Exhibit
10.29

 



AMENDED
AND RESTATED SUPPLY AGREEMENT




AMENDED
AND RESTATED SUPPLY AGREEMENT dated as
of December 3, 2004, by and between DISCOVERY LABORATORIES, INC. (“Seller”) and
LABORATORIOS DEL DR. ESTEVE, S.A., a company organized and existing under the
laws of Spain (“Buyer”).

 

WHEREAS,
Seller and Buyer are parties to a Amended and Restated Sublicense and
Collaboration Agreement (the “Revised
Collaboration Agreement”) dated
as of the date hereof pursuant to which Buyer and Seller have agreed to
collaborate in a product development, commercialization and marketing effort for
the Licensed Products (such term and other capitalized terms used and not
otherwise defined herein having the meanings assigned to them in the Revised
Collaboration Agreement); and 

 

WHEREAS,
Buyer hereby agrees to purchase one hundred percent (100%) of its requirements
of Licensed Products from Seller, and Seller hereby agrees to supply one hundred
percent (100%) of Buyer’s requirements of Licensed Products, pursuant to the
terms and conditions of this Agreement.

 

NOW,
THEREFORE, in consideration of the foregoing premises and the mutual promises
and covenants set forth below, Seller and Buyer mutually agree as
follows:

 

ARTICLE
I

DEFINITIONS

 

As used
in this Agreement, the following terms shall have the following
meanings:

 

“Current
Good Manufacturing Practices” or “cGMP” shall
mean (i) with respect to the United States, the good manufacturing practices
required by the FDA and set forth in the Federal Food, Drugs and Cosmetics Act
or FDA regulations, policies or guidelines in effect at a particular time for
the manufacture, testing and quality control of pharmaceutical materials and
(ii) with respect to any other country of the Licensed Territory, the standards
for the manufacture and testing of pharmaceutical materials that are imposed by
any regulatory authority having jurisdiction.

 

 




















 

“Cost
of Goods”
means the
costs incurred (including, without limitation, costs incurred with respect to
Unrelated Third parties) for the Manufacture of Licensed Product (including, for
the avoidance of doubt, the Manufacture of any device and related apparatus for
administration thereof) for the Licensed Territory, all direct
costs, and a reasonable fully-absorbed allocation of indirect and overhead
expenses directly attributable to the Manufacture of the Licensed Product for
the Licensed Territory. Direct costs shall include, without limitation, raw
materials, equipment and labor and costs of plant operations, and plant support
services. Indirect and overhead expenses shall include, without limitation,
indirect charges incurred by or on behalf of Seller in connection with
Manufacturing process improvements, spoilage, waste, storage, manufacturing
scale up, Manufacturing site qualification, RA, QA and QC (including testing),
supply chain management, capital equipment, customs duties or excise taxes,
costs for plant operations and support services (including utilities,
maintenance, engineering, designing, redesigning, safety, human resources,
finance, and plant management) and similar activities to the extent reasonably
allocated to the Licensed Product in the Licensed Territory including
depreciation and amortization of capitalized costs of any of the foregoing;
provided, that the royalties, if any, payable by Seller to its licensor(s) shall
be deemed to not be a component of Cost of Goods. All components of Cost of
Goods shall be allocated on a basis consistent with United States GAAP and
consistent with the cost accounting policy applied by Seller to other products
that it produces and, if it does not Manufacture any other products, consistent
with the industry standard. The
parties will endeavor in good faith to establish a “standard cost” per unit for
purposes of ongoing cost accounting and invoicing purposes, which “standard
cost” shall be reviewed and updated periodically as appropriate. The parties
shall reconcile the standard cost charges against the standard cost per unit
actually paid by Buyer and appropriate credit or payment shall be made to effect
such reconciliation as directed by the Steering Committee not less than
annually.

 

“Facility” means
an Owned Facility or a Contract Facility (in each case as defined in Section
3.1).

 

“First
Commercial Sale” shall
mean the first commercial sale by Buyer, its Affiliates or sublicensees of any
Licensed Product following final EMEA or other regulatory approval required to
market such Licensed Product commercially in the Licensed Territory for use in
humans.

 

“Licensed
Product Purchase Price” shall
mean, on a Licensed Product-by-Licensed Product basis, the sum of (i) Cost of
Goods together with any markup as set forth in Section 2.2; and (ii) appropriate
insurance, freight charges and, where applicable, custom duties.

 

“Manufacture” or
“Manufacturing” shall
mean manufacturing, filling, processing, testing, engineering, designing,
redesigning, packaging, storing, quality control, quality assurance, releasing,
disposing, handling, shipping, and all other activities undertaken or required
to be undertaken in order to manufacture and supply Licensed Product in its
final packaging (including, without limitation, package inserts and components
reasonably necessary for sale of the finished Licensed Product to the ultimate
consumer) and related devices and apparatus for administration
thereof.

 

 







2












 

 

“Net
Sales”
shall
mean that sum determined by deducting from the gross amount billed for Licensed
Products by the Buyer or any of its Affiliates or sublicensees in an arms length
transaction to customers, that are Unrelated Third Parties of the Buyer or of
any of its sublicensees;

 



	
      
	
      (i)
	
      transportation
      charges or allowances, including freight pickup allowances, and packaging
      cost, if any;





	 	 	 






	
      
	
      (ii)
	
      trade,
      quantity or cash discounts, services allowances and independent broker’s
      or agent’s commissions, if any, allowed or
paid;





	 	 	 






	
      
	
      (iii)
	
      credits
      or allowances for the Licensed Products, if any, given or made on account
      of price, adjustments, returns, bad debts, off-invoice promotional
      discounts, rebates, chargebacks, any and all federal, state or local,
      government rebates or discounts whether in existence now or enacted at any
      time during the term of this Agreement, volume reimbursements, the gross
      amount billed and collected for rejected Licensed Products or Licensed
      Products subject to recall or destruction (voluntarily made or requested
      or made by an appropriate
      government agency, sub-division or department);
and





	 	 	 






	
      
	
      (iv)
	
      any
      tax, excise or other governmental charge upon or measured by the
      production, sale, transportation, delivery or use of the Licensed
      Product;





	 	 	 





	
      
	
      (v)
	
      in
      each case determined in accordance with generally accepted accounting
      practices.







“Specifications” shall
mean the Licensed Product specifications contained in the registration dossier
of the Licensed Product as approved by the EMEA and the other regulatory
authorities having jurisdiction in the Licensed Territory, as the same may be
amended from time to time in accordance with applicable regulatory procedures.


 

“Transfer
Price” shall
mean as defined in Section 2.2.

 

“Unrelated
Third Parties” shall
mean Persons other than Buyer and Seller and Affiliates and sublicensees of
Buyer and Seller or any other related Persons and shall include hospital
formularies and other similar critical and therapeutic care providers who
typically purchase and administer products and therapies such as the Licensed
Products.

 

ARTICLE
II

PURCHASE
AND SALE OF PRODUCTS

 

Section
2.1. Purchase
and Sale; Delivery; Acceptance or Rejection. (a)
Seller agrees to sell to Buyer such quantities of Licensed Products,
manufactured in conformity with cGMP and meeting the Specifications, as Buyer
may order in accordance with the terms and conditions of this Agreement. Subject
to the provisions of Section 7.2 hereof, so long as this Agreement shall remain
in effect, Buyer agrees, for itself and its Affiliates and sublicensees, to
satisfy solely through the purchase of Licensed Products from Seller under this
Agreement one hundred percent (100%) of Buyer’s and its Affiliates’ and
sublicensees’ requirements for Licensed Products.

 


 







3












(b) Purchase
orders issued by Buyer to Seller with respect to purchases of Licensed Products
shall be subject to, and governed exclusively by, the terms of this Agreement.
Buyer agrees not to issue to Seller any purchase order containing terms
different from those set forth herein and further agrees that no shipment of
Licensed Product by Seller in accordance with a nonconforming purchase order
shall be deemed to be acceptance of any terms of such purchase order conflicting
with the terms of this Agreement except to the extent such conflicting terms are
initialed by Seller with the words “change accepted” written thereon by Seller.
Except as aforesaid, this Agreement shall override all other conflicting terms
of purchase and/or sale contained in any purchase and/or sale document generated
by Seller or Buyer.

 

(c) Subject
to paragraphs (d) and (e) below, all Licensed Product sold to Buyer hereunder
shall be delivered FCA Seller’s
Facility or distribution warehouse (Incoterms 2000). Seller shall assist Buyer
in arranging transportation in the manner specified by Buyer, in accordance with
applicable regulatory requirements, to any destinations specified in writing
from time to time by Buyer.

 

(d) Buyer
shall bear all costs and expenses relating to transportation and delivery to
Buyer’s designated distribution sites in the Licensed Territory (including
without limitation all freight charges, customs, duties, taxes, insurance
premiums and all expenses relating to validation of temperature-controlled
shipment conditions), regardless of whether Seller delivers the Licensed
Products to Buyer from Seller’s Facility or distribution site/ warehouse whether
in Europe or the United States; provided,
however, that in
the event that Seller transports Licensed Products from its United States
Facility and/ or its United States distribution site/ warehouse to a European
distribution site/ warehouse or Facility, if any, then delivers such Licensed
Products to Buyer’s designated distribution sites in the Licensed Territory, the
Steering Committee shall promptly meet to establish in good faith a system
whereby Buyer does not bear any such costs in excess of those that would have
been incurred if Seller had delivered such Licensed Products directly from its
United States Facility or distribution site/ warehouse to Buyer’s designated
distribution sites in the Licensed Territory.

 

(e) Seller
shall maintain a cGMP quality control program, as required by governmental
regulations in the Licensed Territory, with respect to the Manufacture of
Licensed Products. Seller will perform appropriate testing programs, and provide
Buyer with documentation arising from such testing programs, as may be agreed to
by the parties or required by any applicable regulatory authority. Finished
Licensed Product testing for release in the Licensed Territory or required by
the EMEA for Licensed Product received by Buyer shall be performed by Seller at
its designated approved testing site and paid for by Seller for Licensed Product
shipped to Buyer. Seller shall provide Buyer with each Licensed Product shipment
with the corresponding certificate of analysis conducted in a country of the
European Union, certifying that each delivery of Licensed Product was produced
and tested in compliance with (i) the Specifications, (ii) cGMP requirements and
(iii) all applicable regulatory documents. The parties will discuss in good
faith the possibility that the quality control for Licensed Product in the
European Union (“EU-QC”) shall be conducted by Buyer for an agreed upon fee to
be paid by Seller. Should, ultimately, Buyer not be the agreed upon party to
conduct EU-QC, Seller shall use its best commercial efforts to provide that
certain equipment acquired, as of the date hereof, by Buyer for the purposes of
conducting such EU-QC shall be purchased by such agreed upon Unrelated Third
Party that shall conduct the EU-QC.

 

 







4












 

(f) Buyer may
reject any portion of any shipment of Licensed Product which does not conform
with the Specifications. In order to reject a shipment, Buyer must (i) give
notice to Seller of Buyer’s intent to reject the shipment within thirty (30)
days of receipt together with a detailed written indication of the reasons for
such possible rejection, and (ii) as promptly as reasonably possible thereafter,
but in any event within an additional thirty (30) days, provide Seller with
notice of final rejection and the full basis therefor. After notice of intent to
reject is given, Buyer shall cooperate with Seller in determining whether
rejection is necessary or justified. If such notices of intent to reject and
final rejection are not timely received, Buyer shall be deemed to have accepted
such delivery of Licensed Product and to have waived all claims for
non-conformity with the Specifications, damage, defect or shortage, other than
claims for latent defects not capable of discovery by Buyer upon physical
examination. In the event of latent defects not capable of discovery by Buyer
upon physical examination, Buyer shall inform Seller within fifteen (15) days of
discovering any such defect. Buyer shall be entitled to an offset of the
Licensed Product Purchase Price (reduced, however, by any customs or other
charges related thereto that are recoverable or avoidable by Buyer) of properly
rejected Licensed Products at the time they are ultimately rejected, provided
that if Seller disputes the rejection, refund shall be made, if at all, at the
time the dispute is finally resolved. Seller shall notify Buyer as promptly as
reasonably possible (but in any event no later than thirty (30) days after
receipt of Buyer’s final rejection notice) whether it accepts Buyer’s basis for
any rejection. In the event Seller disputes Buyer’s rejection, the parties will
select a mutually agreeable independent third party laboratory which shall
determine whether the rejected Licensed Products meet the applicable
Specifications and shall confirm or dissent from Buyer’s rejection of Licensed
Products. If the parties are unable to agree on a laboratory firm within thirty
(30) days after receipt of Buyer’s final rejection notice, the laboratory shall
be appointed by computer generation of a random number, with an even number
signifying Seller’s right to designate the laboratory and an odd number
designating Buyer’s right to designate the laboratory. If the independent tester
confirms Buyer’s rejection, Seller will pay the fees of the tester, and if the
tester dissents from Buyer’s rejection, Buyer will pay the fees.

 

(g) Whether
or not Seller accepts Buyer’s basis for rejection, promptly on receipt of a
notice of rejection, Seller shall use its commercially reasonable efforts, at
Buyer’s request, to provide replacement Licensed Product, which shall be
purchased by Buyer as provided in this Agreement as soon as reasonably
practicable.

 

(h) Unless
Seller requests the return to it of a rejected batch within sixty (60) days of
receipt of Buyer’s final notice of rejection, Buyer shall, at Seller’s cost,
destroy such batch promptly and provide Seller with certification of such
destruction. Buyer shall, upon receipt of Seller’s request for return, promptly
dispatch said batch to Seller, at Seller’s cost.

 

 







5












 

(i) No change
to the Specifications shall be effective unless the same shall be required or
permitted by any regulatory agency having jurisdiction over (i) any country in
the Licensed Territory, (ii) Buyer or (iii) the Licensed Products (and if not
required, shall be agreed to in writing by Buyer and Seller). Seller shall give
Buyer advance notice of any change to the Specifications required by a
regulatory agency.




2.2 Transfer
Pricing. Buyer
shall purchase Licensed Products from Seller at a “Transfer Price” that is
determined on a Licensed Product-by-Licensed Product basis and otherwise as
follows: 

 

(a) With
respect to Surfaxin® for
RDS and/ or BPD, the
Transfer Price to be paid by Buyer to Seller will be the sum of the
following:

 

 


	(i)  	
      [***]%
      of Seller’s Cost of Goods for the subject Licensed Product supplied for
      the Licensed Territory;




 

 


	(ii)  	
      Seller’s
      royalty obligations due with respect to the subject Licensed Product sold
      by Buyer in the Territory; and,




 

 


	(iii)  	
      X%
      of Net Sales of the subject Licensed Product in the Territory (to be
      determined on a country-by-country basis).




 

 

Provided,
however, that the Transfer Price determined in accordance with this Section
2.2(a) shall be equal to [***]% of Net
Sales of the subject Licensed Product in the Territory (to be determined on a
country-by-country basis).

 

 

(b) With
respect to the Licensed Product for the treatment of ARDS, the
Transfer Price to be paid by Buyer to Seller will be the sum of the
following:

 

 


	(i)  	
      [***]%
      of Seller’s Cost of Goods for the subject Licensed Product supplied for
      the Licensed Territory;




 

 


	(ii)  	
      [***]%
      of Seller’s royalty obligations due with respect to the subject Licensed
      Product sold by Buyer in the Territory;
and,




 

 


	(iii)  	
      X%
      of Net Sales of the subject Licensed Product in the Territory (to be
      determined on a country-by-country basis).




 

 

Provided,
however, that the percentage to be determined pursuant to Section 2.2(b)(iii),
above, shall be mutually determined in good faith by 

 

 

Information
marked by [***] has been omitted pursuant to a request for confidential
treatment. The omitted portion has been separately filed with the Securities and
Exchange Commission.

 

 







6












 

 

the
parties (X) within 6 months of the date of completion of a Phase 3 clinical
trial for the subject Licensed Product (defined as the date when all substantive
data shall be available to the parties) and (Y) based upon a methodology that is
intended to ensure that both Buyer and Seller achieve reasonable profits with
respect to the Licensed Product; provided,
however, that in
no case shall the Transfer Price be lower than [***]% or
higher than [***]% of Net
Sales of the subject Licensed Product in the Territory (to be determined on a
country-by-country basis).

 

 

(c) With
respect to all other Licensed Products, the
Transfer Price (determined on a Licensed Product-by-Licensed Product basis) to
be paid by Buyer to Seller will be the sum of the following (provided, however,
that this Section 2.2(c) shall specifically exclude any New Products, as such
term is defined in Section 2.5 of the Revised Collaboration
Agreement):

 

 


	(i)  	
      [***]%
      of Seller’s Cost of Goods for the subject Licensed Product supplied for
      the Licensed Territory;




 

 


	(ii)  	
      [***]%
      of Seller’s royalty obligations due with respect to the subject Licensed
      Product sold by Buyer in the Territory;
and,




 

 


	(iii)  	
      X%
      of Net Sales of the subject Licensed Product in the Territory (to be
      determined on a country-by-country basis).




 

 

Provided,
however, that the percentage to be determined pursuant to Section 2.2(c)(iii),
above, shall be mutually determined in good faith by the parties (X) within 6
months of the date of completion of a Phase 3 clinical trial for the subject
Licensed Product (defined as the date when all substantive data shall be
available to the parties) and (Y) based upon a methodology that is intended to
ensure that both Buyer and Seller achieve reasonable profits with respect to the
Licensed Product; provided,
however, that
the parties acknowledge that it is their mutual intent that the target Transfer
Price determined pursuant to this Section 2.2(c) shall be [***]% and,
further, that in no case shall the Transfer Price be lower than [***]% or
higher than [***]% of Net
Sales of the subject Licensed Product in the Territory (to be determined on a
country-by-country basis).

 

For the
avoidance of doubt, the parties hereby acknowledge and agree that the Transfer
Price for each Licensed Product determined in accordance with this Section 2.2
shall be determined by the parties in good faith and shall be based upon a
mutually agreeable methodology that is intended to ensure that both Buyer and
Seller achieve reasonable profits with respect to sales thereof.




Information
marked by [***] has been omitted pursuant to a request for confidential
treatment. The omitted portion has been separately filed with the Securities and
Exchange Commission.

 

 







7












2.3 Reports,
Reconciliation and Audit, Transfer Price Payments. 

 

(a)  Seller
shall invoice Buyer on the date of each shipment of Licensed Products delivered
by Seller to Buyer, its Affiliates or sublicensees at the Licensed Product
Purchase Price. Buyer shall pay Seller’s invoices no later than thirty (30) days
following the date of the applicable invoice by
electronic funds transfer in immediately available funds to such bank account(s)
as Seller shall designate. Notification as to the date and amount of any such
electronic funds transfer shall be provided to Seller at least two (2) Business
Days prior to such transfer.




(b) Reports.
Buyer, within 30 days after the first day of January, April, July, and October
of each contract year, shall deliver to Seller a true and accurate report giving
such particulars on a monthly basis of each of the Licensed Products: (i)
shipped and invoiced by Seller to Buyer; (ii) invoiced by Buyer and its
Affiliates and sublicensees to Unrelated Third Parties; (iii) the gross sales of
such Licensed Products (disclosing the quantity of each of the Licensed
Products) and the calculation of Net Sales thereon; (iv) the calculation, in
accordance with Section 2.2 of this Agreement, of the Transfer Prices thereon,
in each case during the preceding 3 months under this Agreement (each a
“Contract Quarter”) as are pertinent to perform an accounting of amounts due
under this Agreement and (v) the difference between the Transfer Price and the
Licensed Product Purchase Price invoiced by Seller in the Contract Quarter (the
“Balance”). The reports referred to herein (each a “Report”) shall be separately
delineated not only with respect to the Licensed Products but also with respect
to the different countries of the Licensed Territory and shall be in a standard
format agreed by Buyer and Seller prior to the first Report
delivery. Transfer
Price amounts owed by Buyer to Seller shall be calculated on a
product-by-product and country-by-country basis taking into account, in each
instance, the average of the Euro/ U.S. Dollar exchange rate for the first and
last business day of each month of the Contract Quarter as quoted in the New
York version of the Wall Street Journal.




(c) Balance
Payments. Balance
amounts owed by Buyer to Seller under this Section 2.3 shall be paid in U.S.
Dollars and shall
be free of all withholdings of any nature whatsoever (including, without
limitation, withholding taxes, monetary transfer fees, or similar taxes and
charges), and in the event any withholding is required, Buyer shall pay the same
together with such additional amount as is required so that each such payment
shall be, under any circumstances and in any event, in the amount as set forth
or referred to herein. Balance amounts shall be payable within five (5) Business
Days of receipt by Buyer of the relevant invoice issued by Seller that shall be
in accordance with the applicable Report (as set forth in Section 2.3(b)) by
electronic funds transfer in immediately available funds to such bank account(s)
as Seller shall designate. Notification as to the date and amount of any such
electronic funds transfer shall be provided to Seller at least two (2) Business
Days prior to such transfer.

 

 







8













 

(d) Reconciliation
and Audit. 





	(i)  	
      Reconciliation.
      Within 15 days of Seller’s receipt of a Report provided by Buyer to Seller
      in accordance with Section 2.3(b), Seller shall inform Buyer in writing of
      Seller’s assent or non-assent with respect to the calculations contained
      therein. In the event that Seller does not agree with such calculations,
      it shall notify Buyer of the reasons therefor and the parties hereby agree
      to promptly discuss and reconcile any material differences in the
      calculation of Transfer Price amounts owed by Buyer to Seller and make
      appropriate adjustment with respect
thereto.





	(ii)  	
      Audit.
      Each party shall keep such records as are necessary to determine
      accurately the sums due under this Agreement. Such records shall be
      retained by the party (in such capacity, the “Recording Party”) and, at
      any time during the applicable contract year and for 3 contract years
      thereafter, at the prior written request and expense of the other party,
      shall be made available for inspection, review, and audit during normal
      business hours, by an internationally recognized independent certified
      public accounting firm appointed by such other party and reasonably
      acceptable to the Recording Party for the sole purpose of verifying the
      Recording Party’s accounting reports and payments made or to be made
      pursuant to this Agreement; provided, however, that such audits may not be
      performed by either party more than once per contract year. 
      The results of each inspection, if any, shall be binding on both parties
      except in the event of fraud. The auditing party shall pay for such
      inspections, except that in the event where the adjustment shown by such
      inspection is greater than 10% of the amount incurred, then the Recording
      Party shall pay for such inspection.







ARTICLE
III

PRODUCTION
OF PRODUCTS

Section
3.1. Manufacturing
of Licensed Products.




(a) Until
such time, if any, as a Seller-owned manufacturing facility (an “Owned
Facility”) is
qualified for the manufacture of Licensed Products sold to Buyer hereunder,
Seller shall manufacture or have manufactured the Licensed Products sold to
Buyer hereunder at a contract manufacturing facility (a “Contract
Facility”)
selected by Seller and reasonably acceptable to Buyer. The parties hereby
acknowledge and agree that it is the intent of the Seller that as soon as it may
be practicable Seller shall maintain at least one alternate production site for
Licensed Products sold to Buyer hereunder, which alternate production site, if a
Contract Facility, shall also be selected by Seller and reasonably acceptable to
Buyer. Seller may also satisfy its obligation for an alternate manufacturing
facility through a sublicensing arrangement complying with Section
3.2.

 

 







9













 

(b) Seller
shall be responsible for obtaining and maintaining all necessary licenses,
registrations, authorizations and approvals (other than such licenses,
registrations, authorizations and approvals that are required to be obtained or
made by an owner or operator of a Contract Facility) which are necessary to
manufacture, handle, store, label, package, transport and ship Licensed Products
under cGMP conditions and in accordance with other regulatory requirements.





(c) Seller
shall provide Buyer with copies of any correspondence sent from Seller to
governmental entities relating to the manufacturing, handling, storage,
labeling, packaging, transportation or shipment of Licensed Products at the time
such correspondence is sent by Seller, purged of Seller proprietary and/or
confidential information and trade secrets. Seller shall provide Buyer with
copies of any comments, responses, notices or other correspondence received by
Seller from any governmental entity relating to the foregoing matters within
five (5) Business Days of receipt of such correspondence by Seller, purged of
any Seller proprietary information and/or trade secrets.




(d) Seller
shall furnish to Buyer (i) a summary of any report or correspondence issued by a
governmental entity (or a third party authorized by a governmental entity) in
connection with a visit or inquiry relating to any Owned Facility or, to the
extent Seller is provided with such information, any Contract Facility,
including but not limited to, any FDA Form 483 or warning letter and (ii) not
later than ten (10) Business Days after the time Seller provides such to a
governmental entity, summaries of any and all proposed responses or explanations
relating thereto, in each case purged of trade secrets or other confidential or
proprietary information of Seller. After the filing of a response with the
appropriate governmental entity, Seller will notify Buyer of any further oral
and/or written contacts with a governmental entity (or a third party authorized
by a governmental entity) relating to the manufacturing, handling, storage,
labeling, packaging, transportation or shipment of Licensed
Products.




(e) If
requested in writing by Buyer, Seller shall permit Buyer to inspect, once per
year, during normal business hours, Seller’s Facilities and manufacturing
records to the extent Buyer deems it reasonably necessary to enable Buyer to
verify compliance with any statutory or regulatory requirements to which Buyer
is subject and which are applicable to the manufacture and/or packaging of
Licensed Products. Notwithstanding the foregoing, Buyer shall have the right to
inspect Seller’s Facilities and manufacturing records at any time, in the event
that there is a quality or regulatory problem with any Licensed Product. If, as
a result of any such inspection, Buyer reasonably and in good faith concludes
that Seller is not in compliance with any regulatory obligations or requirements
applicable to Buyer, Buyer shall so notify Seller in writing, specifying such
areas of noncompliance in reasonable detail and Seller shall remedy the problems
identified.

 

 







10













 

(f) Seller
agrees to use all reasonable efforts to promptly rectify or resolve any
deficiencies noted by a governmental entity (or third party authorized by a
governmental entity) in a report or correspondence issued to Seller with respect
to an Owned Facility or a Contract Facility.




Section
3.2. Subcontracting. It is
understood and agreed that Seller shall have the right in connection with its
performance hereunder to contract with such third parties as Seller deems
advisable to manufacture Licensed Products, provided that (i) manufacture and/or
quality control by any such third party has been authorized by the competent
regulatory authorities in the Licensed Territory, (ii) Seller shall provide
Buyer with not less than fifteen (15) Business Days’ advance notice of its
intent to contract with any third party and shall identify such third party to
Buyer, (iii) Buyer may audit Seller’s contractor’s qualifications and (iv)
Seller shall remain fully liable for its performance hereunder to the same
extent as if such contractor had not been engaged.




Section
3.3. Exclusivity. On a
country-by country basis, for so long as the Revised Collaboration Agreement
remains in effect with respect to any such country in the Licensed Territory,
until such time as Buyer has a fully paid-up license in such country in
accordance with the terms of the Revised Collaboration Agreement, Seller shall
supply Licensed Products only to Buyer intended for distribution within such
country. 




Section
3.4. Allocation
of Supplied Licensed Products. In the
event of shortage or inability to timely supply the required Licensed Product,
Seller undertakes and agrees that the amounts of Licensed Products available
shall be allocated on an equitable basis according to forecasts received and
that Buyer shall not be treated less favorably than Seller, its Affiliates and
other distributors and/or sublicensees. 




ARTICLE
IV

QUANTITY
FORECASTS; ORDERS

 

Section
4.1. Forecasts. (a) In
order to assist Seller in planning its production, commencing sixty (60) days
prior to the calendar month in which the First Commercial Sale of Licensed
Products takes place in any country in the Licensed Territory, Buyer shall
provide Seller with a twelve (12) month rolling forecast of the quantities of
such Licensed Product required by Buyer, by month, for the following twelve (12)
months. The first three (3) months of such projections shall constitute a
binding commitment to order the quantity of such Licensed Product forecast for
such period, provided that with respect to the first twelve (12) months
following such First Commercial Sale of Licensed Products in any country in the
Licensed Territory, only the first month’s forecast with respect to such country
shall be binding provided that the portion of such forecast relating to such
country is separately stated and is so indicated. Projections for months four
(4) through twelve (12) (or, as provided above with respect to product launches
in the Licensed Territory, months two (2) through twelve (12)) shall be made in
good faith and shall constitute Buyer’s best estimates of future orders, but
shall not be binding on Buyer. Updated twelve (12) month forecasts will be
provided at the beginning of each succeeding calendar month for the twelve (12)
month period commencing sixty (60) days thereafter. Buyer’s forecast shall also
describe anticipated regulatory modifications to any English language version of
Licensed Product labeling proposed by Seller. Seller shall, no later than
fifteen (15) Business Days after receipt of each such forecast, notify Buyer in
writing of any prospective problems of which Seller is aware of that might
prevent Seller from meeting Buyer’s forecast order quantities or estimated
delivery dates.

 

 







11













 

(b) Notwithstanding
Buyer’s obligation to provide forecasts as set forth in Section 4.1(a), Buyer
hereby agrees that it shall provide Seller with its firm purchase orders for
Licensed Product in accordance with the lead-times and batch size increments to
be specified by Seller in writing as soon as reasonably practicable but in any
event before Buyer places its first order for Licensed Products, such lead-times
and batch sizes to be applicable during the term of this Agreement unless
otherwise agreed in writing by the parties; provided,
however, that
Buyer shall have the right, up to the date of manufacture, to issue binding
change orders to increase or decrease such purchase orders with the consent of
Seller, which shall not be unreasonably withheld so long as Buyer agrees to
compensate Seller for any damages suffered by Seller as a consequence of such
change order (including damages attributable to loss of allocable overhead
recoupment, but excluding loss of profit), provided that Seller shall advise
Buyer before carrying out any change order of Seller’s estimated increased cost
of doing so. Buyer agrees to accept partial shipments of Licensed Products
should, for any reason, it become necessary to ship in advance of order
completion, provided that Seller shall (i) give advance written notice to Buyer
of such shipment and (ii) bear any additional cost to Buyer of receiving
Licensed Products in partial shipments. Seller shall make all commercially
reasonable efforts to comply with any revisions to purchase order requirements
consistent with the provisions of Section 4.1(a) and this Section 4.1(b).
Seller, within ten (10) Business Days after the date that a purchase order is
issued to it, shall acknowledge receipt of Buyer’s order and confirm in writing
that the order can be supplied. For purposes hereof, a purchase order will be
deemed issued on the earlier of (i) the date that Seller receives the purchase
order via mail and (ii) the date of receipt of the telecopied purchase
order.




Section
4.2. Purchase
Order Contents. (a)
Each purchase order shall specify the quantity, concentration and container size
of Licensed Product ordered within the Specifications, and the required delivery
schedule. Seller shall use reasonable commercial efforts to deliver each
shipment of Licensed Product within five (5) days of the delivery dates
specified in the delivery schedule set forth in Buyer’s purchase order relating
thereto (provided that in no event shall any such delivery dates be less than
the lead time established pursuant to Section 4.1(b), unless otherwise consented
to by Seller) using carriers mutually agreeable to Buyer and Seller. Seller
shall use commercially reasonable efforts to accommodate “Rush” orders from
Buyer.

 

 







12













 

(b) When all
appropriate validation and quality control release criteria for a particular
shipment of Licensed Product have been met (the “Release
Date”),
Seller shall notify Buyer in writing of the expected delivery dates (including
details of destination, date and time) to enable delivery and receipt to be
coordinated. Title and risk of loss to Licensed Products shall pass to Buyer
upon delivery of Licensed Products by Seller to the carrier.




Section
4.3. Packaging. (a)
Licensed Products shall be delivered to Buyer as finished goods in final
packaged and labeled form, quality controlled in accordance with Section 2.1(e)
and ready for resale to the ultimate customer and in accordance with the
packaging requirements set forth in the Marketing Regulatory
Approvals.




(b) Buyer
shall distribute all Licensed Products as packaged by Seller in accordance with
Section 4.3(a). In no event shall any Licensed Products be repackaged or
reconfigured by Buyer without Seller’s prior written consent. 




Section
4.4. Labeling. With
respect to each country in the Licensed Territory, prior to distribution of a
Licensed Product, Buyer shall provide Seller with evidence of the regulatory
approval of labeling specifications for such Licensed Product in such country
and any variations required by the applicable regulatory agency. All such
materials shall be provided to Seller together with a proper English
translation. Seller shall distribute Licensed Products bearing only labeling
supplied or approved by Buyer and in accordance with such regulatory
requirements. 




ARTICLE
V

CERTAIN
OBLIGATIONS OF BUYER

 

Buyer
agrees to ascertain and comply with all applicable laws and regulations and
standards of industry or professional conduct in connection with the use,
distribution or promotion of the Licensed Products, including without
limitation, those applicable to product claims, labeling, approvals,
registrations and notifications, and also to obtain Seller’s prior written
consent to all claims, labels, instructions, packaging or the like, which
consent shall not be unreasonably withheld. 

 

 







13












ARTICLE
VI

REGULATORY
MATTERS

Section
6.1. Information
Regarding Regulatory Approvals. Seller
shall promptly advise Buyer in matters pertaining to U.S. regulatory
requirements relating to Seller’s activities hereunder. Seller shall also
provide to Buyer reasonable advance notice of any regulatory submission
containing information or data provided by Buyer to Seller which Seller intends
to disclose to regulatory agencies under this Agreement.




Section
6.2. Quality
Control Program; Additional Testing Programs. Seller
shall maintain a quality control program consistent with cGMP, as required by
the FDA and/or any other governmental entity in the Licensed Territory, with
respect to Seller’s manufacture of Licensed Products hereunder. In addition,
Seller will perform such additional testing programs, and provide Buyer with
documentation arising from such testing programs, as may be agreed to by Buyer
and Seller or required by any applicable regulatory authority.

 

Section
6.3. Retention
of Samples. Seller
shall retain as samples such quantities of Licensed Products from each batch of
Licensed Product as Buyer shall reasonably request. Retained samples shall be
maintained in a suitable storage facility for one (1) year past the product’s
expiration date. All such samples shall be available for inspection and testing
by Buyer at reasonable times and upon reasonable notice.




Section
6.4. Recalls. Buyer
shall notify Seller promptly if any Licensed Product is the subject of a recall,
market withdrawal or correction within the Licensed Territory (a “Recall”), and
Buyer and/or its designee shall have sole responsibility for the handling and
disposition of such Recall. Buyer and/or its designee shall bear the costs of
all Recalls of Licensed Products except to the extent that such Recall shall
have been the result of Seller’s breach of any of the warranties set forth in
this Agreement and/or the Revised Collaboration Agreement, in which case Seller
will promptly reimburse Buyer to such extent for actual, direct costs sustained
as a result of the Recall. In the event that Seller disputes Buyer’s
determination that the fault is due to Seller and/or to its agent, the parties
will select a mutually agreeable outside consulting firm which will be
instructed to review the applicable information and data and to confirm or
dissent from Buyer’s determination. If the consulting firm confirms Buyer’s
determination, Seller will pay the fees of such consulting firm. Buyer and/or
its designee shall maintain records of all sales of Licensed Products and
customers sufficient to adequately administer a Recall, market withdrawal or
correction for a period of three (3) years after termination or expiration of
this Agreement. Except as required by law, Buyer and/or its designee shall serve
as the sole point of contact with the applicable governmental entity concerning
any Recall within the Licensed Territory with respect to Licensed Products and
Seller shall serve as the sole point of contact with the FDA with respect to any
Recall. In the event that Seller is required to communicate with the FDA with
respect to Recall of Licensed Products, Seller shall within one (1) Business Day
notify Buyer of such communication.

 

 







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ARTICLE
VII

TERMINATION;
RIGHTS AND OBLIGATIONS UPON

TERMINATION




Section
7.1. Term. This
Agreement shall commence on the date hereof and shall continue in effect with
respect to each Licensed Product in each country in the Licensed Territory,
unless the parties mutually agree to extend such term, for so long as the
Revised Collaboration Agreement remains in effect with respect to such Licensed
Product in such country(ies). 




Section
7.2. Termination
for Default. If
either party materially defaults in the performance of any material agreement,
condition or covenant of this Agreement and such default or noncompliance shall
not have been remedied, or steps initiated to remedy the same to the other
party’s reasonable satisfaction, within ninety (90) days (or thirty (30) days in
the case of non-payment) after receipt by the defaulting party of a notice
thereof from the other party, the party not in default may terminate this
Agreement. A material breach or default of this Agreement shall be considered as
a material breach or default under the Revised Collaboration Agreement, and
Section 8.2 of the Revised Collaboration Agreement shall apply.




Section
7.3 Rights
and Obligations on Expiration or Termination. Except
to the extent expressly provided to the contrary, the following provisions shall
survive the termination of this Agreement: Sections 6.3 and 6.4 and Articles I
and VIII through X. Any rights of Seller to payments accrued through termination
as well as obligations of the parties under firm orders for purchase and
delivery of Licensed Products at the time of such termination shall remain in
effect, except that in the case of termination under Section 7.2, the
terminating party may elect whether obligations under firm orders will remain in
effect and except that Seller will have no obligation with respect to delivery
dates more than three (3) months after termination. 




ARTICLE
VIII

WARRANTIES;
REPLACEMENT OF PRODUCTS; INSURANCE

 

Section
8.1. Warranties. Seller
warrants to Buyer for itself and on behalf of its subcontractors and agents who
assume any of Seller’s obligations hereunder that (i) when shipped to Buyer by
Seller, the Licensed Products will conform to the Specifications, as then in
effect, and will not be (A) adulterated or misbranded within the meaning of the
Food, Drugs & Cosmetic Act or (B) be an article which may not, under the
provisions of the Food, Drugs & Cosmetic Act, be introduced into interstate
commerce, and (ii) any Facility used by Seller will remain in compliance with
cGMP at all times during the term of this Agreement and (iii) Seller shall
obtain and maintain all necessary permits, registrations and licenses necessary
to carry out its obligations pursuant to this Agreement. The foregoing
warranties are the only warranties made by Seller with respect to the Licensed
Products delivered hereunder, and may only be modified or amended by a written
instrument signed by a duly authorized officer of Seller and duly authorized
officer of Buyer. THE EXPRESS WARRANTIES CONTAINED IN THIS ARTICLE 8 ARE IN LIEU
OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY
WARRANTY OF MERCHANTIBILITY OR FITNESS FOR A PARTICULAR USE. 

 


 







15












Section
8.2. Replacement
of Licensed Products. Any
Licensed Products delivered to Buyer by Seller which do not conform to the
Specifications and are properly rejected as set forth in Article 2, or which are
otherwise not in compliance with the warranties made in Section 8.1, shall be
replaced, or Buyer’s account may be credited, at Buyer’s
election. The remedy of replacement or credit shall not be available if and to
the extent that such nonconformance was caused by Buyer’s misuse, unauthorized
modification, neglect, improper testing or improper storage, including without
limitation storage at inappropriate temperatures, transportation, use beyond any
dating provided, by accident, fire or other hazard. THE EXPRESS OBLIGATIONS
STATED IN THIS SECTION 8.2 AND IN SECTIONS 2.1 AND 8.3 ARE IN LIEU OF ALL OTHER
LIABILITIES OR OBLIGATIONS OF SELLER FOR DAMAGES, INCLUDING BUT NOT LIMITED TO
DIRECT OR CONSEQUENTIAL DAMAGES, ARISING OUT OF OR IN CONNECTION WITH THE
DELIVERY, USE OR PERFORMANCE OF THE PRODUCTS.




Section
8.3. Insurance. Buyer
and Seller shall maintain during the term of this Agreement products liability
insurance policies, covering their respective obligations under this Agreement,
issued by reputable insurance companies under ordinary terms and conditions in
the pharmaceutical industry and will prove the existence thereof to the other
party if so requested.




ARTICLE
IX

MISCELLANEOUS

 

Section
9.1. Entire
Agreement This
Agreement constitutes the entire agreement and understanding between the parties
as to the subject matter hereof. All prior negotiations, representations,
agreements, contracts, offers and earlier understandings of whatsoever kind,
whether written or oral between Seller and Buyer in respect of the subject
matter of this Agreement, are superseded by, merged into, extinguished by and
completely expressed by this Agreement (including, without limitation, the
Supply Agreement dated March 6, 2002, and the Supply Agreement dated October 26,
1999, in each case between Buyer and Seller). No aspect, part or wording of this
Agreement may be modified except by mutual agreement between the Seller and
Buyer taking the form of an instrument in writing signed and dated by duly
authorized representatives of both Seller and Buyer. The representation and
warranties made by Licensor (i.e. Seller) and Licensee (i.e. Buyer) in the
Revised Collaboration Agreement are incorporated herein by reference, provided
that no breach of such representations and warranties shall be the basis for the
termination of this Agreement unless the Revised Collaboration Agreement is
terminated simultaneously.

 

 







16













 

Section
9.2. Notices Any
notice or communication or permitted to be given by this Agreement shall be
given by post-paid, first class, registered or certified mail or reputable
courier service addressed to:




In the
case of
Seller:            Discovery
Laboratories, Inc.

2600
Kelly Drive

Warrington,
Pennsylvania 18976

Attention:    
David L.
Lopez, Esq., CPA
Senior
Vice President and General
Counsel




With a
copy
to:                    Dickstein
Shapiro Morin & Oshinsky, LLP

1177
Avenue of the Americas, 

New York,
NY 10036-2714

Attn: Ira
L. Kotel, Esq.

Facsimile:
(212) 997-9880




In the
case of Buyer:          
Laboratorios
del Dr. Esteve, S.A.

Av. Mare
de Déu de Montserrat, 221

08041
Barcelona (Spain)

Attention:
Development Director

Facsimile:
(34) 93 433 00 72

 


With a
copy
to:                   
JAUSAS
Av.
Diagonal 407 bis, 10th Floor
08008
Barcelona (Spain)
Attention:
Hector Jausas
Facsimile:
(34) 93 415 20 51

 

Such
addresses may be altered by notice so given. If no time limit is specified for a
notice required or permitted to be given by this Agreement, the time limit
therefor shall be ten (10) Business Days, not including the day of mailing.
Notice shall be considered made as of the date of deposit with the appropriate
Post Office or courier service.

 

Section
9.3. Governing
Law. This
Agreement and its effect are subject and shall be construed and enforced in
accordance with the laws of the State of New York, United States (without giving
effect to the principles of conflict of laws), except as to any issue which
depends upon the validity, scope or enforceability of any patent within the
Patent Rights, which issue shall be determined in accordance with the applicable
patent laws of the country of such patent. 



 







17












 

Section
9.4. Representations
regarding Authorization; Organization; Corporate
Action; No Conflicts. Each
party hereto severally represents and warrants that it is a duly organized and
validly existing corporation and/or partnership under the laws of its
jurisdiction of incorporation, and has taken all required corporate action to
authorize the execution, delivery and performance of this Agreement and the
Revised Collaboration Agreement and perform all of its obligations hereunder and
thereunder; the execution and delivery of this Agreement and the Revised
Collaboration Agreement and the consummation of the transactions contemplated
herein and therein do not violate, conflict with, or constitute a default under
its charter or similar organization document, its by-laws or the terms or
provisions of any material agreement or other instrument to which it is a party
or by which it is bound, or any order, award, judgment or decree to which it is
a party or by which it is bound; and upon execution and delivery, this Agreement
and the Revised Collaboration Agreement will constitute the legal, valid and
binding obligation of it. The persons signing on behalf of each of the parties
hereby warrant and represent that they have the authority to execute this
Agreement and the Revised Collaboration Agreement on behalf of the party for
whom they have signed.

 

Section
9.5. Registration. Buyer
shall take all reasonable and necessary steps to register this
Agreement in any country where such is required to permit the transfer of funds
and/or payment of amounts due to Seller hereunder or is otherwise required by
the government or law of such country to effectuate or carry out this Agreement.
Notwithstanding anything contained herein but subject to Section 9.4 hereof,
Buyer shall not be relieved of any of its obligations under this Agreement by
any failure to register this Agreement in any country, and, specifically, Buyer
shall not be relieved of its obligation to make any payment due to Seller
hereunder at Seller’s address specified in Section 9.2 hereof, where such
payment is blocked due to any failure to register this Agreement.




Section
9.6. Headings. As used
in this Agreement, singular includes the plural and plural includes the
singular, wherever so required by the context. The headings appearing at the
beginning of the numbered Articles and Sections hereof have been inserted for
convenience only and do not constitute a part of this Agreement.




Section
9.7. Agency. Nothing
herein shall be deemed to create an agency, joint venture or partnership between
the parties hereto.




Section
9.8 Dispute
Resolution. (a)
Internal
Review. In the
event that a dispute, difference, claim, action, demand, request, investigation,
controversy, threat, discovery request or request for testimony or information
or other question arises pertaining to any matters which arise under, out of, in
connection with, or in relation to this Agreement (a “Dispute”) and
either party so requests in writing, prior to the initiation of any formal legal
action, the Dispute will be submitted to the Steering Committee, which will use
its good faith efforts to resolve the Dispute within ten (10) Business Days. If
the Steering Committee is unable to resolve the Dispute in such period, the
Steering Committee will refer the Dispute to the Chief Executive Officers (or
equivalent position) of Buyer and Seller. For all Disputes referred to the Chief
Executive Officers (or equivalent position), the Chief Executive Officers (or
equivalent position) shall use their good faith efforts to meet in person and to
resolve the Dispute within ten (10) Business Days after such
referral.

 

 







18













 

(b)
Arbitration. If,
pursuant to Section 9.8(a), within such ten (10) Business Days or such other
period as may be agreed upon between the parties, the dispute remains
unresolved, it shall be settled on application by either party by arbitration
conducted in the English language, in Stockholm (Sweden) in accordance with the
Rules of Arbitration of the International Chamber of Commerce by one or more
arbitrators appointed in accordance with the said rules. The parties expressly
agree to abide the award rendered. This provision shall not prevent either party
from addressing any competent court or tribunal in order to seek interim
measures.

 

(c)
Costs. The
parties shall bear their own costs in preparing for and participating in the
resolution of any Dispute, and the costs of mediator(s) and arbitrator(s) shall
be equally divided between the parties.

 

Section
9.9. Force
Majeure.
Notwithstanding any other provisions of this Agreement, neither of the parties
hereto shall be liable in damages for any delay or default in performing
hereunder if such delay or default is caused by conditions beyond its control
including but not limited to acts of God, governmental restrictions, wars, or
insurrections, strikes, floods, work stoppages and/or lack of materials;
provided, however, that the party suffering such delay or default shall notify
the other party in writing of the reasons for the delay or default. If such
reasons for delay or default continuous exist for six (6) months, this Agreement
may be terminated by either party.




Section
9.10. Assignment. Except
as otherwise set forth in Sections 2.1 and 2.3 of the Revised Collaboration
Agreement with respect to Buyer’s right to grant sublicenses and appoint
co-marketers and/or co-promoters, neither party hereto may assign or transfer
this Agreement or any rights or obligations hereunder without the prior written
consent of the other, except that a party may make such an assignment without
the other party’s consent to Affiliates or to a successor to substantially all
of the business of such party, whether in a merger, sale of stock, sale of
assets or other transaction. Any permitted successor or assignee of rights
and/or obligations hereunder shall, in a writing to the other party, expressly
assume performance of such rights and/or obligations. Any permitted assignment
shall be binding on the successors of the assigning party. Any assignment or
attempted assignment by either party in violation of the terms of this Section
9.10 shall be null and void and of no legal effect.




Section
9.11. Successors
and Assigns. Subject
to Section 9.10, this Agreement shall be binding upon and inure to the benefit
of the permitted successors or permitted assigns of Seller and Buyer
respectively.




Section
9.12. Counterparts. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.













19












ARTICLE
X

BASIS
OF BARGAIN

 

 

EACH
PARTY RECOGNIZES AND AGREES THAT THE WARRANTY DISCLAIMERS AND LIABILITY AND
REMEDY LIMITATIONS IN THIS AGREEMENT ARE MATERIAL, BARGAINED FOR BASES OF THIS
AGREEMENT AND THAT THEY HAVE BEEN TAKEN INTO ACCOUNT AND REFLECTED IN
DETERMINING THE CONSIDERATION TO BE GIVEN BY EACH PARTY UNDER THIS AGREEMENT AND
IN THE DECISION BY EACH PARTY TO ENTER INTO THIS
AGREEMENT.

 

IN
WITNESS WHEREOF, the parties have executed this Agreement to be effective as of
the date first written above.





 



	 	DISCOVERY LABORATORIES,
      INC.
	 	 
	
       By:   
	/s/ Robert J.
  Capetola  
	 	
      

    
	 	
      Name: Robert J. Capetola, Ph.D.

      Title:
      President and Chief Executive
Officer




 


 


	 	LABORATORIOS DEL DR. ESTEVE,
      S.A.
	 	 
	
        By:   
	/s/ Antonio Esteve
	 	
      

    
	 	
      Name:

      Title:





 

 

 







20