Unassociated Document


    

      Exhibit
        10.1

      


      Confidential
        Treatment Requested

    

     

    

      Portions
        of this Exhibit have been omitted pursuant to a request for confidential
        treatment. The omitted portions, marked by “[***]”, have been separately filed
        with the Securities and Exchange Commission.

      


      


      
 

      STRATEGIC
        ALLIANCE AGREEMENT

      


      


      by
        and between

      


      DISCOVERY
        LABORATORIES, INC.

      (a
        Delaware corporation)

      


      and

      


      PHILIP
        MORRIS USA INC., d/b/a CHRYSALIS TECHNOLOGIES

      (a
        Virginia corporation)

      


      


      


      DECEMBER
        9, 2005

      


      


      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        
          
            
              
                	
                        ARTICLE
                          1

                      	
                        DEFINITIONS

                      	
                        1

                      
	 	 	 
	
                        ARTICLE
                          2

                      	
                        SCOPE
                          OF ALLIANCE

                      	
                        10

                      
	 	 	 
	
                        ARTICLE
                          3

                      	
                        LICENSE

                      	
                        10

                      
	
                        3.1

                      	
                        License

                      	
                        10

                      
	
                        3.2

                      	
                        Limitations

                      	
                        10

                      
	
                        3.3

                      	
                        Sublicensing
                          Rights

                      	
                        10

                      
	
                        3.4

                      	
                        Retained
                          Rights

                      	
                        10

                      
	
                        3.5

                      	
                        Exclusivity

                      	
                        11

                      
	 	 	 
	
                        ARTICLE
                          4

                      	
                        PRODUCT
                          DEVELOPMENT

                      	
                        11

                      
	
                        4.1

                      	
                        In
                          General

                      	
                        11

                      
	
                        4.2

                      	
                        Supported
                          Product Development Projects

                      	
                        11

                      
	
                        4.3

                      	
                        Project
                          Plans

                      	
                        11

                      
	
                        4.4

                      	
                        Development
                          Responsibilities and Consulting Services

                      	
                        12

                      
	 	
                        4.4.1

                      	
                        Direction
                          and Oversight

                      	
                        12

                      
	 	
                        4.4.2

                      	
                        Responsibilities
                          of Discovery

                      	
                        12

                      
	 	
                        4.4.3

                      	
                        Responsibilities
                          of Chrysalis

                      	
                        12

                      
	 	
                         

                      	
                        
                          
                            (a)     In
                              General

                          

                        

                      	
                        12

                      
	 	
                         

                      	
                        
                          
                            (b)     Development
                              Activities

                          

                        

                      	
                        13

                      
	 	
                         

                      	
                        
                          
                            (c)     Consulting
                              Services

                          

                        

                      	
                        13

                      
	
                        4.5

                      	
                        Development
                          Effort

                      	
                        13

                      
	
                        4.6

                      	
                        Development
                          Milestone

                      	
                        13

                      
	
                        4.7

                      	
                        Skilled
                          Personnel

                      	
                        13

                      
	
                        4.8

                      	
                        Costs

                      	
                        14

                      
	
                        4.9

                      	
                        Additional
                          License Product Opportunities

                      	
                        14

                      
	
                         

                      	
                        
                          4.9.1

                        

                      	
                        Additional
                          Product Opportunities

                      	
                        14

                      
	 	
                        4.9.2

                      	
                        Procedure

                      	
                        14

                      
	
                        4.10

                      	
                        Design
                          Configurations

                      	
                        15

                      
	 	 	 
	
                        ARTICLE
                          5

                      	
                        GOVERNANCE
                          AND COMMITTEE STRUCTURE

                      	
                        15

                      
	
                        5.1

                      	
                        General

                      	
                        15

                      
	
                        5.2

                      	
                        Alliance
                          Managers

                      	
                        15

                      
	 	
                        5.2.1

                      	
                        Appointment
                          and Rules

                      	
                        15

                      
	 	
                        5.2.2

                      	
                        Changes
                          in Alliance Managers

                      	
                        15

                      
	 	
                        5.2.3

                      	
                        Additional
                          Responsibilities of Alliance Managers

                      	
                        15

                      
	
                        5.3

                      	
                        Steering
                          Committee

                      	
                        16

                      
	 	
                        5.3.1

                      	
                        Formation
                          and Purpose

                      	
                        16

                      
	 	
                        5.3.2

                      	
                        Membership,
                          Chairmanship and Meetings

                      	
                        16

                      
	
                        5.4

                      	
                        Project
                          Team

                      	
                        16

                      
	 	
                        5.4.1

                      	
                        Formation
                          and Purpose

                      	
                        17

                      
	 	
                        5.4.2

                      	
                        Specific
                          Responsibilities of the Project Team

                      	
                        17

                      
	 	
                        5.4.3

                      	
                        Membership,
                          Chairmanship and Meetings

                      	
                        17

                      
	
                        5.5

                      	
                        Working
                          Groups

                      	
                        17

                      


              

               

              
                
                  
                  

                

                
                  i

                  
                    

                  

                

                
                  
                  

                

              

               

              
                
                  	
                          5.6

                        	
                          General
                            Committee Membership and Procedures

                        	
                          18

                        
	 	
                          5.6.1

                        	
                          Membership
                            and Meetings

                        	
                          18

                        
	 	
                          5.6.2

                        	
                          Ad
                            Hoc Participants

                        	
                          18

                        
	 	
                          5.6.3

                        	
                          Decision-Making

                        	
                          18

                        
	 	
                          5.6.4

                        	
                          Meeting
                            Agendas and Minutes

                        	
                          18

                        
	 	
                          5.6.5

                        	
                          Interactions
                            between Committees and Internal Teams

                        	
                          19

                        
	
                          5.7

                        	
                          Design
                            Review Board

                        	
                          19

                        
	 	 	 
	
                          ARTICLE
                            6

                        	
                          COMMERCIALIZATION

                        	
                          19

                        
	
                          6.1

                        	
                          Exclusive
                            Right to Sell the Licensed Products

                        	
                          19

                        
	 6.2	
                          Responsibility
                            for Commercialization Matters

                        	
                          19

                        
	
                          
                            6.3

                          

                        	
                          Diligent
                            Commercialization Efforts

                        	
                          
                            19

                          

                        
	 	
                          6.3.1

                        	
                          Commercialization
                            Initiation

                        	
                          20

                        
	 	
                          6.3.2

                        	
                          Commercialization
                            Milestones

                        	
                          20

                        
	 	 	 
	
                          ARTICLE
                            7

                        	
                          REGULATORY
                            MATTERS

                        	
                          20

                        
	
                           

                        	
                           

                        
	 7.1	
                          Responsibility
                            and Consultation

                        	20
	
                          7.2

                        	
                          Regulatory
                            Communications

                        	
                          21

                        
	
                          7.3

                        	
                          Meetings

                        	
                          21

                        
	
                          7.4

                        	
                          Sharing
                            of Information

                        	
                          21

                        
	
                          7.5

                        	
                          Discovery’s
                            Right to Audit Certain Third Parties

                        	
                          21

                        
	 	 	 
	
                          ARTICLE
                            8

                        	
                          FINANCIAL
                            PROVISIONS

                        	
                          21

                        
	
                          8.1

                        	
                          Royalties
                            with Respect to Supported Products

                        	
                          21

                        
	
                          8.2

                        	
                          Royalties
                            with Respect to Independent Products

                        	
                          23

                        
	
                          8.3

                        	
                          Prohibition
                            on Bundling

                        	
                          23

                        
	
                          8.4

                        	
                          Fixed
                            Consideration

                        	
                          23

                        
	
                          8.5

                        	
                          Treatment
                            of Partial Product Sales

                        	
                          23

                        
	
                          8.6

                        	
                          Royalty
                            Reports

                        	
                          23

                        
	
                          8.7

                        	
                          Payment
                            of Estimated and Actual Amounts

                        	
                          24

                        
	 	
                          8.7.1

                        	
                          Payment
                            of Estimated Amounts

                        	
                          24

                        
	 	
                          8.7.2

                        	
                          Quarterly
                            Reconciliation and True-Up

                        	
                          24

                        
	
                          8.8

                        	
                          Pass-Through
                            Royalties

                        	
                          24

                        
	
                          8.9

                        	
                          Records
                            and Audits

                        	
                          24

                        
	 	
                          8.9.1

                        	
                          Records

                        	
                          24

                        
	 	
                          8.9.2

                        	
                          Audit

                        	
                          24

                        
	 	
                          8.9.3

                        	
                          Audit
                            Confidentiality

                        	
                          25

                        
	 	
                          8.9.4

                        	
                          Costs
                            of Audits

                        	
                          25

                        
	
                          8.10

                        	
                          Foreign
                            Exchange

                        	
                          25

                        
	
                          8.11

                        	
                          Manner
                            of Payments

                        	
                          25

                        
	
                          8.12

                        	
                          Late
                            Payments

                        	
                          25

                        
	
                          8.13

                        	
                          Tax
                            Withholding

                        	
                          26

                        
	 	 	 
	
                          ARTICLE
                            9

                        	
                          INTELLECTUAL
                            PROPERTY

                        	
                          26

                        
	
                          9.1

                        	
                          Ownership

                        	
                          26

                        


                

                 

                
                  
                    
                    

                  

                  
                    ii

                    
                      

                    

                  

                  
                    
                    

                  

                

                 

                
                  
                    	 	
                            9.1.1

                          	
                            Chrysalis
                              Intellectual Property

                          	
                            26

                          
	 	
                            9.1.2

                          	
                            Discovery
                              Intellectual Property

                          	
                            26

                          
	 	
                            9.1.3

                          	
                            Joint
                              Intellectual Property

                          	
                            26

                          
	
                            9.2

                          	
                            Disclosure,
                              Assignment, License and Exploitation

                          	
                            27

                          
	 	
                            9.2.1

                          	
                            Disclosure

                          	
                            27

                          
	 	
                            9.2.2

                          	
                            Assignment
                              and License

                          	
                            27

                          
	 	
                            9.2.3

                          	
                            Exploitation
                              of Intellectual Property

                          	
                            27

                          
	
                            9.3

                          	
                            Agreement
                              with Personnel

                          	
                            27

                          
	
                            9.4

                          	
                            Prosecution
                              of Patents

                          	
                            27

                          
	 	
                            9.4.1

                          	
                            Discovery
                              and Chrysalis Patent Filings

                          	
                            27

                          
	 	
                            9.4.2

                          	
                            Joint
                              Patent Filings

                          	
                            28

                          
	 	
                            9.4.3

                          	
                            Patent
                              Prosecution Costs

                          	
                            28

                          
	 	
                            9.4.4

                          	
                            Abandonment
                              of Prosecution

                          	
                            28

                          
	
                            9.5

                          	
                            Patent
                              Term Extensions

                          	
                            28

                          
	
                            9.6

                          	
                            Third
                              Party Infringement

                          	
                            29

                          
	 	
                            9.6.1

                          	
                            Suits
                              for Infringement

                          	
                            29

                          
	 	
                            9.6.2

                          	
                            Step-In
                              Right

                          	
                            29

                          
	 	
                            9.6.3

                          	
                            Allocation
                              of Recovery

                          	
                            29

                          
	 	
                            9.6.4

                          	
                            Declaratory
                              Actions and Counterclaims

                          	
                            29

                          
	
                            9.7

                          	
                            Infringement
                              of Third Party Rights

                          	
                            30

                          
	 	
                            9.7.1

                          	
                            Infringement
                              Claims

                          	
                            30

                          
	 	
                            9.7.2

                          	
                            Step-In
                              Right

                          	
                            30

                          
	 	
                            9.7.3

                          	
                            Notice
                              of Certification

                          	
                            30

                          
	 	 	 
	
                            ARTICLE
                              10

                          	
                            RIGHT
                              OF FIRST ACCESS TO CERTAIN ADDITIONAL
                              OPPORTUNITIES

                          	
                            31

                          
	
                            10.1

                          	
                            First
                              Access Products

                          	
                            31

                          
	
                            10.2

                          	
                            Provision
                              of Right of First Access

                          	
                            31

                          
	
                            10.3

                          	
                            First
                              Access Product Presentation

                          	
                            31

                          
	
                            10.4

                          	
                            Negotiation
                              of First Access Product Arrangements

                          	
                            31

                          
	 	 	 
	
                            ARTICLE
                              11

                          	
                            CONFIDENTIAL
                              INFORMATION

                          	
                            32

                          
	
                            11.1

                          	
                            Use
                              of Confidential Information

                          	
                            32

                          
	
                            11.2

                          	
                            Permitted
                              Disclosure and Use

                          	
                            32

                          
	
                            11.3

                          	
                            Disclosure
                              for SEC Filings

                          	
                            33

                          
	
                            11.4

                          	
                            Publications

                          	
                            33

                          
	
                            11.5

                          	
                            Public
                              Announcements

                          	
                            34

                          
	
                            11.6

                          	
                            Survival

                          	
                            34

                          


                  

                   

                  
                    
                      
                      

                    

                    
                      iii

                      
                        

                      

                    

                    
                      
                      

                    

                  

                   

                  
                    
                      	
                              ARTICLE
                                12

                            	
                              REPRESENTATIONS,
                                WARRANTIES AND COVENANTS

                            	
                              34

                            
	
                              12.1

                            	
                              Mutual
                                Representations and Warranties

                            	
                              34

                            
	 	
                              12.1.1

                            	
                              Organization;
                                Authority

                            	
                              34

                            
	 	
                              12.1.2

                            	
                              Consents

                            	
                              34

                            
	 	
                              12.1.3

                            	
                              No
                                Conflict

                            	
                              34

                            
	 	
                              12.1.4

                            	
                              Enforceability

                            	
                              35

                            
	 	
                              12.1.5

                            	
                              Regulatory

                            	
                              35

                            
	
                              12.2

                            	
                              Intellectual
                                Property

                            	
                              35

                            
	
                              12.3

                            	
                              No
                                Adverse Effects

                            	
                              37

                            
	 	 	 
	
                              ARTICLE
                                13

                            	
                              ADDITIONAL
                                COVENANTS

                            	
                              37

                            
	
                              13.1

                            	
                              Compliance
                                with Laws

                            	
                              37

                            
	
                              13.2

                            	
                              Cooperation

                            	
                              37

                            
	
                              13.3

                            	
                              Sharing
                                of Information

                            	
                              37

                            
	 	 	 
	
                              ARTICLE
                                14

                            	
                              DISCLAIMERS
                                AND LIMITATION OF LIABILITY

                            	
                              37

                            
	
                              14.1

                            	
                              Disclaimer
                                of Warranties

                            	
                              37

                            
	
                              14.2

                            	
                              Limitation
                                of Liability

                            	
                              34

                            
	 	 	 
	
                              ARTICLE
                                15

                            	
                              INDEMNIFICATION;
                                INSURANCE

                            	
                              37

                            
	
                              15.1

                            	
                              Indemnification

                            	
                              37

                            
	 	
                              15.1.1

                            	
                              Obligations
                                of the Parties

                            	
                              38

                            
	 	
                              15.1.2

                            	
                              Certain
                                Product Liability Claims

                            	
                              38

                            
	 	
                              15.1.3

                            	
                              Complete
                                Indemnification

                            	
                              38

                            
	
                              15.2

                            	
                              Indemnification
                                Procedures

                            	
                              38

                            
	 	
                              15.2.1

                            	
                              Notification

                            	
                              38

                            
	 	
                              15.2.2

                            	
                              Assumption
                                of Defense

                            	
                              38

                            
	 	
                              15.2.3

                            	
                              Settlements

                            	
                              39

                            
	
                              15.3

                            	
                              Insurance

                            	
                              39

                            
	 	 	 
	
                              ARTICLE
                                16

                            	
                              TERM

                            	
                              40

                            
	 	 	 
	
                              ARTICLE
                                17

                            	
                              TERMINATION

                            	
                              40

                            
	
                              17.1

                            	
                              Termination
                                for Material Breach

                            	
                              40

                            
	 	
                              17.1.1

                            	
                              Right
                                to Terminate Agreement

                            	
                              40

                            
	 	
                              17.1.2

                            	
                              Right
                                to Terminate Supported Product

                            	
                              40

                            
	 	
                              17.1.3

                            	
                              Applicable
                                Cure Periods Development
                                Projects

                            	
                              41

                            
	
                              17.2

                            	
                              Termination
                                Due to Certain Events

                            	
                              41

                            
	
                              17.3

                            	
                              Effects
                                of Termination Generally

                            	
                              41

                            
	 	
                              17.3.1

                            	
                              Accrued
                                Obligations; Survival

                            	
                              41

                            
	 	
                              17.3.2

                            	
                              Outstanding
                                Payments

                            	
                              41

                            


                    

                     

                    
                      
                        
                        

                      

                      
                        iv

                        
                          

                        

                      

                      
                        
                        

                      

                    

                     

                    
                      	
                              ARTICLE
                                18

                            	
                              TECHNOLOGY
                                TRANSFER

                            	
                              42

                            
	
                              18.1

                            	
                              Technology
                                Transfer

                            	
                              42

                            
	
                              18.2

                            	
                              Transfer
                                of Regulatory Files, Data and Filings

                            	
                              42

                            
	 	 	 
	
                              ARTICLE
                                19

                            	
                              STANDSTILL
                                AGREEMENT

                            	
                              42

                            
	
                              19.1

                            	
                              General
                                Standstill

                            	
                              42

                            
	
                              19.2

                            	
                              Certain
                                Exceptions

                            	
                              43

                            
	
                              19.3

                            	
                              Exception
                                for an Acquisition Transaction

                            	
                              43

                            
	
                              19.4

                            	
                              Other
                                Agreements

                            	
                              43

                            
	 	 	 
	
                              ARTICLE
                                20 

                            	
                              DISPUTE
                                RESOLUTION

                            	44
	
                              20.1

                            	
                              Dispute
                                Resolution

                            	
                              44

                            
	
                              20.2

                            	
                              Escalation
                                and Executive Negotiation

                            	
                              44

                            
	
                              20.3

                            	
                              Mediation

                            	
                              44

                            
	
                              20.4

                            	
                              Arbitration

                            	
                              44

                            
	 	
                              20.4.1

                            	
                              Referral
                                to Arbitration

                            	
                              44

                            
	 	
                              20.4.2

                            	
                              Rules
                                and Procedures

                            	
                              44

                            
	 	
                              20.4.3

                            	
                              Awards

                            	
                              45

                            
	 	
                              20.4.4

                            	
                              Costs

                            	
                              45

                            
	 	
                              20.4.5

                            	
                              No
                                Other Forum

                            	
                              45

                            
	
                              20.5

                            	
                              Right
                                to Injunctive and Other Relief

                            	
                              45

                            
	 	 	 
	
                              ARTICLE
                                21

                            	
                              MISCELLANEOUS

                            	
                              45

                            
	
                              21.1

                            	
                              Choice
                                of Law

                            	
                              46

                            
	
                              21.2

                            	
                              Severability

                            	
                              46

                            
	
                              21.3

                            	
                              Relationship
                                of the Parties

                            	
                              46

                            
	
                              21.4

                            	
                              Parties
                                in Interest

                            	
                              46

                            
	
                              21.5

                            	
                              Enforcement
                                of Certain Agreements

                            	
                              46

                            
	
                              21.6

                            	
                              Use
                                of Affiliates, Subcontractors and Distributors

                            	
                              47

                            
	
                              21.7

                            	
                              Assignment

                            	
                              47

                            
	
                              21.8

                            	
                              Further
                                Assurances and Actions

                            	
                              47

                            
	
                              21.9

                            	
                              Waiver

                            	
                              48

                            
	
                              21.10

                            	
                              Section
                                365(n) of the Bankruptcy Code

                            	
                              48

                            
	
                              21.11

                            	
                              Notices

                            	
                              48

                            
	
                              21.12

                            	
                              Construction

                            	
                              49

                            
	
                              21.13

                            	
                              Registration
                                and Filing of this Agreement

                            	
                              49

                            
	
                              21.14

                            	
                              Force
                                Majeure

                            	
                              49

                            
	
                              21.15

                            	
                              Entire
                                Agreement

                            	
                              50

                            
	
                              21.16

                            	
                              Third
                                Party Beneficiaries

                            	
                              50

                            
	
                              21.17

                            	
                              Execution
                                in Counterparts; Facsimile Signatures

                            	
                              50

                            


                    

                  

                

              

            

            


            
              
                
                

              

              
                v

                
                  

                

              

              
                
                

              

            

          

        

      

      

        STRATEGIC
          ALLIANCE AGREEMENT

         

        THIS
          STRATEGIC ALLIANCE AGREEMENT is made as of December 9,
          2005
          (the “Effective
          Date”),
          by
          and between DISCOVERY LABORATORIES, INC., a Delaware corporation (“Discovery”),
          and PHILIP
          MORRIS USA INC., d/b/a CHRYSALIS TECHNOLOGIES, a Virginia corporation
          (“Chrysalis”).
          Discovery and Chrysalis shall be referred to herein individually as a
“Party”
          and
          collectively as the “Parties”.

         

        WHEREAS,
          Discovery is currently developing a portfolio of aerosolized surfactant
          replacement therapies (aSRT)
          based upon its proprietary precision-engineered surfactant technology for
          the
          prevention and treatment of respiratory disorders;

         

        WHEREAS,
          Chrysalis is currently developing and has expertise in the development
          and
          design of proprietary technology for the aerosolization of pharmaceutical
          products; and

         

        WHEREAS,
          the Parties desire to enter into a strategic alliance pursuant to which
          they
          will develop certain combination drug-device surfactant products, Chrysalis
          will
          license its proprietary aerosolization technology to Discovery, and Chrysalis
          will provide certain additional consultative services to Discovery in connection
          with combination drug-device surfactant products, all on the terms and
          conditions set forth herein.

         

        NOW,
          THEREFORE, in consideration of the foregoing premises and the representations,
          warranties, covenants, and agreements contained herein, the Parties, intending
          to be legally bound, hereby agree as follows:

         

        ARTICLE
          1

        DEFINITIONS

         

        In
          addition to terms defined elsewhere in this Agreement, the following terms
          used
          in this Agreement are defined below:

         

        1.1 “AAA”
          means
          the American Arbitration Association.

         

        1.2 “Actual
          Amount”
          has the
          meaning set forth in Section 8.7.2.

         

        1.3 [***]

         

        1.4 “Additional
          Product Opportunities”
          has the
          meaning set forth in Section 4.9.1.

         

         

        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.

        


        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

         

        1.5 “Aerosol
          Device”
          means a
          device for the aerosolization of a pharmaceutical compound for administration
          to
          humans. It is contemplated that the Aerosol Device shall consist of (i)
          permanent (e.g.,
          nondisposable) components that control power and electronics (e.g.,
          control unit) and (ii) a physical mechanism (e.g.,
          pump)
          to provide a means for dispensing the Drug Product from the container closure
          system.

         

        1.6 “Aerosol
          Technology”
          means
          any technology related to the aerosolization of a liquid form of a
          pharmaceutical compound. Aerosol Technology does not include technology
          that is
          related to the delivery of aerosols as dry powders.

         

        1.7 “Affiliates”
          means
          with respect to any Party, any Person, directly or indirectly, controlling,
          controlled by or under common control with such Party. For purposes of
          this
          Section 1.7, “control” means (i) in the case of a Person that is a
          corporate entity, direct or indirect ownership of more than fifty percent
          (50%)
          of the stock or shares having the right to vote (or such lesser percentage
          which
          is the maximum allowed to be owned by a foreign corporation in a particular
          jurisdiction) for the election of directors of such Person or (ii) in the
          case
          of a Person that is an entity, but is not a corporate entity, the possession,
          directly or indirectly, of (A) more than fifty percent (50%) of the economic
          or
          partnership interest in the income or capital of such Person or (B) the
          power to
          direct, or cause the direction of, the management or policies of such Person,
          whether through the ownership of voting securities, by contract or otherwise;
          and the terms “controlling,”  “controlled by” or “under common control”
          shall have the meanings correlative to the foregoing.

         

        1.8 “Agreement”
          means
          this Strategic Alliance Agreement, including the Schedules attached
          hereto.

         

        1.9 “Alliance”
          has the
          meaning set forth in Article 2.

         

        1.10 “Alliance
          Manager”
          has the
          meaning set forth in Section 5.2.1.

         

        1.11 “Base
          Hospital General Product”
          has the
          meaning set forth in Section 4.2.

         

        1.12 “Base
          NICU Product”
          has the
          meaning set forth in Section 4.2.

         

        1.13 “Base
          Supported Product Development Projects”
          means a
          Supported Product Development Project with respect to a Base NICU Product
          or a
          Base Hospital General Product.

         

        1.14 “Breaching
          Party”
          has the
          meaning set forth in Section 17.1.1 and 17.1.2, as applicable.

         

        1.15 “Business
          Day”
          means a
          day other than a Saturday, Sunday, or other day on which commercial banks
          in New
          York, New York are authorized or required by Law to close.

         

        1.16 “Chrysalis”
          has the
          meaning set forth in the Preamble hereto.

         

        1.17 “Chrysalis
          Intellectual Property”
          has the
          meaning set forth in Section 9.1.1.

         

        
          
            
            

          

          
            2

            
              

            

          

          
            
            

          

        

        1.18 “Chrysalis
          Patents”
          means
          all Patents owned by Chrysalis or to which Chrysalis otherwise has rights
          that
          claim or are directed to the Chrysalis Technology.

         

        1.19 “Chrysalis
          Technology”
          means
          (a) Chrysalis’ proprietary Aerosol Technology (including without limitation the
          technologies, devices, processes, equipment, materials and know-how relating
          to
          the aerosolization of liquid forms of drug products and the Aerosol Devices
          and
          Disposable Dose Packs therefor) and (b) all Intellectual Property owned
          by or
          licensed to Chrysalis relating to such Aerosol Technology, including, without
          limitation, the Chrysalis Patents.

         

        1.20 “Chrysalis
          Technology Improvements”
          means
          any Inventions created or reduced to practice [***]
          in the
          performance of the Alliance or exercise of the license granted pursuant
          to this
          Agreement, which Inventions relate primarily to the Chrysalis
          Technology.

         

        1.21 “Clinical
          Trials”
          means
          Phase I, II, III and, if required, Phase IV clinical trials and such other
          tests
          and studies in human subjects or patients that are required to obtain,
          maintain,
          or sustain Regulatory Approval in a country in the Territory.
          

         

        1.22 “Combined
          Net Sales”
          means
          with respect to any Contract Year, the total Net Sales of all of the Supported
          Products during such Contract Year.

         

        1.23 “Committees”
          has the
          meaning set forth in Section 5.1. 

         

        1.24 “Confidential
          Information”
          means
          all information received by either Party or its Affiliates from or on behalf
          of
          the other Party or its Affiliates relating to this
          Alliance that the disclosing Party treats as confidential, including, without
          limitation: (i) copies of any nonpublic information regarding a Party’s Patents;
          (ii) techniques, technology, practices, trade secrets, inventions (whether
          or
          not patentable), designs, methods, manufacturing processes, formulae,
          formulations, specifications, documents, knowledge, know-how, skill, experience,
          test data, and results, (including that related to pharmacology, toxicology,
          preclinical testing, clinical testing, expression data, Chemistry, Manufacturing
          and Control (CMC) data, batch records, trials, and studies, safety and
          efficacy,
          analytical, and quality control); (iii) devices and related components,
          compounds, polypeptides, proteins, formulations, compositions of matter,
          cells,
          cell lines, markers, assays, and physical, biological, or chemical material;
          (iv) marketing information, market research data, medical/physicians advisory
          boards, and consultant input, including clinical studies designed to support
          promotional efforts;
          (v) the
          terms of this Agreement, and (vi) other proprietary business information
          such as
          business plans, financial or personnel matters, present or future products,
          research, process and technology development programs, sales, suppliers,
          customers, employees, investors, or other business information, whether
          in oral,
          written, graphic, or electronic form.

         

        1.25 “Contract
          Month”
          means
          each month during any Contract Year. The initial Contract Month will be
          deemed
          to begin on the Effective Date and end on the expiration of that Contract
          Month
          in which the Effective Date falls.

         

        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.

         

        
          
            
            

          

          
            3

            
              

            

          

          
            
            

          

        

        1.26 “Contract
          Quarter”
          means
          each three (3) month period ending on March 31, June 30, September
          30 and
          December 31 during any Contract Year. The initial Contract Quarter will
          be
          deemed to begin on the Effective Date and end on the expiration of that
          Contract
          Quarter in which the Effective Date falls.

         

        1.27 “Contract
          Year”
          means a
          twelve (12) month period ending on December 31. The initial Contract Year
          will
          be deemed to begin on the Effective Date and end on December 31 of that
          Contract
          Year in which it falls.

         

        1.28 “Design
          Review Board”
          has the
          meaning set forth in Section
          5.7.

         

        1.29 “Diligent
          Commercialization Efforts”
          means
          efforts and resources reasonably comparable to those commonly used in the
          research-based pharmaceutical industry for a medical device, pharmaceutical
          product or pharmaceutical compound at a similar stage in its commercialization
          or product life of similar market potential, taking into account safety
          and
          efficacy, the competitiveness of alternative products in the marketplace,
          the
          patent and other proprietary position of the product, the likelihood of
          regulatory approval given the regulatory structure involved, the potential
          profitability of the product and alternative products and other relevant
          factors
          relating to the commercialization of a Licensed Product, including, without
          limitation, the potential cost, risk, timing and reward, provided,
          however,
          that
          the fact that the Parties are required to share revenues with respect to
          the
          Licensed Products shall not be a factor taken into account in determining
          whether Diligent Commercialization Efforts were satisfied. Diligent
          Commercialization Efforts shall be determined on a market by market basis
          for a
          particular Licensed Product, and it is anticipated that the level of effort
          will
          change over time reflecting changes in the status of the Licensed Product
          and
          the market involved.

         

        1.30 “Diligent
          Development Efforts”
          means
          efforts and resources reasonably comparable to those commonly used in the
          research-based pharmaceutical industry for a medical device, pharmaceutical
          product or pharmaceutical compound at a similar stage in its development
          of
          similar market potential, taking into account safety and efficacy, product
          profile, difficulty in developing the product, competitiveness of alternative
          products in the marketplace, the patent and other proprietary position
          of the
          product, the likelihood of regulatory approval given the regulatory structure
          involved, the potential profitability of the product and alternative products
          and other relevant factors affecting the cost, risk and timing of development
          and total potential reward to be obtained if a Licensed Product is
          commercialized, provided,
          however,
          that
          the fact that the Parties are required to share revenues with respect to
          the
          Licensed Products shall not be a factor taken into account in determining
          whether Diligent Development Efforts were satisfied. 

         

        1.31 “Discovery”
          has the
          meaning set forth in the Preamble hereto.

         

        1.32 “Discovery
          Intellectual Property”
          has the
          meaning set forth in Section 9.1.2.

         

        1.33 “Discovery
          Patents”
          means
          all Patents owned by Discovery or to which Discovery otherwise has rights
          that
          claim or are directed to any Discovery Intellectual Property. 

         

        
          
            
            

          

          
            4

            
              

            

          

          
            
            

          

        

        1.34 “Discovery
          Technology”
          means
          (a) Discovery’s proprietary Pulmonary Surfactant technology (including without
          limitation the technologies, formulations, processes, equipment, materials
          and
          know-how relating to the manufacture and use of Pulmonary Surfactants for
          treatment of respiratory conditions), and (b) all Intellectual Property
          owned by
          or licensed to Discovery relating to such Pulmonary Surfactant technology,
          including, without limitation, the Discovery Patents. 

         

        1.35 “Discovery
          Technology Improvements”
          means
          any Inventions created or reduced to practice [***]
          in the
          performance of the Alliance or exercise of the license granted pursuant
          to this
          Agreement, which Inventions relate primarily to Pulmonary Surfactants (alone
          or
          in combination with other pharmaceutical compounds).

         

        1.36 “Disposable
          Dose Packet”
          consists of: (i) Drug Product within a container (comprising the drug
          formulation containing the drug substance and the container closure system
          in
          which it is packaged), (ii) aerosolization capillary (heatable capillary
          through
          which the formulation is pumped to produce an aerosol), (iii) patient interface
          (components through which the aerosol produced by the capillary travels
          in order
          to reach the patient), and (iv) all ancillary tubing, connectors and fittings
          related thereto. 

         

        1.37 “Dispute”
          has the
          meaning set forth in Section 20.1.

         

        1.38 “Dollars”
          and
“$”
          means,
          unless otherwise specified, United States Dollars.

         

        1.39 “Drug
          Product”
          means
          Pulmonary Surfactant(s) or other pharmacological agent(s), together with
          any
          excipients or inactive ingredients, formulated for use in a Licensed
          Product.

         

        1.40 “Effective
          Date”
          has the
          meaning set forth in the Preamble hereto.

         

        1.41 “Estimated
          Amount”
          has the
          meaning set forth in Section 8.7.1.

         

        1.42 [***]

         

        1.43 “Exchange
          Act”
          has the
          meaning set forth in Section
          19.1.

         

        1.44 “Exclusive
          Field”
          means
          the therapeutic or preventative use in humans of Aerosol Technology to
          deliver
          Pulmonary Surfactants (alone or in combination with any other pharmaceutical
          compound(s)) as an active ingredient for the prevention or treatment of
          Respiratory Indications.

         

        1.45 “FDA”
          shall
          mean the United States Food and Drug Administration, and any successor
          agency.

         

        1.46 “First
          Access Product”
          has the
          meaning set forth in Section 10.1.

         

        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.

        


        
          
            
            

          

          
            5

            
              

            

          

          
            
            

          

        

         

        1.47 “First
          Access Product Presentation”
          has the
          meaning set forth in Section 10.3.

         

        1.48 “First
          Commercial Sale”
          means
          the first arms-length commercial sale of a Licensed Product to a Third
          Party by
          Discovery or its Affiliates or sublicensees, as the case may be, in any
          country
          in the Territory after receipt of Marketing Authorization in such country
          which
          results in an exchange for cash or some equivalent to which value can be
          assigned for the purpose of determining Net Sales.

         

        1.49 “Force
          Majeure Event”
          means
          an event or occurrence that materially interferes with the ability of a
          Party to
          perform its obligations or duties hereunder which is not within the reasonable
          control of the Party affected or any of its Affiliates, not due to malfeasance
          by such Party or its Affiliates, and which could not with the exercise
          of due
          diligence have been avoided, including without limitation fire, earthquake,
          acts
          of God, acts of war, labor strikes or lockouts, riots, civil disturbances,
          actions or inactions of governmental authorities (except actions in response
          to
          a breach of applicable Law by such Party).

         

        1.50 “GAAP”means
          generally accepted accounting principles in the United States of America.
          

         

        1.51 “Hospital
          General Products”
          has the
          meaning set forth in Section 4.2.

         

        1.52 “Hospital
          Setting”
          means a
          hospital-setting in the delivery room, NICU, PICU, CCU, emergency department,
          surgical care unit and/or intermediate care unit.

         

        1.53 “Indemnitee”
          has the
          meaning set forth in Section 15.2.1.

         

        1.54 “Indemnitor”
          has the
          meaning set forth in Section 15.2.1.

         

        1.55 “Independent
          Product”
          means
          any Licensed Product other than a Supported Product.

         

        1.56 “Infringement
          Notice”
          has the
          meaning set forth in Section 9.6.1.

         

        1.57 “Intellectual
          Property”
          means
          all know how, Inventions, Patents, copyrights, trademarks, trade secrets
          and any
          other intellectual property rights in the Territory that may be secured
          in any
          place under laws now or hereafter in effect.

         

        1.58 “Invention”
          means
          any new or improved apparatus, process, information, product, invention,
          discovery, idea, suggestion, material, data, equipment, design, circuit
          component, drawing, tooling, prototype, report, computer software, documentation
          or other intellectual property or know-how (whether or not patentable)
          discovered, produced, conceived, created or reduced to practice by either
          or
          both Parties (or their Affiliates, sublicensees, subcontractors, successors
          or
          assigns).

         

        1.59 “Joint
          Inventions”
          has the
          meaning set forth in Section 9.1.3.

         

        1.60 “Joint
          Patents”
          means
          all Patents that claim or are directed to any Joint Inventions.

         

        
          
            
            

          

          
            6

            
              

            

          

          
            
            

          

        

        1.61 “Law”
          means
          any applicable statute, law, ordinance, regulation, order, or rule of any
          federal, state, local, foreign, or other governmental agency or body or
          of any
          other type of regulatory body (including common law) or securities exchange
          or
          automated quotation system.

         

        1.62 “Licensed
          Product”means
          a
          combination drug-device product using or otherwise practicing the Chrysalis
          Technology and delivering Pulmonary Surfactants (alone or in combination
          with
          other pharmaceutical compounds).

         

        1.63 “Losses”
          has the
          meaning set forth in Section
          15.1.1.

         

        1.64 “Major
          Markets”
          means
[***].

         

        1.65 “Marketing
          Authorization”
          means,
          with respect to each country in the Territory, the principal
          Regulatory Approval required to market the Product in such country (e.g.,
          the
          NDA), including satisfactory pricing and reimbursement approval, when
          applicable.

         

        1.66 “NDA”
          shall
          mean (a) a new drug application, biologics license application, pre-market
          approval application, or a pre-market clearance under FDCA Section 510k
          that may
          be filed with the FDA in the United States or any comparable application
          that
          may be filed with any equivalent Regulatory Authority in the
          Territory.

         

        1.67 “Net
          Sales”
          means,
          with respect to Licensed Products, as applicable, sold by Discovery, its
          Affiliates and sublicensees, the [***]
          amount
[***]
          for
          Licensed Products by Discovery, its Affiliates, and any sublicensees of
          Discovery in arms-length, commercial transactions with customers that are
          Third
          Parties, less the following deductions to the extent included in such
[***]
          amount:
[***]

         

        Any
          discretionary rebates, discounts or other adjustments to the [***]
          amount
          shall be commercially reasonable and consistent with standard industry
          practices. Net Sales (including each applicable deduction from the [***]
          amount)
          shall be determined from the books and records of Discovery maintained
          in
          accordance with GAAP consistently applied. 

         

        1.68 “NICU”
          means
          neonatal intensive care unit.

         

        1.69 “NICU
          Products”
          has the
          meaning set forth in Section 4.2.

         

        1.70 “Non-Breaching
          Party”
          has the
          meaning set forth in Section 17.1.1 and 17.1.2, as applicable.

         

        1.71 “Party”
          and
“Parties”
          have
          the meanings set forth in the Preamble hereto.

         

        1.72 “Party
          Vote”
          has the
          meaning set forth in Section 5.6.3.

         

         

        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

            
              

            

          

          
            
            

          

        

        1.73 “Patents”
          means
          all patents and patent applications, and all patents issuing thereon (including
          utility, model and design patents and certificates of invention), together
          with
          all reissue patents, patents of addition, divisions, renewals, continuations,
          continuations-in-part, substitutions, additions, extensions (including
          supplemental protection certificates), registrations, confirmations,
          re-examinations, and foreign counterparts of any of the foregoing in the
          Territory.

         

        1.74 “Person”
          means
          any natural person, corporation, company, partnership, limited liability
          company, proprietorship, trust or estate, joint venture, association, or
          other
          legal entity.
          

         

        1.75 “Phase
          2 Completion Point”
          has the
          meaning set forth in Section 10.2.

         

        1.76 “Project
          Plan”means
          a
          plan for the overall development and commercialization of Licensed Products
          pursuant to a Supported Product Development Project.

         

        1.77 “Project
          Team”
          has the
          meaning set forth in Section 5.4.1.

         

        1.78 “Pulmonary
          Surfactant”
          means
          surface active agents designed for deposition in the lungs in order to
          exert a
          physiological or pharmacological affect to prevent or treat Respiratory
          Indications. 

         

        1.79 “Regulatory
          Approval”
          means
          any approvals (including, where necessary for the marketing, use, or other
          distribution of a drug, medical device, or combination drug and medical
          device
          in a regulatory jurisdiction, pricing, and reimbursement approvals), licenses,
          registrations, or authorizations or equivalents necessary for the manufacture,
          use, storage, import, export, clinical testing, transport, marketing, sale,
          and
          distribution of the Drug Product or Aerosol Device and any Licensed Product
          in a
          regulatory jurisdiction anywhere in the Territory, including Marketing
          Authorizations. 

         

        1.80 “Regulatory
          Authority”
          means
          any federal, national, multinational, state, provincial, or local regulatory
          agency, department, bureau, or other governmental entity with authority
          to
          regulate the marketing and sale of a pharmaceutical product, delivery system
          or
          device in a country in the Territory, including the FDA in the United
          States.
          

         

        1.81 “Regulatory
          Data”
          means
          any and all research data, pharmacology data, chemistry, manufacturing,
          and
          control data, preclinical data, clinical data and/or all other documentation
          submitted, or required to be submitted, to Regulatory Authorities in association
          with an Investigational New Drug Application or NDA for Licensed Products
          (including any Drug Master Files, Device Master Files, Chemistry, Manufacturing
          and Control (CMC) data, or similar documentation). “Respiratory
          Indications”
          means
          all respiratory dysfunctions, failures, syndromes, diseases, disorders,
          or
          conditions.

         

        1.82 “Right
          of First Access”
          has the
          meaning set forth in Section 10.1.

         

        1.83 “Royalty
          Credit”
          has the
          meaning set forth in Section 8.7(b).

         

        1.84 “Royalty
          Report”
          means
          the reports to be delivered by Discovery to Chrysalis pursuant to Section
          8.6
          with respect to each Contract Month and pursuant to Section 8.7 with respect
          to
          each Contract Quarter, which reports shall give such particulars of each
          of the
          Licensed Products sold by Discovery and its Affiliates and sublicensees
          during
          the preceding Contract Month in the case of Section 8.6 and during the
          preceding
          Contract Quarter in the case of Section 8.7 on a country-by-country basis
          as are
          reasonably pertinent to perform an accounting of royalties under this Agreement.
          

         

        
          
            
            

          

          
            8

            
              

            

          

          
            
            

          

        

        1.85 “SEC”
          has the
          meaning set forth in Section 11.3.

         

        1.86 “Steering
          Committee”
          has the
          meaning set forth in Section 5.3.1.

         

        1.87 “Supported
          Product”
          means:
          (i) the NICU Product, (ii) the Hospital General Product, and (iii) any
          other
          Licensed Products deemed to be Supported Products pursuant to Section 4.9.
          

         

        1.88 “Supported
          Product Development Projects”
          has the
          meaning set forth in Section 4.1. 

         

        1.89 “Target
          Indications”
          means
          the following Respiratory Indications: Respiratory Distress Syndrome (RDS);
          Chronic Lung Disease (BPD); Transient Tachypnea; Hypoxemia; Pulmonary
          Hypertension; Pneumonia; Bronchiolitis; Diaphragmatic Hernia; Acute Lung
          Injury
          (ALI); Acute Respiratory Distress Syndrome (ARDS); Lung Transplantation;
          Respiratory Syncitial Virus (RSV); and, Cystic Fibrosis.

         

        1.90 “Target
          Populations”
          means
          human patients in a Hospital Setting receiving forms of treatment for the
          applicable Respiratory Indication that are typically and principally provided
          within a Hospital Setting. For the sake of clarity, Target Populations
          shall not
          include patients or forms of treatment which are typically rendered outside
          a
          Hospital Setting or in ambulatory or chronic care modalities, even if such
          forms
          of treatment are also administered in a Hospital Setting. 

         

        1.91 “Taxes”
          has the
          meaning set forth in Section 8.13.

         

        1.92 “Term”
          has the
          meaning set forth in Article
          16.

         

        1.93 “Territory”
          means
          all countries in all continents of the world.

         

        1.94 “Third
          Party”
          means
          any Person other than Chrysalis or Discovery or their respective
          Affiliates.

         

        1.95 “Third
          Party Claim”
          has the
          meaning set forth in Section 15.1.1.

         

        1.96 “Valid
          Claim”
          means a
          claim of an issued and unexpired patent, which claim has not been held
          unpatentable, invalid, or unenforceable by a court or other government
          agency of
          competent jurisdiction from which no appeal can be or has been taken and
          has not
          been held or admitted to be invalid or unenforceable through re-examination
          or
          disclaimer, opposition procedure, nullity suit or otherwise, which claim,
          but
          for the licenses granted herein, would be infringed by the sale of a Licensed
          Product.
          

         

        1.97 “Working
          Group”
          has the
          meaning set forth in Section 5.5.

         

        
          
            
            

          

          
            9

            
              

            

          

          
            
            

          

        

        ARTICLE
          2

        SCOPE
          OF ALLIANCE

         

        The
          Parties agree to enter into this Agreement for the general purpose of developing
          and licensing for manufacturing and commercialization by Discovery certain
          combination drug-device products to promote and enhance human health on
          the
          terms and conditions set forth herein (the “Alliance”).
          To
          facilitate the development of such products, pursuant to this Agreement,
          Chrysalis is granting Discovery a license under the Chrysalis Technology,
          Chrysalis and Discovery have agreed to work together to develop certain
          combination drug-device products and Chrysalis has agreed to provide certain
          additional consultative services to Discovery, all on the terms and conditions
          set forth herein. Except as set forth in this Agreement or otherwise agreed
          to
          in writing, the Parties shall have no rights and obligations with respect
          to the
          Alliance. The Parties agree at all times to act in good faith and in a
          cooperative manner and, subject to any contractual or legal restrictions,
          to
          share such information as reasonably necessary to facilitate each Party’s
          performance of its obligations hereunder under this Agreement. 

         

        ARTICLE
          3

        LICENSE

         

        3.1 License.
          Subject
          to the terms, conditions, and limitations of this Agreement, Chrysalis
          hereby
          grants to Discovery an exclusive right and royalty-bearing license or
          sublicense, as applicable, with the right to grant sublicenses solely as
          set
          forth in Section 3.3 under the Chrysalis Technology and Joint Patents
          to
          make and have made, to use and have used, to sell and have sold, to offer
          for
          sale and have offered for sale, to import and export and have imported
          and
          exported Licensed Products in the Exclusive Field in the Territory during
          the
          Term.

         

        3.2 Limitations.
          The
          license granted pursuant to Section 3.1 shall be exclusive only to the
          extent
          that Chrysalis has the right to grant an exclusive license with respect
          to the
          Licensed Product in question. No right or license outside of the Exclusive
          Field
          is granted and all such rights are expressly reserved by Chrysalis. No
          right or
          license is or shall be granted under this Agreement by implication. All
          such
          rights or licenses are or shall be granted only as expressly provided in
          this
          Agreement. Discovery shall not practice the Chrysalis Technology except
          as
          expressly licensed herein. Nothing herein shall limit the ability of Chrysalis
          to perform any research or development work on or using the Chrysalis
          Technology. Notwithstanding any other provision of this Agreement, no rights
          with respect to any trademarks, trade names, service marks or logos of
          Chrysalis
          are granted pursuant to this Agreement.

         

        3.3 Sublicensing
          Rights.
          The
          license granted to Discovery pursuant to Section 3.1 by Chrysalis shall
          include
          the right of Discovery to grant sublicenses, subject to terms and conditions
          set
          forth in Section 21.6. Discovery shall provide Chrysalis with prompt written
          notice of any sublicenses granted hereunder.

         

        3.4 Retained
          Rights.
          Any
          rights of each Party not expressly granted to the other Party under the
          provisions of this Agreement shall be retained by each Party, and, subject
          to
          any applicable terms, conditions, and limitations of this Agreement, each
          Party
          shall retain the right to: (a) exploit such Party’s own Intellectual Property
          relating to Licensed Products to develop, manufacture, and commercialize
          products outside the Exclusive Field; (b) exploit such Party’s own Intellectual
          Property relating to Licensed Products for other purposes outside the Exclusive
          Field unrelated to the Licensed Products; and (c) perform its obligations
          and
          exercise its rights under this Agreement.

         

        
          
            
            

          

          
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        3.5 Exclusivity.
          In
          light of the substantial investments and undertakings to be made by each
          Party
          in connection with the Alliance in order to successfully develop and bring
          to
          market products to enhance human health, each Party agrees that the Alliance
          shall be exclusive in the Exclusive Field. Accordingly, during the Term,
          neither
          Party shall without the other Party’s prior written consent directly or
          indirectly offer for sale or sell, or grant any third party the right to
          offer
          for sale or sell any Aerosol Device, Disposable Dose Packet or Drug Product
          for
          use in the Exclusive Field other than a Licensed Product. 

         

        ARTICLE
          4

        PRODUCT
          DEVELOPMENT

         

        4.1 In
          General.
          In
          light of Chrysalis’ substantial expertise regarding the Chrysalis Technology and
          Discovery’s substantial expertise regarding Pulmonary Surfactants, Discovery
          desires to have Chrysalis work with Discovery on the development of certain
          of
          the Licensed Products. The Parties have agreed to work together on Supported
          Product projects (the “Supported
          Product Development Projects”)
          with
          the objective of developing Licensed Products on the terms and conditions
          set
          forth in this Article 4. 

         

        4.2 Supported
          Product Development Projects.
          As of
          the Effective Date, the Parties have agreed to work together on the following
          Supported Product Development Projects to develop aerosolized Pulmonary
          Surfactant products for use in the Hospital Setting: (i) a project to develop
          an
          initial aerosolized Pulmonary Surfactant product for the prevention and
          treatment of Respiratory Indications in neonates in the NICU (the initial
          Licensed Product resulting therefrom, the “Base
          NICU Product”
          and,
          together with any other NICU-related Licensed Products, the “NICU
          Products”);
          and
          (ii) a project to develop an initial aerosolized Pulmonary Surfactant product
          for the prevention and treatment of Respiratory Indications in patients
          outside
          of the NICU (the initial Licensed Product resulting therefrom, the “Base
          Hospital General Product”
          and,
          together with any other non-NICU-related Licensed Products, the “Hospital
          General Products”).
          As soon
          as practicable after the Effective Date, the Project Team shall mutually
          agree
          upon and submit to the Steering Committee for approval a Project Plan for
          each
          of the Base Supported Product Development Projects. Licensed
          Products that may be developed other than the Base NICU Product and the
          Base
          Hospital General Product shall be treated as Additional Product Opportunities
          as
          provided for in Section 4.9. 

         

        4.3 Project
          Plans.
          The
          Project Plans for each Supported Product Development Project shall, subject
          to
          the Steering Committee’s right to modify or add to the following requirements in
          its discretion, include: (i) a list of development activities (including
          preclinical studies, toxicology work, Clinical Trials, Clinical Trial material
          requirements, specifications and other key activities required for obtaining
          Marketing Authorizations and timelines for the performance of the development
          activities; (ii) a reasonably detailed and specific budget for such development
          activities; and (iii) Discovery’s plan for commercialization (including timing
          and plans for Discovery obtaining Marketing Authorizations in the Major
          Markets). The Parties acknowledge that the Project Plan budgets are intended
          to
          provide an estimation of expenditures and resource deployment and are not
          required to disclose sensitive data on either Party’s cost structure (for the
          sake of clarity, Parties are expected to provide reasonable detail on such
          items
          as aggregate costs for relevant cost categories (e.g., personnel and overhead
          expenses) but are not expected to provide data regarding individual personnel
          costs or line-by-line overhead cost classifications). The Project Team
          shall be
          responsible for the preparation of the budget for each Project Plan. The
          Project
          Plans for each Supported Product Development Project shall be updated,
          amended
          and modified as deemed necessary by the Project Team, but no less frequently
          than each Contract Year. Updated Project Plans shall be submitted by the
          Project
          Team to the Steering Committee for approval in a timely fashion by a date
          that
          is determined from time-to-time by the Steering Committee that shall conform
          to
          the greatest practicable extent the Parties’ respective internal budgeting
          cycles. Neither Party will pursue development tasks or product studies
          relating
          to Supported Product Development Projects not provided for in the Project
          Plans
          prior to presenting such proposals to the Steering Committee and obtaining
          authorization therefor from the Steering Committee.

         

        
          
            
            

          

          
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        4.4 Development
          Responsibilities and Consulting Services.
          

         

        4.4.1 Direction
          and Oversight.
          All
          development activities in connection with Supported Product Development
          Projects
          shall be conducted under the direction and oversight of the Steering Committee
          and the Project Team. In order to facilitate effective management of the
          projects each Party shall have lead responsibility for particular aspects
          of the
          development as set forth below in Sections 4.4.2 and 4.4.3(b), as appropriate.
          Each Party shall also reasonably support the other Party as provided for
          in the
          relevant Project Plan to facilitate such other Party’s ability to perform its
          development responsibilities. Chrysalis shall also provide consulting to
          Discovery with respect to certain of Discovery’s responsibilities as set forth
          below in Section 4.4.3(c). 

         

        4.4.2 Responsibilities
          of Discovery.
          The
          specific activities to be undertaken by Discovery in connection with each
          project and the Supported Products developed pursuant thereto shall be
          as set
          forth in the applicable Project Plan. Discovery shall act as the lead Party
          for,
          and shall be principally responsible for performing, the
          following activities with respect to each project: (i) drug product formulation
          development; (ii) development and implementation of analytical methods
          for
          quality assurance/control of Drug Product, Aerosol Device and Disposable
          Dose
          Packet; (iii) manufacturing of Supported Products, including manufacturing
          of
          the Drug Product, Aerosol Device and Disposable Dose Packet: (iv) filling
          of
          Disposable Dose Packets; (v) development of procedures for final release
          testing
          and testing of Supported Products; (vi) pre-clinical and clinical development
          and trials; (vii) regulatory activities relating to the Supported Products,
          including without limitation submissions to regulatory authorities; (viii)
          medical affairs, such as adverse event reporting and pharmacovigilance.
          Discovery shall also be solely responsible for manufacturing and commercializing
          the Supported Products.

         

        4.4.3 Responsibilities
          of Chrysalis. 

         

        (a) In
          General.
          The
          specific activities to be undertaken by Chrysalis in connection with each
          Supported Product Development Project and the Supported Products developed
          pursuant thereto shall be as set forth in the applicable Project
          Plan.

        
           

          
            
              
              

            

            
              12

              
                

              

            

            
              
              

            

          

        

        (b) Development
          Activities.
          Chrysalis shall act as the lead Party for, and shall be principally responsible
          for performing, the following development activities with respect to each
          Supported Product Development Project: (i) unfilled Disposable Dose Packet
          development, including the container closure system, aerosolization capillary
          and patient interface; (ii) Aerosol Device development, including the control
          unit and pump; and (iii) design and development of filling
          equipment.

         

        (c) Consulting
          Services.
          In
          addition to the development activities to be performed by Chrysalis, Chrysalis
          shall also provide certain consulting services to Discovery as set forth
          in the
          Project Plan with respect to each Supported Product. In particular, Chrysalis
          shall provide consulting services to Discovery regarding: (i) manufacturing
          development for the Aerosol Device and Disposable Dose Packet; (ii) the
          development and implementation of quality control specifications and processes
          for the Aerosol Device and Disposable Dose Packet; (iii) training and set-up
          of
          the Aerosol Device and Disposable Dose Packet for preclinical and clinical
          studies; (iv) the development of Discovery’s organizational infrastructure to
          manage manufacturing of the Supported Products; and (v) troubleshooting
          and
          corrective measures regarding the Aerosol Device and Disposable Dose Packet.
          

         

        4.5 Development
          Effort.
          Each
          Party shall use Diligent Development Efforts to
          develop
          the Supported Products in accordance with the Project Plans therefor and
          to
          otherwise carry out its responsibilities under this Agreement relating
          to such
          Supported Products promptly and expeditiously in accordance with all Laws.
          Notwithstanding the foregoing, the Parties acknowledge that the development
          of
          pharmaceutical products is inherently speculative and there is no guarantee
          that
          the Alliance will be successful in developing any commercially viable Supported
          Products, or that the development of any Supported Products will proceed
          as
          anticipated or in accordance with the Project Plans. 

         

        4.6 Development
          Milestone.
          As soon
          as practicable after the Effective Date, Discovery and Chrysalis shall
          mutually
          agree in writing with respect to each of the Base Supported Product Development
          Projects on a particular development milestone related to the development
          activities to be performed by Chrysalis in connection therewith (e.g.,
          the
          delivery of an initial Aerosol Device and related Disposable Dose Packet
          design
          validated by a prototype) (such event, the “Development
          Milestone”)
          and
          the date by which such Development Milestone should reasonably be achieved
          (the
“Milestone
          Date”).
          Chrysalis shall use Diligent Development Efforts to achieve the Development
          Milestone by the Milestone Date. To the extent any delay in achieving such
          Development Milestone is caused by Discovery or other factors beyond Chrysalis’
          reasonable control, the Milestone Date shall be equitably extended by the
          Steering Committee to take into account such delays. If, after taking into
          account any such equitable adjustments to the Milestone Date, Chrysalis
          fails to
          achieve the Development Milestone by such adjusted Milestone Date with
          respect
          to a Base Supported Product Development
          Project
          for a particular Base NICU Product or Base Hospital General Product, then
          the
          royalty payments to Chrysalis hereunder in connection with all NICU Products
          or
          Hospital General Products, as the case may be, shall be modified as provided
          in
          Section 8.1(c).  

         

        4.7 Skilled
          Personnel.
          Each
          Party shall promptly assign
          responsibilities for the various operational aspects of the Alliance, including
          without limitation, pursuant to Supported Product Development Projects,
          to
          portions of their respective organizations which have expertise reasonably
          appropriate to perform such functions. Each Party shall be solely responsible
          for making all decisions regarding its staffing and personnel.

         

        
          
            
            

          

          
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        4.8 Costs.
          Except
          as otherwise expressly provided in this Agreement, each Party shall be
          solely
          responsible for all costs incurred by such Party in the performance of
          its
          obligations in connection with a Supported Product Development Project.
          Each
          Party shall internally budget for its development costs and shall provide
          resources (financial, personnel and otherwise) in accordance with the budgets
          set forth in the applicable Project Plans to satisfy their respective
          responsibilities under such Project Plan.

         

        4.9 Additional
          Licensed Product Opportunities.
          

         

        4.9.1 Additional
          Product Opportunities.
          In the
          event that Discovery desires to (a) exercise the rights granted
          pursuant to
          Section 3.1 or (b) develop or commercialize any Licensed Product
          other than
          the Base NICU Product and the Base Hospital General Product (each, an
“Additional
          Product Opportunity”),
          then
          the following shall apply: (i) should Discovery, in its sole discretion,
          develop any such Additional Product Opportunity independently of Chrysalis
          (either on its own or with Third Parties), such Additional Product Opportunity
          shall be deemed to be a Supported Product for the purposes of determining
          the
          application of royalties provided for in Section 8.1; (ii) should Discovery,
          in
          its sole discretion, offer Chrysalis the opportunity to assist with the
          development of any such Additional Product Opportunity and (X) should Chrysalis
          agree to so assist on the terms and conditions provided for in this Agreement,
          then such Additional Product Opportunity shall be deemed to be a Supported
          Product for the purposes of determining the application of royalties provided
          for in Section 8.1; or (Y) should Chrysalis choose not to assist, then
          such
          Additional Product Opportunity shall be deemed to be a Independent Product
          and
          any royalties thereon shall be as provided for in Section 8.2.

         

        4.9.2 Procedure.
          Additional Product Opportunities presented by Discovery to the Steering
          Committee shall be in a reasonably detailed manner to enable Chrysalis
          to
          conduct an evaluation of the potential market and collaborative opportunity
          with
          respect thereto. Reasonably promptly following the presentation of any
          such
          Additional Product Opportunity, Chrysalis shall make the determination
          (a) to
          participate in the development of the Licensed Product that is the subject
          of
          the Additional Product Opportunity (in which case such Licensed Product
          will
          become a Supported Product Development Project), or (b) not to participate
          in
          the development of the Licensed Product that is the subject of the Additional
          Product Opportunity (in which case such Licensed Product shall constitute
          an
          Independent Product). In the event Chrysalis fails to notify Discovery
          of its
          decision to participate in such Additional Product Opportunity within sixty
          (60)
          days after such presentation, Chrysalis shall be deemed to have elected
          not to
          participate. In the event Chrysalis elects to participate in the development
          of
          such Licensed Product, the Parties shall commence a Supported Product
          Development Project with respect to such Supported Product as soon as
          practicable thereafter. The specific responsibilities of each Party in
          connection with the development of such Supported Product shall be as mutually
          agreed and set forth in a Project Plan as soon as practicable after each
          such
          election. The Parties intend that Chrysalis’ and Discovery’s responsibilities
          with respect to such Supported Product shall be reasonably comparable to
          those
          set forth in Sections 4.4.2 and 4.4.3 except as otherwise mutually agreed
          taking
          into account the particular needs with respect to the development of such
          Supported Product.

         

        
          
            
            

          

          
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        4.10 Design
          Configurations.
          Throughout the Term, unless otherwise mutually agreed to by the Parties,
          it
          shall be a design objective of the Alliance to minimize the number of different
          configurations of the Disposable Dose Packets and Aerosol Devices in the
          Exclusive Field. Furthermore, the Parties agree that any Aerosol Device
          and
          Disposable Dose Packet configuration developed for use outside the Exclusive
          Field shall be distinct in appearance from those for use with the Licensed
          Products and shall not be interchangeable with the Aerosol Device or Disposable
          Dose Packet of the Licensed Products. Without limiting the generality of
          the
          foregoing, neither Party shall offer for sale or sell, or authorize any
          Third
          Party to offer for sale or sell, any pharmaceutical product (other than
          a
          Licensed Product) (i) in the Disposable Dose Packet for a Licensed Product,
          (ii)
          in packaging similar in appearance to the Disposable Dose Packet for a
          Licensed
          Product, or (iii) in packaging that is interchangeable with the Disposable
          Dose
          Packet of a Licensed Product for purposes of use in an Aerosol
          Device.

         

        ARTICLE
          5

        GOVERNANCE
          AND COMMITTEE STRUCTURE

         

        5.1 General.
          The
          Alliance shall be governed by the Steering Committee, Alliance Managers,
          a
          Project Team and such Working Groups as mutually agreed to by the Parties
          and as
          provided in this Article 5. The
          Steering Committee and the Project Team are collectively referred to herein
          as
          the “Committees.”

         

        5.2 Alliance
          Managers.
          

         

        5.2.1 Appointment
          and Roles.
          Promptly after the Effective Date, and in any event within thirty (30)
          days
          thereafter, each of the Parties shall appoint a single individual to act
          as that
          Party’s alliance manager (the “Alliance
          Manager”).
          The
          role of the Alliance Managers is to act as a single point of contact for
          its
          respective Party. The Alliance Managers shall have the right to attend
          all
          Committee meetings and shall support the Committee chairpersons in the
          discharge
          of their responsibilities. Alliance Managers shall be nonvoting participants
          in
          such Committee meetings, unless they are also appointed members of such
          Committee; provided, however, that an Alliance Manager may bring any matter
          to
          the attention of any Committee if such Alliance Manager reasonably believes
          that
          such matter warrants such attention.
          

         

        5.2.2 Changes
          in Alliance Managers.
          Each
          Party may change its designated Alliance Manager from time to time upon
          written
          notice to the other Party. Any Alliance Manager may designate a substitute
          to
          temporarily perform the functions of that Alliance Manager by written notice
          to
          the other Party. Each Alliance Manager shall be charged with creating and
          maintaining a collaborative work environment within and among the Committees.
          

         

        5.2.3 Additional
          Responsibilities of Alliance Mangers.
          Each
          Alliance Manager, with respect to its Party, shall also: (i) coordinate
          the
          relevant functional representatives of the Parties in developing and executing
          strategies and plans for the Supported Products in an effort to ensure
          consistency and efficiency throughout the Territory; (ii) provide a single
          point
          of communication for seeking consensus both internally within the respective
          Parties’ organizations and between the Parties regarding key strategy and plan
          issues with respect to the development of the Supported Products; (iii)
          plan and
          coordinate cooperative efforts and internal and external communications;
          and
          (iv) take responsibility for ensuring that governance activities, such
          as the
          conduct of required Committee meetings and production of meeting minutes
          occur
          as set forth in this Agreement, and that relevant action items resulting
          from
          such meetings are appropriately carried out or otherwise addressed.


         

        
          
            
            

          

          
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        5.3 Steering
          Committee.

         

        5.3.1 Formation
          and Purpose.
          Discovery
          and Chrysalis hereby establish a Steering Committee (“Steering
          Committee”)
          that
          shall generally operate by the procedures set forth in Section 5.6. The
          Steering
          Committee shall have overall
          responsibility for the Alliance, including for:

         

        (i) managing
          the overall relationship and development activities for the Supported
          Products;

         

        (ii) overseeing
          the Project Team;

         

        (iii) reviewing,
          commenting on, and approving or rejecting Project Plans and updates or
          amendments thereto;

         

        (iv) facilitating
          the flow of information between the Parties and coordinating the activities
          of
          the Parties; 

         

        (v) attempting
          to resolve disputes, if any, with respect to general Alliance matters and
          any
          disputes referred to the Steering Committee by the Project Team;

         

        (vi) discussing
          and making recommendations with respect to Intellectual Property developed
          under
          the Alliance; and

         

        (vii) performing
          such other functions as appropriate to further the purposes of this Agreement
          and the Alliance as determined by the Parties.

         

        5.3.2 Membership,
          Chairmanship and Meetings.
          The
          Steering Committee shall be comprised of representatives of each Party
          and
          initially shall consist of senior representatives from each Party having
          the
          technical knowledge and decision making authority appropriate for supervising
          such Party’s responsibilities under this Agreement. Each Party shall designate
          its respective Steering Committee members within thirty (30) days of the
          Effective Date. Discovery shall designate the Chairperson of the Steering
          Committee. The Steering Committee shall meet at least every six (6) months.
          

         

        5.4 Project
          Team.
          

         

        5.4.1 Formation
          and Purpose.
          Reasonably promptly after the Effective Date, Discovery and Chrysalis shall
          establish a project team (“Project
          Team”)
          consisting of representatives designated by each Party. The Project Team
          shall
          generally operate by the procedures set forth in Section 5.6.

         

        
          
            
            

          

          
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        5.4.2 Specific
          Responsibilities of the Project Team.
          In
          furtherance of its responsibility for overseeing, coordinating and expediting
          the development of the Supported Products in the Territory, the Project
          Team
          shall have responsibility for:

         

        (i) developing
          Project Plans (including preparation of the applicable budget and related
          operational plans) for the development of Licensed Products for manufacture
          by
          Discovery and technology transfer regarding Licensed Products in coordination
          with the Design Review Board;

         

        (ii) 
          managing
          the day-to-day activities related to the operational plans in order to
          fulfill
          Project Plans;

         

        (iii) 
          reviewing, amending and updating individual Project Plans on an annual
          basis as
          well as more frequently as shall be necessary or advisable to take into
          account
          completion, commencement or cessation of development not then contemplated
          by
          the Project Plan and submitting such amended or updated Project Plan to
          the
          Steering Committee for approval;

         

        (iv) 
          monitoring the progress of development of any Supported Product;

         

        (v) 
          facilitating the exchange of all development information; 

         

        (vi) 
          working
          together to assure a smooth transition from development to Discovery’s
          manufacturing and commercialization; 

         

        (vii) reporting
          on a regular basis to the senior management of each Party as well as to
          the
          Steering Committee; and

         

        (viii) overseeing
          any Working Groups established by the Project Team.

         

        5.4.3 Membership,
          Chairmanship and Meetings.
          The
          Project Team shall be comprised of representatives from each Party possessing
          the appropriate experience and expertise and responsible for: Aerosol Device,
          Disposable Dose Packet and Drug Product development; quality control/assurance;
          regulatory affairs; project management; clinical affairs. The initial members
          of
          the Project Team for each Party shall be designated promptly following
          the
          Effective Date. The Project Team shall be jointly chaired by the Parties.
          The
          Project Team shall meet no less than monthly. 

         

        5.5 Working
          Groups.
          From
          time to time, the Committees may establish sub-committees or directed teams
          (each, a “Working
          Group”)
          on an
“as-needed” basis to oversee particular projects or activities. Each such
          Working Group shall be constituted and shall operate as the applicable
          parent
          Committee determines. Each Working Group and its activities shall be subject
          to
          the oversight, review and approval of, and shall report to, the applicable
          parent Committee that established such Working Group. In no event shall
          the
          authority of the Working Group exceed that specified for the relevant Committee
          in this Article
          5. The
          Parties agree and acknowledge that Alliance Managers shall have access
          to all
          members of the Working Groups, at reasonable times and places, so as to
          be able
          to have appropriate oversight and direct interaction with such Working
          Group
          members.

         

        
          
            
            

          

          
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        5.6 General
          Committee Membership and Procedures.

         

        5.6.1 Membership
          and Meetings.
          With
          respect to the Parties’ Committee representatives, each representative may serve
          on more than one Committee as appropriate in view of such representative’s
          expertise. Each Party may replace its Committee representatives at any
          time upon
          written notice to the other Party. Meetings of any Committee may be held
          by
          audio or video teleconference with the consent of each Party. All Committee
          representatives shall be given prior notice of any Committee meetings.
          Each
          meeting shall require that representatives from each Party be in attendance
          before business may be conducted. 

         

        5.6.2 Ad
          Hoc
          Participants.
          Other
          employees of each Party (including the Alliance Managers) may attend meetings
          of
          any Committee as nonvoting participants with the reasonable consent of
          the other
          Party. In addition, with the consent of both Parties, consultants or advisors
          to
          a Party may attend Committee meetings as nonvoting observers; provided
          that such
          Third Party representatives are under obligations of confidentiality and
          non-use
          applicable to the Confidential Information of each Party and that are at
          least
          as stringent as those set forth in Article 11. Each Party shall be responsible
          for all of its own expenses of participating in any Committee.

         

        5.6.3 Decision-Making.
          Each
          Party’s representatives on a Committee shall, collectively, have one vote (the
          “Party
          Vote”)
          on all
          matters brought before such Committee, which Party Vote shall be determined
          by
          majority vote of such representatives present at any meeting. Except as
          expressly provided in this Section 5.6.3, each Committee shall operate
          as to
          matters within its jurisdiction by unanimous vote (although the vote of
          the
          representatives present at a meeting underlying the Party Vote need not
          be
          unanimous); provided that only the Steering Committee in accordance with
          Section
          21.15, shall have the authority to amend or modify, or waive compliance
          with,
          this Agreement.
          If a
          Committee fails to achieve a unanimous vote with respect to any matter,
          such
          dispute shall be resolved in accordance with Article 20.

         

        5.6.4 Meeting
          Agendas and Minutes.
          The
          chairperson(s) of each Committee shall be responsible for calling meetings
          and
          preparing, and circulating an agenda in advance of each meeting of such
          Committee. Each Party shall disclose to the chairperson(s) of each Committee
          proposed agenda items for a meeting, along with appropriate information
          for such
          proposed agenda item, at least three (3) Business Days in advance of each
          meeting of the applicable Committee; provided that under exigent circumstances
          requiring Committee input, a Party may provide its agenda items to the
          chairperson(s) of each Committee within a lesser period of time in advance
          of
          the meeting, or may propose that there not be a specific agenda for a particular
          meeting, so long as such other Party consents to such later addition of
          such
          agenda items or the absence of a specific agenda for such Committee meeting.
          The
          Alliance Managers, or the particular Committee representatives of each
          Party
          designated by such Alliance Managers, shall be responsible for, on an alternate
          basis, preparing and issuing minutes of each meeting within ten (10) days
          of
          each Committee meeting; provided, however, that the minutes will not be
          finalized until both Parties review and confirm the accuracy of such minutes
          in
          writing. 

         

        
          
            
            

          

          
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        5.6.5 Interactions
          between Committees and Internal Teams.
          The
          Parties recognize that while they will establish Committees and Working
          Groups
          for the purpose of the Alliance, each Party possesses an internal structure
          (including various committees, teams and review boards) that will be involved
          in
          administering such Party’s activities under this Agreement. Each Committee and
          Working Group shall establish procedures to facilitate communications between
          such Committee or Working Group and the relevant internal committee, team,
          or
          board of each Party in order to maximize the efficiency of the Alliance,
          including by requiring appropriate members of such Committees to be available
          at
          reasonable times and places and upon reasonable prior notice for making
          appropriate oral reports to, and responding to reasonable inquiries from,
          the
          relevant internal committee, team, or board of each Party.

         

        5.7 Design
          Review Board.
          Discovery
          shall have the right to designate one or more (as agreed by the Parties)
          representatives to participate in the design review board established by
          Chrysalis to oversee the design of Aerosol Devices for use in the Alliance
          (the
“Design
          Review Board”).
          The
          role and voting power of such representative shall be mutually determined
          by the
          Parties.
          

         

        ARTICLE
          6

        COMMERCIALIZATION

         

        6.1 Exclusive
          Right to Sell the Licensed Products.
          The
          Parties agree that during the Term, subject to Discovery’s achievement of the
          commercialization milestones and minimums in this Article 6, Discovery
          shall
          have the exclusive right to market and have marketed, sell and have sold,
          and
          offer for sale or have offered for sale any Licensed Products.

         

        6.2 Responsibility
          For Commercialization Matters.
          Discovery
          shall have the sole responsibility for all activities associated with the
          commercialization of the Licensed Products, including, without limitation,
          (a)
          preparing, submitting and seeking Marketing Authorizations for the Licensed
          Products, (b) sales, advertising and marketing of the Licensed Product,
          (c)
          scientific and medical affairs, (d) customer service and distribution related
          services, such as order taking, shipping, billing, accounts receivable,
          returns,
          allowance activities and product support; (e) Phase IV Clinical Trials,
          (f)
          commercial manufacture of the Licensed Product; and (g) branding of the
          Licensed
          Products.

         

        6.3 Diligent
          Commercialization Efforts.
          Discovery shall use Diligent Commercialization Efforts to bring the Licensed
          Products to market and to market and sell the Licensed Products with a
          particular focus on obtaining Marketing Authorizations for and commercializing
          Supported Products in the Major Markets. Discovery shall promptly notify
          Chrysalis of the receipt of any Marketing Authorization for a Licensed
          Product.

         

        
          
            
            

          

          
            19

            
              

            

          

          
            
            

          

        

        6.3.1 Commercialization
          Initiation.
          With
          respect to each Licensed Product, the First Commercial Sale in each country
          constituting the Major Markets shall occur within [***]
          of
          receipt of the relevant Marketing Authorization for such country
          for such
          Licensed Product. Should Discovery materially fail to achieve any such
          commercialization initiation within [***]
          of
          having received written notice of such failure from Chrysalis [***].

         

         

        6.3.2 Commercialization
          Milestones.
          Discovery shall meet certain mutually agreed upon commercialization milestones
          (determined in the best faith of the Parties) with respect to minimum sales
          levels to be achieved for each Licensed Product in each of the Major Markets.
          Such commercialization milestones shall be established no later than
[***]
          prior to
          the First Commercial Sale of such Licensed Product in each of the Major
          Markets
          and shall equal Discovery's good faith estimate of total Net Sales for
          [***]
          after
          the First Commercial Sale of such Licensed Product, which estimate shall
          be the
          same as the estimate used by Discovery for its financial projections and
          other
          business purposes (the "Estimated
          Sales").
          The
          Estimated Sales forecast for [***]
          shall be
          reviewed for compliance [***]
          prior to
          the end of [***],
          and may
          be reduced for purposes of this calculation of Estimated Sales by up to
          [***]
          percent
          ([***]%)
          for
[***]
          in the
          event that Discovery's good faith estimate of such sales has gone down
          [***]
          percent
          ([***]%)
          or
          more. Should Discovery fail to satisfy [***]
          percent
          ([***]%)
          of the
          Estimated Sales levels (taking into account any adjustment in the [***]
          forecast
          as provided above) with respect to the subject Licensed Product on a
          country-by-country basis in the Major Markets for [***].

         

        ARTICLE
          7

        REGULATORY
          MATTERS

         

        7.1 Responsibility
          and Consultation.
          Discovery shall be responsible for preparing, submitting, seeking and
          maintaining Marketing Authorization for the Licensed Products in the United
          States and other jurisdictions in the Territory. Discovery shall consult
          with
          Chrysalis regarding, and keep Chrysalis regularly and fully informed with
          respect to such regulatory matters. Chrysalis shall provide consultant
          services
          to Discovery regarding Aerosol Device and Disposable Dose Packet related
          regulatory matters regarding the Supported Products. Discovery shall provide
          Chrysalis with advance notice of all regulatory activities regarding the
          Licensed Products that are initiated by Discovery and Chrysalis shall have
          the
          right to participate in any such activities. Within their respective
          responsibilities as outlined in Article 4, the Parties shall cooperate
          to
          provide each other all reasonable assistance and take all actions reasonably
          requested that are necessary to comply with any material requirement of
          a Law
          applicable to Licensed Products. Each Party shall obtain and maintain all
          necessary Regulatory Approvals for the performance of its obligations and
          lead
          responsibilities under this Agreement and shall take all actions necessary
          to
          comply with any material requirement of a Law applicable to the performance
          of
          such Party’s obligations and the exercise of such Party’s rights with respect to
          the Licensed Products. 

         

        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.

         

        
          
            
            

          

          
            20

            
              

            

          

          
            
            

          

        

        7.2 Regulatory
          Communications.
          The
          Parties shall cooperate with respect to all interactions and in the drafting
          and
          review of all submissions to Regulatory Authorities. Each Party shall,
          immediately upon receipt of any significant contact with or communication
          from
          any Regulatory Authority relating to a Licensed Product, but in no event
          more
          than two (2) Business Days after such receipt or contact, forward a copy
          (if in
          writing) or description (if oral) of the same to the other Party and respond
          to
          all reasonable inquiries by the other Party relating thereto. Each Party
          shall,
          within two (2) Business Days of receipt thereof by such Party, provide
          notice to
          the other Party of any additional requirements which a Regulatory Authority
          may
          impose with respect to a Regulatory Approval (including, without limitation,
          additional clinical studies) and of all Regulatory Authority inquiries
          requiring
          a response.

         

        7.3 Meetings.
          To the
          extent not prohibited by Law, each Party will have an opportunity to participate
          in all material meetings between the other Party and a Regulatory Authority
          to
          the extent that they pertain to the Licensed Products. To the extent
          practicable, the Alliance Managers and their designees shall use reasonable
          efforts to agree in advance on the scheduling of such meetings and on the
          objectives to be accomplished at such meetings, conferences, and discussions
          and
          the agenda for the meetings, conferences, and discussions with the Regulatory
          Authorities. Each Party shall provide the other Party at least five (5)
          Business
          Days before any such meeting with copies of all documents, correspondence,
          and
          other materials in its possession, which are relevant to the matters to
          be
          addressed at any such meeting.

         

        7.4 Sharing
          of Information.
          In
          addition to any other reports required under this Agreement, each Party
          shall
          provide to the other Party at least once every three Contract Months copies
          of
          all updated data and information provided by such Party to a Regulatory
          Authority in connection with the Licensed Products in the Territory.


         

        7.5 Discovery’s
          Right to Audit Certain Third Parties.
          Chrysalis shall use reasonable efforts to obtain from Third Parties providing
          products or services relating to the Supported Product Development Projects,
          the
          right for Discovery or its representatives, with reasonable prior written
          notice
          and during regular business hours, (i) to examine and inspect such Third
          Party’s
          facilities and (ii) subject to applicable law and any Third Party
          confidentiality restrictions or obligations, to examine and inspect data,
          documentation, and work products relating to the activities performed by
          such
          Third Party. 

         

        ARTICLE
          8

        FINANCIAL
          PROVISIONS

         

        8.1 Royalties
          with Respect to Supported Products.
          For
          each individual Supported Product:  

         

        (a) Royalties
          Prior to [***].
          Until
[***]
          the
          First Commercial Sale of such Supported Product, Discovery shall pay royalties
          to Chrysalis on Net Sales of Supported Product(s) as follows depending
          on the
          Combined Net Sales attributable to all of the Supported Products during
          such
          Contract Year:

         

        


        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.

         

        
          
            
            

          

          
            21

            
              

            

          

          
            
            

          

        

         

        
          	
                  Combined
                    Net Sales of Supported Products During Such Contract
                    Year

                	
                  Royalty
                    Rate

                
	
                  First
                    $500 million of Combined Net Sales of Supported Products in a
                    Contract
                    Year

                	
                  [***]%
                    of the Net Sales for the particular Supported Product 

                
	
                  Next
                    $500 million of Combined Net Sales of Supported Products in a
                    Contract
                    Year

                	
                  [***]%
                    of Net Sales for the particular Supported Product 

                
	
                  In
                    excess of $1 billion of Combined Net Sales of Supported Products
                    in a
                    Contract Year

                	
                  [***]%
                    of the Net Sales for the particular Supported Product; subject
                    to the
                    exception set forth in Section 8.1(c) below.


                


        

        


         

        (b) Royalties
          Commencing on [***].
          Starting [***]
          the
          First Commercial Sale of a particular Supported Product, Discovery shall
          pay
          royalties to Chrysalis on Net Sales of Supported Product as follows depending
          on
          the Combined Net Sales attributable to all of the Supported Products during
          such
          Contract Year:

         

        
          	
                  Combined
                    Net Sales of Supported Products During Such Contract
                    Year

                	
                  Royalty
                    Rate

                
	
                  First
                    $500 million of Combined Net Sales of Supported Products in a
                    Contract
                    Year

                	
                  [***]%
                    of Net Sales for the particular Supported Product. 

                
	
                  In
                    excess of $500 million of Combined Net Sales of Supported Products
                    in a
                    Contract Year

                	
                  [***]%
                    of Net Sales for the particular Supported Product, subject to
                    the
                    exception set forth in Section 8.1(c)
                    below.

                


        

        


         

        For
          the
          avoidance of doubt, Net Sales with respect to Independent Products shall
          not be
          taken into account in the calculation of Combined Net Sales with respect
          to
          Supported Product(s) for purposes of Sections 8.1(a) and 8.1(b).

         

        (c) Reduction
          for Failure to Timely Achieve Development Milestone.
          In the
          event that with respect to a particular Base Supported Product Development
          Project, Chrysalis fails
          to
          achieve the applicable Development Milestone by its Milestone Date, after
          any
          adjustments in
          such
          dates pursuant to Section 4.6, then, unless Discovery shall be entitled
          to and
          shall elect to terminate the Agreement pursuant to Section 17.1.1 or a
          Supported
          Product Development Project pursuant to Section 17.1.2, [***].

         

        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.

         

        
          
            
            

          

          
            22

            
              

            

          

          
            
            

          

        

         

        8.2 Royalties
          with Respect to Independent Products.
          For
          each individual Independent Product, Discovery shall pay royalties to Chrysalis
          on Net Sales of Independent Product(s) in an amount equal to [***]%
          of Net
          Sales for such Independent Product.

         

        8.3 Prohibition
          on Bundling.
          Notwithstanding any other provision of this Agreement to the contrary,
          Discovery
          hereby covenants that it will not include or bundle any Licensed Products
          or
          components thereof as part of a multiple product offering with any other
          products or services if it would result in the price of the Licensed Product
          or
          any components thereof being discounted from the then-applicable sale price
          in
          such jurisdiction, nor shall Discovery permit its Affiliates or sublicensees
          to
          do so, except with the prior written consent of Chrysalis. In the event
          any such
          bundled sales occur, the Net Sales with respect to such bundled transactions
          shall be deemed to be the-then current average Net Sales for the Licensed
          Product in such jurisdiction in arms length transactions or in the event
          there
          are no unbundled transactions, the fair market value of such Net
          Sales.

         

        8.4 Fixed
          Consideration.
          In the
          event that Discovery receives any fixed payment, fee or other consideration
          from
          a Third Party in consideration of any discount, credit or similar allowance
          granted to such Third Party in connection with the purchase of any Licensed
          Product(s), then Discovery shall pay to Chrysalis a royalty equal to the
          product
          of (a) such consideration multiplied by (b) the royalty rate applicable
          to the
          sale of such Licensed Product(s) to such Third Party. Discovery shall report
          on
          the amount of any such consideration, and the royalty payable thereon in
          U.S.
          Dollars, in the Royalty Report.

         

        8.5 Treatment
          of Partial Product Sales.
          In the
          event that portions of a Licensed Product are sold separately, (e.g., Aerosol
          Device, Disposable Dose Packet, Drug Product) the royalties payable pursuant
          to
          this Article 8 shall be paid [***].
          

         

        8.6 Royalty
          Reports.
          Within
[***]
          days
          after the end of each Contract Month, Discovery shall deliver to Chrysalis
          a
          preliminary Royalty Report. [***]
          The
          Royalty Report shall include at least the following items, separately stated
          as
          to each of the Licensed Products, as applicable: 

         

        (i) the
          quantity of each of the Licensed Products (delineated as Aerosol Devices
          and
          Disposable Dose Packets) invoiced by Discovery and its Affiliates and
          sublicensees during such Contract Month and the [***]
          amount
          therefor; 

         

        (ii) the
          allowable deductions therefrom and an itemization of each specific deduction
          [***];
          and


         

        (iii) whether
          each such Licensed Product is a Supported Product or Independent
          Product;

         

        (iv) the
          calculation of royalties, if any, thereon in a manner consistent with the
          amounts set forth in the Royalty Report prepared in accordance with this
          Section
          8.6.

         

         

        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.

         

        
          
            
            

          

          
            23

            
              

            

          

          
            
            

          

        

        8.7 Payment
          of Estimated and Actual Amounts.
          

         

        8.7.1 Payment
          of Estimated Amounts.
          Simultaneous with the issuance of the preliminary Royalty Report, Discovery
          shall make payment of estimated amounts due to Chrysalis hereunder with
          respect
          to such Contract Month (the “Estimated
          Amount”).

         

        8.7.2 Quarterly
          Reconciliation and True-Up.
          Within
[***]
          days
          following each Contract Quarter, Discovery shall calculate the actual amount
          due
          to Chrysalis hereunder with respect to the immediately preceding Contract
          Quarter (the “Actual Amount”) and provide to Chrysalis a true and accurate
          Royalty Report for such Contract Quarter, setting forth the corrected
          calculations for such Contract Quarter. If the Estimated Amounts paid to
          Chrysalis pursuant to Section 8.7.1 for the three Contract Months comprising
          the
          immediately preceding Contract Quarter exceeds the Actual Amount for such
          Contract Quarter, Discovery shall notify Chrysalis and such excess amount
          (the
“Royalty Credit”) shall, at the discretion of Discovery, be available to offset
          future royalties payable to Chrysalis by Discovery. If such Actual Amount
          exceeds such Estimated Amount, Discovery shall promptly pay such excess
          amount
          to Chrysalis. [***]

         

        8.8 Pass-Through
          Royalties.
          Each
          Party shall be solely responsible for paying any royalties which may be
          due to
          Third Parties with respect to such Party’s Intellectual Property. 

         

        8.9 Records
          and Audits.

         

        8.9.1 Records.
          Discovery shall keep, and shall require its Affiliates and sublicensees
          to keep,
          such records as are necessary to determine accurately the sums due to each
          other
          under this Agreement. Such records shall be retained by Discovery for the
          Term
          and for three (3) years thereafter.
          

         

        8.9.2 Audit.
          At the
          written request of Chrysalis, with reasonable advance notice, Discovery
          shall
          make available for inspection, review, and audit, by an internationally
          recognized independent certified public accounting firm appointed by Chrysalis
          and reasonably acceptable to Discovery, such records of Discovery as may
          be
          reasonably necessary to verify Discovery’s accounting reports and payments made
          or to be made pursuant to this Agreement; provided, however, that such
          audits
          may not be performed by Chrysalis more than twice per Contract Year in
          the
          absence of a reasonable basis for concern regarding compliance with the
          Agreement or any applicable Laws. If
          such
          accountants identify a discrepancy, then the appropriate Party shall pay
          the
          other Party the amount of the discrepancy within thirty (30) days of the
          date of
          receiving such accountant’s written report, or as otherwise agreed upon by the
          Parties, plus, in the event of any underpayment, interest calculated in
          accordance with Section 8.12. 

         

        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.

        


        
          
            
            

          

          
            24

            
              

            

          

          
            
            

          

        

         

        8.9.3 Audit
          Confidentiality.
          Chrysalis shall cause any accountants selected by it to enter into a
          confidentiality agreement acceptable to Discovery obligating such accountants
          to
          retain all such information in confidence pursuant to such confidentiality
          agreement. Such accountants shall not reveal to Chrysalis the details of
          its
          review, except for such information as is required to be disclosed under
          this
          Agreement, and such details shall be treated as Confidential Information.
          Each
          Party agrees to hold in strict confidence all information concerning payments
          and reports, and all information learned in the course of any audit or
          inspection (and not to make copies of such reports and information), except
          to
          the extent necessary for such Party to reveal such information in order
          to
          enforce its rights under this Agreement or if disclosure is required by
          Law,
          regulation or judicial order.

         

        8.9.4 Costs
          of Audits.
          Chrysalis shall pay for such inspections, except that in the event the
          adjustment shown by such inspection is greater than [***]
          percent
          ([***]%)
          of the
          amount incurred, Discovery shall pay for such inspection.

         

        8.10 Foreign
          Exchange.
          For the
          purpose of computing the Net Sales for Licensed Products sold in a currency
          other than Dollars, such amounts shall be converted into Dollars each Contract
          Month in the then standard manner used by Discovery in the preparation
          of its
          audited financial statements, consistently applied. Such method of currency
          conversion used by Discovery shall be a commercially reasonable method
          consistent with industry standards, and Discovery shall disclose to Chrysalis
          [***]
          prior to
          First Commercial Sale of a Licensed Product in a country such method of
          currency
          conversion. Notwithstanding anything herein to the contrary, at Chrysalis’
          option, with respect to any particular country in the Territory, Discovery
          shall
          pay royalties for Licensed Products sold in such country in such country’s local
          currency. Discovery shall not change such method of currency conversion
          disclosed to Chrysalis pursuant to this Section 8.10 without obtaining
          Chrysalis’ prior written consent, such consent not to be unreasonably withheld.


         

        8.11 Manner
          of Payments.
          All
          sums due to Chrysalis under this Agreement shall be payable by electronic
          funds
          transfer in immediately available funds to such bank account(s) as Chrysalis
          shall designate at least two (2) Business Days in advance. 

         

        8.12 Late
          Payments.
          Any
          amounts not paid when due under this Agreement shall be subject to interest
          from
          and including the date payment is due through and including the date upon
          which
          Chrysalis has collected immediately available funds in an account designated
          by
          Chrysalis at an annual rate equal to the sum of [***]
          percent
          ([***]%)
          plus
          the annual prime rate of interest quoted in the Money Rates section of
          the East
          Coast edition of the Wall
          Street Journal
          calculated daily on the basis of a 365-day year, or similar reputable data
          source, or, if lower, the highest rate permitted under applicable
          law.
          Notwithstanding the foregoing, any payment of amounts by Discovery representing
          the excess of Actual Amount over Estimated Amount, calculated in accordance
          with
          Section 8.7, shall not be subject to this Section 8.12. 

         

        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.

         

        
          
            
            

          

          
            25

            
              

            

          

          
            
            

          

        

        8.13 Tax
          Withholding.
          Any
          taxes, levies, or other duties (“Taxes”)
          paid
          or required to be withheld under the appropriate local tax Laws by Discovery
          on
          account of monies payable to Chrysalis under this Agreement shall be deducted
          from the amount of monies otherwise payable to Chrysalis under this Agreement
          and paid by Discovery to the proper taxing authority. Discovery shall secure
          and
          send to Chrysalis within a reasonable period of time proof of any such
          Taxes
          paid or required to be withheld by Discovery for the benefit of Chrysalis.
          The
          Parties shall cooperate reasonably with each other to (i) ensure that any
          amounts required to be withheld by Discovery are reduced in amount to the
          fullest extent permitted by Law
          and (ii)
          to resolve such other Party’s taxation concerns.

         

        ARTICLE
          9

        INTELLECTUAL
          PROPERTY

         

        9.1 Ownership.
          

         

        9.1.1 Chrysalis
          Intellectual Property.
          Chrysalis shall own (i) all Intellectual Property owned or controlled by
          Chrysalis relating to the Chrysalis Technology or Licensed Products that
          was
          existing or conceived prior to the Effective Date, (ii) all Intellectual
          Property relating to the Chrysalis Technology or the Licensed Products
          developed
          by Chrysalis outside of the performance of the Alliance or to which Chrysalis
          otherwise obtains rights from a Third Party; (iii) all Inventions conceived,
          created and reduced to practice solely by or on behalf of Chrysalis in
          the
          course of the performance of the Alliance, except Discovery Technology
          Improvements; and (iv) all Chrysalis Technology Improvements (collectively,
          “Chrysalis
          Intellectual Property”).
          

         

        9.1.2 Discovery
          Intellectual Property.
          Discovery shall own (i) all Intellectual Property owned or controlled by
          Discovery relating to Discovery Technology or the Licensed Products that
          was
          existing or conceived prior to the Effective Date or is developed by Discovery
          outside of the performance of the Alliance, (ii) all Intellectual Property
          relating to Discovery Technology or the Licensed Products developed by
          Discovery
          outside of the performance of the Alliance or exercise of the license granted
          hereunder or to which Discovery otherwise obtains rights from a Third Party,
          and
          (iii) all Inventions conceived, created and reduced to practice solely
          by or on
          behalf of Discovery in the course of the performance of the Alliance or
          exercise
          of the license granted hereunder, except Chrysalis Technology Improvements;
          and
          (iv) all Discovery Technology Improvements (collectively “Discovery
          Intellectual Property”).

         

        9.1.3 Joint
          Intellectual Property.
          Inventions conceived, created and reduced to practice jointly by or on
          behalf of
          the Parties in the course of the performance of the Alliance or exercise
          of the
          license granted hereunder shall be jointly owned by the Parties, except
          regardless of whether such Inventions were jointly conceived, created or
          developed by the Parties, all Chrysalis Technology Improvements shall be
          owned
          by Chrysalis and all Discovery Technology Improvements shall be owned by
          Discovery, as provided in Sections 9.1.1 and 9.1.2. Any Inventions that
          are
          jointly-owned pursuant to the allocation of Intellectual Property Rights
          set
          forth in this Section 9.1.3 shall be referred to herein as the “Joint
          Inventions.”

         

        
          
            
            

          

          
            26

            
              

            

          

          
            
            

          

        

        9.2 Disclosure,
          Assignment, License and Exploitation.

         

        9.2.1 Disclosure.
          Each
          Party shall cause all personnel conducting work or exercising rights on
          its
          behalf under the Alliance to, promptly disclose to the other Party all
          Intellectual Property in which the other Party has an ownership interest
          pursuant to Section 9.1, and to assign any and all right, title
          and
          interest in all such Inventions and Intellectual Property in accordance
          with
          this Agreement. Each Party shall maintain records in sufficient detail
          and in
          good scientific manner appropriate for patent prosecution purposes to properly
          reflect all work done and results achieved in conducting its work hereunder,
          and
          shall respond to reasonable requests of the other Party for information
          regarding Intellectual Property in which the other Party has an ownership
          interest. 

         

        9.2.2 Assignment
          and License.
          In the
          event Chrysalis conceives, creates or reduces to practice any Discovery
          Technology Improvements, Chrysalis shall promptly notify Discovery and
          Chrysalis
          shall assign all right, title and interest in and to such Discovery Technology
          Improvements to Discovery. In the event Discovery conceives, creates or
          reduces
          to practice any Chrysalis Technology Improvements, Discovery shall promptly
          notify Chrysalis of such Invention and Discovery shall assign all right,
          title
          and interest in and to such Chrysalis Technology Improvements to Chrysalis,
          however, such Chrysalis Technology Improvements are included in the Intellectual
          Property licensed to Discovery pursuant to Section 3.1.

         

        9.2.3 Exploitation
          of Intellectual Property.
          To the
          extent permitted by Law, except as expressly provided in this Section 9.2.3
          below, Chrysalis agrees not to exploit the Chrysalis Intellectual Property
          or
          its ownership interest in the Joint Intellectual Property in a pharmaceutical
          product for the Target Populations for the Target Indications in a manner
          that
          competes with a Licensed Product(s) in the Hospital Setting for such Target
          Indications. Notwithstanding the foregoing, this Section 9.2.3 shall not
          limit
          Chrysalis’ ability to exploit any Inventions conceived, created and reduced to
          practice solely by or on behalf of Chrysalis after the Effective Date,
          except
          Discovery Technology Improvements. To the extent permitted by Law, Discovery
          agrees not to exploit its ownership interest in the Joint Intellectual
          Property
          in a pharmaceutical product for the Target Populations for the Target
          Indications in a manner that competes with a Licensed Product(s) in the
          Hospital
          Setting for such Target Indications. 

         

        9.3 Agreement
          with Personnel.
          Each
          Party shall have valid and enforceable written agreements with all personnel
          conducting work on its behalf under the Alliance containing a nondisclosure
          obligation comparable in scope to Article 11 and giving the other Party
          all
          rights and authority necessary to effectuate the provisions of this Article
          9.
          Each Party shall provide copies of these agreements to the other Party
          upon the
          other Party’s request as allowed by each Party’s internal personnel
          policies.

         

        9.4 Prosecution
          of Patents.
          

         

        9.4.1 Discovery
          and Chrysalis Patent Filings.
          Discovery and Chrysalis each shall use commercially reasonable efforts
          to
          diligently prosecute their respective Patents claiming a Licensed Product
          in the
          Territory. As soon as practicable prior to any contemplated filing, the
          Party
          filing a Patent claiming a Licensed Product shall submit a substantially
          completed draft of the applicable Patent to the other Party for its review
          and
          comment, which comments shall be considered in good faith. Within forty-five
          (45) days of a Party’s receipt of an allowance or grant of a Patent, the Party
          prosecuting the Patent shall inform the other Party of such allowance or
          grant,
          and provide the other Party with a copy of the allowed or granted Patent
          claims
          thereof. If the other Party determines that filing one or more continuing
          or
          divisional Patents is necessary to cover such Party’s rights or commercial
          interests, then the prosecuting Party shall file such one or more continuing
          or
          divisional patents in a timely manner prior to the expiration of any period
          for
          making such filings.

         

        
          
            
            

          

          
            27

            
              

            

          

          
            
            

          

        

        9.4.2 Joint
          Patent Filings.
          The
          Parties shall refer any Joint Inventions to the Steering Committee to allow
          the
          Steering Committee to determine which Party should be responsible for filing,
          prosecuting, and maintaining any Joint Patent related to such Joint Invention
          based on a good faith determination of the relative contributions of the
          Parties
          to the Joint Inventions, the relative level of interest of the Parties
          in the
          Joint Inventions and the relative extent to which the Licensed Product
          relating
          to such Joint Patents is being developed or commercialized. The Steering
          Committee may decide not to file a Joint Patent for any Joint Invention.
          The
          Party determined to be responsible for a Joint Patent shall use commercially
          reasonable efforts to diligently prosecute that Patent in the Territory.
          As soon
          as practicable prior to any contemplated filing, the Party responsible
          hereunder
          for such activities shall submit a substantially completed draft of the
          applicable Joint Patent or Joint Patents to the other Party for its approval,
          which shall not be unreasonably withheld. Within forty-five (45) days of
          the
          allowance or grant of a Joint Patent, the Party responsible hereunder shall
          inform the other Party of such allowance or grant, and provide the other
          Party
          with a copy of the allowed or granted Patent. If the other Party determines
          that
          filing one or more continuing or divisional Patents is necessary to cover
          the
          Parties’ rights or commercial interests in Joint Inventions, then the
          responsible Party shall file such one or more continuing or divisional
          patents
          in a timely manner prior to the expiration of any period for making such
          filings.

         

        9.4.3 Patent
          Prosecution Costs.
          Each
          Party shall bear its own costs to file, prosecute and maintain its Patents,
          or
          Joint Patents for which it is responsible, in the Territory (including,
          without
          limitation, patent term extension).

         

        9.4.4 Abandonment
          of Prosecution.
          Each
          Party shall notify the other Party in the event it is unable for any reason
          to
          meet its obligations under this Article 9 with respect to any Patents covering
          the Licensed Products. Such notification shall be given within a reasonable
          period prior to the date on which such Patents will lapse or become abandoned.
          The Party receiving any notification hereunder shall then have the option,
          exercisable upon written notification to the Party that delivered such
          notification, to assume full responsibility, at its discretion and its
          sole cost
          and expense, for prosecution or maintenance of the affected Patents in
          such
          country or countries in the Territory.

         

        9.5 Patent
          Term Extensions.
          Each
          Party shall have the right to request that the other Party file all applications
          and take all actions necessary to obtain patent extension pursuant to 35
          U.S.C.
§ 156 or like foreign statutes for the respective Parties’ Patents and the Joint
          Patents in the Territory. If the filing Party declines to pursue such patent
          term extensions, then as permitted by law, the other Party shall have the
          right
          (at its cost and expense) on behalf of the filing Party to file, or direct
          the
          filing of, all such applications and take all such actions necessary to
          obtain
          such patent term extensions. Each Party agrees to sign such further documents
          and take such further actions as may be requested by the other Party in
          this
          regard.

         

        
          
            
            

          

          
            28

            
              

            

          

          
            
            

          

        

        9.6 Third
          Party Infringement.

         

        9.6.1 Suits
          for Infringement.
          If
          Discovery or Chrysalis becomes aware of infringement of any Patent included
          in
          the Discovery Patents or the Chrysalis Patents by a Third Party in the
          Territory, such Party shall promptly notify the other Party in writing
          to that
          effect and provide a summary of the relevant facts and circumstances known
          to
          such Party relating to such infringement (“Infringement
          Notice”).
          Each
          Party shall have the right, at its sole discretion and expense, on its
          own
          behalf, to institute, prosecute, and control any action or proceeding to
          restrain infringement of any of its Patents. A Party instituting suit shall
          have
          control of such suit and all negotiations for its settlement or compromise;
          provided however, that the instituting Party shall not settle or compromise
          any
          such suit or enter into any consent order for the settlement or compromise
          thereof which would materially adversely affect the Intellectual Property
          rights
          with respect to a Licensed Product without the prior written consent of
          the
          other Party, which consent shall not be unreasonably withheld, conditioned,
          or
          delayed.

         

        9.6.2 Step-in
          Right.
          If,
          prior to the expiration of three (3) months from said Infringement Notice,
          the
          Party whose Patents are alleged to be infringed has not obtained a
          discontinuance of an alleged infringement by a Third Party or brought an
          infringement action or proceeding or otherwise taken appropriate action
          to abate
          such infringement, such Party shall notify the other Party at any time
          prior
          thereto of its intention not to bring suit against an alleged infringer.
          Upon
          such notice and if such infringement is reasonably likely to materially
          adversely affect a Licensed Product in the Territory, then, and in those
          events
          only, the other Party shall have the right, but not the obligation, at
          its sole
          expense to institute, prosecute, and control any action or proceeding to
          restrain such infringement. Each Party agrees to be joined as a party if
          necessary to prosecute the action or proceeding and shall provide all reasonable
          cooperation, including any necessary use of its name, required to prosecute
          such
          litigation. The other Party shall have control of any such suit and all
          negotiations for its settlement or compromise; provided, however, that
          the other
          Party shall not settle or compromise any such suit or enter into any consent
          order for the settlement or compromise thereof without the prior written
          consent
          of the patentee Party, which consent shall not be unreasonably withheld,
          conditioned, or delayed.

         

        9.6.3 Allocation
          of Recovery.
          All
          damages, settlements and rewards made or obtained in connection with any
          suit or
          other legal proceeding under this Section 9.6 shall be shared among the
          parties
          as follows: [***]

         

        9.6.4 Declaratory
          Actions and Counterclaims.
          In the
          event that an action alleging invalidity or non-infringement of any of
          the
          Discovery Patents or Chrysalis Patents is brought against Discovery or
          Chrysalis, the Party defending such action or counterclaim, at its sole
          discretion, shall have the right, within thirty (30) days after the commencement
          of such action, to take or regain control of the action at its own expense.
          If
          the defending Party determines
          not to exercise this right, the other Party may take over or remain as
          lead
          counsel for the action at that Party’s sole discretion. Any recovery obtained
          from such litigation, proceeding or settlement shall be shared in accordance
          with Section 9.6.3.

         

        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.

         

        
          
            
            

          

          
            29

            
              

            

          

          
            
            

          

        

        9.7 Infringement
          of Third Party Rights.

         

        9.7.1 Infringement
          Claims.
          With
          respect to any and all claims instituted by Third Parties for patent
          infringement involving the manufacture, use, offer for sale, or sale of
          a
          Licensed Product in the Territory during the Term, the Party named as defendant
          shall promptly notify the other Party of such claim, and the defending
          Party
          shall have the right, at its sole discretion and expense, to defend and
          control
          any action or proceeding with respect to such claim. The other Party agrees
          to
          be joined as a Party if necessary to defend the action or proceeding and
          shall
          provide reasonable cooperation, including any necessary use of its name,
          required to defend such litigation. The defending Party shall have sole
          control
          of any such suit and all negotiations for its settlement or compromise;
          provided, however, that the defending Party shall not settle or compromise
          any
          such suit or enter into any consent order for the settlement or compromise
          thereof without the prior written consent of the other Party if such settlement
          would materially adversely affect the other Party’s rights or impose any
          obligation on the other Party, which consent shall not be unreasonably
          withheld,
          conditioned, or delayed.

         

        9.7.2 Step-in
          Right.
          If,
          prior to the expiration of three (3) months from said claim being brought,
          or
          such sooner period as may be necessary to appropriately respond to said
          claim,
          the defending Party has not elected to defend such action or proceeding,
          or if
          the defending Party shall notify the other Party at any time prior thereto
          of
          its intention not to defend such action or proceeding, then, and in those
          events
          only, the other Party shall have the right, but not be obligated, at its
          own
          expense to defend and control any action or proceeding. Such other Party
          shall
          have sole control of any such suit and all negotiations for its settlement
          or
          compromise; provided, however, that the other Party shall not settle or
          compromise any such suit or enter into any consent order for the settlement
          or
          compromise thereof without the prior written consent of the original defending
          Party, which consent shall not be unreasonably withheld, conditioned, or
          delayed.

         

        9.7.3 Notice
          of Certification.
          Discovery and Chrysalis each shall immediately give notice to the other
          of any
          certification filed under the U.S. “Drug Price Competition and Patent Term
          Restoration Act of 1984” claiming that Discovery Patents, Chrysalis Patents or
          the Joint Patents are invalid or that any infringement will not arise from
          the
          manufacture, use, or sale of any Licensed Product by a Third Party. If
          a Party
          decides not to bring infringement proceedings against the entity making
          such a
          certification, that Party shall give notice to the other Party of its decision
          not to bring suit within twenty-one (21) days after receipt of notice of
          such
          certification. The other Party may then, but is not required to, bring
          suit
          against the party that filed the certification. Any suit by Discovery or
          Chrysalis shall either be in the name of Discovery or in the name of Chrysalis,
          or jointly in the name of Discovery and Chrysalis, as may be required by
          Law.
          For this purpose, the Party not bringing suit shall execute such legal
          papers
          necessary for the prosecution of such suit as may be reasonably requested
          by the
          Party bringing suit.

         

        
          
            
            

          

          
            30

            
              

            

          

          
            
            

          

        

        ARTICLE
          10

        RIGHT
          OF FIRST ACCESS TO CERTAIN ADDITIONAL
          OPPORTUNITIES

        


        10.1 First
          Access Products.
          During
          the five year period commencing on the Effective Date and ending on the
          fifth
          anniversary thereof, each Party shall provide the other with the first
          option to
          negotiate described in this Article 10 (the “Right
          of First Access”)
          with
          respect to all First Access Products. A “First
          Access Product”
          shall
          mean a combination drug-device product comprised of an aerosolization device
          and
          an active pharmaceutical compound (other than a Pulmonary Surfactant) which
          pharmaceutical product (a) is intended for the treatment of a Respiratory
          Indication in the Hospital Setting in the Target Populations and (b) is
          a
          pharmaceutical compound that such Party has the right to market and sell
          and
          there is no restriction as to the use of Discovery or Chrysalis, as applicable,
          as a development or commercialization partner for combination drug-device
          products containing such pharmaceutical compound. 

        


        10.2 Provision
          of Right of First Access.
          Each
          Party shall provide to the other the Right of First Access within sixty
          (60)
          days of such Party’s completion of a phase 2 clinical trial for FDA submission
          (constituting a study of a candidate drug in the target patient population
          of a
          sufficient number and sufficient length of time whereby adequate safety
          data is
          provided and there is a clear indication of dosage effects with respect
          to
          efficacy as defined in the study protocol for such drug candidate). Such
          completion date shall be referred to as the “Phase
          2 Completion Point”.

         

        10.3 First
          Access Product Presentation. Within sixty (60) days after the Phase 2 Completion
          Point for a First Access Product, the
          Party
          which developed the First Access Product shall, in compliance with any
          Third
          Party confidentiality restrictions, present the opportunity for the treatment
          of
          the specified indication in the Target Population to the other Party in
          a
          reasonably detailed manner to enable the receiving Party to conduct an
          evaluation of the potential market and collaborative opportunity with respect
          thereto (the “First
          Access Product Presentation”).

         

        10.4 Negotiation
          of First Access Product Arrangements.
          Within
          thirty (30) days from the date of the First Access Product Presentation,
          the
          receiving Party shall notify the presenting Party in writing whether it
          desires
          to enter into negotiations with respect to a potential commercial arrangement
          regarding the development and/or commercialization of such First Access
          Product
          for the treatment of a Respiratory Indication in the Hospital Setting.
          In the
          event the receiving Party notifies the presenting Party of its desire to
          negotiate a possible commercial arrangement during such thirty (30) day
          period,
          the Parties shall promptly commence such negotiations. In the event the
          receiving Party fails to notify the presenting Party of its desire to negotiate
          a possible commercial arrangement during such thirty (30) day period, or
          the
          Parties fail, despite such negotiations to enter into definitive agreements
          within sixty (60) days of the date of the initiation of such negotiations,
          the
          presenting Party shall be entitled to negotiate and enter into commercial
          arrangements with Third Parties relating to the First Access Product for
          the
          specified indication in the Target Population, provided that any such
          arrangements with Third Parties shall not be on terms that are, in substance,
          more favorable than those offered to the receiving Party, taking into account
          the relative merits of the respective technologies and the development
          and
          commercialization capabilities of the prospective partners.

         

        
          
            
            

          

          
            31

            
              

            

          

          
            
            

          

        

        ARTICLE
          11

        CONFIDENTIAL
          INFORMATION

         

        11.1 Use
          of
          Confidential Information.
          A Party
          receiving Confidential Information (the “Receiving
          Party”)
          from
          the other Party (the “Disclosing
          Party”)
          shall
          keep all such Confidential Information with the same degree of care it
          maintains
          the confidentiality of its own confidential information, but in no event
          less
          than a reasonable degree
          of
          care. Neither Party shall use such Confidential Information for any purpose
          other than in performance of this Agreement,
          and
          shall
          not disclose the same to any Person other than to its Affiliates and such
          of its
          and their employees or agents who have a need to know such Confidential
          Information to implement the terms of this Agreement, and who are subject
          to a
          nondisclosure obligation comparable in scope to this Article 11. Each Party
          shall advise any employee or agent who receives such Confidential Information
          of
          the confidential nature thereof and of the obligations contained in this
          Agreement relating thereto, and such Party shall ensure that all such employees
          and agents comply with such obligations as if they had been a Party hereto.
          Upon
          termination of this Agreement, each Party shall use commercially reasonable
          efforts to return or destroy all documents, tapes or other media containing
          Confidential Information of the Disclosing Party that remains in such Party’s or
          its agents’ or employees’ possession, except that each Party may keep one (1)
          copy of the Confidential Information solely for archival purposes. Such
          archival
          copy shall be deemed to be the property of the Disclosing Party, and shall
          continue to be subject to the provisions of this Article 11.
          Notwithstanding anything to the contrary in this Agreement, Confidential
          Information shall not include any information or materials that the Receiving
          Party can demonstrate by documentary evidence: 

         

        (i) were
          already known to the Receiving Party (other than under an obligation of
          confidentiality), at the time of disclosure by the Disclosing
          Party;

         

        (ii) were
          generally available to the public or otherwise part of the public domain
          at the
          time of its disclosure to the Receiving Party;

         

        (iii) became
          generally available to the public or otherwise part of the public domain
          after
          its disclosure or development, as the case may be, and other than through
          any
          act or omission of a Party in breach of such Party’s confidentiality obligations
          under this Agreement;

         

        (iv) were
          disclosed to a Party, other than under an obligation of confidentiality,
          by a
          Third Party who had no obligation to the Disclosing Party not to disclose
          such
          information to others; or

         

        (v) were
          independently discovered or developed by or on behalf of the Receiving
          Party
          without the use of the Confidential Information belonging to the other
          Party.
          

         

        11.2 Permitted
          Disclosure and Use.
          Notwithstanding anything to the contrary in this Agreement, in the event
          that
          the Receiving Party or any of its directors, officers, employees, agents
          and
          advisors and their representatives deems it necessary or are requested
          or
          required (by oral questions, deposition, interrogatories, requests for
          information or documents, subpoena, civil investigative demand or other
          legal
          process by a court or other governmental authority, or by any Regulatory
          Authority to obtain Regulatory Approval of a Licensed Product) to disclose
          all
          or any part of any Confidential Information, the Receiving Party will provide
          the Disclosing Party with prompt notice of such request or requirement
          (which
          notice shall be reasonably in advance of such requested or required disclosure),
          as well as notice of the terms and circumstances surrounding such request
          or
          requirement, so that the Disclosing Party may seek an appropriate protective
          order or waive compliance with the provisions of this Agreement. In such
          case,
          the Receiving Party shall consult with the Disclosing Party with respect
          to the
          advisability of pursuing any such order or other legal action or available
          steps
          to resist or narrow such request or requirement. If, failing the entry
          of a
          protective order or the receipt of a waiver hereunder, the Receiving Party
          is,
          in the opinion of counsel satisfactory to the Disclosing Party and its
          counsel,
          legally compelled to disclose any Confidential Information, the Receiving
          Party
          may disclose that portion of the Confidential Information which its counsel
          advises the Receiving Party that the Receiving Party is legally compelled
          to
          disclose. In any event, the Receiving Party will use reasonable efforts
          to
          obtain and will not oppose action by the Disclosing Party to obtain, an
          appropriate protective order or other reliable assurance that confidential
          treatment will be afforded the disclosure of such Confidential Information.
          The
          Receiving Party will use best efforts to cause its directors, officers,
          employees, affiliates, agents and advisors and their representatives to
          comply
          with the terms of this Section. A Receiving Party may disclose Confidential
          Information belonging to a Disclosing Party to the extent such disclosure
          is
          reasonably necessary to enforce the provisions of this Agreement.
          

         

        
          
            
            

          

          
            32

            
              

            

          

          
            
            

          

        

        11.3 Disclosure
          for SEC Filings.
          Notwithstanding anything to the contrary in this Agreement, the Parties
          expressly acknowledge that Discovery may file a copy of this Agreement
          with the
          Securities and Exchange Commission (the “SEC”)
          in any
          of its SEC reports and filings, as well as incorporate them by reference
          into
          other SEC filings. Discovery shall request confidential treatment of sensitive
          terms hereof to the extent such confidential treatment is reasonably available
          to Discovery under the prevailing circumstances. Discovery shall coordinate
          in
          advance with Chrysalis with regard to the terms of this Agreement, for
          which
          Discovery shall seek to be redacted in any such SEC filings, and Discovery
          shall
          use reasonable efforts to seek confidential treatment for such mutually
          agreed
          terms and terms reasonably requested by Chrysalis; provided, however, that
          each
          Party shall retain ultimate control and responsibility for their respective
          disclosures to the SEC and the public generally.
          To the
          extent permitted by Law, Discovery shall use reasonable efforts to provide
          Chrysalis reasonable advance notice of any SEC filing related to this Agreement
          which differs materially from prior filings.

         

        11.4 Publications.
          Subject
          to any Third Party rights existing as of the Effective Date, each Party
          shall
          submit to the other Party for review and approval all proposed academic,
          scientific and medical publications and public presentations relating to
          a
          Licensed Product or any research or development activities conducted as
          part of
          the Alliance for review in connection with preservation of Patents, and
          trade
          secrets and/or to determine whether Confidential Information should be
          modified
          or deleted from the proposed publication or public presentation. Written
          copies
          of such proposed publications and presentations shall be submitted to the
          non-publishing Party no later than sixty (60) days before submission for
          publication or presentation and the non-publishing Party shall provide
          its
          comments with respect to such publications and presentations within ten
          (10)
          Business Days of its receipt of such written copy. The review period may
          be
          extended for an additional thirty (30) days if the non-publishing Party
          can
          demonstrate a reasonable need for such extension including the preparation
          and
          filing of patent applications. By written agreement, this period may be
          further
          extended. The Parties will each comply with standard academic practice
          regarding
          authorship of scientific publications and recognition of contribution of
          other
          Persons in any publications relating to a Licensed Product or any research
          or
          development activities under this Agreement. 

         

        
          
            
            

          

          
            33

            
              

            

          

          
            
            

          

        

        11.5 Public
          Announcements.
          Subject
          to Section 11.2 and Section 11.3, neither Party will make any public
          announcement of any information regarding this Agreement, the Licensed
          Products
          or any research or development activities under this Agreement without
          the prior
          written approval of the other Party, provided however that each Party may
          disclose (i) the general stage of development, commercialization and
          manufacturing at any given time during the course of the Alliance, except
          to the
          extent that any such information constitutes Confidential Information,
          (ii) any
          information required by Law, and (iii) any other information that has been
          previously approved for disclosure by the other Party, without further
          approval
          from the other Party hereunder.
          The
          Parties agree and acknowledge that Discovery may, at its sole discretion,
          subject to its compliance with this Article 11, file a Current Report on
          Form
          8-K with the SEC to announce the filing of the press release and file it
          as an
          exhibit thereto, as well as to incorporate it by reference into other SEC
          filings.
          At each
          Party’s option, public releases by the other Party concerning the Alliance,
          including press releases, technical publications, regulatory filings, seminar
          and conference speeches and posters, interviews, videos and other public
          statements concerning the Alliance shall mention the other Party as a
          development partner.
          

         

        11.6 Survival.
          The
          obligations and prohibitions contained in this Article 11 shall survive
          the
          expiration or termination of this Agreement.

         

        ARTICLE
          12

        REPRESENTATIONS,
          WARRANTIES AND COVENANTS

         

        12.1 Mutual
          Representations and Warranties.
          Each
          Party hereby represents, warrants and covenants to the other Party that
          as of
          the Effective Date:

         

        12.1.1 Organization;
          Authority.
          It is
          duly organized, validly existing and in good standing under the laws of
          the
          jurisdiction of its incorporation, has full right, corporate power and
          authority
          to enter into this Agreement, to perform its obligations under this Agreement,
          to grant the licenses granted by such Party pursuant to this Agreement
          and to
          carry out the provisions hereof. 

         

        12.1.2 Consents.
          Except
          for any Regulatory Approvals necessary for the development, manufacture,
          or
          commercialization of a Licensed Product, all necessary consents, approvals,
          orders, permits and authorizations of all government authorities and Regulatory
          Authorities and other Persons or Third Parties required to be obtained
          by it as
          of the Effective Date in connection with the execution, delivery, and
          performance of this Agreement have been obtained. 

         

        12.1.3 No
          Conflict.
          The
          execution and delivery of this Agreement by such Party, the performance
          of such
          Party’s obligations hereunder, and the rights, licenses and sublicenses to be
          granted by such Party pursuant to this Agreement, (i) do not conflict with,
          violate or constitute a breach or default under any requirement of Laws
          or
          regulations existing as of the Effective Date and applicable to such Party
          or
          under any instrument, judgment, order, writ, decree, contract of such Party
          or
          any of its Affiliates existing as of the Effective Date; (ii) do not give
          rise
          to any event that results in the creation of any lien, charge or encumbrance
          upon any assets of such Party or the suspension, revocation, impairment,
          forfeiture or non-renewal of any material permit, license, authorization
          or
          approval that applies to such Party, its business or operations or any
          of its
          assets or properties; or (iii) conflict with any rights granted by such
          Party to
          any Third Party or breach any obligation that such Party has to any Third
          Party.


         

        
          
            
            

          

          
            34

            
              

            

          

          
            
            

          

        

        12.1.4 Enforceability.
          This
          Agreement is a legal and valid obligation binding upon it and is enforceable
          against it in accordance with its terms, subject to and limited by: (i)
          applicable bankruptcy, insolvency, reorganization, moratorium, and other
          laws
          generally applicable to creditors’ rights; and (ii) judicial discretion in the
          availability of equitable relief.

         

        12.1.5 Regulatory.
          There
          are no investigations, inquiries, actions or other proceedings pending
          before
          or, to such Party’s knowledge, threatened, by any Regulatory Authority or other
          government agency with respect to any Licensed Products (or components
          thereof)
          or any facility where such Licensed Products (or components thereof) are
          manufactured, and such Party has not received written notice threatening
          any
          such investigation. 

         

        12.2 Intellectual
          Property.
          Discovery represents, warrants, and covenants to Chrysalis that as of the
          Effective Date with respect to the Discovery Intellectual Property and,
          except
          with regard to Chrysalis’ intellectual property rights in the name “Aria,”
          Chrysalis represents, warrants, and covenants to Discovery that as of the
          Effective Date with respect to the Chrysalis Intellectual Property:

         

        (i) It
          (a)
          holds good title to and is the legal and beneficial owner of, or (b) is
          the
          licensee of, such Intellectual Property free and clear of any lien, mortgage,
          security interest, license, right, pledge, restriction on transferability,
          defect of title or other claim, charge, or encumbrance of any nature whatsoever
          on or affecting any property or property interest and no Third Party has
          any
          right, title, or interest in or to such Intellectual Property. 

         

        (ii) To
          its
          knowledge, the Patents included in such Intellectual Property are valid
          and
          enforceable in the Major Markets and there have been no, and such Party
          has no
          reason to believe that there will be any, inventorship challenges with
          respect
          to any of such Patents.

         

        (iii) There
          are
          no infringement proceedings, actions, suits or complaints pending against
          nor
          any outstanding injunctions, judgments, orders, decrees, rulings or other
          charges against such Party relating to such Intellectual Property.

         

        (iv) It
          has
          not received any form of notice from a third party of infringement of Third
          Party Patent rights that may affect the making, using or selling of Licensed
          Products; and to its knowledge (a) the manufacture, development and
          commercialization of the Licensed Products will not infringe the Patents
          of any
          Third Party and (b) there are no Third Party patent applications pending
          which,
          if issued, would materially adversely affect the ability to make, use or
          sell
          the Licensed Products.

         

        
          
            
            

          

          
            35

            
              

            

          

          
            
            

          

        

        (v) It
          has
          not granted any third party any license, covenant not to sue, options,
          or other
          right with respect to such Intellectual Property that would impact its
          ability
          to enforce such Intellectual Property. There are no existing agreements,
          options, commitments, or rights with, of, or to any Person to acquire or
          obtain
          any rights with respect to the Intellectual Property that are inconsistent
          with
          the rights granted herein.

         

        (vi) Each
          agreement pursuant to which a Third Party has granted, assigned or otherwise
          transferred rights with respect to such Intellectual Property are in full
          force
          and effect, and no Party to such agreements is in breach or default thereunder,
          and the execution and performance of this Agreement will not result in
          a breach
          or default thereunder. It has provided a true and complete copy of each
          such
          Third Party agreement to which it is a party to the other Party.

         

        12.3 No
          Adverse Effects.
          Discovery represents, warrants and covenants to Chrysalis that as of the
          Effective Date, the studies of Pulmonary Surfactants conducted by Discovery
          prior to the Effective Date have not shown any adverse effects or toxicity
          of
          the Pulmonary Surfactant in humans that could reasonably be anticipated
          to
          frustrate the purposes of this Alliance, and as of the Effective Date,
          Discovery
          has not been informed of any such adverse effects or toxicity.

         

        ARTICLE
          13

        ADDITIONAL
          COVENANTS

         

        13.1 Compliance
          with Laws.
          Each
          Party
          shall perform its responsibilities in a good scientific manner in accordance
          with the terms of this Agreement and in compliance in all material respects
          with
          the requirements of Laws. 

         

        13.2 Cooperation.
          The
          Parties agree that maintaining effective and open communication between
          the
          Parties on matters relating to the Alliance is important to the success
          of the
          Alliance. Upon reasonably advance notice, each Party shall make its employees
          and consultants reasonably available to consult with the other Party on
          any
          aspect of the relationship, including regulatory, scientific, technical
          and
          clinical testing issues and shall provide the other Party reasonable access
          to
          materials relating to the development of Licensed Products. 

         

        13.3 Sharing
          of Information.
          Subject
          to applicable Law and privileges and obligations of confidentiality, the
          Parties
          agree to provide the other Party, upon such other Party’s reasonable request,
          copies or access to all data, documentation and work products, including
          Clinical Trials, relating to any Licensed Product.

         

        ARTICLE
          14

        DISCLAIMERS
          AND LIMITATION OF LIABILITY

         

        14.1 Disclaimer
          of Warranties.
          EXCEPT
          AS OTHERWISE SPECIFICALLY PROVIDED IN THIS AGREEMENT, NEITHER PARTY MAKES
          ANY
          REPRESENTATIONS OR WARRANTIES, EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE,
          CONCERNING THE DEVELOPMENT, COMMERCIALIZATION, MARKETING, OR SALE OF ANY
          PRODUCT
          INCLUDING THE SUCCESS OR POTENTIAL SUCCESS THEREOF. EXCEPT AS EXPRESSLY
          SET
          FORTH HEREIN, EACH PARTY EXPRESSLY DISCLAIMS ANY AND ALL REPRESENTATIONS,
          WARRANTIES AND AGREEMENTS OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING THE
          WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

         

        
          
            
            

          

          
            36

            
              

            

          

          
            
            

          

        

        THE
          PARTIES UNDERSTAND THAT THE LICENSED PRODUCTS ARE THE SUBJECT OF ONGOING
          CLINICAL RESEARCH AND DEVELOPMENT AND THAT NEITHER PARTY CAN ASSURE THE
          SAFETY
          OR USEFULNESS OF LICENSED PRODUCTS. NEITHER PARTY MAKES ANY REPRESENTATION
          OR
          WARRANTY EXCEPT AS SET FORTH IN THIS ARTICLE 14 CONCERNING ITS PATENT RIGHTS
          OR
          KNOW-HOW, INCLUDING THE VALIDITY OR SCOPE OF ITS PATENT RIGHTS OR THAT
          THE
          MANUFACTURE, USE OR SALE OF ANY LICENSED PRODUCT WILL NOT INFRINGE THE
          PATENT
          RIGHTS OF THIRD PARTIES.

         

        14.2 Limitation
          of Liability.
          IN NO
          EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR ANY OF ITS PERSONNEL
          FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL, PUNITIVE OR EXEMPLARY
          DAMAGES (INCLUDING, LOST PROFITS, BUSINESS, OR GOODWILL) SUFFERED OR INCURRED
          BY
          SUCH OTHER PARTY OR ITS AFFILIATES AND THEIR RESPECTIVE PERSONNEL IN CONNECTION
          WITH A BREACH OR ALLEGED BREACH OF THIS AGREEMENT EXCEPT WHERE ATTRIBUTABLE
          TO A
          WILLFUL OR INTENTIONAL BREACH OF THIS AGREEMENT. NOTHING IN THIS SECTION
          14.2 IS
          INTENDED TO, NOR SHALL, LIMIT OR RESTRICT THE INDEMNIFICATION RIGHTS OR
          OBLIGATIONS OF EITHER PARTY WITH RESPECT TO THIRD PARTY CLAIMS UNDER THIS
          ARTICLE 14, OR ANY REMEDIES OR DAMAGES AVAILABLE FOR BREACHES OF CONFIDENTIALITY
          OBLIGATIONS IN ARTICLE 11.

         

        ARTICLE
          15

        INDEMNIFICATION;
          INSURANCE

         

        15.1 Indemnification.

         

        15.1.1 Obligations
          of the Parties.
          Each
          of
          the Parties shall defend, indemnify and hold harmless the other Party,
          its
          Affiliates and its and their respective directors, officers, employees,
          consultants, contractors, representatives and agents (collectively, the
          “Indemnified
          Parties”)
          from
          and against any and all losses, costs, damages, fees, liabilities, or expenses
          (including reasonable attorneys’ fees and expenses) (collectively, “Losses”)
          incurred in connection with any Third Party claim, action or proceeding
          (a
“Third Party Claim”) arising out of or related to: 

         

        (i) any
          material breach by the indemnifying Party of any of its representations,
          warranties, covenants or obligations pursuant to this Agreement; 

         

        (ii) any
          negligence, recklessness, willful misconduct or wrongful intentional acts
          or
          omissions of the indemnifying Party, its Affiliates, or their officers,
          directors, employees, contractors, consultants, agents, representatives,
          or
          sublicensees in the exercise of any of the indemnifying Party’s rights or the
          performance of any of the indemnifying Party’s obligations under this Agreement,
          provided, however, that each Party maintains the right to seek indemnification
          pursuant to this Section 15.1.1 with respect to strict liability claims
          by Third
          Parties to the extent that the other Party’s negligence resulted in such strict
          liability claim; and

         

        
          
            
            

          

          
            37

            
              

            

          

          
            
            

          

        

        (iii) intellectual
          property infringement and trade secret misappropriation liability resulting
          from
          acts or omissions by the indemnifying Party, its Affiliates and sublicensees
          relating to the development, manufacture, or commercialization of any Licensed
          Product.
          

         

        15.1.2 Certain
          Product Liability Claims.
          In
          addition to the indemnity set forth in Section 15.1.1 above, Discovery
          shall
          defend, indemnify and hold harmless Chrysalis, its Affiliates and its and
          their
          respective directors, officers, employees, consultants, contractors,
          representatives and agents from and against any and all Losses incurred
          in
          connection with any Third Party Claims arising out of or relating to the
          commercialization, marketing, sale, use, handling, manufacture and/or storage
          of
          any Licensed Product, including any claims that involve death or bodily
          injury
          (or allegations thereof) to any individual, except to the extent such Losses
          are
          due to matters for which Chrysalis is required to provide indemnification
          pursuant to Section 15.1.1.

         

        15.1.3 Complete
          Indemnification.
          As the
          Parties intend complete indemnification, all direct out of pocket costs
          and
          expenses reasonably incurred by an Indemnitee in connection with enforcement
          of
          Section 15.1 shall also be reimbursed by the Indemnitor.

         

        15.2 Indemnification
          Procedures.
          

         

        15.2.1 Notification.
          In the
          case of a Third Party Claim as to which a Party may be obligated to provide
          indemnification pursuant to this Agreement (the “Indemnitor”),
          such
          Indemnified Party seeking indemnification hereunder (“Indemnitee”)
          will
          notify the Indemnitor in writing of the Third Party Claim (and specifying
          in
          reasonable detail the factual basis for the Third Party Claim and to the
          extent
          known, the amount of the Third Party Claim) reasonably promptly after becoming
          aware of such Third Party Claim; provided, however, that failure to give
          such
          notification will not affect the indemnification provided hereunder except
          to
          the extent the Indemnitor shall have been actually prejudiced as a result
          of
          such failure.

         

        15.2.2 Assumption
          of Defense.
          If a
          Third Party Claim is made against an Indemnitee, the Indemnitor will be
          entitled, within one hundred twenty (120) days after receipt of written
          notice
          from the Indemnitee of the commencement or assertion of any such Third
          Party
          Claim, to assume the defense thereof (at the expense of the Indemnitor)
          with
          counsel selected by the Indemnitor and reasonably satisfactory to the
          Indemnitee, for so long as the Indemnitor is conducting a good faith and
          diligent defense. Should the Indemnitor so elect to assume the defense
          of a
          Third Party Claim, the Indemnitor will not be liable to the Indemnitee
          for any
          legal or other expenses subsequently incurred by the Indemnitee in connection
          with the defense thereof; provided, however, that if in the opinion of
          counsel,
          such counsel and opinion being satisfactory to Indemnitor and its counsel,
          a
          conflict of interest exists between the Indemnitor and an Indemnitee in
          respect
          of such claim, such Indemnitee shall have the right to employ separate
          counsel
          (which shall be reasonably satisfactory to the Indemnitor) to represent
          such
          Indemnitee with respect to the matters as to which a conflict of interest
          exists
          and in that event, the reasonable fees and expenses of such separate counsel
          shall be paid by such Indemnitor; provided further, that the Indemnitor
          shall
          only be responsible for the reasonable fees and expenses of one (1) separate
          counsel for such Indemnitee. If the Indemnitor assumes the defense of any
          Third
          Party Claim, the Indemnitee shall have the right to participate in the
          defense
          thereof and to employ counsel, at its own expense, separate from the counsel
          employed by the Indemnitor. If the Indemnitor assumes the defense of any
          Third
          Party Claim, the Indemnitor will promptly supply to the Indemnitee copies
          of all
          correspondence and documents relating to or in connection with such Third
          Party
          Claim and keep the Indemnitee informed of developments relating to or in
          connection with such Third Party Claim, as may be reasonably requested
          by the
          Indemnitee (including providing to the Indemnitee on reasonable request
          updates
          and summaries as to the status thereof). If the Indemnitor chooses to defend
          a
          Third Party Claim, all Indemnitees shall reasonably cooperate with the
          Indemnitor in the defense thereof (such cooperation to be at the expense,
          including reasonable legal fees and expenses, of the Indemnitor). If the
          Indemnitor does not elect to assume control of the defense of any Third
          Party
          Claim, within the one hundred twenty (120) day period set forth above,
          or if
          such good faith and diligent defense is not being or ceases to be conducted
          by
          the Indemnitor, the Indemnitee shall have the right, at the expense of
          the
          Indemnitor, after three (3) Business Days notice to the Indemnitor of its
          intent
          to do so, to undertake the defense of the Third Party Claim for the account
          of
          the Indemnitor (with counsel selected by the Indemnitee), and to compromise
          or
          settle such Third Party Claim, exercising reasonable business
          judgment.

         

        
          
            
            

          

          
            38

            
              

            

          

          
            
            

          

        

        15.2.3 Settlements.
          The
          Indemnitee may agree to any settlement, compromise, or discharge of such
          Third
          Party Claim that the Indemnitor may recommend that by its terms obligates
          the
          Indemnitor to pay the full amount of Losses (whether through settlement
          or
          otherwise) in connection with such Third Party Claim and unconditionally
          and
          irrevocably releases the Indemnitee completely from all liability in connection
          with such Third Party Claim; provided, however, that, without the Indemnitee’s
          prior written consent, the Indemnitor shall not consent to any settlement,
          compromise, or discharge (including the consent to entry of any judgment),
          and
          the Indemnitee may refuse in good faith to agree to any such settlement,
          compromise, or discharge, that provides for injunctive or other nonmonetary
          relief affecting the Indemnitee. The Indemnitee shall not (unless required
          by
          Law) admit any liability with respect to, or settle, compromise, or discharge,
          such Third Party Claim without the Indemnitor’s prior written consent (which
          consent shall not be unreasonably withheld,
          conditioned, or delayed). 

         

        15.3 Insurance.
          Each
          Party agrees to obtain and maintain commercial general liability insurance
          and/or self-insurance, including prior to the date a Licensed Product is
          first
          administered in humans, commercial general liability insurance and/or
          self-insurance for Clinical Trials and products liability, with reputable
          and
          financially secure insurance carriers, in such amounts and subject to such
          deductibles as are
          reasonable and customary in the pharmaceutical industry for companies of
          comparable size and activities. Each Party shall maintain such insurance
          for so
          long as Licensed Products in the Territory continue to be developed,
          manufactured, or commercialized and thereafter for so long as is necessary
          to
          cover any and all Third Party Claims required to be indemnified by such
          Party
          which Third Party Claims may arise from the development, manufacture, and/or
          commercialization of a Licensed Product in the Territory. Upon reasonable
          request by a Party, the other Party shall produce evidence that such insurance
          policies are valid, kept up to date, and in full force and effect. The
          insurance
          obligations set forth in this Section 15.3 may be satisfied by commercially
          reasonable self-insurance or a commercially reasonable combination of insurance
          and self-insurance. 

         

        
          
            
            

          

          
            39

            
              

            

          

          
            
            

          

        

        ARTICLE
          16

        TERM

         

        This
          Agreement shall become effective on the Effective Date, and unless terminated
          earlier in accordance with the provisions of Article 17 shall expire
          as
          follows as to each Licensed Product in each country in the Territory, on
          a
          country-by-country basis, upon the latest of: (a) the 10th
          anniversary of the date of the First Commercial Sale of the Licensed Product;
          (b) the date on which the sale of such Licensed Product ceases to be covered
          by
          a Valid Claim in such country, or (c) in consideration of the performance
          by
          Chrysalis of development services without charge, the date a generic form
          of the
          product is introduced in such country (the “Term”).
          

         

        ARTICLE
          17

        TERMINATION

         

        17.1 Termination
          for Material Breach.
          

         

        17.1.1 Right
          to Terminate Agreement.
          If a
          Party (the “Breaching
          Party”)
          commits a material breach of this Agreement and fails to cure such breach
          within
          the applicable Cure Period (as provided in 17.1.3
          below),
          the other Party (the “Non-Breaching
          Party”)
          may, by
          written notice of termination within thirty (30) days after the expiration
          of
          the applicable Cure Period, elect to terminate the Agreement. Without limiting
          the generality of the foregoing, and notwithstanding the Cure Period set
          forth
          in Section 17.1.3, the practice by Discovery of the Chrysalis Technology
          outside
          the scope of the licenses and sublicenses granted herein, which practice
          does
          not cease within thirty (30) days after the receipt of written notice of
          such
          breach from Chrysalis, shall constitute a material breach. 

         

        17.1.2 Right
          to Terminate Supported Product Development Projects.
          If a
          Party (the “Breaching
          Party”)
          commits a material breach of its obligations in connection with a Supported
          Product Development Project and fails to cure such breach within the applicable
          Cure Period (as provided in 17.1.3
          below),
          the other Party (the “Non-Breaching
          Party”)
          may, by
          written notice of termination within thirty (30) days after the expiration
          of
          the applicable Cure Period elect to terminate such Supported Product Development
          Project and/or any other Supported Product Development Project that has
          been
          affected by such material breach. In the event that Discovery terminates
          any
          Supported Product Development Project pursuant to this Section 17.1.2 due
          to a
          material breach by Chrysalis, [***].
          If such
          material breach by Chrysalis also constitutes a material breach of the
          Agreement, Discovery may, at its option, terminate this Agreement pursuant
          to
          Section 17.1.1. In the event that Chrysalis terminates any Supported Product
          Development Project pursuant to this Section 17.1.2 due to a material breach
          by
          Discovery, [***].
          If such
          material breach by Discovery also constitutes a material breach of the
          Agreement, Chrysalis may, at its option, terminate this Agreement pursuant
          to
          Section 17.1.1. 

         

        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.

         

         

        
          
            
            

          

          
            40

            
              

            

          

          
            
            

          

        

        17.1.3 Applicable
          Cure Periods.
          Upon
          receipt of written notice of a material breach pursuant to Section 17.1.1
          or
          17.1.2, and except as otherwise provided for in Section 17.1.1,
          the
          allegedly Breaching Party shall have sixty (60) days to cure such material
          breach (the “Cure
          Period”),
          provided, however, that in
          the
          case of any material breach that cannot be reasonably cured within the
          sixty
          (60) day cure period, should the Breaching Party deliver to the Non-Breaching
          Party a plan for curing such material
          breach
          which is reasonably sufficient to effect a cure and uses commercially reasonable
          efforts to pursue such plan and effect a cure, the Cure Period shall be
          extended
          for an additional sixty (60) days.

         

        17.2 Termination
          Due to Certain Events.
          Without
          prejudice to any other remedies available to it at Law or in equity, either
          Party may, subject to the provisions set forth herein, terminate this Agreement
          immediately upon written notice to the other Party if, at any time, the
          other
          Party shall (i) file in any court pursuant to any statute a petition for
          bankruptcy or insolvency, or for reorganization in bankruptcy, or for an
          arrangement or for the appointment of a receiver, trustee or administrator
          of
          such Party or of its assets, (ii) be served with an involuntary petition
          against
          it, filed in any insolvency proceeding, and such petition shall not be
          dismissed
          within sixty (60) days after the filing thereof, (iii) propose or be a
          party to
          any dissolution, (iv) make an assignment for the benefit of its creditors;
          or
          (v) ceases to do business in the ordinary course. 

         

        17.3 Effects
          of Termination Generally

         

        17.3.1 Accrued
          Obligations; Survival. Upon
          expiration or termination of this Agreement, all of the Parties’ rights and
          obligations under this Agreement including the exclusive license in Section
          3.1
          obligations of exclusivity set forth in Section 3.5 shall terminate immediately
          except: (a) any rights that shall have accrued to the benefit of any Party
          prior
          to such termination or expiration, including the right of Chrysalis to
          receive
          royalties as provided in Article 8; and (b) any rights and obligations
          of the
          Parties which are expressly indicated to survive termination or expiration
          of
          this Agreement. All of the Parties’ rights and obligations under, and the
          provisions contained in [***]
          shall
          survive termination or expiration of this Agreement. [***] 

         

        17.3.2 Outstanding
          Payments.
          All
          payments of amounts owing to either Party under this Agreement as of its
          expiration or termination shall be due and payable within the later of
          (i) to
          the extent such amounts can be calculated and a fixed sum determined at
          the time
          of expiration or termination of this Agreement, sixty (60) days after the
          date
          of such expiration or termination, and (ii) ten (10) days after the date
          in
          which such amounts can be calculated and a fixed sum determined. 

         

        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.

         

        
          
            
            

          

          
            41

            
              

            

          

          
            
            

          

        

        ARTICLE
          18

        TECHNOLOGY
          TRANSFER

         

        18.1 Technology
          Transfer.
          Commencing [***]
          after
          the Effective Date, Chrysalis shall provide Discovery with a technology
          transfer
          reasonable in scope to enable the practice of the Chrysalis Technology
          for
          purposes of exercising the license rights granted hereunder. Upon expiration
          or
          termination of any Supported Product Development Project other than termination
          by Chrysalis pursuant to Section 17.1 or 17.2, Chrysalis shall provide
          Discovery
          with an incremental technology transfer with respect to such Supported
          Product
          Development Project reasonable to enable the practice of the Chrysalis
          Technology utilized in connection with such Supported Product Development
          Project, to the extent such technology transfer has not previously
          occurred. 

         

        18.2 Transfer
          of Regulatory Files, Data and Filings.
          In
          connection with the technology transfer contemplated pursuant to Section
          18.1,
          Chrysalis shall provide
          to
          Discovery or its designee, a copy of all governmental or regulatory
          correspondence, conversation logs, filings, and approvals relating to the
          development, manufacture or commercialization of the Licensed Product (including
          study protocols, study results, analytical methodologies, validation
          documentation, and regulatory documentation) that are reasonably necessary
          for
          the continued development and sale of the Licensed Product. Chrysalis shall
          also
          provide to Discovery copies of and permit Discovery to reference in connection
          with any Licensed Products all reasonably necessary Regulatory Data relating
          to
          Licensed Product to continue the development, marketing and sale of the
          Licensed
          Product. From and after such time, all such Regulatory Data and information
          provided to Discovery shall remain Confidential Information of Chrysalis,
          provided, however, that Discovery may use all such Regulatory Data and
          information solely for the purposes of continuing to pursue the development
          and
          commercialization of Licensed Products. Chrysalis shall execute all documents
          and take all such further actions as may be reasonably requested by Discovery
          and required in order to give
          effect
          to the foregoing. 

         

        ARTICLE
          19

        STANDSTILL
          AGREEMENT

         

        19.1 General
          Standstill.
          Except
          as set forth in this Section 19.1, Chrysalis hereby agrees that, without
          the
          written consent of Discovery, during the Term and for a [***]
          period
          beginning on the date of termination of this Agreement for any reason,
          neither
          Chrysalis nor any of its Affiliates will (nor assist or encourage others
          to),
          directly or indirectly, without the written consent of Discovery: (i) acquire,
          or agree to acquire, directly or indirectly, alone or in concert with others,
          by
          purchase, gift, or otherwise, any direct or indirect beneficial ownership
          (within the meaning of Rule 13d-3 under the Securities Exchange Act of
          1934, as
          amended (the “Exchange
          Act”),
          or
          interest in any securities or direct or indirect rights, warrants, or options
          to
          acquire, or securities convertible into or exchangeable for, any securities
          of
          Discovery; (ii) directly or indirectly effect or seek, initiate, offer,
          or
          propose or participate in any (A) tender or exchange offer, merger,
          consolidation, or other business combination involving Discovery, or (B)
          any
          recapitalization, restructuring, liquidation, dissolution, sale of all
          or
          substantially all the assets,
          or other extraordinary transaction with respect to Discovery; (iii) make,
          or in
          any way participate in, directly or indirectly, alone or in concert with
          others,
          any “solicitation” of “proxies” to vote (as such terms are used in the proxy
          rules of the SEC promulgated pursuant to Section 14 of the Exchange Act);
          (iv)
          form or become a member of a “group” (as defined under the Exchange Act) with
          respect to any voting securities of Discovery (including by depositing
          any
          securities of Discovery in a voting trust or by subjecting any securities
          of
          Discovery to any other arrangement or agreement with respect to the voting
          of
          such securities); or (v) enter into any agreements, discussions, or arrangements
          with any Third Party with respect to any of the foregoing. 

         

        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.

         

        
          
            
            

          

          
            42

            
              

            

          

          
            
            

          

        

        19.2 Certain
          Exceptions.
          Nothing
          in this Article 19 shall prohibit Chrysalis’ or its Affiliates’ employees from
          purchasing securities of Discovery pursuant to (i) a pension plan established
          for the benefit of Chrysalis’ or its Affiliates’ employees, (ii) any employee
          benefit plan of Chrysalis or its Affiliates, (iii) any stock portfolios
          not
          controlled by Chrysalis or any of its Affiliates that invest in Discovery
          among
          other companies, or (iv) de
          minimis
          passive
          investments not to exceed five percent (5%) of Discovery’s outstanding voting
          securities. 

         

        19.3 Exception
          for an Acquisition Transaction.
          This
          Article 19 shall terminate (subject to revival as provided below) and Chrysalis
          and its Affiliates shall have the right to acquire any securities of Discovery
          without regard to the limitations set forth in this Article 19 in the event
          that
          Discovery publicly announces a transaction, an intention or desire to effect
          any
          transaction, or the receipt of any offer, which would result in (a) the
          sale of
          all or substantially all of the assets of Discovery within the meaning
          of
          Section 271 of the Delaware General Corporation Law, or (b) Discovery common
          shareholders immediately prior to such transaction owning less than fifty
          percent (50%) of the outstanding common stock of the acquiring entity or,
          in the
          case of a merger transaction, the surviving corporation (an “Acquisition
          Transaction”).
          If
          the proposed Acquisition
          Transaction has
          not
          been consummated within six (6) months following Discovery’s public announcement
          in respect thereof, the provisions of this Article 19 shall be revived
          and have
          full force and effect until such time as Discovery makes a subsequent public
          announcement regarding an Acquisition Transaction, at which time the provisions
          of this Article 19 shall once again apply.

         

        19.4 Other
          Agreements.
          Notwithstanding anything in this Agreement to the contrary, Discovery agrees
          that if, subsequent to the date hereof and prior to the end of the [***] period
          following
          the Term, any other party which becomes a licensee of Discovery patents
          or other
          technology does not agree to the terms contained in this Article 19, or
          agrees
          to terms that are materially less restrictive to such other party than
          those
          contained in this Article 19, then Discovery will so notify Chrysalis,
          and will
          as appropriate describe in such notice any such less restrictive terms
          and, if
          Chrysalis elects, the provisions of this Article 19 will be deemed to have
          been
          modified to delete the provisions of this Article 19 or to provide Chrysalis
          with the benefit of such materially less restrictive terms, as
          appropriate.

         

        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.

         

        
          
            
            

          

          
            43

            
              

            

          

          
            
            

          

        

        ARTICLE
          20

        DISPUTE
          RESOLUTION

         

        20.1 Dispute
          Resolution.
          Except
          as expressly otherwise provided in this Agreement, any material dispute,
          difference, claim, action, demand, request, investigation, controversy,
          threat
          or other question arising out of or relating to the interpretation of any
          provisions of this Agreement or the failure of any Party to perform or
          comply
          with any obligations or conditions applicable to such Party pursuant to
          this
          Agreement unresolved by the Steering Committee (a “Dispute”) shall be settled in
          accordance with the provisions of this Article 20; provided, however, that
          after
          the expiration or termination of this Agreement, such Disputes shall be
          referred
          directly to the senior executives of the Parties as provided for in Section
          20.2. If a Party intends to initiate executive negotiation, mediation or
          arbitration (as set forth below) to resolve a Dispute, such Party shall
          provide
          written notice to the other Party informing such other Party of such intention
          and the issues to be resolved.
          

         

        20.2 Escalation
          and Executive Negotiation.
          Any
          dispute or disagreement between the representative of Discovery and Chrysalis
          on
          the Project Team as to matters within such Project Team’s jurisdiction shall, at
          the election of either Party, be addressed, first, with the Alliance Managers,
          and if the dispute is not resolved within ten (10) Business Days after
          such
          referral to the Alliance Managers, then it shall, at the election of either
          Party, be submitted to the Steering Committee for resolution, provided
          however
          that after the expiration or termination of this Agreement, such disputes
          shall
          be referred directly to the senior executives of the Parties as provided
          for in
          this Section 20.2. The Steering Committee shall attempt in good faith to
          resolve
          any issues presented to it.
          If
          the
          Steering Committee, after acting in good faith and in a diligent manner,
          is
          unable to resolve any Dispute submitted to it within a reasonable period
          of time
          and in any event within thirty (30) days of such submission, such matter
          shall,
          at the election of either Party, be
          referred
          for good faith negotiation to a senior executive of each Party. 

         

        20.3 Mediation.
          If the
          senior executives referenced in Section 20.2 are unable to resolve
          any such
          Dispute within ten (10) Business Days, either Party may, upon written notice
          to
          the other Party, refer such Dispute to mediation. Upon such written notice,
          the
          Parties shall mutually agree on a mediator to assist in the negotiations.
          If the
          Parties fail to mutually agree on a mediator within one week of the written
          notice, a mediator shall be appointed by the AAA. The Party responsible
          for
          referring the Dispute to mediation shall bear the costs of such mediation.
          Any
          settlement reached by mediation shall be resolved in writing, signed by
          the
          Parties, and shall be binding on them. 

         

        20.4 Arbitration.  

         

        20.4.1 Referral
          to Arbitration.
          In the
          event that a Dispute is not resolved during mediation within thirty (30)
          days of
          the selection of a mediator, either Party may refer such Dispute to final
          and
          binding arbitration by sending written notice of such election to the other
          Party clearly marked “Arbitration Demand,” whereupon such Dispute shall be
          arbitrated in accordance with this Section 20.4. 

         

        20.4.2 Rules
          and Procedures.
          Except
          as expressly otherwise provided in this Agreement, any Dispute shall be
          finally
          settled by arbitration under the then-current expedited procedures applicable
          to
          the then-current Commercial Arbitration Rules of the AAA in accordance
          with the
          terms set forth in this Section
          20.4.
          The arbitration of any Dispute shall be kept confidential and shall be
          filed
          with the office of the AAA located in Washington, D.C. or such other AAA
          office
          as the Parties may agree. Such arbitration shall be conducted by three
          arbitrators, one appointed by each of Chrysalis and Discovery and the third
          selected by the first two appointed arbitrators. Each arbitrator shall
          be a
          person with relevant experience in the pharmaceutical industry. Chrysalis
          and
          Discovery must make their respective arbitrator appointments within ten
          (10)
          Business Days of notice being given to a Party by the other Party of its
          intention to resolve such Dispute through arbitration. Such appointed
          arbitrators shall select the third arbitrator within ten (10) Business
          Days of
          the last to occur of their respective appointments. Chrysalis and Discovery
          shall instruct such arbitrators to render a determination of any such Dispute
          within sixty (60) days after the appointment of the third arbitrator. All
          Disputes shall be resolved by submission of documents unless the arbitration
          panel determines that an oral hearing is necessary.

         

        
          
            
            

          

          
            44

            
              

            

          

          
            
            

          

        

        20.4.3 Awards.
          The
          decision of the arbitrators with respect to any Dispute shall be in writing
          and
          state the findings, facts and conclusions of law upon which the decision
          is
          based. Any such decision and award rendered by the arbitrators shall be
          final
          and binding upon the Parties. Judgment upon any award rendered may be entered
          in
          any court having jurisdiction, or application may be made to such court
          for a
          judicial acceptance of the award and an order of enforcement, as the case
          may
          be. Each Party submits itself to the jurisdiction of any such court for
          the
          entry and enforcement to judgment with respect to the decision of the
          arbitrators hereunder. The arbitrators shall have the power to grant all
          legal
          and equitable remedies except specific performance and award compensatory
          damages provided by applicable law, but shall not have the power or authority
          to
          award punitive damages. No Party shall seek punitive damages or specific
          performance in relation to any matter under, arising out of, or in connection
          with or relating to this Agreement in any other forum, provided however,
          that
          the foregoing does not preclude suits or limit damages associated with
          infringement.

         

        20.4.4 Costs.
          Each
          Party shall pay its own expenses of arbitration, and the expenses of the
          arbitrators shall be equally shared between Chrysalis and Discovery unless
          the
          arbitrators assess as part of their award all or any part of the arbitration
          expenses of a Party or Parties (including reasonable attorneys’ fees) against
          the other Party or Parties, as the case may be.

         

        20.4.5 No
          Other Forum.
          Except
          as provided in Section 20.5, the provisions of this Section 20.4 shall
          be a
          complete defense to any suit, action or proceeding instituted in any federal,
          state or local court or before any administrative tribunal with respect
          to any
          Dispute arising under this Agreement. Any Party commencing a lawsuit in
          violation of this Section 20.4 shall pay the costs of the other Party,
          including, without limitation, reasonable attorney’s fees and defense
          costs.

         

        20.5 Right
          to Injunctive and Other Relief.
          Nothing
          in this Agreement, shall prohibit
          either Party from seeking injunctive relief from a court of competent
          jurisdiction in the event of a breach or prospective breach of this Agreement
          by
          the other Party which would cause irreparable harm to the first Party.
          Nothing
          in this Agreement shall prevent a Party from seeking any remedies available
          at
          law or in equity in any court of competent jurisdiction in the event of
          the
          practice of such Party’s Intellectual Property outside the scope of the rights
          granted herein. 

         

        
          
            
            

          

          
            45

            
              

            

          

          
            
            

          

        

        ARTICLE
          21

        MISCELLANEOUS

         

        21.1 Choice
          of Law.
          This
          Agreement shall be governed by and interpreted under, and any action or
          proceeding shall apply, the Laws of the State of New York excluding (i)
          its
          conflicts of Laws principles, other than Section 5-1401 of the New York
          General
          Obligations Law (ii), the United Nations Conventions on Contracts for the
          International Sale of Goods and (iii) the 1974 Convention on the Limitation
          Period in the International Sale of Goods and any Protocols thereto, done
          at
          Vienna, April 11, 1980.

         

        21.2 Severability.
          If,
          under Law, any provision of this Agreement is invalid or unenforceable,
          or
          otherwise directly or indirectly affects the validity of any other material
          provision(s) of this Agreement, this Agreement shall endure except for
          such
          provision. The Parties shall consult one another and use their best efforts
          to
          agree upon a valid and enforceable provision that is a reasonable substitute
          for
          such invalid or unenforceable provision in view of the intent of this
          Agreement.

         

        21.3 Relationship
          of the Parties.
          Each
          Party shall bear its own fees, expenses, and disbursements, including the
          fees
          and expenses of their respective counsel, accountants, bankers, and other
          experts, in connection with the subject matter of this Agreement and costs
          incurred in the performance of its obligations hereunder without charge
          or
          expense to the other except as expressly provided in this Agreement. Neither
          Party shall have any responsibility for the hiring, termination or compensation
          of the other Party’s employees or for any employee benefits of such employee. No
          employee or representative of a Party shall have any authority to bind
          or
          obligate the other Party to this Agreement for any sum or in any manner
          whatsoever, or to create or impose any contractual or other liability on
          the
          other Party without said Party’s approval. For all purposes, and notwithstanding
          any other provision of this Agreement to the contrary, the Parties’ legal
          relationship under this Agreement shall be that of independent contractors.
          This
          Agreement is not a partnership agreement and nothing in this Agreement
          shall be
          construed to establish a partnership, joint venture, agency, or
          employer-employee relationship between the Parties.

         

        21.4 Parties
          in Interest.
          This
          Agreement shall be binding upon and inure to the benefit of and be enforceable
          by the respective legal representatives, successors, and permitted assigns
          of
          the Parties hereto. Nothing in this Agreement, express or implied, is intended
          to confer on any Person
          other than the Parties hereto, or their respective successors and assigns,
          any
          rights, remedies, obligations, or liabilities under or by reason of this
          Agreement.

         

        21.5 Enforcement
          of Certain Agreements.
          Each
          Party shall use commercially reasonable efforts at its expense to enforce
          the
          provisions of any confidentiality agreements and agreements with respect
          to
          noncompetition existing as of the Effective Date with any of its present
          or
          former employees, agents, consultants or independent contractors of Discovery
          that relate to any Licensed Product; provided, however, that the obligation
          with
          respect to any agreement related to this Section 21.5 shall terminate as
          of the
          date on which such agreement and the obligations regarding noncompetition
          have
          terminated or expired in accordance with its terms.

         

        
          
            
            

          

          
            46

            
              

            

          

          
            
            

          

        

        21.6 Use
          of
          Affiliates, Subcontractors, Sublicensees and Distributors.
          Each
          Party shall have the right to use Affiliates, subcontractors, sublicensees
          and
          distributors in exercising its rights and carrying out its obligations
          under
          this Agreement, provided, however, that (i) such entities agree in writing
          to be
          bound by the provisions of Article 11, (ii) the use of such entities does
          not in
          any way materially diminish the other Party’s rights or otherwise modify the
          other Party’s rights or obligations hereunder without such other Party’s prior
          written consent, (iii) Discovery may not delegate, sublicense, assign,
          or
          otherwise transfer any of its rights or obligations hereunder to any entity
          (including any Affiliate) that competes with any tobacco product of Chrysalis
          or
          its Affiliates or a company engaged in the development or sale of Aerosol
          Technologies without Chrysalis’ prior written consent, (iv) Chrysalis may not
          delegate, assign or otherwise transfer any of its rights or obligations
          hereunder to a company engaged in pulmonary critical care medicine, without
          Discovery’s prior written consent and (v) except with respect to rights,
          benefits and obligations assigned as permitted pursuant to Section 21.7,
          each
          Party shall be liable for any actions or omissions of its Affiliates,
          subcontractors, sublicensees and distributors in connection with this Agreement
          and the Intellectual Property and Confidential Information of the other
          Party to
          the same extent as if such actions or omissions were conducted by the Party
          itself. 

         

        21.7 Assignment.
          Chrysalis
          may assign or otherwise transfer this Agreement or any or all right, benefit
          or
          obligation hereunder (whether by operation of Law or otherwise) to any
          Affiliate
          of Chrysalis without the prior written consent of Discovery subject only
          to the
          limitations set forth in Section 21.6 (iv) above. Discovery may assign
          or
          otherwise transfer this Agreement or any or all right, benefit or obligation
          hereunder (whether by operation of Law or otherwise) to any Affiliate of
          Discovery without the prior written consent of Chrysalis, subject only
          to the
          limitations set forth in Section 21.6 (iii) above, provided, however,
          notwithstanding such an assignment, Discovery shall remain responsible
          for the
          performance of the indemnification obligations set forth herein. No Party
          may
          assign or otherwise transfer this Agreement or any or all right, benefit
          or
          obligation hereunder (whether by operation of Law or otherwise) to any
          other
          Person other than an Affiliate without the prior written consent of the
          other
          Party, which consent shall not be unreasonably withheld, conditioned, or
          delayed; except that, subject to the limitations set forth in Section 21.6
          (iii)
          and (iv) above, either Party may assign or otherwise transfer any or all
          of its
          rights and interests hereunder in connection with the sale of all or
          substantially all of its assets or business to which this Agreement relates,
          whether by way of merger, sale of stock, sale of assets or other similar
          transaction, provided that the assignee or transferee expressly agrees
          to assume
          all of the obligations hereunder.

         

        21.8 Further
          Assurances and Actions.
          From
          time to time after the Effective Date, Discovery and Chrysalis shall execute,
          acknowledge and deliver to each other any further documents, assurances,
          and
          other matters, and will take any other action consistent with the terms
          and
          conditions of this Agreement, that may reasonably be requested by a Party
          and
          necessary or desirable to carry out the purpose and intent of this Agreement.
          Chrysalis and Discovery shall cooperate and use all reasonable efforts
          to make
          all other registrations, filings, and applications, to give all notices,
          and to
          obtain as soon as practicable all governmental or other consents, transfers,
          approvals, orders, qualifications, authorizations, permits, and waivers,
          if any,
          and to do all other things necessary or desirable for the consummation
          of this
          Agreement. 

         

        
          
            
            

          

          
            47

            
              

            

          

          
            
            

          

        

        21.9 Waiver.
          Any
          term or condition of this Agreement may be waived at any time by the Party
          that
          is entitled to the benefit thereof, but no such waiver shall be effective
          unless
          set forth in a written instrument duly executed by or on behalf of the
          Party
          waiving such term or condition. No waiver by any Party of any term or condition
          of this Agreement, in any one or more instances, shall be deemed to be
          or
          construed as a waiver of the same or any other term or condition of this
          Agreement on any future occasion. Except as expressly set forth in this
          Agreement, all rights and remedies available to a Party, whether under
          this
          Agreement or afforded by Law or otherwise, will be cumulative and not in
          the
          alternative to any other rights or remedies that may be available to such
          Party.

         

        21.10 Section
          365(n) of the Bankruptcy Code.
          All
          rights and licenses granted under or pursuant to any section of this Agreement
          are, and shall otherwise be deemed to be, for purposes of Section 365(n)
          of the
          Bankruptcy Reform Act of 1978, 11 U.S.C. §§ 101 et
          seq.,
          as
          amended (the “Bankruptcy
          Code”),
          licenses of rights to “intellectual property” as defined under
          Section 101(35A) of the Bankruptcy Code. The Parties shall retain
          and may
          fully exercise all of their respective rights and elections under Section
          365(n)
          of the Bankruptcy Code.
          

         

        21.11 Notices.
          All
          notices that are required or permitted hereunder shall be in writing and
          shall
          be sufficient if personally delivered or sent by mail or Federal Express
          or
          other delivery service. Any notices shall be deemed given upon the earlier
          of
          the date when received at, or the third day after the date when sent by
          registered or certified mail or the day after the date when sent by Federal
          Express to, the address set forth below, unless such address is changed
          by
          notice to the other Parties hereto:

         

        If
          to
          Chrysalis:

         

        Chrysalis
          Technologies

        615
          Maury
          Street

        Richmond,
          VA 23224

        Attention:
          Timothy Beane

         

        


        If
          to
          Discovery:

         

        Discovery
          Laboratories, Inc.

        2600
          Kelly Road, Suite 100

        Warrington,
          PA 18976

        Attention
          : David L. Lopez, Esq., CPA

        


        
          
            
            

          

          
            48

            
              

            

          

          
            
            

          

        

        with
          a
          copy to:

         

        Dickstein
          Shapiro Morin & Oshinsky, LLP

        1177
          Avenue of the Americas, 47th
          Fl

        New
          York,
          NY 10036

        Attention:
          Ira L. Kotel, Esq.

         

        21.12 Construction.
          Unless
          the context of this Agreement clearly requires otherwise, (i) references
          to any
          gender include all genders, (ii) “or” has the inclusive meaning frequently
          identified with the phrase “and/or,” (iii) “including” has the inclusive meaning
          frequently identified with the phrase “including but not limited to” or
“including without limitation”, and (iv) references to “hereunder” or “herein”
          relate to this Agreement and (v) all terms defined in the singular shall
          have
          the same meaning in the plural and visa versa. The section and other headings
          contained in this Agreement are for reference purposes only and shall not
          control or affect the construction of this Agreement or the interpretation
          thereof in any respect. Section, subsection, Schedule and Exhibit references
          are
          to this Agreement unless otherwise specified. Each accounting term used
          herein
          that is not specifically defined herein shall have the meaning given to
          it under
          GAAP.

         

        21.13 Registration
          and Filing of this Agreement.
          To the
          extent, if any, that either Party concludes in good faith that it or the
          other
          Party is required to file or register this Agreement or a notification
          thereof
          with any Regulatory Authority, including the SEC or the U.S. Federal Trade
          Commission, in accordance with Law, such Party shall inform the other Party
          thereof. Should both Parties jointly agree that either of them is required
          to
          submit or obtain any such filing, registration or notification, they shall
          cooperate, each at its own expense, in such filing, registration or notification
          and shall execute all documents reasonably required in connection therewith.
          In
          such filing, registration or notification, the Parties shall request
          confidential treatment of sensitive provisions of this Agreement, to the
          extent
          permitted by Law. The Parties shall promptly inform each other as to the
          activities or inquiries of any such Regulatory Authority relating to this
          Agreement, and shall reasonably cooperate to respond to any request for
          further
          information therefrom on a timely basis.
          

         

        21.14 Force
          Majeure.
          No
          Party shall be held liable or responsible to the other Party nor be deemed
          to be
          in default under, or in breach of any provision of, this Agreement for
          failure
          or delay in fulfilling or performing any obligation of this Agreement when
          such
          failure or delay is due to Force Majeure, and without the fault or negligence
          of
          the Party so failing or delaying. For purposes of this Agreement, Force
          Majeure
          is defined as causes beyond the control of the Party, including, without
          limitation, acts of God; acts, regulations, or laws of any government;
          war;
          civil commotion; destruction of production facilities or materials by fire,
          flood, earthquake, explosion or storm; labor disturbances; epidemic; and
          failure
          of public utilities or common carriers. In such event Discovery or Chrysalis,
          as
          the case may be, shall immediately notify the other Party of such inability
          and
          of the period for which such inability is expected to continue. The Party
          giving
          such notice shall thereupon be excused from such of its obligations under
          this
          Agreement as it is thereby disabled from performing for so long as it is
          so
          disabled and the thirty (30) days thereafter. To the extent possible, each
          Party
          shall use reasonable efforts to minimize the duration of any Force
          Majeure.
          

         

        
          
            
            

          

          
            49

            
              

            

          

          
            
            

          

        

        21.15 Entire
          Agreement.
          This
          Agreement constitutes the entire agreement between the Parties with respect
          to
          the subject matter and supersedes all previous agreements and understandings
          between the Parties, whether written or oral. This Agreement may be altered,
          amended or changed only by a writing making specific reference to this
          Agreement
          and signed by duly authorized representatives of Discovery and
          Chrysalis.

         

        21.16 Third
          Party Beneficiaries.
          Except
          for any Third Party Indemnities under Article 15, none of the provisions
          of this
          Agreement shall be for the benefit of or enforceable by any Third Party,
          including any creditor of either Party hereto, and no such Third Party
          (except
          for such Indemnitees, as such) shall obtain any right under any provision
          of
          this Agreement or shall by reasons of any such provision make any claim
          in
          respect of any debt, liability or obligation (or otherwise) against either
          Party
          hereto.

         

        21.17 Execution
          in Counterparts; Facsimile Signatures.
          This
          Agreement may be executed in counterparts, each of which counterparts,
          when so
          executed and delivered, shall be deemed to be an original, and both of
          which
          counterparts, taken together, shall constitute one and the same instrument
          even
          if both Parties have not executed the same counterpart. Signatures provided
          by
          facsimile transmission shall be deemed to be original signatures.

         

        [Signature
          Page Follows]

        


        
          
            
            

          

          
            50

            
              

            

          

          
            
            

          

        

        IN
          WITNESS WHEREOF, this Agreement has been executed by the Parties hereto
          as of
          the day and year first written above.

        


        
          
            	 	 	 
	 	
                    PHILIP
                      MORRIS USA INC., 

                    d/b/a
                      CHRYSALIS TECHNOLOGIES

                  
	 
 	 
 	 
 
	 	By:  	/s/ John
                    R. Nelson
	 	
                    

                    Name: John
                      R. Nelson

                    Title: President,
                      Operations and Technology

                  


          



        


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

                  Name: Robert
                    J. Capetola, Ph.D.

                  Title:
                    President
                    and Chief Executive Officer