be required to manufacture the Drug Substance in
accordance with the Subcontract and to support regulatory filings for the Drug
Substance; provided, however, that Diosynth shall not be required to provide
PharmAthene with any such Diosynth Intellectual Property Rights if PharmAthene
does not possess a then current license under Section 8.4. Subject to the
availability of the appropriate Diosynth

 

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8 personnel, PharmAthene may request that Diosynth provide to PharmAthene
reasonable consulting services related to the manufacturing, quality control,
quality assurance, and the CMC (chemistry, manufacturing and control) part of
the Drug Substance registration process; provided however that Diosynth shall
not be required to provide consulting services under this Section 4.4 for so
long as PharmAthene has not paid Diosynth amounts due to Diosynth hereunder.
PharmAthene shall pay Diosynth for all reasonable expenses related to the
consulting services provided under this Section 4.4, and shall compensate
Diosynth at its then current rates for such consulting services. All technical
assistance to be provided by Diosynth pursuant to this Section 4.4 shall be in
accordance with a plan provided to Diosynth by PharmAthene and agreed upon by
the Parties. To the extent transferable, Diosynth shall also transfer any
license(s), permit(s), or approval(s) obtained specifically for the
manufacturing of the Drug Substance. The Parties agree to work in good faith for
the transfer of any information and materials related to the Drug Substance,
PharmAthene’s Intellectual Property Rights and any Diosynth Intellectual
Property Rights required under this Section 4.4(a). (b) Subject to the
limitations set forth in Section 4.4(a), the technology transfer contemplated by
Section 4.4(a) shall include without limitation at least the following
activities: (i) Diosynth shall provide PharmAthene access to any and all
Diosynth Intellectual Property Rights (as defined in Article 8) that are used in
the manufacture of the Drug Substance in accordance with the Subcontract and to
support regulatory filings for the Drug Substance (including, without
limitation, analytical testing methods, protocols, process descriptions, batch
records, specifications and other process and manufacturing data and
documentation); (ii) Diosynth shall provide PharmAthene with reasonable access
to Diosynth employees with expertise in development and manufacturing the Drug
Substance to answer questions related to such technology transfer; and (iii)
Diosynth shall allow PharmAthene reasonable access to the Facility at reasonable
times on business days for any reasonable purpose connected with such technology
transfer; provided, however, that such access must be scheduled in advance with
Diosynth and may not interfere with Diosynth’s business operations (such
training sessions, assistance, cooperation, access to Diosynth employees and
access to the Facility shall be limited to (i) PharmAthene employees and (ii)
any consultants hired by PharmAthene and approved by Diosynth, with such
approval not to be unreasonably denied, provided each consultant signs a
confidentiality agreement that consistent with the confidentiality obligations
established in this Subcontract. PharmAthene shall provide Diosynth with a list
of proposed visitors to the Facility at least one (1) business day in advance of
such visit. PharmAthene shall pay Diosynth for all reasonable expenses related
to Diosynth’s provision of Facility access under this Section 4.4(b). (c) The
technology transfer contemplated in Section 4.4(a) and (b) above shall be
provided promptly and in accordance with the terms of this Subcontract for the
provision of CMO Services. In the event that this Subcontract is terminated (i)
by Diosynth due to a default of PharmAthene under Section 4.2(a) or due to an
Insolvency Event with respect to PharmAthene described in Section 4.2(c), or
(ii) by PharmAthene under Section 4.2(b), PharmAthene shall pay for the
technology transfer contemplated in Section 4.4(a) and (b) above at Diosynth’s
then-current hourly rates. If this Subcontract is terminated by

 

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9 PharmAthene due to a default of Diosynth under Section 4.2(a) or due to an
Insolvency Event with respect to Diosynth described in Section 4.2(c), Diosynth
shall provide such technology transfer without charge to PharmAthene, except for
the consulting services described in Section 4.4(a). 5. Confidential Information
and Records. 5.1 Disclosure. During and in furtherance of this Subcontract, each
of the Parties hereto may disclose certain of its Confidential Information to
the other Party. “Confidential Information” shall mean a Party’s non-public
and/or proprietary information that is disclosed under this Subcontract by the
disclosing Party to the recipient Party in writing or in other tangible form and
marked “confidential,” or if disclosed orally (or in some other non-tangible
form), are identified as confidential to the recipient Party or reasonably
should be considered confidential by the recipient Party. Such information may
include technology, data, know-how, trade secrets, cell lines, specifications,
drawings, designs, regulatory strategies, inventions, discoveries, methods and
procedures, and all information whether technical or non-technical, including,
but not limited to, financial statements, reports, pricing, secret processes,
formulae, samples, proposals, SOPs, Scope, Quality Agreement, business and
financial information, capacity information, etc. and any unpublished patent
applications. 5.2 Use and Non-Disclosure of Confidential Information. During the
term of this Subcontract and for a period of ten (10) years from the termination
thereof, each of the Parties hereto agrees (a) to use the other Party’s
Confidential Information only in connection with the performance of this
Subcontract; (b) to treat the other Party’s Confidential Information as it would
its own sensitive or proprietary information; and (c) to take all reasonable
precautions to prevent the disclosure of the other Party’s Confidential
Information to any individual or entity, (except to such of its employees and
contractors who reasonably require same for purposes hereof and who are bound to
that Party by like obligations as to confidentiality and non-use), without the
prior written consent of the other Party. The receiving Party shall be
responsible for any breaches of this Subcontract by its employees, agents, board
members, consultants or suppliers. In addition, a Party may disclose
Confidential Information provided under this Subcontract by the other Party to
any governmental authority in order to prosecute or maintain any Intellectual
Property Rights or any Regulatory Authority to obtain approval to manufacture
and/or market the Product or perform its obligations under the Prime Contract.
5.3 Exceptions to Confidential Information. Each Party shall be relieved of its
obligations under Section 5.2 regarding Confidential Information which such
Party demonstrates (a) was lawfully in the possession of such Party as evidenced
by competent evidence of such Party, and which was not acquired directly or
indirectly from the disclosing Party or any of the representatives or advisors
to the disclosing Party, or in violation of any confidentiality agreement; (b)
at the time of disclosure, was generally available to the public or which after
disclosure hereunder becomes generally available to the public through no fault
attributable to the receiving Party hereto; (c) is developed by the receiving
Party independently of information received by it from the disclosing Party
hereunder, or (d) is required to be disclosed by the law

 

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10 or the rules of any applicable regulatory organization provided that the
receiving Party shall apply for confidential treatment of such Confidential
Information to the fullest extent permitted by law, shall provide the other
Party a copy of the confidential treatment request far enough in advance of its
filing, if reasonably practical or legally permitted, to give the other Party a
meaningful opportunity to comment thereon, and shall use reasonable efforts to
incorporate in such confidential treatment request any reasonable comments of
the other Party. 5.4 Return. Upon the expiration or sooner termination of this
Subcontract or written request, all information of the disclosing Party in the
receiving Party’s possession will be returned to the disclosing Party (or
irretrievably destroyed by the receiving Party, with written confirmation of
such destruction), and the receiving Party will make no further use thereof.
Notwithstanding the foregoing, the receiving Party may retain one copy of the
Confidential Information of the disclosing Party solely for archival purposes to
ensure compliance with the provisions of this Article 5 or with the requirements
of regulatory authorities. 5.5 Designation of Confidential Information. For
purposes of this Subcontract, the Parties hereby acknowledge and agree that this
Subcontract and all results, data and other information that result or are
generated from the CMO Services rendered by Diosynth hereunder (other than the
Diosynth Intellectual Property Rights (as defined below)) shall be considered
PharmAthene’s Confidential Information to the extent relating to the Drug
Substance. Furthermore, any all data, information, and materials that
PharmAthene transfers to Diosynth as part of the Technology Transfer shall be
considered PharmAthene’s Confidential Information. The Diosynth Intellectual
Property Rights shall be considered Diosynth’s Confidential Information. 6.
Safety; Protected Health Information. 6.1 Adherence to Safety Procedures.
Diosynth shall adhere to its internal health and safety procedures during the
performance of the CMO Services, including any handling of the Drug Substance or
raw materials, components, hazardous waste and other materials. Such procedures
shall comply with all applicable federal, state and local laws and regulations
(including without limitation federal, state and local health and safety laws
and regulations). 6.2 Training. Diosynth shall educate and train all employees
and contractors involved in the performance of the CMO Services about the
potential hazards associated with the handling of the Drug Substance, raw
materials, components, hazardous waste and other materials involved in the CMO
Services and on the proper use of personal protective equipment, to the extent
that such hazards relating to the Drug Substance have been communicated to
Diosynth by PharmAthene. Diosynth shall make applicable material safety data
sheets available to all affected employees and contractors to the extent that
such sheets have been provided to Diosynth by PharmAthene. 6.3 Disposal of
Waste. Diosynth shall handle, store and dispose of all Hazardous Waste in
accordance with Applicable Law. For purposes of the foregoing sentence, the term
“Hazardous

 

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11 Waste” shall mean all hazardous waste, as defined by Applicable Law, to the
extent the same arise out of Diosynth’s performance of CMO Services. 6.4 HIPAA
Compliance. The Parties recognize that the Federal Health Insurance Portability
and Accountability Act of 1996 and implementing regulations (“HIPAA”) require
written confidentiality agreements to protect the privacy and security of
protected health information (as defined under HIPAA) that may be acquired in
the course of performing this Subcontract. The parties agree to comply with
HIPAA and other Applicable Law governing protected health information. 7.
Program Management. 7.1 Joint Steering Committee. Effective on the Effective
Date, the Parties shall establish a Joint Steering Committee (the “Joint
Steering Committee”) comprised of three (3) representatives designated by
PharmAthene and three (3) representatives designated by Diosynth, each of whom
shall have experience and seniority sufficient to enable him or her to make
decisions on behalf of the Party he or she represents. The Project Managers may
not be appointed to the Joint Steering Committee. 7.2 Replacement of Joint
Steering Committee Representatives. Each party shall be free to replace its
representative members on the Joint Steering Committee with new appointees who
have authority to act on behalf of such party, on notice to the other Party. 7.3
Responsibilities of Joint Steering Committee. The Joint Steering Committee shall
be responsible for overseeing and directing the Parties’ interaction and
performance of their respective obligations under this Subcontract. Without
limiting the generality of the foregoing, its duties shall include: (i)
monitoring the performance of the Program; (ii) resolving disagreements that
arise under this Subcontract; and (iii) determining the need for and terms of
any Change Orders. 7.4 Meetings. The Joint Steering Committee shall meet at such
times as the Joint Steering Committee determines to resolve issues arising
hereunder and to perform its responsibilities under this Subcontract, provided
that the Joint Steering Committee shall meet not less than four (4) times per
calendar year unless otherwise mutually agreed. Such meetings may be in person
or by telephone as agreed by the Joint Steering Committee. To the extent that
meetings are held in person, they shall alternate between the offices of the
Parties unless the Parties agree otherwise. The Project Managers shall attend
all meetings of the Joint Steering Committee. All decisions of the Joint
Steering Committee shall be unanimous. 7.5 Administration. The chairperson of
the Joint Steering Committee shall at all times be a representative designated
by PharmAthene. The chairperson shall be responsible for calling meetings,
sending notices of meetings and for leading such meetings; provided however that
each member of the Joint Steering Committee may demand that the chairperson
convene a meeting of the Joint Steering Committee.

 

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12 7.6 Minutes. Within fifteen (15) days after each Joint Steering Committee
meeting, the PharmAthene Project Manager shall prepare and distribute minutes of
the meeting, which shall provide a description in reasonable detail of the
discussions had at the meeting and a list of any actions, decisions or
determinations approved by the Joint Steering Committee. Minutes shall be
approved or disapproved and revised, as necessary, at the next meeting. Final
minutes shall be distributed to the members of the Joint Steering Committee. 7.7
Dispute Resolution. In the event that the Joint Steering Committee cannot reach
agreement with respect to any material issue, then the issue may be submitted to
dispute resolution pursuant to Article 26. 7.8 Limitations. The Joint Steering
Committee is not empowered to amend the terms of this Subcontract. 8.
Intellectual Property and Proprietary Rights. 8.1 Intellectual Property
Definitions. For purposes of this Subcontract, “Intellectual Property Rights”
shall mean all proprietary rights and proprietary information, in any tangible
or intangible form, including without limitation inventions, discoveries,
devices, data, patents, patent applications, designs, copyrights, trademarks,
trade secrets, proprietary know-how, Confidential Information and similar rights
of any type under the laws of any governmental authority, including all
applications and registrations relating to any of the foregoing and any
Improvements relating to any of the foregoing. For purposes of this Subcontract,
“Improvements” mean all improvements, discoveries, inventions, developments,
enhancements, derivative works and the like, whether or not patentable or
protectable. 8.2 Background IP. As between the Parties, each Party shall be sole
owner of any Intellectual Property Rights it owns, licenses or controls as of
the Effective Date and all Improvements thereto reduced to practice by either
Party during the term of this Subcontract (each Party’s “Background IP”).
Diosynth hereby represents and warrants that Diosynth owns or holds sufficient
rights to its Background IP to perform the activities contemplated by this
Subcontract relating to the Drug Substance, including without limitation all
Background IP used by Diosynth in the development and manufacturing of the Drug
Substance pursuant to this Subcontract. 8.3 PharmAthene License to Diosynth.
PharmAthene hereby grants Diosynth a non-exclusive, non-sublicensable,
non-transferable, fully paid, royalty-free license under any PharmAthene
Intellectual Property Rights, including without limitation any PharmAthene
Background IP, relating to the Drug Substance solely in order for Diosynth to
provide the CMO Services to PharmAthene during the term and to otherwise perform
its obligations under the terms of this Subcontract. 8.4 Diosynth License to
PharmAthene. Diosynth hereby grants PharmAthene a non-exclusive, perpetual,
worldwide, fully paid, royalty free, fully transferable license with the right
to grant sublicenses, to and under Diosynth’s Intellectual Property Rights,
including without

 

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13 limitation any Diosynth Background IP and any Process Inventions, solely for
the purpose of developing, marketing, selling, manufacturing or having
manufactured the Drug Substance and/or the Product and to support regulatory
filings for the Drug Substance and/or Product; provided however that Diosynth
may suspend this license by written notice at any time that amounts due by
PharmAthene under this Subcontract have not been paid; provided further that
such license shall be reinstated upon satisfaction of PharmAthene’s payment
obligations hereunder. Diosynth shall confirm such reinstatement by written
notice to PharmAthene. 8.5 New Intellectual Property. (a) PharmAthene shall
retain all rights to, and Diosynth will, at no cost or further action by
PharmAthene, assign to PharmAthene, any Product improvement or use invention or
other trade secret or other intellectual property right to the extent relating
to the Product, discovered by Diosynth as a result of performing the CMO
Services under this Subcontract (“Product Invention”). Any Product Invention is
deemed included in PharmAthene’s Intellectual Property Rights and the license
set forth in Section 8.3. Diosynth shall retain all rights to any patentable
invention other than a Product Invention relating to manufacturing and
analytical methods and processes discovered in connection with the CMO Services
and any pre-existing know-how (“Process Invention”). Any Process Invention is
deemed included in Diosynth’s Intellectual Property Rights and the license set
forth in Section 8.4. (b) If PharmAthene requests and at PharmAthene’s expense,
Diosynth will execute any and all applications, assignments or other instruments
and give such testimony as shall be necessary to apply for and obtain Letters of
Patent of the United States or of any foreign country with respect to the
Product Invention. PharmAthene shall compensate Diosynth for the time devoted to
such activities and reimburse it for expenses incurred. If Diosynth requests and
at Diosynth’s expense, PharmAthene will execute any and all applications,
assignments or other instruments and give such testimony as shall be necessary
to apply for and obtain Letters of Patent of the United States or of any foreign
country with respect to the Process Invention and Diosynth shall compensate
PharmAthene for the time devoted to such activities and reimburse it for
expenses incurred. (c) Diosynth shall promptly disclose to PharmAthene any
Product Invention or Process Invention generated by Diosynth during the
performance of this Subcontract, and all such Product Invention shall be deemed
to the fullest extent possible to be works made for hire exclusively for
PharmAthene, with PharmAthene having sole ownership of such Product Invention
and the sole right to obtain and to hold in its own name patents, copyrights, or
such other protection as PharmAthene may deem appropriate to the subject matter,
and any extensions or renewals thereof (though PharmAthene is under no
obligation to file any patent application, secure or maintain any patent or
register any copyright). 8.6 Rights in Data.

 

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14 (a) Diosynth agrees to use its best efforts to complete the requirements of
this Subcontract and the Scope without having to include any Diosynth
Intellectual Property Rights in the items, data, and information required to be
delivered in the performance of this Subcontract. As soon as Diosynth knows or
should have known that it plans to deliver to PharmAthene any item, data or
information that will include any element of Diosynth’s Intellectual Property
Rights, Diosynth agrees to notify PharmAthene in writing that it plans to
deliver said item, data, or information with limited rights as defined in FAR
52.227-14 Rights in Data-General (the “Limited Rights Data”) and the rationale
for the required inclusion of Diosynth’s Intellectual Property Rights and the
impact if the same is not included in the deliverable product. Without limiting
PharmAthene’s rights under Section 8.4, subject to the immediately preceding
sentence and the fulfillment of any payment-related obligations by PharmAthene
to Diosynth under this Subcontract, Diosynth hereby grants to PharmAthene an
irrevocable, perpetual, worldwide, fully paid, royalty free, non-exclusive
license to use the Limited Rights Data provided pursuant to this Subcontract for
the purpose of fulfilling its obligations to the U.S. Government under the Prime
Contract and any future contract with the U.S. Government or any foreign
government related to the Product (the “Permitted Use”), and to deliver the same
as Limited Rights Data per FAR 52.227-14 Rights in Data-General. PharmAthene may
sublicense, disclose, reproduce, modify, prepare derivative works of, distribute
copies of, and perform or display the Limited Rights Data solely for the
Permitted Use. Diosynth agrees to provide, if requested in writing by
PharmAthene pursuant to a valid request of the Prime Contract’s Contracting
Officer, written substantiation of the propriety of any limited rights legend.
(b) Diosynth is responsible for marking its Limited Rights Data in accordance
with FAR 52.227-14, Rights in Data-General. (c) Unless otherwise marked at time
of delivery, all data, information, and other items delivered under this
Subcontract shall be provided to PharmAthene with unlimited rights per FAR
52.227-14, Rights in Data-General. Diosynth reserves the right to use data
during the course of the CMO Services to support applications, assignments or
other instruments necessary to apply for and obtain Letters of Patent of the
United States or any foreign country with respect to Process Inventions so long
as no information which Diosynth is required to keep confidential under this
Subcontract is disclosed in any such application, assignment, or other
instrument. To the extent practicable, Diosynth shall notify PharmAthene at
least ninety (90) days in advance of intent to file such application, assignment
or other instrument and PharmAthene shall have an opportunity to review same
prior to filing. (d) At the time of the execution of this Subcontract, Diosynth
is not aware of any item, data or information to be provided under this
Subcontract that is or will be deemed Limited Rights Data. 8.7 Enforcement. (a)
Diosynth shall immediately notify PharmAthene in writing of (i) any unauthorized
or improper use by any person, entity or organization of the PharmAthene

 

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15 Intellectual Property Rights and activities which are likely to amount to
infringement, misuse, passing-off or counterfeiting in respect of such
Intellectual Property Rights, and/or (ii) any allegations, claims or demands
(actual or threatened) in respect of infringement of any third party proprietary
rights by virtue of Diosynth’s use of the PharmAthene Intellectual Property
Rights. PharmAthene may, at it sole discretion, bring an action based on
infringement, misappropriation or misuse or passing off in relation to its
Intellectual Property Rights, at its own cost. Diosynth shall provide such
assistance to PharmAthene as may be reasonably required in connection with such
proceedings. Any damages, awards or settlement monies actually received by
PharmAthene pursuant to this Article 8 upon the final judgment or settlement of
any such action shall belong to PharmAthene. (b) PharmAthene shall immediately
notify Diosynth in writing of (i) any unauthorized or improper use by any
person, entity or organization of the Diosynth Intellectual Property Rights and
activities which are likely to amount to infringement, misuse, passing-off or
counterfeiting in respect of such Intellectual Property Rights, and/or (ii) any
allegations, claims or demands (actual or threatened) in respect of infringement
of any third party proprietary rights by virtue of PharmAthene’s use of the
Diosynth Intellectual Property Rights. Diosynth may, at it sole discretion,
bring an action based on infringement, misappropriation or misuse or passing off
in relation to its Intellectual Property Rights, at its own cost. PharmAthene
shall provide such assistance to Diosynth as may be reasonably required in
connection with such proceedings. Any damages, awards or settlement monies
actually received by Diosynth pursuant to this Article 8 upon the final judgment
or settlement of any such action shall belong to Diosynth. 9. Representations
and Warranties. The applicable Party indicated below represents and warrants to
the other Party as of the date hereof and as of the date on which such Party
enters into each Scope as follows: 9.1 Requisite Experience, Etc. Diosynth
represents and warrants that it has the experience, capability, personnel and
resources necessary to perform the CMO Services under this Subcontract in
accordance with the Scope, this Subcontract, the Quality Agreement, cGMP (as
defined in the Scope), the Federal Food, Drug, and Cosmetic Act, as amended (the
“FFDCA”) and other Applicable Law. 9.2 Technology. PharmAthene represents and
warrants that it owns or otherwise has sufficient legal rights to the Drug
Substance, the Product, and all technology that will be provided to Diosynth so
it may perform under this Subcontract. 9.3 Power and Authority,
Non-Contravention. Each Party represents and warrants that (a) it has the
corporate power and authority to enter into and perform its obligations under
this Subcontract; and (b) entering into and performing this Subcontract will not
conflict with or result in a violation of any of the terms or provisions, or
constitute a default under any of its organizational documents any mortgage,
indenture, lease, contract or other agreement or instrument binding upon it or
by which any of its properties are bound, or any permit,

 

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16 concession, franchise, license, judgment, order, decree, statute, law
ordinance, rule or regulation applicable to it or its properties. 9.4 Debarment.
Diosynth represents and warrants that it does not use the services of any
persons debarred or suspended under 21 U.S.C. § 335a (a) or (b) in any capacity
associated with or related to the CMO Services. Diosynth further represents and
warrants that it shall not hire or retain as an officer or employee any person
who has been convicted of a felony under the laws of the United States for
conduct relating to the regulation of any drug product under the FFDCA. 9.5
Diosynth Warranties. Diosynth represents and warrants that: (i) work it performs
hereunder will be in accordance with Sections 2.1 and 2.7, (ii) all work
performed hereunder shall be in accordance with the regulatory approvals for the
Drug Substance, cGMP (as defined in the Scope), OSHA and applicable federal,
state and local regulations related to manufacturing and (iii) Diosynth
possesses and shall maintain in full force and effect at all times during the
term of this Subcontract all licenses, permits and similar certificates required
for the operation of the Facility and for the production of Drug Substance and
the storage of the materials and components for manufacturing of Drug Substance
and Diosynth shall promptly notify PharmAthene if Diosynth receives any notice
that any such license, permit, or approval is or may be revoked or suspended.
9.6 DISCLAIMER OF WARRANTIES. EXCEPT AS OTHERWISE SET FORTH IN THIS SUBCONTRACT
OR ATTACHMENTS HERETO, PHARMATHENE AND DIOSYNTH MAKE NO REPRESENTATIONS AND
EXTEND NO WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, WITH REGARD TO THE DRUG
SUBSTANCE OR THE PRODUCT INCLUDING ANY WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE. EXCEPT AS EXPRESSLY SET FORTH IN THIS SUBCONTRACT OR
ATTACHMENTS HERETO, DIOSYNTH MAKES NO WARRANTIES THAT THE EXECUTION OF THE SCOPE
WILL RESULT IN ANY SPECIFIC QUANTITY OR QUALITY OF PRODUCT. 10. Indemnification.
10.1 SAFETY Act. (a) Application. Notwithstanding anything to the contrary
contained in this Article 10, the indemnification provisions contained in this
Subcontract are intended by the Parties to be fully consistent with the
application of the SAFETY Act. The Parties recognize that PharmAthene has not
yet received recognition of the Product as a QATT and, as such, the provisions
of the SAFETY Act may not apply to this Subcontract. However, to the extent
anything contained herein conflicts with the SAFETY Act and the terms of the
SAFETY Act apply to the activities described in this Subcontract and the Drug
Substance and/or Product, the provisions of the SAFETY Act shall govern. (b)
Limitations. PharmAthene and Diosynth agree that with respect to all third party
claims, suits, actions and demands brought against either PharmAthene or
Diosynth

 

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17 or both to which the provisions of the SAFETY Act apply to limit the
liability of PharmAthene and/or Diosynth, each party retains responsibility for
Losses (as defined below), including business interruption Losses, that it
sustains, and for Losses sustained by its own employees resulting from an Act of
Terrorism when Drug Substance has been deployed in defense against, response to,
or recovery from such act, but only to the extent that such Party’s liability is
actually limited by the application of the SAFETY Act. 10.2 PharmAthene
Indemnification. PharmAthene agrees to defend, indemnify and hold Diosynth, its
Affiliates, officers, directors, employees and agents harmless against any and
all losses, damages, fines, costs, claims, demands, judgments and liability
(including reasonable legal fees and court costs) (collectively, “Losses”) to
which the provisions of the SAFETY Act do not apply resulting from, or relating
to: (i) the negligence, gross negligence or intentional misconduct of
PharmAthene; (ii) the infringement or alleged infringement of the Product on the
intellectual property rights of a third party; (iii) PharmAthene’s breach of its
agreements, representations or warranties under this Subcontract or (iv) the
handling, distribution, storage, sales, use or testing of the Drug Substance
and/or Product that is manufactured by Diosynth in accordance with this
Agreement, including without limitation Section 2.1(a) and the Scope; except in
any such case to the extent that any such Losses are due to the negligence or
intentional misconduct of Diosynth or its Affiliates or their respective
officers, employees, contractors or agents;. 10.3 Diosynth Indemnification.
Diosynth agrees to defend, indemnify and hold PharmAthene, its Affiliates,
officers, directors, employees and agents harmless against any and all Losses to
which the provisions of the SAFETY Act do not apply, resulting from, or relating
to (i) the negligence, gross negligence or intentional misconduct of Diosynth or
its subcontractors; (ii) the infringement or alleged infringement of any
Diosynth Intellectual Property, including without limitation any Diosynth
Background IP, on the intellectual property rights of a third party; (iii)
Diosynth’s breach of its agreements, representations or warranties under this
Subcontract or (iv) failure to take safety precautions to prevent known risks of
the Sponsor Deliverables, the Drug Substance or the Product as communicated in
writing to Diosynth by PharmAthene; except in any such case to the extent that
any such Losses are due to the negligence or intentional misconduct of
PharmAthene or its Affiliates or their respective officers, employees,
contractors or agents. 10.4 Indemnification Procedures. (a) All indemnification
claims in respect of a Party, its Affiliates or their respective directors,
officers, employees and agents (each, an “Indemnitee”) will be made solely by
the applicable Party (the “Indemnified Party”). The Indemnified Party will give
the indemnifying Party (the “Indemnifying Party”) prompt written notice (an
“Indemnification Claim Notice”) of any Losses for which Indemnified Party
intends to request indemnification under any Section of this Article 10. Each
Indemnification Claim Notice must contain a description of the claim and the
nature and amount of such Loss, to the extent that the nature and amount of

 

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18 such Loss are known at such time. The Indemnified Party will furnish promptly
to the Indemnifying Party copies of all papers and official documents received
in respect of any Losses. (b) At its option, the Indemnifying Party may assume
the defense of any third party claims, suits, actions and demands (each a “Third
Party Claim”) by giving written notice to the Indemnified Party within thirty
(30) days after the Indemnifying Party’s receipt of an Indemnification Claim.
(c) Upon assuming the defense of a Third Party Claim, the Indemnifying Party may
appoint as lead counsel in the defense of the Third Party Claim any legal
counsel selected by the Indemnifying Party and acceptable to the Indemnified
Party in its reasonable judgment. In the event the Indemnifying Party assumes
the defense of a Third Party Claim, the Indemnified Party will immediately
deliver to the Indemnifying Party all original notices and documents (including
court papers) received by any lndemnitee in connection with the Third Party
Claim. Should the Indemnifying Party assume the defense of a Third Party Claim,
the Indemnifying Party will not be liable to the Indemnified Party or any other
lndemnitee for any legal expenses subsequently incurred by such Indemnified
Party or other lndemnitee in connection with the analysis defense or settlement
of the Third Party Claim. (d) Without limiting the preceding Section 10.4(c),
any Indemnitee will be entitled to participate in, but not control, the defense
of such Third Party Claim and to employ counsel of its choice for such purpose;
provided, however, that such employment will be at the Indemnitee’s own expense
unless (i) the employment thereof has been specifically authorized by the
Indemnifying Party in writing, or (ii) the Indemnifying Party has failed to
assume the defense and employ counsel in accordance with the preceding Section
10.4(b), in which case the Indemnified Party will control the defense. (e) With
respect to any Losses relating solely to the payment of money damages in
connection with a Third Party Claim and that will not result in the Indemnitee
becoming subject to injunctive or other relief or otherwise adversely affect the
business of the Indemnitee in any manner, and as to which the Indemnifying Party
will have acknowledged in writing the obligation to indemnify the lndemnitee
hereunder, the Indemnifying Party will have the sole right to consent to the
entry of any judgment, enter into any settlement or otherwise dispose of such
Loss, on such terms as the Indemnifying Party, in its sole discretion, will deem
appropriate, and will transfer to the Indemnified Party all amounts which said
Indemnified Party will be liable to pay prior to the entry of judgment. With
respect to all other Losses in connection with a Third Party Claim, where the
Indemnifying Party has assumed the defense of the Third Party Claim in
accordance with Section 10.4(b), the Indemnifying Party will have authority to
consent to the entry of any judgment, enter into any settlement or otherwise
dispose of such Losses provided it obtains the prior written consent of the
Indemnified Party (which consent will be at the Indemnified Party’s sole and
absolute discretion). The Indemnifying Party will not be liable for any
settlement or other disposition of Losses by an lndemnitee that is reached
without the written consent of the Indemnifying Party. Regardless of whether the
Indemnifying Party chooses to defend or prosecute any Third Party Claim, no

 

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19 Indemnitee will admit any liability with respect to, or settle, compromise or
discharge, any Third Party Claim without the prior written consent of the
Indemnifying Party. (f) The Indemnified Party will, and will cause each other
Indemnitee to, cooperate in the defense or prosecution of any Third Party Claim
and will furnish such records, information and testimony, provide such witnesses
and attend such conferences, discovery proceedings, hearings, trials and appeals
as may be reasonably requested in connection therewith. Such cooperation will
include access during normal business hours afforded to the Indemnifying Party,
and reasonable retention by the Indemnified Party of, records and information
that are reasonably relevant to such Third Party Claim, and making Indennnitees
and other employees and agents available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder, and the Indemnifying Party will reimburse the Indemnified Party for
all its reasonable out-of-pocket expenses in connection therewith. 10.5
Definition of Affiliates. As used in this Subcontract, “Affiliate” of any Party
means any corporation, firm, partnership, joint venture, limited liability
company or other entity or association which is controlled by or is under common
control with a Party. For the purpose of this definition, “control” shall mean
the power to direct, or cause the direction of, the management and policies of
such entity or association through the ownership of at least fifty percent (50%)
of the voting share capital of such entity or any other comparable equity, by
contract, or by ownership interest. 11. Insurance. 11.1 Diosynth Requirement.
Diosynth shall have and maintain throughout the term, at a minimum, the
insurance coverage listed below but in no event shall the policy limits,
deductibles, and other terms of such insurance afford less protection than that
required by the Department of Homeland Security under the SAFETY Act. All
insurance shall be with an insurance carrier with an A.M. Best rating of at
least “A” or greater or the equivalent rating: (a) workers compensation
insurance, including occupational disease, in the statutory limits of the state
in which the CMO Services will be performed; (b) employers liability insurance
in each state in which the CMO Services will be performed with minimum limits of
$500,000 each accident and a $1,000,000 disease policy limit; (c) comprehensive
general liability insurance with minimum limits of $5,000,000 per occurrence and
$5,000,000 aggregate for bodily injury and property damage, also providing
coverage for (i) broad form contractual liability insurance insuring the hold
harmless and indemnification provisions contained in this Subcontract, (ii)
broad form property damage insurance, (iii) completed operations insurance for a
term of two (2) years, which term shall commence upon expiration or termination
of this Subcontract and (iv) the exclusion in the

 

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20 comprehensive general liability policy commonly referred to as the x, c, u
exclusion shall be deleted therefrom; and (d) comprehensive automobile liability
insurance covering claims arising from owned, hired, and non-owned vehicles for
bodily injury and property damage with minimum limits of $2,000,000 per
occurrence and $2,000,000 aggregate. 11.2 Excess Insurance. Diosynth may fulfill
its insurance obligations under this Article 11 by providing $5,000,000 primary
coverage limits for comprehensive general liability and for automobile
liability, and by providing excess or umbrella liability insurance with minimum
limits of $5,000,000 per occurrence and $5,000,000 aggregate in excess of the
primary coverage limits, but only so long as such excess policy includes broad
form contractual liability, broad form property damage, and completed operations
coverage. 11.3 Certificates of Insurance and Other Requirements. Certificates of
the above insurance must be filed with PharmAthene within five (5) days before
the time performance under this Subcontract is commenced. Diosynth covenants,
represents and warrants to PharmAthene that (a) all policies of insurance
required hereunder shall by appropriate endorsement, or otherwise, provide for
thirty (30) days prior written notice of cancellation to PharmAthene, (b) the
contractual liability insurance required hereunder, shall, by appropriate
endorsement, or otherwise, specifically insure the terms and conditions as
expressed in this Subcontract, (c) all insurance policies, except worker’s
compensation, shall identify PharmAthene as an additional insured under such
policies, (d) all policies required to be provided by Diosynth shall be primary
and not secondary to any policies held by PharmAthene; and (e) all policies
referenced in Section 11.1 include waivers of all rights of subrogation. 11.4
PharmAthene Requirement. PharmAthene shall secure and maintain in full force and
effect throughout the performance of the Program policies of insurance for (a)
general liability and (b) product liability having policy limits, deductibles
and other terms appropriate to the conduct of PharmAthene’s business in
PharmAthene’s reasonable judgment. 12. Prime Contract and FAR Provisions. 12.1
Applicable FAR Provisions. Diosynth recognizes that, under this Subcontract, it
will provide commercial item goods and/or services as defined in the Federal
Acquisition Regulation (“FAR”) 2.101. All work conducted by Diosynth shall be in
accordance with the terms of this Subcontract, including the flow-down terms and
other obligations set forth in Exhibit C. 12.2 Cost Accounting Standards;
Support of Earned Value Management System. (a) In providing the commercial item
goods and/or services under this Subcontract, Diosynth shall be exempt from the
Cost Accounting Standards pursuant to Part 48 of the Code of Federal
Regulations, Section 9903.201-1(b)(6).

 

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21 (b) PharmAthene will be operating an Earned Value Management System (“EVMS”)
for the assessment and reporting of progress to the U.S. Government with respect
to work under the Prime Contract. In support of PharmAthene’s EVMS, Diosynth
will periodically and as otherwise requested by PharmAthene from time to time:
report progress against timeline (by, among other things, updating appropriate
gantt chart(s) with % completion, recorded by task); report status of work
against the agreed payment schedule; report time deviations and how they will be
addressed; and provide input necessary for PharmAthene to update its risk
register. Exhibit E sets forth additional requirements with respect to the
Earned Value Management System applicable to Diosynth. Diosynth shall provide
the required report(s) covering these activities electronically by the 2nd
working day of each calendar month. PharmAthene shall provide Diosynth with
electronic templates for such reports. 13. Inspections and Audits. 13.1
Inspections and Audits. During the term of this Subcontract, Diosynth shall
permit PharmAthene, its authorized representatives or representatives of a
Regulatory Authority to inspect and audit the Facility in connection with this
Subcontract. The terms and conditions of such inspections or audits are provided
in the Quality Agreement. 13.2 Post-Termination Audits. For five (5) years
following the completion or termination of any Scope authorized under this
Subcontract, the applicable Regulatory Authority and/or government audit agency
shall have access to Diosynth’s records and documentation related to the CMO
Services being performed under this Subcontract for audit purposes during normal
business hours and upon twenty (20) day’s notice. Diosynth will accommodate any
such a request on the specified date, and in the event that a visit on the
specified date is not possible, on the next available date. 13.3 Record
Retention. During the term of this Subcontract, Diosynth shall maintain and
safeguard all materials and all other data obtained or generated by it in the
performance of the Scope, including all computerized records and files in a
secure environment. Archive data will be retained in accordance with the Quality
Agreement for a period of five (5) years following the completion or termination
of any Scope authorized under this Subcontract. Following the retention period
in this Section 13.3, PharmAthene may request that Diosynth destroy any such
data or return it to PharmAthene at PharmAthene’s expense. 14. Force Majeure;
Other Delays. 14.1 Excusing Performance. Neither Party shall be liable for the
failure to perform its obligations under this Subcontract if such failure is not
preventable, was not reasonably foreseeable at the time of contracting, and is
caused by a contingency beyond such Party’s reasonable control, including, but
not limited to, riots, wars, fires, floods or storms, strikes, public utilities
or common carriers. A failure or delay of performance of suppliers or
contractors shall not excuse performance hereunder.

 

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22 14.2 Notice. A Party claiming a right to excused performance under this
Article 14 shall promptly notify the other Party in writing of the extent of its
inability to perform, which notice shall specify the occurrence beyond its
reasonable control that prevents such performance. 14.3 Resumption. Each Party
shall employ all reasonable efforts toward resumption of its performance
hereunder if such performance is delayed or interrupted by reason of force
majeure. Each Party shall bear its own costs and losses arising from any event
described in Section 14.1, including all costs of resuming performance under
this Section 14.3. 15. Non-Solicitation; Independent Contractors. During the
term of this Subcontract, neither Diosynth nor PharmAthene shall directly
solicit employees of the other Party without the other Party’s prior written
authorization. Neither party shall be in breach of this Article 15 to the extent
that one Party’s employee responds to a bona fide advertisement for employment
offered to the public by the other Party. The Parties shall be deemed to be
independent contractors, and this Subcontract shall not be construed to create
between PharmAthene arid Diosynth any other relationship such as, by way of
example only, that of employer-employee, principal and agent, joint-venturer,
co-partners or any similar relationship, the existence of which is expressly
denied by the Parties hereto. 16. Publications; Public Statements. Diosynth may
not publish any articles or make any presentations relating to any Scope or
referring to data, information or materials generated as part of any Scope
without the prior written consent of PharmAthene. Diosynth understands that the
written consent of the federal government may also be required. Except as
required by Applicable Law, or as required by the rules of the exchange on which
a Party’s stock is traded, no Party will originate any publication, news release
or other public announcement, written or oral, whether in the public press,
stockholders’ reports or otherwise, relating to this Subcontract or referring to
the other Party without the prior written approval of the other Party, which
approval shall not be unreasonably withheld, conditioned or delayed, provided,
however, that information previously mutually approved for disclosure by the
Parties may be reiterated by each Party without addition approval by the other
Party. The Parties shall agree on a mutual press release and the timing of such
press release to announce the timing of this Subcontract. 17. Subcontracting.
Diosynth shall not, without prior written approval of PharmAthene (which shall
not be unreasonably withheld, conditioned or delayed), subcontract any part of
its responsibilities under this Subcontract to another party; provided however
that Diosynth may subcontract raw material testing to an approved Diosynth
vendor without obtaining prior written approval from PharmAthene. PharmAthene
expressly approves of and consents to Diosynth’s use of as detailed in the
Scope. Diosynth shall have the obligation to ensure its subcontractors are
monitored and audited through Diosynth’s internal management program. 18.
Assignment. This Subcontract shall not be assigned in whole or in part by either
Party without the prior written consent of the other Party, which consent shall
not be unreasonably withheld, conditioned or delayed. Any attempt to assign this
Subcontract without such consent

 

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23 shall be void and of no effect. Notwithstanding the foregoing, either Party
shall be entitled, without the prior written consent of the other Party, to
assign all or part of its rights under this Subcontract to a purchaser of all or
substantially all of its assets, or an entity with which it may merge where it
is not the surviving company, provided that the assignee agrees in writing to
assume all obligations undertaken by its assignor in this Subcontract and, with
respect to an assignment by Diosynth, the assignee possesses adequate technical
capabilities to perform the CMO Services. The terms of this Subcontract shall
inure to the benefit of all successors and permitted assigns. 19. Governing Law.
This Subcontract and any Scope will be governed by and construed and interpreted
in accordance with the law of the State of Maryland without reference to
conflicts of law principles that may dictate application of the laws of another
jurisdiction, except that any applicable flow-down clauses as set forth in
Exhibit C will be construed and interpreted according to the federal common law
of government contracts as enunciated and applied by federal judicial bodies,
Boards of Contract Appeal, and quasi-judicial agencies of the U.S. Government.
20. Notices. Any notice, approval, instruction or other written communication
required or permitted hereunder shall be sufficient if made or given to the
other Party by personal delivery, courier service or Certified First Class U.S.
Mail to the mailing address set forth below: If to PharmAthene: PharmAthene,
Inc. One Park Place, Suite 450 Annapolis, MD 21401 Attn: Director of Contracts
with separate correspondence to PharmAthene, Inc. One Park Place, Suite 450
Annapolis, MD 21401 Attn: General Counsel If to Diosynth: Diosynth RTP Inc. 101
J Morris Commons Lane Morrisville, North Carolina 27560 Attn: Henrik Edeback or
Jenifer Wheat with separate correspondence to: 23

 

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24 Diosynth RTP Inc. c/o Schering-Plough Corporation 2000 Galloping Hill Road
Kenilworth, NJ 07033 Attn: Legal Director, Business Development and Licensing or
to such other addresses provided to the other Party in writing in accordance
with the terms of this Article 20. Notices of written communication made or
given by personal delivery or courier service shall be deemed to have been
sufficiently made or given when sent (receipt acknowledged). 21. Entire
Agreement. This Subcontract, which includes the exhibits hereto, the Scope and
any Change Order (s) entered into hereunder constitute the full, complete, final
and integrated agreement between the Parties hereto relating to the subject
matter hereof and supersede all previous written or oral negotiations,
commitments, agreements, transactions, or understandings with respect to the
subject matter hereof. Nothing herein shall be deemed to require the parties to
enter into a Development and Supply Subcontract. Nothing in this Subcontract
shall be deemed or construed to establish any precedent with respect to any
other or future agreement, if any, between the Parties. 22. Amendments; No
Waiver. No provision of this Subcontract may be amended, revoked or waived
except in writing signed and delivered by an authorized officer of each Party.
No failure or delay on the part of either Party in exercising any right
hereunder will operate as a waiver of, or impair, any such right. No single or
partial exercise of any such right will preclude any other or further exercise
thereof or the exercise of any other right. No waiver of any such right will be
deemed a waiver of any other right hereunder. 23. Validity. Should any part or
provision of this Subcontract be held unenforceable or invalid, the invalid or
unenforceable provision shall be replaced with a provision which accomplishes,
to the extent possible, the original business purpose of such provision in a
valid and enforceable manner, and the remainder of this Subcontract shall remain
binding upon the Parties. 24. Headings. The descriptive headings in this
Subcontract are inserted for the convenience of reference only and are not
intended to be part of or affect the meaning of or interpretation of this
Subcontract. 25. Execution in Counterparts. This Subcontract may be executed,
either by original or by facsimile signature, in one or more counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument. 26. Dispute Resolution. The Parties
shall attempt in good faith to resolve any dispute arising out of this
Subcontract. Except for claims for injunctive relief as provided in Section

 

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25 26.6, any dispute, controversy or claim arising under, out of or in
connection with this Subcontract, or the validity, enforceability, construction,
performance or breach hereof, shall be submitted by the Parties to binding
arbitration as the exclusive forum for resolving such dispute in lieu of filing
suit in a court of law or seeking other remedies. The Parties agree not to take
any action, including the filing of any lawsuit or other proceeding, in
contravention thereof. 26.1 Binding Arbitration. Binding arbitration will be
conducted in Washington, D.C. in accordance with: (i) the Federal Arbitration
Act; (ii) the then-current commercial arbitration rules of the American
Arbitration Association (the “AAA”); and (iii) this Subcontract. The terms set
forth in this Subcontract will control in the event of any inconsistency between
such terms and the AAA rules. 26.2 Arbitrator. The arbitration will be conducted
by a single arbitrator reasonably familiar with the technology and business
covered by this Subcontract selected by mutual agreement of the Parties. If the
Parties fail to select an arbitrator within thirty (30) days following the date
of either party’s notice of demand to conduct arbitration, then the AAA will, in
accordance with its rules, appoint an arbitrator reasonably familiar with the
technology and business covered by this Subcontract. The award of the arbitrator
will be in writing setting forth findings of fact and conclusions of law. 26.3
Judgment and Fees. Judgment on the arbitrator’s award will be final and binding
upon the Parties and may be entered in any court having jurisdiction thereof.
The arbitrator’s fees will be shared equally by the Parties and each party will
bear its own costs and attorneys’ fees; provided that the arbitrator may in his
or her discretion award to the prevailing Party the costs and expenses incurred
by the prevailing Party in connection with the arbitration proceeding. 26.4
Discovery. All papers, documents, or evidence, whether written or oral, filed
with or presented in connection with the arbitration proceeding shall be
considered confidential and not disclosed to anyone without prior written
consent of the Parties. Highly sensitive documents produced by a producing party
may be designated “outside counsel only”, and in that event, subject to any
de-designation by the arbitrator, shall be limited to outside counsel only, may
not be shown to any officer, director, employee or independent contractor of the
non-producing party (except non-party expert witnesses), and may not be shown to
any attorney or patent agent that is responsible for prosecuting patent
applications for the non-producing party (“patent counsel”). In the event that
any attorney, patent counsel or a non-party expert witness is given access to
such “outside counsel only” documents of the producing party, such person may
not thereafter have any role in the prosecution of patents for the non-producing
party for a period of not less than one year. Nothing herein shall limit a
party’s counsel with respect to that party’s own highly sensitive documents. In
all events, documents produced pursuant to the arbitration shall not be used for
any purpose other than the conduct of the arbitration. The arbitrator shall
permit such limited discovery necessary for an understanding of any legitimate
issue raised in the arbitration, including the production of documents. Each
party shall be permitted but not required to take the deposition of not more

 

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26 than five (5) persons, each such deposition not to exceed seven (7) hours in
length. If the arbitrator believes that exceptional circumstances exist, and
additional discovery is necessary for a full and fair resolution of the issue,
the arbitrator may order such additional discovery as the arbitrator deems
necessary. At the hearing the Parties may present testimony (either by live
witness or deposition) and documentary evidence. 26.5 Pre-Arbitration Dispute
Resolution. No dispute under this Subcontract shall be referred to arbitration
under this Article 26 until the following procedures in this Section 26.5 have
been satisfied. Executive officers of Diosynth and PharmAthene shall meet as
soon as practicable, as reasonably requested by either Party to review any
dispute with respect to the interpretation of any provision of this Subcontract
or the Quality Agreement, or with respect to the performance of either Party
under this Subcontract or the Quality Agreement. If the dispute is not resolved
by the officers by mutual agreement within thirty (30) days after a meeting to
discuss the dispute, either Party may at any time thereafter provide the other
Party written notice specifying the terms of such dispute in reasonable detail
and notifying the other Party of its decision to institute arbitration
proceedings under Article 26. 26.6 Injunctive Remedy. Nothing in this
Subcontract shall limit the right of either Party to seek to obtain in any court
of competent jurisdiction any injunctive relief and seeking or obtaining such
equitable relief shall not be deemed a waiver of this Subcontract to arbitrate.
For clarity, any such equitable remedies shall be cumulative and not exclusive
and are in addition to any other remedies that either Party may have under this
Subcontract or Applicable Law. 27. Survival. The rights and obligations of the
Parties set forth in Sections 2.1(b), 2.5, 4.3, 4.4, Article 5, Article 8,
Article 9, Article 10, Section 13.2 and 13.3, Article 16 and Article 26 shall
survive expiration or earlier termination of this Subcontract. IN WITNESS
WHEREOF, the Parties have executed this Subcontract as of the Effective Date.
Diosynth RTP Inc. PharmAthene, Inc. By: /s/ Stephen A. Spearman By: /s/
Christopher Camut Name: Stephen A. Spearman, Ph.D., MBA Name: Christopher Camut
General Manager Title: Title: VP Contracting By: /s/ Henrik Edeback Name: Henrik
Edeback Title: Finance Director  LAW DEPARTMENT /s/ M. H. Skorella M. H.
Skorella

 

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1 Exhibit A  Scope of Work for Technology Transfer, Scale-Up and cGMP
Manufacturing of rPA Drug Substance Diosynth Biotechnology CONFIDENTIAL

 

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35 EXHIBIT B Program Price and Payment Schedule

 

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36 EXHIBIT C Prime Contract Flow-Down Terms Incorporation of FAR Clauses: The
Federal Acquisition Regulation (“FAR”) clauses clauses referenced below are
incorporated herein by reference, with the same force and affect as if they were
given in there full text, during the performance of this Contract. The reference
to the Contractor in the FAR clauses shall mean the Diosynth acting as the
immediate subcontractor to PharmAthene. The full text of a FAR clause may be
accessed electronically at: http://www.arnet.gov Notes: 1. Substitute
PharmAthene for “Government” or United States as applicable throughout this
clause. 2. Substitute PharmAthene “Director of Contracts” for “Contracting
Officer,” “Administrative Contracting Officer,” and “ACO” throughout this
clause. 3. Insert “and PharmAthene after “Government” or Contracting Officer
throughout this clause. 4. Insert “or PharmAthene” after Government throughout
this clause. 5. Communication or notification required under this clause from or
to the Contracting Officer and to and from the Contracting Officer shall be
through PharmAthene. 6. “Contracting Officer” shall mean the US Government
Contracting Officer for PharmAthene’s government Prime Contract under which this
Contract is entered. ItemFAR- #.SectionDateTitle 352.246-16Apr
1984Responsibility for SuppliesSee Note 1: title passes upon formal acceptance.
Does not eliminate right of rejection 852.203-12Sept 2005Limitation on Payments
to Influence Certain Federal Transactions (Over $100,000)See Note 3: Required
Certification by Subcontractor shall be submitted upon written request.
952.203-13Dec 2007Contractor Code of Business Ethics and Conduct 1152.211-5Aug
2000Material RequirementsSee Note 2 1252.222-19Jan 2006Child Labor – Cooperation
with Authorities and Remedies

 

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37 13  52.222-20  Dec 1996  Walsh-Healey Public Contracts Act  Applicable if the
work is to be performed in United States, Puerto Rico, and or the US Virgin
Islands. 14  52.222-21  Feb 1999  Prohibition of Segregated Facilities 15 
52.222-26  Mar 2007  Equal Opportunity 16  52.222-35  Sept 2006  Equal
Opportunity for Special Disabled Veterans, Veterans of the Vietnam Era, and
Other Eligible Veterans 17  52.222-36  Jun 1998  Affirmation Action for Workers
with Disabilities 18  52.222-37  Sept 2006  Employment Reports on Special
Disabled Veterans, Veterans of the Vietnam Era, and Other Eligible Veterans 19 
52.222-50  Aug 2007  Combating Trafficking in Persons  Must be flown down to
Contractor’s subcontractors 21  52.223-14  Aug 2003  Toxic Chemical Release
Reporting (Over $100,000) 22  52.225-1  Jun 2003  Buy American Act – Supplies
23  52.225-13  Feb 2006  Restrictions on Certain Foreign Purchases  See Notes 5
and 6 24  52.227-1  Jul 1995  Authorization and Consent  See Notes 3 and 4 25 
52.227-2  Aug 1996  Notice and Assistance Regarding Patent and Copyright
Infringement (Over $100,000)  See Note 3 27  52.227-14  Jun 1987  Rights in Data
– General  See Notes 1 and 2 89  52.222-39  Dec. 2004  Notification of Employee
Rights Concerning Payment of Union Dues or Fees 90  52.247-64  Feb 2006 
Preference for Privately Owned U.S.-Flag Commercial Vessels 

 

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38 EXHIBIT D Quality Agreement

 

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16 Definitions and Abbreviations Analytical Test Methods  Methods used for
analytical testing, including Standard Test Methods and Compendial Methods.
Anomalous  A result that does not follow the expected trend, either in
comparison with other batches or with respect to previous results collected
during a stability study. API  Active Pharmaceutical Ingredient, may be used
interchangeably with Bulk Drug Substance. Approval  The term “Approval” is
defined as concurrence between PharmAthene and Diosynth, such as agreement on a
proposed Change, as evidenced in writing and signed by both companies’
Authorized Quality Representatives. Approved Supplier  A supplier who has met
minimum approval standards and who has been approved to provide required items
or services that may impact product quality. Authorized Quality Representatives 
An individual named within the Quality Agreement with the authority to resolve
any disputes or conflicts relating to this Quality Agreement in a timely and
equitable manner and in compliance with all applicable quality and regulatory
requirements. Batch  Batches are defined as the material represented at the end
of the processing step for Bulk Drug Substance. Batch Packet  Relevant
documentation to be transferred to PharmAthene to facilitate the release of a
Batch. This packet consists of copies of QA reviewed; • executed processing
batch records •all Deviations and NOEs, which references CAPA’s initiated
•investigations •in-process and release assay results including raw data
•Certificate of Analysis (CoA) or analytical results •QA disposition of product
statement •batch genealogy (when applicable) •restriction summary •facility
summary including associated laminar flow environmental data 

 

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17 Bulk Drug Substance (BDS)  Any substance or mixture of substances intended to
be used in the manufacture of a drug (medicinal) product and that, when used in
the production of a drug, becomes an active ingredient of the Drug Product. Such
substances are intended to furnish pharmacological activity or other direct
effect on the diagnosis, cure mitigation, treatment, or prevention of disease or
to affect the structure and function of the body. Certificate of Analysis (CoA) 
An authentic document that states that a specific batch of material has been
evaluated in accordance with the Item Specification for that material.
Certificate of Conformance (CoC)  A PharmAthene supplied document that states a
specific lot of material has been evaluated by PharmAthene and conforms to all
product and regulatory requirements for further manufacturing or release. cGMP 
Current Good Manufacturing Practices pursuant to (a) the U.S. Federal Food, Drug
and Cosmetics Act as amended (21 USC 301 et seq.), (b) U.S. regulations in Title
21 of the U.S. Code of Federal Regulations Parts 210, 211, 600 and 610, (c) the
EU Guide to Good Manufacturing Practice for Medicinal Products, Volume 4, Part
lI including relevant sections of DIR 2003/94/EC, and (d) International
Conference on Harmonization (ICH) Guidance for Industry Q7 Good Manufacturing
Practice Guidance for Active Pharmaceutical Ingredients. Change Management  Any
change that: (a) has the potential to impact the quality of PharmAthene’s
Product; (b) impacts the regulatory commitments and/or reporting requirements of
the bulk drug substance; (c) requires re-qualification or re-validation of
PharmAthene’s methods, process or reference standards; and/or (d) results in
changing or modifying PharmAthene’s approved Item Specifications, test methods
or any document approved by PharmAthene. Critical Raw Materials  Critical raw
materials are raw materials that have the potential to impact process
performance attributes and/or product quality, compromise the final formulation
components or combine structurally or chemically with the active pharmaceutical
ingredient or drug product. Critical Consumable  A consumable that comes into
direct contact with the product post the CSIB stage.

 

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18 Date of Manufacturing  At Diosynth determined from the first date of fill
into final container or packaging for intermediate or Bulk Drug Substance.
Deviation  An unplanned event requiring investigation with 1) may affect the
quality or compliance status of the product, process, materials, equipment or
facility involved or 2) may not be in alignment with regulatory submissions.
Disposition  A recommendation given by Diosynth Quality on the suitability of
the Intermediate or BDS for further processing. Drug Substance (DS)  Synonymous
with Bulk Drug Substance (BDS). Drug Product  The dosage form in the final
immediate packaging intended for clinical use. Exception  An exception to a
validation protocol is either a deviation from or modification to
pre-established acceptance criteria; or an issue encountered after approval of
the protocol that requires retesting or additional test plans. For Cause Visit 
The term “for cause visit” is used to describe site visits, other than internal
audits or business discussions, for the purpose of reviewing documentation,
facilities or processes related to a specific deviation affecting Product
disposition. Item Specification  A set of criteria to which a material must
conform to be considered acceptable for its intended use. Master Batch Record  A
detailed description of PharmAthene specific production process outlining the
different actions an operator has to perform to complete the BDS production
process. A scaled copy of the master batch record is the batch production
record. Notice of Events (NOE)  Events which are not considered deviations.
These events have no impact to products or materials because the incident is a
departure from Standard Operating Procedures (SOPs), manufacturing/testing
instructions, maintenance/calibration out of tolerances, environmental
monitoring excursions, deemed minor in nature and can be verified by existing
documentation available at the time of observation. Out-of-Specification (OOS) 
A test that is valid but the sample result does not comply with the established
specification. In this case, “result” is defined as the final reportable value
as determined according to the test 

 

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19 method. Such a reportable value may be comprised of multiple individual
determinations (i.e., replicates) as per the test method. Only reportable values
are compared to specifications; therefore only a reportable value may constitute
an OOS. Process Consumable  Disposable equipment or equipment parts that may/may
not come in contact with an intermediate or bulk drug substance. A consumable
may be single or for multiple use, and may/may not be sterile. Process
Consumables  Process Consumables include any Process Consumable or Raw Material
used in the manufacture of an intermediate or BDS that do not themselves
participate in a chemical or biological reaction. Such other materials include:
media, resins, filters, membranes, product-contact materials or surfaces,
disposable analytical test kits, analytical columns dedicated to the Program,
disposable containers, and subcontracted analytical testing are considered to be
process consumables. Process Profiling  A campaign of three (or more) batches
performed at scale, in advance of Process Validation, to demonstrate the final
process can perform effectively and reproducibly and meet the predefined
acceptance criteria.  Product  Any (a) API/Bulk Drug Substance, or (b) Drug
Product comprised of API/Bulk Drug Substance, or (c) intermediate(s) of (a) or
(b), in each case as specified in the applicable Scope. Production Batch Record 
An accurate reproduction of a Master Batch Record used as instruction for and
documentation of production activities. QC Raw Data  Analytical worksheets or
notebook pages used to record analyses, including details of preparation and
expiry dates of reagents, sample and standard solutions and details of
instruments used and associated printouts, sequences and methods. For HPLC,
single injection reports for all injections, this includes integration events
and the sequence table. For SDS-PAGE and IEF, original gel scans, processed gels
and details of processing parameters. Any analytical report or CoA from a
sub-contractor. Raw Material  Any ingredient intended for use in the manufacture
of an intermediate or API, including those that may not appear in the final
formulation. These include chemicals used directly and/or indirectly in the
manufacturing process. Release  Dispositioned material is approved by
PharmAthene for further processing, as evidence by Diosynth’s receipt of
PharmAthene’s CoC.

 

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20 Significant Deviation  An unplanned event requiring investigation which has a
known serious negative impact on the quality of the product, process, materials,
equipment or facility, represents a quality system failure with serious negative
impact, or is not in alignment with regulatory submissions. Standard Test
Methods  An approved document describing a method of testing which establishes a
particular course of action or way of performing an activity as established by
Diosynth. Statement of Compliance  A Diosynth QA Disposition of Product
Statement stating that a specific Batch of BDS complies with all Product, GMP
and regulatory requirements and is signed by an authorized representative of
Diosynth. 

 

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39 EXHIBIT E Earned Value Management System 1. Reporting a. Diosynth shall
provide a detailed schedule in line with the Work Breakdown Structure (WBS),
provided by PharmAthene. b. Diosynth shall submit monthly reports to PharmAthene
compared against the agreed baseline plan. The monthly reports will be submitted
electronically by the end of the 2nd business day following the end of each
calendar month. c. Diosynths’ reporting will be submitted in accordance with the
WBS structure. Each report must include: i. Monthly Technical Progress Report by
work package; ii. Any schedule changes or slippages by work package; and iii. An
updated cash flow analysis spreadsheet. 2. Schedule a. Setting the Baseline
schedule i. PharmAthene will provide Diosynth with a WBS for its portion of the
work. ii. Diosynth will provide a detailed schedule (Microsoft project gantt)
that breaks down the tasks into activities that are four (4) weeks or less in
duration. Some management activities may be longer, but tasks that are
discretely measurable and/or have defined products should follow this guideline
wherever possible. b. Monthly Schedule Status Reports i. Diosynth shall provide
schedule updates to PharmAthene on a monthly basis (in accordance with the
project schedule outlined above). Actual start and end dates must be reported
and percentage (%) completion against all active activities. Any proposed
changes to the forward planned activities should be listed, for
discussion/agreement by PharmAthene.

 

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40 3. Budget a. Diosynth shall provide a payment schedule by work package to
PharmAthene. The time-phased budget will include all subcontracted costs,
purchased materials costs as well as Diosynth costs. This payment schedule will
be structured to show how the invoices will be presented. b. Monthly Status
Reports i. As the program progresses, changes to the cost and schedule may be
negotiated between PharmAthene and Diosynth. If those changes impact either the
program Master Schedule or budget, those changes must be formally approved. c.
Cost to complete. Diosynth shall highlight in the monthly report any changes to
the Scope or to the proposed costs, and therefore any change to the overall cost
to complete. 4. Risk Management a. Diosynth shall, however, provide input and
feedback to PharmAthene during routine program status meetings on high
impact/high probability risks and opportunities on the program and discuss and
agree how identified risks should be mitigated. Monthly program management
updates shall include any changes in risk assessment.