Document:

Exhibit 10.52

 

PharmAthene, Inc.

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

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

  	
   

  

 

	
  

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

  

 

	
  

  	
  35 EXHIBIT B Program Price and Payment Schedule

  

 

	
  

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

  

 

	
  

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

  

 

	
  

  	
  38 EXHIBIT D Quality Agreement 

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

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

  

 

	
  

  	
  40 3. Budget a. Diosynth shall provide a payment schedule by
  work package to PharmAthene. The time-phased budget will include all
  subcontracted costs, purchased materials costs as well as Diosynth costs.
  This payment schedule will be structured to show how the invoices will be
  presented. b. Monthly Status Reports i. As the program progresses, changes to
  the cost and schedule may be negotiated between PharmAthene and Diosynth. If
  those changes impact either the program Master Schedule or budget, those
  changes must be formally approved. c. Cost to complete. Diosynth shall
  highlight in the monthly report any changes to the Scope or to the proposed
  costs, and therefore any change to the overall cost to complete. 4. Risk
  Management a. Diosynth shall, however, provide input and feedback to
  PharmAthene during routine program status meetings on high impact/high
  probability risks and opportunities on the program and discuss and agree how
  identified risks should be mitigated. Monthly program management updates
  shall include any changes in risk assessment.Exhibit 10.2

 

CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND

EXCHANGE
COMMISSION. “[ * ]” BRACKETED
ASTERISKS DENOTE SUCH OMISSIONS.

 

CONFIDENTIAL

 

[ * ]
SUPPLY AGREEMENT

 

This [ * ]
SUPPLY AGREEMENT (hereinafter referred to as the “Supply
Agreement”), effective as of the date of last signature herein (“Effective Date”) is made and entered into by and among (i) CombiMatrix Corporation, which is a corporation organized
under the law of the state of Delaware and has a primary business address
located at 6500 Harbour Heights Parkway, Suite 303,
Mukilteo, Washington 98275 (hereinafter referred to as “CombiMatrix”) and (ii) Illumina, Inc.,
which is a corporation organized under the law of the state of
Delaware and has a primary business address located at 9885 Towne
Centre Drive, San Diego, CA 92121-1975  (hereinafter
referred to as “Illumina”).

 

AGREEMENT

 

In
consideration of the mutual covenants, agreements, representations, warranties,
and conditions contained herein, the Parties hereby agree as follows:

 

1.              Definitions.

 

1.1                               The term “Parties” means CombiMatrix and Illumina, and “Party” means
either CombiMatrix or Illumina.

 

1.2                               The term “Field of Use” is defined to be [ * ].

 

1.3                               The term “QC Test”
is defined to be procedures set forth on Exhibit B.

 

1.4                               The term “Indemnitees”
is defined in Section 9.2.

 

1.5                               The term “[ * ] Exclusivity” is
defined in Section 3.7.

 

1.6                                 The term “[ * ]”
means [ * ].

 

1.7                               Additional terms and phrases are as defined
in Exhibit D.

 

2.              Term; Termination.

 

2.1                               The “Term” begins on the Effective Date and ends on the End Date.
The “End Date” is [ * ],
unless terminated earlier as permitted in this Supply Agreement, or extended
longer as the Parties may mutually agree in a written amendment to this Supply
Agreement, in which case the End Date is the actual date of termination of this
Supply Agreement.

 

2.2                               Each Party has the right to terminate this
Supply Agreement earlier than the natural End Date stated in Section 2.1,
upon (i) material breach of this Supply Agreement by the other Party,
provided the non-breaching Party provides written notice of the material breach
to the breaching Party and the breaching Party does not cure the breach within
thirty (30) days after the

 

1

 

CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND

EXCHANGE
COMMISSION. “[ * ]” BRACKETED ASTERISKS DENOTE SUCH OMISSIONS.

 

CONFIDENTIAL

 

date
that the notice is sent, in which case the non-breaching Party has the right to
provide written notice of termination effective immediately or on a date set
forth in the notice of termination, (ii) the institution of proceedings in
receivership, bankruptcy, or insolvency by or against the other Party or an
assignment for the benefit of creditors or dissolution or liquidation of the
other Party’s business whether voluntarily or by a third party, or (iii) pursuant
to Section 19.2 (force majeure), provided the Party having the right to
terminate this Supply Agreement provides written notice of termination
effective immediately or on a date set forth in the notice. All parties have
the right to relief in equity and/or law for breach of this Supply Agreement.

 

2.3                               Subject to Section 3.5, Illumina has the
right to terminate this Supply Agreement earlier than the natural End Date upon
[ * ] prior written notice to
CombiMatrix.

 

2.4                               In the event that the Parties extend this
Supply Agreement beyond the natural End Date, CombiMatrix will have the right
to terminate this Supply Agreement upon sixty (60) days prior written notice to
Illumina if Illumina does not submit purchase orders that in the aggregate
(with its Affiliates) total [ * ] over any
one year extension period beginning on the first day of the first extension
period. For clarity, this Section 2.4 is not applicable during the first
year of this Supply Agreement.

 

2.5                               Notwithstanding anything herein to the
contrary, in the event of termination or expiration of this Supply Agreement
for any reason, including for default by a Party, the Parties shall have no
further rights and obligations to each other under this Supply Agreement, other
than the continuing rights and obligations set forth in this Section 2.5.
Termination or expiration does not relieve either Party of any liability or obligation
that accrued hereunder prior to the date of such termination nor preclude
either Party from pursuing all rights and remedies it may have hereunder or at
law or in equity with respect to any breach of this Supply Agreement, nor
prejudice either Party’s right to obtain performance of any obligation. All
rights and obligations of the Parties set forth herein that expressly or by
their nature survive the expiration or termination of this Supply Agreement,
including confidentiality and payment obligations, and Sections 3.2, 3.4, 4-6,
8-18, 19 (except for 19.2), and C1 (only second sentence), C3, C7, and C8 shall
continue in full force and effect subsequent to and notwithstanding the
expiration or termination of this Supply Agreement, until they are satisfied,
or by their nature, expire and shall bind the Parties and their legal
representatives, successors, and permitted assigns.

 

3.              Supply; Rights; Limitations.

 

3.1                               Supply of [ * ]. CombiMatrix
agrees to supply [ * ] to Illumina and its
Affiliates for use in the Field of Use according to the pricing given in Exhibit A
and the terms and conditions set forth in this Supply Agreement, including in
this Section 3 and Exhibit C.

 

3.2                               License to [ * ]. Under Patent
Rights and Know How Rights, and pursuant to payment for [ * ]
according to this Supply Agreement, CombiMatrix hereby grants to Illumina and
its Affiliates the royalty-free perpetual right to use and have used [ * ] in and for the Field of Use throughout the world. For
clarity, the license in this Section 3.2 does not grant Illumina or its
Affiliates or any party other than CombiMatrix the right to practice under
Patent Rights or Know How Rights outside the Field of Use or the right to

 

2

 

CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND

EXCHANGE
COMMISSION. “[ * ]” BRACKETED
ASTERISKS DENOTE SUCH OMISSIONS.

 

CONFIDENTIAL

 

manufacture or have manufactured [ * ]. For
additional clarity, except as explained in the previous sentence, the license
in this Section 3.2 permits Illumina and its Affiliates to make, have
made, sell, have sold, offer for sale, have offered for sale, use, have used,
import, and have imported Illumina Products, and nothing in this Supply
Agreement will limit the rights of Illumina and its Affiliates to confer rights
of use and resale upon any party that purchases or otherwise receives an
Illumina Product from Illumina or an Affiliate thereof. For further clarity,
any additional rights with respect to Patent Rights and Know How Rights that
CombiMatrix may grant to Illumina and its Affiliates are in separate agreements
between the Parties if and when such agreements are executed.

 

3.3                               Pricing
Updates. CombiMatrix agrees that, upon Illumina’s request,
it will enter into good-faith negotiations with Illumina to update the pricing
in Exhibit A to include pricing for [ * ].

 

3.4                               QC Test. If a [ * ] passes the QC Test listed in Exhibit B, then it
is judged to be acceptable and may not be returned to CombiMatrix for refund.

 

3.5                               Purchase Order
Commitment. Illumina agrees to submit purchase orders itself
or by its Affiliates for [ * ] that, in
the aggregate over the period beginning on the Effective Date and ending on [ * ], total [ * ]. For
clarity, Illumina may submit purchase orders that exceed the [ * ] minimum. Upon termination of the Supply Agreement
before [ * ] under Sections 2.1, 2.2 (if
CombiMatrix is the terminating party), 2.3, or 19.2, Illumina shall pay to
CombiMatrix a non-refundable amount that is equal to [ * ]
minus the sum of all amounts already paid by Illumina or its Affiliates, or
already committed to be paid, to CombiMatrix up to the End Date, for the supply
of [ * ] under this Supply Agreement. For
clarity, termination of this Supply Agreement at any time after Illumina has
paid to CombiMatrix the sum of [ * ] or more
for purchase of [ * ] under this Supply Agreement
shall not require any additional payment by Illumina, other than amounts owed
under outstanding purchase orders. Any post-termination payment due pursuant to
this Section 3.5 shall be made within thirty (30) days after the End Date.

 

3.6                               [ * ] and Custom Kit. Illumina
agrees that a [ * ] can be used to create one or
more Custom Kits of [ * ] (i.e.,
uses included in all Custom Kits made from that [ * ]).  If Illumina sells more than one Custom Kit
made from a particular [ * ], for each
Custom Kit sold beyond the first Custom Kit (i.e, for the 2nd and each higher Custom Kit sold), Illumina
will pay an “Extra-Kit Amount” to
CombiMatrix.  In the first 12 month
period starting on the Effective Date, the Extra-Kit Amount is [ * ].  In each
successive 12-month period, the Extra-Kit Amount is [ * ]
than in the previous 12-month period.

 

3.7                               Option for [ * ]Exclusivity. Illumina has
a [ * ] period that starts on the
Effective Date and ends [ * ] after the
Effective Date to purchase [ * ]
Exclusivity.  [ * ]

 

3

 

CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND

EXCHANGE
COMMISSION. “[ * ]” BRACKETED
ASTERISKS DENOTE SUCH OMISSIONS.

 

CONFIDENTIAL

 

[ * ].  Illumina can purchase [ * ] Exclusivity [ * ].  If and when purchased, [ * ]
Exclusivity terminates if Illumina purchases less than a rolling two quarter
average of [ * ] worth of CombiMatrix
products in any quarter starting from the time [ * ] Exlusivity
starts and continuing on thereafter. Illumina will be given the chance to make
up any shortfall in purchase within [ * ] after the
end of the quarter in order to maintain [ * ] Exclusivity.  This additional purchase counts in the
shortfall rolling average period but not outside the shortfall rolling-average
period (i.e., next period’s rolling average) — i.e., no double counting. If [ * ] Exclusivity begins during a quarter, the [ * ] purchase minimum will be prorated accordingly. [ * ]. “[ * ] Exclusivity”
is defined as the [ * ] of [ * ] by CombiMatrix to Illumina and its Affiliates and
CombiMatrix not entering into agreements with [ * ]
where CombiMatrix is a supplier of [ * ] for [ * ], wherein the [ * ] are used
in [ * ] products [ * ].

 

3.8                               Audit and
Inspection.  Illumina or
its designee shall have the right to inspect, audit and/or test all [ * ] or services ordered hereunder, and the facilities in
which they are produced or offered, at reasonable times before, during and/or
after manufacture or performance as well as after delivery or performance. If
any inspection or test is made on CombiMatrix’s premises, it shall be done at a
date and time mutually agreeable, and Illumina shall provide CombiMatrix with
at least fifteen (15) business days advance notice prior to such inspection.
CombiMatrix shall provide reasonable facilities and assistance for the safety
and convenience of Illumina’s inspectors in such manner as shall not unreasonably
hinder or delay CombiMatrix’s performance hereunder.   In the event of a nonconformance or an issue
during an inspection or audit, Illumina may, at Illumina’s sole discretion,
send CombiMatrix a written notice requesting that CombiMatrix provide a written
corrective and preventative action plan to Illumina (the “Corrective and
Preventative Action Plan”).  The
Corrective and Preventative Action Plan shall be submitted to Illumina within
ten (10) business days of such notice and shall include either (1) a
description of the reasons for the non-conformity or defect and the actions
CombiMatrix has taken or will take to reduce the likelihood that a similar
non-conformity or defect will not occur in a future shipment of [ * ] to Illumina or (2) if CombiMatrix believes that
there is no nonconformance, issue, nonconformity, or defect, an explanation of
why CombiMatrix feels that it is in compliance with its responsibilities under
this Supply Agreement.  Illumina may not
request more than two such inspections per year.  Each inspection may not last more than five
business days.  CombiMatrix is not
obligated to devote more than 80 man hours of work by its personnel or agents
during each inspection.  Illumina will
reimburse CombiMatrix for any materials or reagents expended at Illumina’s
request during an inspection. 
CombiMatrix, in its sole discretion, shall pick which of its personnel
and/or agents are involved in an inspection. 
Such inspections are limited to portions of CombiMatrix facilities and
processes used to produce [ * ] under
this Supply Agreement.

 

4

 

CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND

EXCHANGE
COMMISSION. “[ * ]” BRACKETED
ASTERISKS DENOTE SUCH OMISSIONS.

 

CONFIDENTIAL

 

4.              Inventions.

 

4.1                               Except as
otherwise stated, any invention, discovery, innovation, improvement,
suggestion, addition, or idea, whether patentable or not, that is made or
arises under this Supply Agreement, is an “Invention”.
Each Party retains title to and all rights in and to any Invention, Patent, or other intellectual property right that
arises from performance of the Parties’ respective obligations or rights under
this Supply Agreement, subject to the terms and conditions of any agreement in
place between a Party and that Party’s respective employees, agents, and/or
contractors, wherein such agreement pertains to inventions and assignment of
rights related thereto. Inventorship is determined by applicable patent law.
Illumina retains all intellectual property rights pertaining to the Custom
Content in a [ * ].

 

4.2                               Except as otherwise stated herein, if any
Invention arises under this Supply Agreement from the joint inventive
contribution of Illumina and CombiMatrix, it is a “Joint
Invention” and is jointly owned by Illumina and CombiMatrix. The
Parties are jointly responsible for all costs and expenses associated with any
Joint Invention. The Parties shall determine which of them shall manage
prosecution of any Patent directed to a Joint Invention, where the
determination will be based on the subject matter of the Joint Invention and
the Party whose expertise is most aligned with that Joint Invention. Each Party
has (i) the right to be informed of the patent status of a Joint
Invention, of which status includes the right to receive all substantive
correspondence to and from a patent office and (ii) a right to have its
comments and requests regarding the Joint Invention considered by the managing
Party with good faith and reason; the managing Party agrees to manage the
prosecution in a manner that recognizes and respects the rights of the other
Party. A Party has the right to discontinue paying costs and fees associated
with prosecution of a patent application or an issued patent for any Joint
Invention, provided that a Party who discontinues paying such costs will no
longer have the right to participate in prosecution decisions regarding that
Joint Invention and the other Party will have no obligation to keep that Party
informed of prosecution matters regarding that Joint Invention. Other than as
expressly stated in this Section 4.2, neither Party has any obligation to
account to the other Party for a Joint Invention.

 

4.3                               Rights of CombiMatrix in Inventions
pertaining to [ * ] in the Field of Use are included
within Patent Rights or Know How Rights, as the case may be, and are subject to
the license in Section 3.2. CombiMatrix is not granted (expressly or
implied) any license or other right under any intellectual property owned by or
licensed to Illumina or its Affiliates, except for rights in Joint Inventions
as provided in Section 4.2.

 

5.              Confidentiality.

 

5.1                               To the extent
permitted by law, each Party agrees to treat in confidence, and not disclose to
any individual or entity (except as permitted herein), for a period beginning
on the Effective Date and ending three years after the End Date, any written
information provided to it by the other Party under this Supply Agreement that
is stamped “CONFIDENTIAL,” (or with a similar designation) (“Confidential Information”), except for information that (i) was
previously known to the receiving party other than from disclosure by the
disclosing party, (ii) is or becomes publicly available through no fault
of the receiving party, (iii) is disclosed to the receiving party by a
third party who has the right to disclose that information without breaching a
confidentiality obligation to the other Party, (iv) is independently
developed by the receiving Party without any

 

5

 

CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND

EXCHANGE
COMMISSION. “[ * ]” BRACKETED
ASTERISKS DENOTE SUCH OMISSIONS.

 

CONFIDENTIAL

 

reliance on the information provided by the providing Party, or (v) is
required to be disclosed by law, court order, rule, or regulation, provided
that promptly after becoming aware of the requirement for disclosure pursuant
to this part (v), and prior to any disclosure, the Party who is required to
make the disclosure notifies the other Party and assists that other Party in
any lawful efforts it may undertake to limit, restrict, or cancel the
requirement to disclose and, thereafter, only discloses that amount of
information that is necessary to meet the requirement.

 

5.2                               Any oral
disclosures between the parties shall be identified as being CONFIDENTIAL by
written notice delivered to the other party within 30 days after the date of
the oral disclosure and shall be included in Confidential Information
accordingly.

 

5.3                               A receiving Party may use Confidential
Information only as necessary to further the objectives of this Supply
Agreement. A receiving Party shall protect the Confidential Information using
at least the same degree of care it uses to protect its own Confidential
Information, but in no event shall it use less than reasonable care. A
receiving Party has the right to disclose the Confidential Information to its
employees, Affiliates, agents, directors, officers, and representatives
provided that any such individual needs to have the Confidential Information to
further the objectives of this Supply Agreement and has signed a written
agreement of nondisclosure and limited use, of which agreement must have terms
no less stringent than those set forth herein.

 

5.4                               A receiving Party shall promptly return any
Confidential Information upon the request of the other Party; however, it may
retain one copy of returned Confidential Information in its legal files only to
ensure compliance with this Supply Agreement.

 

6.              Notices.

 

6.1                               All notices,
requests, demands, and other communications required hereunder shall be in
writing and are deemed to have been given if delivered or mailed by
certified mail, return receipt requested, or delivered by hand or by messenger
to the person named below on the date such notice, request, demand, or other
communication is received by the Party to whom they are sent:

 

(i)                                     if to CombiMatrix, to:

 

CombiMatrix Corporation

6500 Harbour Heights Parkway, Suite 303

Mukilteo, WA 98275

Attention: CEO

cc: General Counsel

Facsimile: 425-493-2010

 

(ii)                                  if to Illumina, to:

 

Illumina, Inc.

9885 Towne Centre Drive

San Diego, CA 92121-1975

Attention: Vice President, Business Development

cc: General Counsel

Facsimile: 858-202-4766

 

6

 

CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND

EXCHANGE
COMMISSION. “[ * ]” BRACKETED
ASTERISKS DENOTE SUCH OMISSIONS.

 

CONFIDENTIAL

 

7.              Amendment.

 

7.1                               No amendment,
alteration, or modification of the terms of this Supply Agreement is valid
unless made in writing and signed by duly authorized representatives of the
Parties.

 

7.2                               Any valid
amendment, alteration, or modification of this Supply Agreement becomes a part
of the original Supply Agreement.

 

8.              Previous Agreements; Entire
Agreement.

 

8.1                               Except for the
Confidentiality Agreement between the Parties, effective October 9, 2008,
of which agreement is applicable on its terms, this Supply Agreement, including
all Exhibits and valid amendments, supersedes any and all agreements, either
oral or written, between the Parties with respect to the subject matter of this
Supply Agreement and contains all the covenants and agreements between the
Parties with respect to the subject matter of this Supply Agreement.
Notwithstanding the foregoing, the Parties may have entered into or may in the
future enter into other agreements that relate to CombiMatrix technology but
not to the supply rights and obligations of this Supply Agreement.

 

8.2                               This Supply
Agreement may not be contradicted by evidence of any prior or contemporaneous
statements or agreements.

 

8.3                               No Party has
been induced to enter into this Supply Agreement by, nor is any Party relying
on, any representation, understanding, agreement, commitment, or warranty
outside those expressly set forth in this Supply Agreement.

 

9.              Liability; Indemnification.

 

9.1                               The
indemnification and liability provisions of Sections 9.2, 9.3, and 9.4 are
applicable to this Supply Agreement only to the extent the indemnification
provisions in Exhibit C are not applicable.

 

9.2                               Indemnification. Subject to Sections 9.1, 9.3, and 9.4, each
Party (as first Party) shall defend, indemnify and hold harmless the other
Party (as second Party) and its Affiliates, officers, directors, employees,
agents and representatives (collectively with the indemnified Party, the “Indemnitees”) from and against any and all third party
claims, actions, demands, judgments, expenses, damages, and awards (including,
without limitation, liability for court costs and reasonable fees of attorneys
and other professionals), collectively “Claims”,
brought or to which the second Party is subject as a direct result of (a) the
gross negligence or intentional wrongdoing of the first Party, (b) breach
of this Supply Agreement, including breach of Section 9.3 or any
misrepresentation or breach of a warranty, by a first Party, or (c) only
with respect to

 

7

 

CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND

EXCHANGE
COMMISSION. “[ * ]” BRACKETED
ASTERISKS DENOTE SUCH OMISSIONS.

 

CONFIDENTIAL

 

Illumina as a first party
and CombiMatrix as a second party, the manufacture or sale of a [ * ] comprising Custom Content specified by Illumina or its
Affiliates. For clarity, CombiMatrix has no obligation to determine if [ * ] ordered by Illumina as Custom Content are subject to
third-party intellectual property rights.

 

9.3                               The obligation of the first Party to defend,
indemnify and hold harmless set forth herein is conditioned upon (i) prompt
written notice to the first Party of any Claim for which indemnification is
sought, (ii) complete control of the defense and settlement thereof by the
indemnifying first Party, (iii) cooperation of the Indemnitees in such
defense, and (iv) the terms and conditions of this Supply Agreement. The
first Party is responsible for all indemnification costs and expenses,
including reimbursement of reasonable costs and expenses of the second Party.

 

9.4                               Limit on Liability. NOTWITHSTANDING ANY PROVISION IN THIS
SUPPLY AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO
THE OTHER FOR LOST PROFITS, DATA, OR BUSINESS, OR FOR ANY INDIRECT, SPECIAL,
INCIDENTAL, PUNITIVE, EXEMPLARY, OR CONSEQUENTIAL DAMAGES OF ANY KIND ARISING
OUT OF OR IN CONNECTION WITH THIS SUPPLY AGREEMENT, HOWEVER CAUSED AND ON ANY
THEORY OF LIABILITY (WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT
LIABILITY, OR OTHERWISE). THE TOTAL AND CUMULATIVE LIABILITY OF A PARTY ARISING
UNDER OR IN CONNECTION WITH THIS SUPPLY AGREEMENT SHALL IN NO EVENT EXCEED [ * ], PROVIDED, HOWEVER, THAT THIS LIMIT ON LIABILITY SHALL
NOT APPLY TO THE EXTENT THE LIABILITY IS A DIRECT RESULT OF THE GROSS
NEGLIGENCE, BAD FAITH, WILLFUL DEFAULT, BREACH, OR MISCONDUCT OF THAT PARTY.
THE LIMITATIONS SET FORTH IN THIS SECTION SHALL APPLY EVEN IF A PARTY HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND NOTWITHSTANDING ANY
FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.

 

10.       Assignment.

 

10.1                        This Supply
Agreement is binding upon and inures to the benefit of the Parties and their
respective successors and permitted assigns.

 

10.2                        This Supply
Agreement and the rights, benefits, or obligations hereunder shall not be
assigned or delegated in whole or in part by either Party without the prior
written consent of the other Party, which consent shall not be unreasonably
withheld, delayed, or require any additional contractual consideration, except
that either Party may assign this Supply Agreement to an Affiliate without the
need for consent of the other Party, but will provide notice of the assignment
no later than thirty (30) days after such assignment. For clarity, CombiMatrix
will provide written notice and obtain Illumina’s consent before assigning this
Supply Agreement to any party, including an Affiliate, that would give Illumina
the right to [ * ]

 

8

 

CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND

EXCHANGE
COMMISSION. “[ * ]” BRACKETED
ASTERISKS DENOTE SUCH OMISSIONS.

 

CONFIDENTIAL

 

[ * ]  is in effect at the time of the
assignment.

 

10.3                        Any purported
assignment or delegation other than in accordance with this Section is
void and ineffective for all purposes.

 

11.       Confidentiality of Agreement
Terms.

 

11.1                        Subject to
contrary law, regulation, or court order, the Parties agree to maintain the
terms of this Supply Agreement in confidence, even if not tangibly marked with
a CONFIDENTIAL marking, under the terms and conditions of Article 5.

 

12.       Warranties; Lack of Warranty

 

12.1                        CombiMatrix represents and warrants the
following: (i) it is duly authorized to grant the rights and licenses it
grants to Illumina and its Affiliates under this Supply Agreement, (ii) it
is the owner of the Patent Rights and Know How Rights, and (iii) as of the
Effective Date, CombiMatrix does not have rights (by ownership or license) to
any intellectual property other than Patent Rights and Know How Rights, wherein
such intellectual property would be infringed by the practice by Illumina, its
Affiliates, or its customers of the rights granted under Section 3.2 of
this Supply Agreement.

 

12.2                        EXCEPT AS
EXPRESSLY STATED IN THIS SUPPLY AGREEMENT, INCLUDING EXHIBIT C, COMBIMATRIX
MAKES NO WARRANTIES OR REPRESENTATIONS WHATSOEVER, INCLUDING, WITHOUT
LIMITATION, EXPRESS OR IMPLIED WARRANTIES OF NONINFRINGEMENT, MERCHANTABILITY,
OR FITNESS FOR A PARTICULAR PURPOSE AND ALL SUCH WARRANTIES AND ANY RELATED
WARRANTIES ARE EXPRESSLY DISCLAIMED.

 

13.       Paragraph Headings;
Interpretation; Counterparts.

 

13.1                        Paragraph
headings are inserted herein solely for convenience and shall not be construed
as part of this Supply Agreement.

 

13.2                        The terms “shall”
and “will” are used synonomously; any use of “for example” is understood to be
a non-limiting example; any use of “including” is understood to be followed by “but
not limited to” even if that phrase is not written; the singular and plural
terms are synonomous except as the context otherwise requires; the Supply
Agreement shall not be interpreted for or against either Party merely because a
Party drafted this Supply Agreement.

 

13.3                        The Parties may
execute this Supply Agreement in counterparts, and each counterpart is deemed
an original, and all counterparts, as a collective, constitute one agreement.

 

9

 

CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND

EXCHANGE
COMMISSION. “[ * ]” BRACKETED
ASTERISKS DENOTE SUCH OMISSIONS.

 

CONFIDENTIAL

 

14.       Waiver.

 

14.1                        No term or
condition of this Supply Agreement is deemed to have been waived, and there is
no estoppel against the enforcement of any provision of this Supply Agreement,
except by written instrument of the Party who has the right to grant such
waiver or estoppel.

 

14.2                        No such written
waiver is deemed a continuing waiver unless specifically stated therein, and
each such waiver shall operate only as to the specific term or condition waived
and does not constitute a waiver of such term or condition for the future or as
to any act other than that specifically waived.

 

15.       Severability.

 

15.1                        If, for any
reason, any provision of this Supply Agreement is held in whole or in part to
be invalid, illegal, or unenforceable, such invalidity, illegality, or
unenforceability shall not affect any other provision of this Supply Agreement,
and each such other provision shall, to the full extent consistent with the
law, continue in full force and effect, and the invalid, illegal, or
unenforceable provision or part thereof shall, to the extent possible, be
construed to effect its original intent.

 

16.       Governing Law.

 

16.1                        This Supply
Agreement is deemed entered into in, and shall be interpreted, construed,
performed, and enforced in all respects in accordance with, the laws of
Washington State.

 

17.       Official Language.

 

17.1                        The official
language of this Supply Agreement is English.

 

17.2                        Documents or
notices not orginally written in English will have no effect under this Supply
Agreement until they have been translated into English and then transmitted to
the receiving party.

 

17.3                        The English
translation shall be the controlling form of document or notice.

 

18.       Authority.

 

18.1                        Each Party
represents and warrants that it is duly authorized to enter into this Supply
Agreement and that in so doing it is not in violation of the terms or conditions
of any contract or other agreement to which it may be a party.

 

19. Additional Terms.

 

19.1                        No Third-Party Beneficiaries. 
Nothing in this Supply Agreement is intended to or shall confer upon any
person who is not a party to this Supply Agreement any rights, benefits or
remedies of any nature whatsoever under or by reason of this Supply Agreement,
nor shall any

 

10

 

CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND

EXCHANGE COMMISSION. “[ * ]” BRACKETED ASTERISKS
DENOTE SUCH OMISSIONS.

 

CONFIDENTIAL

 

such person be entitled to assert any claim
hereunder, other than the rights granted to an Affiliate of Illumina including
under Section 3.2.

 

19.2        Force
Majeure.  Neither Party is
responsible for any failure to perform or delay attributable in whole or in
part to any cause beyond its reasonable control, including but not limited to
fire, flood, tornado, earthquake, hurricane, lightning, government actions,
actual or threatened acts of war, terrorism, civil disturbance or insurrection,
sabotage, labor shortages or disputes not particular to a Party, failure or
delay in delivery by such Party’s suppliers or subcontractors, transportation
difficulties, shortage of energy, raw materials or equipment.  In the event of any such delay, the date of
delivery or performance shall, at the request of the Party affected by the
force majeure, be deferred for a period equal to the time lost by reason of the
delay.  Notwithstanding the foregoing, if
such delay lasts for a period of three (3) months or more, the Party not
affected by the force majeure is entitled to terminate this Supply Agreement
effective immediately by providing written notice.

 

19.3        Bankruptcy.  For purposes of Section 365(n) of
Title 11 of the United States Code, as amended, and any foreign equivalents
thereof (“Bankruptcy Code”), all rights and
licenses granted under this Supply Agreement are licenses of rights to “intellectual
property” as such term is used in the Bankruptcy Code.  In the event of the commencement of
bankruptcy proceedings by or against a Party under the Bankruptcy Code, that
Party agrees that the other Party shall retain and may fully exercise all of
such licensed rights under this Supply Agreement (including any license granted
hereunder) and all of its rights and elections under the Bankruptcy Code.

 

19.4        Relationship of the Parties.  The Parties are independent contractors and
are engaged in the operation of their own respective businesses.  Nothing contained in this Supply Agreement
shall be construed as creating a partnership, joint venture, or agency
relationship between the Parties or, except as otherwise expressly provided in
this Supply Agreement, as granting either Party the authority to bind or
contract any obligation in the name of or on the account of the other Party or
to make any statements, representations, warranties, or commitments on behalf
of the other Party.

 

19.5        Publicity; Use of Names.  Each Party shall obtain the prior written
consent of the other on all press releases or other public announcements
relating to this Supply Agreement, including its existence or its terms.
CombiMatrix agrees that it will not publicly disclose that it has entered into
this Supply Agreement with Illumina or otherwise use the name of Illumina or
its Affiliates, without the prior written consent of Illumina.  Illumina agrees that it will not publicly
disclose that it has entered into this Supply Agreement with CombiMatrix or
otherwise use the name of CombiMatrix or its Affiliates, without the prior
written consent of CombiMatrix. 
Notwithstanding any of the foregoing, if required by law, including
without limitation by the U.S. Securities and Exchange Commission or any stock
exchange or Nasdaq, then a Party may issue a press release or other public
announcement regarding this Supply Agreement or any products developed and/or
commercialized hereunder provided that the other Party has received
prior written notice of such intended press release or public announcement if
practicable under the circumstances, and an opportunity to seek a protective
order if practicable under the circumstances, and the Party subject to the
requirement includes

 

11

 

CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND

EXCHANGE COMMISSION. “[ * ]” BRACKETED ASTERISKS
DENOTE SUCH OMISSIONS.

 

CONFIDENTIAL

 

in such press release or
public announcement only such information relating to this Supply Agreement or
any products developed and/or commercialized hereunder as is required by such
law.

 

IN WITNESS WHEREOF, the Parties have executed this Supply Agreement
effective as of the date last written below by their duly authorized
representatives.

 

	
  CombiMatrix
  Corporation:

  	
   

  
	
  Signature:

  	
   

  	
   /s/
  Amit Kumar

  	
   

  
	
  Printed Name:

  	
   

  	
   Amit
  Kumar, Ph.D.

  	
   

  
	
  Title:

  	
   

  	
   President &
  CEO

  	
   

  
	
  Date:

  	
   

  	
   September 29,
  2009

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Illumina, Inc.:

  	
   

  	
   

  
	
  Signature:

  	
   

  	
   /s/
  Joel McComb

  	
   

  
	
  Printed Name:

  	
   

  	
   Joel
  McComb

  	
   

  
	
  Title:

  	
   

  	
   Senior
  Vice President and General Manager

  	
   

  
	
  Date:

  	
   

  	
   September 29,
  2009

  	
   

  

 

12

 

CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND

EXCHANGE COMMISSION. “[ * ]” BRACKETED ASTERISKS
DENOTE SUCH OMISSIONS.

 

CONFIDENTIAL

 

Exhibit A:  Pricing

 

[ * ]

 

13

 

CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND

EXCHANGE COMMISSION. “[ * ]” BRACKETED ASTERISKS
DENOTE SUCH OMISSIONS.

 

CONFIDENTIAL

 

[ * ]

 

14

 

CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND

EXCHANGE COMMISSION. “[ * ]” BRACKETED ASTERISKS
DENOTE SUCH OMISSIONS.

 

CONFIDENTIAL

 

Exhibit B:  QC Test

 

[ * ]

 

15

 

CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND

EXCHANGE COMMISSION. “[ * ]” BRACKETED ASTERISKS
DENOTE SUCH OMISSIONS.

 

CONFIDENTIAL

 

Exhibit C

 

Additional Terms and Conditions for Supply of [ * ]

 

C1.          Purchase Orders; Specifications.

 

C1.1a      Illumina
or its Affiliates will order [ * ] by
submitting a purchase order that will include the Custom Content of each [ * ] to be supplied and the timing and particulars for
delivery of same. (Reference to Illumina in this Exhibit C is understood
to be Illumina or its Affiliate, as applicable.) The [ * ]
for each [ * ] ordered hereunder will be
Confidential Information of Illumina and will be marked Confidential. For the
purpose of clarity, all orders of [ * ] are
hereby marked as confidential and, therefore, are Confidential Information of
Illumina under this Supply Agreement. The terms and conditions of this Supply
Agreement and any consistent purchase order submitted by Illumina and accepted
by CombiMatrix will control any and all procurement of [ * ] by
or on behalf of Illumina and shall supersede the terms of any orders, invoices,
or other documents issued by CombiMatrix. CombiMatrix will accept any purchase
order that is consistent with the terms of this Supply Agreement. In addition
to rights under Paragraph C6, Illumina may modify or cancel any purchase order
by providing CombiMatrix written notice of such change prior to CombiMatrix
beginning [ * ]; such modification or
cancellation may include, but is not limited to, modifying the quantity of and
the delivery date of [ * ].

 

C1.1b      The
term “Production Time” is defined as the
number of days between receipt by CombiMatrix of a valid purchase order from
Illumina for [ * ] and the day upon which
CombiMatrix delivers the [ * ] to a
common carrier for shipment.  The
Production Time for [ * ] shall not
exceed [ * ] business days, and CombiMatrix
shall use its best efforts to have [ * ] ordered
by Illumina achieve a Production Time of [ * ] business
days or less.  For clarity, as Illumina
may specify shipping and thus shipping times (such as not accepting packages on
particular days or delivering on particular days, using multi-day shipping instead
of overnight shipping, etc.), Production Time excludes the period for which the
[ * ] are in transit to Illumina.  In the event that CombiMatrix will not be
able to meet a Production Time of [ * ] business
days, CombiMatrix shall notify the Illumina employee(s) generating the
purchase order via email and will also provide an estimate of what the revised
Production Time will be.  If Illumina
responds via e-mail that it still desires delivery of the original [ * ] ordered (the “Order”),
CombiMatrix shall ship the Order as under the revised Production Time and the
original purchase order terms, and Illumina will be obligated to pay for the
Order according to the terms of this Supply Agreement.  If Illumina does not verify via response
email within [ * ] business days that it still
desires the Order (measured from the day that the original email was sent by
CombiMatrix to Illumina), and CombiMatrix has confirmed that the email was
received and acknowledged, CombiMatrix will consider the Order to be cancelled
with no financial obligations incurred by Illumina for the original Order, and
CombiMatrix will not ship the Order.

 

C1.2        CombiMatrix shall not make any changes to the
[ * ] or changes to the manufacturing process of [ * ] or techniques that would result in a change
in any [ * ] specification, performance, or functionality as measured pursuant to Exhibit B
without first obtaining the prior written approval of Illumina, which shall not
be

 

16

 

CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND

EXCHANGE COMMISSION. “[ * ]” BRACKETED ASTERISKS
DENOTE SUCH OMISSIONS.

 

CONFIDENTIAL

 

unreasonably withheld or delayed.  Notwithstanding the foregoing, as Exhibit A
contains price reductions over time, CombiMatrix has (subject solely to its own
judgment) the right to make refinements to its process of producing [ * ], possibly including but not limited to [ * ].  For clarity, a [ * ] shall be judged acceptable if it passes the QC Test in Exhibit B.

 

C1.3        In the event CombiMatrix
determines that [ * ] will no longer be made
available to Illumina, CombiMatrix will provide written notice to Illumina no
less than [ * ] calendar days prior to the date
on which the [ * ] will no longer be available
to Illumina. Illumina will have [ * ] calendar
days from that notice within which to place an end-of-life purchase order
having shipping and delivery-time terms that are consistent with previous
purchase orders filled under this Supply Agreement. For the avoidance of doubt,
Illumina has the right to place an end-of-life purchase order prior to the
natural End Date of this Supply Agreement.

 

C1.4        If
either Party believes that forecasting is necessary to ensure the required
volume of supply, then CombiMatrix and Illumina will negotiate in good faith to
amend this Supply Agreement to set forth terms and conditions regarding
quarterly forecasts.

 

C2.  Pricing; Payment; Taxes; Invoice. The
pricing in Exhibit A is for [ * ] from a [ * ]. Payments by Illumina for purchase of a [ * ] are due hereunder within thirty (30) calendar days
after receipt of an invoice from CombiMatrix. Any [ * ]
purchased hereunder may become a component part of an Illumina Product
manufactured by Illumina and/or bought for re-sale, and no retail sales tax is
applicable. All payments shall be made free and clear of, and without reduction
for, any withholding or other taxes, unless CombiMatrix has the legal
obligation to collect taxes, in which case the appropriate amount will be added
to its invoice to Illumina. CombiMatrix shall render a separate invoice for
each shipment made hereunder to Illumina’s Accounts Payable Department, or as
specified on the purchase order, on the day each shipment is made. Each invoice
shall include at least the following information,; as applicable: (i) Illumina’s
purchase order number, (ii) Illumina’s part number if provided by
Illumina, (iii) the quantity of goods shipped, (iv) the date shipped,
(v) the address to which the goods were shipped, and (vi) any other
information requested by Illumina to be on the invoice. In addition to the
price of [ * ] ordered (and required taxes, if
any, as explained above), an invoice will include any costs to be paid by
Illumina pursuant to Paragraph C5. A minor discrepancy regarding the
information required by Illumina to be set forth on an invoice does not relieve
Illumina from timely payment.

 

C3.          Quality Testing. If the QC Test
in Exhibit B is performed by Illumina or its Affiliate on a [ * ] and the [ * ] passes
the QC Test, then the [ * ] is judged
to be acceptable and may not be returned to CombiMatrix for refund. If any [ * ] does not pass the QC Test when performed by Illumina
or its Affiliate, then Illumina

 

17

 

CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND

EXCHANGE COMMISSION. “[ * ]” BRACKETED ASTERISKS
DENOTE SUCH OMISSIONS.

 

CONFIDENTIAL

 

shall
provide written notice and [ * ] to
CombiMatrix within 30 days of Illumina receiving the [ * ],
and CombiMatrix will provide Illumina with a replacement [ * ]
within thirty (30) days at no additional charge to Illumina. In the event the
replacement [ * ] is not provided within the
stated time period or does not pass the QC Test, then CombiMatrix will immediately
refund to Illumina the purchase price (including costs and expenses paid
according to Paragraph C5) of the initial [ * ] that
failed the QC Test. In the event that the notice of failure to pass QC and [ * ] is not received by CombiMatrix within 30 days of
Illumina receiving the [ * ], then
CombiMatrix is not required to replace the [ * ] or refund
the purchase price.

 

C4.          Title
and Risk of Loss.  Shipments of [ * ] shall be FOB point of origin. Title and risk of loss
or damages to a [ * ] will pass to Illumina upon
delivery of the [ * ] by CombiMatrix to the
transportation carrier. CombiMatrix will make every reasonable effort to assist
Illumina in filing any claims associated with improper transportation and
handling or loss or damages to a [ * ] during
transit.

 

C5.  Shipping;
Packing; Insurance; Delivery. All transportation and
transportation insurance costs will be the responsibility of Illumina and, if
paid by CombiMatrix, the actual costs will be set forth on the invoice for
reimbursement by Illumina. Illumina shall have the right to specify shipper and
insurer that will be used to ship [ * ]. If
Illumina fails to specify a shipper and/or insurer, then CombiMatrix may select
the shipper and/or insurer. CombiMatrix shall be responsible for proper packing
of [ * ]. Illumina may request CombiMatrix
to provide special packaging at the expense of Illumina. CombiMatrix shall not
combine in the same container [ * ] to be
sent to different receiving locations. CombiMatrix shall ship [ * ] in the quantity as specified on the purchase order to
the point of destination specified on the purchase order and no later than the
date specified on the purchase order.

 

C6.          Failure to Deliver or Meet
Requirements.  CombiMatrix shall
immediately provide Illumina written notice of any inability to or delay in
delivering [ * ] under this Supply Agreement
or any purchase order hereunder. In the event CombiMatrix fails, for any reason
including, without limitation, to supply [ * ] that meet
specifications, quantities required, or delivery dates, Illumina shall have all
rights and remedies available at law, including, but not limited to: (a) the
right to cancel all or a part of the purchase order(s) affected by the
failure, (b) require CombiMatrix to ship [ * ]
via an expedited delivery method, and CombiMatrix will pay difference in cost
and expense over normal shipping, or (c) the right to terminate this
Supply Agreement by providing thirty (30) days written notice to CombiMatrix.

 

C7.          Infringement
Indemnification by CombiMatrix.

 

C7.1        Subject
to Paragraphs C8 and C9, and Sections 9.1 and 9.4, CombiMatrix shall defend,
indemnify and hold harmless Illumina, its Affiliates, its customers, and the
respective officers, directors, employees, distributors, and representatives of
each (“Illumina Indemnitees”) from and against
any and all claims, actions, or demands (including, without limitation,
liability for court costs and reasonable fees of attorneys and other
professionals),

 

18

 

CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND

EXCHANGE COMMISSION. “[ * ]” BRACKETED ASTERISKS
DENOTE SUCH OMISSIONS.

 

CONFIDENTIAL

 

collectively,
alleging that the [ * ] sold to
Illumina hereunder infringes any intellectual property right of any third party
(collectively “Infringement Claims”), except to
the extent any such Infringement Claim is a direct result of (a) CombiMatrix’s
compliance with a custom specification, including Custom Content, provided by
Illumina to CombiMatrix, (b) a combination with, an addition to, or a
modification of the [ * ] after
delivery by CombiMatrix to Illumina or its designee, or (c) use of the [ * ] in a manner not permitted under this Supply Agreement.
However, to the extent any of (a), (b), or (c) is applicable to an
Infringement Claim, that Infringement Claim shall not be excluded from
the obligation to indemnify the Illumina Indemnitees to the extent the
Infringement Claim: (i) arose as a result of the gross negligence or
intentional wrongdoing of CombiMatrix, or (ii) arose as a result of breach
of this Supply Agreement by CombiMatrix, including misrepresentation of any
representation or breach of any warranty made herein.

 

C7.2        In
the event use by Illumina, its Affiliates or a customer of either of any [ * ], or a product made therefrom that comprises [ * ] in a [ * ], is
enjoined due to infringement of any third party’s intellectual property rights,
and the infringement is not a direct result of an exception set forth in
Paragraph C7.1 (a), (b), or (c), Illumina shall permit CombiMatrix: (1) to
procure for Illumina the right to use or continue to use such [ * ] or product free of any liability for patent
infringement; or (2) replace or modify the applicable [ * ]
without any material loss in functionality so as to avoid infringement; or (3) refund
the purchase price and the transportation costs of such [ * ],
except that CombiMatrix will not refund the purchase price of [ * ] already received by Illumina and that pass the QC
Test  If infringement is alleged, then
CombiMatrix may decline to make further shipments of the [ * ]
without being in breach of this Supply Agreement.

 

C8.          Indemnification
Conditions. The obligation to indemnify in Paragraph C7 is
conditioned upon: 1) prompt written notice provided by Illumina of any
Infringement Claim for which indemnity is sought; 2) complete control of the
defense and settlement thereof by CombiMatrix; 3) cooperation of the Illumina
Indemnitees in such defense, and 4) the terms and conditions of this Supply Agreement.
CombiMatrix shall be responsible for all indemnification costs and expenses,
including the reasonable costs of the Illumina Indemnitees.

 

C9.          Insurance. Throughout the
Term of this Supply Agreement so long as CombiMatrix is supplying [ * ] to Illumina, and for [ * ]
thereafter, each Party shall maintain general liability and property damage
liability insurance coverage. Such insurance shall have policy limits of no
less than $[ * ] per occurrence for death or
personal injury, $[ * ] per
occurrence for real and personal property damage, and $[ * ]umbrella
aggregate liability per year.

 

C10.            Warranty
for [ * ]. CombiMatrix warrants that a [ * ] will, for a QC test done within 30 days of Illumina’s
receipt of the [ * ], pass the QC test.

 

19

 

CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND

EXCHANGE COMMISSION. “[ * ]” BRACKETED ASTERISKS
DENOTE SUCH OMISSIONS.

 

CONFIDENTIAL

 

EXHIBIT
D

ADDITIONAL
DEFINITIONS APPLICABLE TO [ * ], SUPPLY
AGREEMENT, [ * ]

 

The
term “Affiliate” is defined as any person or
entity that controls, is controlled by, or is under common control with a
Party, wherein control is the right to control, directly or indirectly, more
than fifty percent (50%) of the equity securities or other ownership interests
in the subject entity entitled to vote in the election of directors or with the
power to direct or elect management of such subject entity.

 

The
term “Custom Content” is defined as all [ * ] information provided or otherwise disclosed by
Illumina or its Affiliates to CombiMatrix to [ * ]
having said [ * ] information.

 

The
term “Custom Kit” is defined as a product
made by or for Illumina or any of its Affiliates, wherein the product contains [ * ]. For clarity, a Custom Kit may or may not include
additional components, including but not limited to other consumables,
reagents, and instructions sheets.

 

The
term “[ * ]” is defined as [ * ] made by CombiMatrix or an Affiliate thereof for
Illumina or an Affiliate thereof pursuant to the Supply Agreement.

 

The
term “[ * ]” is defined as [ * ].

 

The
term “Illumina Product” is defined as a
product, including a Custom Kit, made by or for Illumina or any of its
Affiliates using or containing [ * ].

 

The
term “Know How Rights” is defined as any and
all rights, other than Patent Rights, that CombiMatrix and its Affiliates have
in knowledge, information, methods, or material, all of which are necessary for
the use, development, manufacture, or commercialization of [ * ],
including the [ * ], software (including
Software), consumables, and equipment related therewith. If and when a right
within Know How Rights becomes part of the subject matter of the claims of one
or more Patents, such Know How Rights shall be included within Patent Rights.

 

The
term “[ * ]” is defined as [ * ].

 

20

 

CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND

EXCHANGE COMMISSION. “[ * ]” BRACKETED ASTERISKS
DENOTE SUCH OMISSIONS.

 

CONFIDENTIAL

 

The
term “[ * ]” is defined to mean the right to [ * ] using CombiMatrix-supplied [ * ],
using CombiMatrix Know-How Rights and Patent Rights regarding production of [ * ], and using the [ * ].

 

The term “[ * ]” is
defined as [ * ].

 

The
term “[ * ]” is defined as [ * ].

 

The term “[ * ]” is
defined as [ * ].

 

The
term “Patent Rights” is defined as any and
all rights CombiMatrix and its Affiliates have in Patents that are directed
towards [ * ], and related software (including
Software), consumables, and equipment of the same, as well as methods and
compositions for making and using same, including the [ * ].
For clarity, Patent Rights includes rights CombiMatrix has in Patents through
ownership, license, or other manners of transfer of rights as of the Effective
Date and during the Term.

 

The
term “Patents” is defined as United States
and non-United States (i) unexpired letters patents (including inventor’s
certificates) that have not lapsed or been held invalid or unenforceable by a
court or administrative body of competent jurisdiction from which no appeal can
be taken or has been taken within the required time period, including, without
limitation, any substitution, extension, registration, confirmation, reissue,
reexamination, renewal or any like filing thereof and (ii) pending
applications for letters patent that have not been the subject of a rejection
notice to which a response cannot be filed or from which an appeal cannot be
taken or in respect of which the applicable period of appeal has expired,
including, without limitation, any continuation, division, or
continuation-in-part thereof and any provisional applications.

 

The
term “Software” is defined as software or
firmware programs owned by or licensed to CombiMatrix and provided with the [ * ] by CombiMatrix, and any updates and upgrades of the
foregoing provided by CombiMatrix.

 

The
term “Supply Agreement” is defined as the
agreement between the Parties pertaining to supply of [ * ]
by CombiMatrix to Illumina and its Affiliates.

 

The
term “[ * ]” is defined as [ * ].

 

21

 

CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND

EXCHANGE COMMISSION. “[ * ]” BRACKETED ASTERISKS
DENOTE SUCH OMISSIONS.

 

CONFIDENTIAL

 

The
term “[ * ]” is defined as [ * ].

 

22

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00165-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00165-of-00352.parquet"}]]