Document:

Exhibit 10.10

Certain portions have been omitted pursuant to a request for confidentiality and
such omitted portions have been separately filed with the Commission.

                    [DISCOVERY LABORATORIES, INC. LETTERHEAD]

March 7, 2000                                                 VIA FEDEX
                                                              ---------

Charlotte-Mecklenburg Hospital Authority
P.O. Box 32861
Charlotte, North Carolina 28232-2861

Attention:        Dr. James G. Martin
                  Cannon Research Center
                  1542 Garden Terrace Drive
                  Charlotte, North Carolina 28203

Dear Dr. Martin:

         Reference is herein made to the License Agreement dated as of March 20,
1996 by and between The Charlotte-Mecklenburg Hospital Authority and Discovery
Laboratories, Inc., as successor-in-interest to Triad Pharmaceuticals and as
amended by an Amendment Letter dated July 18, 1996 and as further amended by an
Amendment Letter dated August 8, 1996 and as further amended by an Amendment
Letter dated December 9, 1996 (collectively, the "License Agreement").

         Licensor and Licensee hereby agree to further amend the License
Agreement as follows:

         1.       Section 3.4 is hereby amended and restated as follows:

                  "In the event[***], then Licensee shall on [***] pay to
                  Licensor a nonrefundable, one-time, additional license fee in
                  the amount of [***] to maintain its rights under this
                  Agreement for one additional year. On each subsequent
                  anniversary of [***] thereafter, if [***], then Licensee will
                  pay an additional [***] for each further annual extension of
                  the License Agreement. Licensee's failure to pay any such
                  additional license fee shall constitute a material breach or
                  default for purposes of the termination provisions of
                  Paragraph 7.3."

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935262.1

<PAGE>

         2.       Section 4.1.5 is hereby amended and restated as follows:

                  "Within thirty (30) days following [***], Licensee shall pay
                  Licensor a nonrefundable, one time, license fee in the amount
                  of [***]."

Except as expressly provided for in this Amendment, the terms of the License
Agreement shall continue in full force and effect without modification and
amendment, including without limitation, Section 4.1.4. If the terms set forth
above are acceptable to you, please acknowledge your consent in the space
provided below and return one executed original to us.

Very truly yours,

DISCOVERY LABORATORIES, INC.

By:/s/ Robert J. Capetola, Ph.D.
   _________________________________
Name:  Robert J. Capetola, Ph.D.
Title: President/CEO

Consented and agreed to this 9th day of March, 2000

CHARLOTTE-MECKLENBURG HOSPITAL AUTHORITY

By:/s/ James G. Martin, Ph.D.
   __________________________________
Name:  James G. Martin, Ph.D.
Title: Vice President, Research
       Chairman, Research Development Board, Cannon Research Center

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935262.1Exhibit 10.52

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  Certain portions have been omitted pursuant to a request for confidentiality
    and such omitted portions have been separately filed with the Commission.
--------------------------------------------------------------------------------

================================================================================

                              SUBLICENSE AGREEMENT

                                     between

                          DISCOVERY LABORATORIES, INC.

                                       and

                        LABORATORIOS DEL DR. ESTEVE S.A.

                      Concerning Sinapultide (Lucinactant)

                               October 26th, 1999

================================================================================

<PAGE>

935292.1

                              SUBLICENSE AGREEMENT

         THIS SUBLICENSE AGREEMENT (this "Agreement") is made as of October
26th, 1999 (the "Effective Date"), between DISCOVERY LABORATORIES, INC.
("Licensor"), a Delaware corporation, and LABORATORIOS DEL DR. ESTEVE S.A., a
company organized and existing under the laws of Spain ("Licensee").

         WHEREAS, Licensor has the exclusive worldwide right, under a license
from Johnson & Johnson, to sublicense certain technology, including certain
technology relating to synthetic pulmonary surfactant peptides and proteins, one
of which is known as sinapultide;

         WHEREAS, Licensor owns certain technology and patent rights relating to
synthetic pulmonary surfactant formulations; and

         WHEREAS, Licensee desires to acquire a license to the Licensed Products
in the Licensed Territory (in each case as defined below) and Licensor is
willing to grant such license to Licensee for the purpose of commercializing the
Licensed Products for the treatment of certain respiratory distress syndromes;

         NOW, THEREFORE, in consideration of the promises and the performance of
the covenants herein contained, the parties agree as follows:

                                    ARTICLE 1

                                   DEFINITIONS

         For the purposes of this Agreement, the following terms shall have the
following meanings:

         "Affiliate/s" of a Person shall mean any Person which directly or
indirectly Controls, is Controlled by or is under common Control with such
Person.

         "ARDS/ALI Indication" shall mean the use of Licensed Products for the
treatment of acute respiratory distress syndrome or acute lung injury.

         "Control" shall mean direct or indirect beneficial ownership of at
least 50% of the voting stock of a Person having outstanding voting securities,
or a 50% or greater interest in the income of a Person not having outstanding
securities, or, in either case, the power to direct or cause the direction of
the management or policies of such Person.

         "Development" shall refer to all activities relating to formulation,
process development, manufacturing scale-up, quality assurance/quality control,
clinical studies and regulatory affairs in connection with a Licensed Product.

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         "Development Costs" shall mean Direct Development Costs and Indirect
Development Costs.

         "Direct Development Costs" shall mean all direct costs incurred in
connection with the Development of a Licensed Product in the Field. Direct
Development Costs shall include but are not limited to the cost of studies
(including post-approval studies) on the pharmacokinetic, metabolic or clinical
aspects of a Licensed Product conducted internally or by individual
investigators or consultants (such as contract research organizations) necessary
for the purpose of obtaining and/or maintaining approval of a Licensed Product
in the Field by a governmental entity in a country of the Licensed Territory
(including without limitation related hospital grants), and costs for preparing,
submitting, reviewing or developing data or information for the purpose of
submission to a governmental entity to obtain and/or maintain approval of a
Licensed Product in the Field in a country of the Licensed Territory.

         "EMEA" shall mean the European Medicines Evaluation Agency.

         "FDA" shall mean the United States Food and Drug Administration.

         "Field" shall mean the use of Licensed Products for the ARDS/ALI
Indication and the Neonatal Indications [***].

         "Indication" shall mean any ARDS/ALI Indication or Neonatal Indication
[***].

         "Indirect Development Costs" shall mean all indirect costs incurred in
connection with the Development of a Licensed Product in the Field, including
without limitation, general and administrative expenses, allocable overhead, and
compensation, benefits and travel and other employee-related expenses.

         "Initial Period" shall mean, on a country by country basis, the period
comprehended between the Effective Date until the latest of the following dates:

     (i) the expiration of the last Patent Rights containing a Valid Claim
     covering a Licensed Product in such country; or

     (ii) the fifteenth (15th) anniversary of the first commercial sale of a
     Licensed Product in such country.

         "IRDS Indication" shall mean the use of Licensed Products for the
treatment of infant (idiopathic) respiratory distress syndrome.

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         "Licensed Know-how" shall mean all know-how, data, information or
technology arising before or during the course of this agreement which are
proprietary to the Licensor and/or with respect to which Licensor has the power
and right to grant the licenses provided for herein and which relate to the
development or therapeutic use of Licensed Products.

         "Licensed Methods" shall mean the methods for treating respiratory
distress syndromes that are covered by one or more claims of [***], and all
corresponding national patents and patent applications, European Patent
Convention filings and applications and filings and applications under similar
administrative international conventions, together with any divisional,
continuation, continuation-in-part, substitution, reissue, extension,
registration, confirmation, reexamination, renewal, supplementary protection
certificate or other application based thereon.

         "Licensee Proprietary Information" shall mean any scientific and
technical information or data developed, possessed or acquired by Licensee
relating to Licensed Products, Patent Rights or Licensed Know-how which Licensee
is free to disclose other than such information that is within or enters the
public domain.

         "Licensed Products" shall mean, with respect to each Indication, (i)
the Surfaxin(R) Product and/or (ii) if any Replacement Product has been
identified by the Committee pursuant to Section 5.8 with respect to such
Indication, the most recently identified Replacement Product with respect to
such Indication.

         "Licensed Rights" shall mean collectively the Patent Rights, the
Licensed Methods, the Trademarks and the Licensed Know-how.

         "Licensed Territory" shall mean Spain, Andorra, Portugal, Greece,
Central and South America, with an option for Italy as established in Section
2.2.

         "Marketing Regulatory Approvals" shall mean all permissions and
applications for such permissions from the regulatory and/or governmental health
authorities in the Licensed Territory which are necessary for the importation of
the Licensed Products and their marketing, use, distribution and sale in the
Licensed Territory, including, where applicable, the Pricing Approvals.

         "MAS Indication" shall mean the use of Licensed Products for the
treatment of meconium aspiration syndrome.

         "Neonatal Indications" shall mean the IRDS Indication and the MAS
Indication.

         "NDA" shall mean a New Drug Application or Product License Application
filed with the United States Food and Drug Administration under 21 USC 355(b)
(FDCA

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Section 505(b)) or its equivalent filed with the EMEA or with any country
within the Licensed Territory for purposes of mutual recognition by the other
countries within the Licensed Territory.

         "Original License" shall mean the Sublicense Agreement dated as of
October 28, 1996 between the Original Licensor and Licensor.

         "Original Licensor" shall mean Johnson & Johnson.

         "Patent Rights" shall mean (i) the patents and patent applications in
Schedule I hereto, (ii) and any other patents or patent applications covering
the surfactant pharmaceutical compositions referenced in the patents and patent
applications in Schedule I or their use or administration owned by Licensor or
under which Licensor has the right, at any time while this Agreement is in
effect, to license to Licensee and (iii) with respect to the foregoing letters
patent and patent applications, all corresponding national patents and patent
applications, Patent Cooperation Treaty and European Patent Convention filings
and applications and filings and applications under similar administrative
international conventions, together with any divisional, continuation,
continuation-in-part, substitution, reissue, extension, supplementary protection
certificate or other application based thereon. Notwithstanding the foregoing,
"Patent Rights" shall not include any patents or patent applications, filings,
or applications under any treaty, or any divisional, continuation,
continuation-in-part, substitution, reissue, extension, supplementary protection
certificate or other application relating in whole or in part to the use or
administration of any of the surfactant pharmaceutical compositions on Schedule
I or any Licensed Product, alone or together with other active or inactive
components, outside the Field.

         "Person" shall mean any natural person, corporation, limited liability
company, unincorporated association, partnership, joint venture or other entity.

         "Phase 2 Clinical Trial" shall mean a controlled study in humans of the
potential efficacy and safety of a Licensed Product which is prospectively
designed to demonstrate activity of a given dose/s of a Licensed Product in a
particular indication.

         "Phase 3 Clinical Trial" shall mean a controlled study in humans with a
Licensed Product which is prospectively designed to demonstrate statistically
any possible difference in efficacy or equivalence and/or safety in comparison
with an approved drug, if there is an approved drug and standard of care, if
there is no approved drug.

         "Pricing Approvals" shall mean approvals by the regulatory and/or
governmental health authorities in the Licensed Territory defining the prices of
the Licensed Products and reimbursement conditions for the sale thereof.

         "Product Failure" shall mean, with respect to the Surfaxin(R) Product
or any Replacement Product, the earlier to occur of (i) a determination by the
applicable regulatory

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authority in (or having jurisdiction over) any country of the Licensed Territory
that the Surfaxin(R) Product or such Replacement Product may not be
commercialized for an Indication, or that further clinical trials of the
Surfaxin(R) Product or such Replacement Product should not be conducted for an
Indication or (ii) a determination by the Committee (as defined in Section 5.4)
that the continued development of the Surfaxin(R) Product or such Replacement
Product for an Indication is not economically feasible or is unlikely to result
in the receipt of Marketing Regulatory Approvals within time frames and in
markets that will permit Licensor and Licensee to achieve the anticipated
benefits of this Agreement.

         "Replacement Product" shall mean [***].

         "Scripps Patent Rights" shall mean the Patent Rights identified in part
(a) of Schedule I.

         "Securities Purchase Agreement" shall mean the Securities Purchase
Agreement dated as of October 26th, 1999 between Licensor, as the seller and
Licensee's Affiliate Laboratorios P.E.N., S.A. as the purchaser.

         "Surfaxin(R)Product" shall mean, in each jurisdiction [***].

         "Trademark" shall mean Surfaxin(R) and such other trademarks owned by
Licensor that are selected by the Committee (as defined in Section 5.4) for use
within the Licensed Territory in connection with one or more Licensed Products.

         "Valid Claim" shall mean a claim of an unexpired patent within the
Patent Rights which has matured into an issued patent or a claim being
prosecuted in a pending application within the Patent Rights. In each case a
claim shall be presumed to be valid unless and until it has been held to be
invalid by a final, unappealable judgement of a court of competent jurisdiction.

                                    ARTICLE 2

                                      GRANT

         Section 2.1. Grant of License. Licensor hereby grants to Licensee, and
Licensee hereby accepts from Licensor, upon the terms and conditions herein
specified, an exclusive license under the Patent Rights, the Licensed Know-how
and the Trademark to import, use and sell Licensed Products under the Trademark,
and to practice Licensed Methods, in the Licensed Territory in the Field.
Licensor hereby agrees that it shall not grant

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any other licenses to exploit the Licensed Rights, the Licensed Products or the
Replacement Products in the Licensed Territory to any third party (including,
without limitation, its Affiliates) during the term of this Agreement. The
license granted hereunder does not include any right or license of Licensee to
make or have made Licensed Products, all such right and license, together with
the right to sublicense, being hereby retained by Licensor. The license granted
under this Article 2 shall be subject to the terms and conditions of this
Agreement and the following terms:

                  (a) The rights of the Original Licensor of the Scripps Patent
         Rights to use the Scripps Patent Rights for educational and research
         purposes;

                  (b) To the extent applicable, the rights of the United States
         Government pursuant to 35 U.S.C. 202 et seq. and 37 C.F.R. 401.1 et
         seq. (the "U.S. Government Interest") which may have arisen or resulted
         from federal funding of research relating to the Scripps Patent Rights,
         including the non-exclusive right of the United States Government to
         practice the inventions covered by the Scripps Patent Rights; and

                  (c) The reserved right of Licensor, to use the Licensed Rights
         for research and development purposes and, to the extent permitted by
         Section 6.2, for publication purposes subject to approval by Licensee.

Licensee shall have no right to sublicense or otherwise share its rights
hereunder with any other Person other than (i) Affiliates of Licensee (provided
that such Affiliates shall acknowledge in writing that they have read this
Agreement and that they agree to be bound by the applicable terms herein
contained, and provided further that Licensee shall not be relieved of any of
its obligations under this Agreement thereby), as provided for in Section 14.9,
and (ii) third parties pursuant to a sublicense or distribution agreement
complying with Section 2.4.

         Section 2.2 Option for Italy. Subject to the conditions set forth
hereinafter, Licensee shall have an option right (the "Option Right") to include
Italy in the Licensed Territory. The Option Right shall be exercised by Licensee
not later than sixty (60) days (the "Option Period") after [***].

In the event that Licensee desires to exercise the Option Right, it shall prior
or upon the expiration of the Option Period so notify Licensor in writing.
Should Licensee fail to exercise its Option Right within the Option Period or
should Licensee notify Licensor at any time during the Option Period by written
notice of its intention not to exercise the Option Right, then Licensor shall be
no longer under any obligation towards Licensee for the country of Italy.

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In the event that Licensee exercises its Option Right, the country of Italy
shall be covered by the terms of this Agreement (provided, however, that Section
4.1 (a) shall not apply) and Licensee shall pay to Licensor the following
License Fees in consideration thereof:

                  (a) [***] within ten (10) business days of receipt of
         Licensor's invoice issued upon first grant of final Marketing
         Regulatory Approval for the MAS Indication in Italy.

                  (b) [***].

                  (c) [***] within ten (10) business days of receipt of
         Licensor's invoice issued upon first grant of final Marketing
         Regulatory Approval for the ARDS/ALI Indication in Italy.

Moreover, Licensee shall, within 90 (ninety) days of exercising its Option
Right, purchase from Licensor shares of Licensor's common stock for a total
price of Seven Hundred Fifty Thousand Dollar ($750,000) at a fifty percent (50%)
premium to the average market value of Licensor's shares in the ten (10) days
period immediately preceding the date of acquisition.

         Section 2.3. No Active Sales Outside Licensed Territory. Licensee shall
neither directly nor indirectly carry out any active sales of the Licensed
Products outside the Licensed Territory and it shall not advertise the Licensed
Products or maintain branches for the distribution of the Licensed Products
outside the Licensed Territory.

         Section 2.4. Sublicense Agreements. Licensee shall be entitled to
sublicense its rights and obligations under this Agreement in any country of the
Licensed Territory other than [***], provided that (i) any such sublicense
agreement shall be under terms no less stringent than the ones contained in this
Agreement and (ii) Licensee hereby warrants and represents that any such
sublicensee will comply with all applicable terms of this Agreement.

         Section 2.5. Consideration for Licensed Products. Licensee shall not
accept as consideration for the sale or transfer of Licensed Products any
consideration other than cash except as consented to by Licensor following
agreement between Licensor and Licensee on the methodology for valuing such
non-cash consideration.

         Section 2.6. Right of First Negotiation on New Products. In the event
that, during a period of [***] Licensor owns or controls the rights to
distribute, market and sell a product other than the Licensed Products in the
Licensed Territory which reaches or has reached [***], Licensor shall promptly
so notify Licensee in writing and shall provide Licensee with information on
such product as is reasonably necessary for Licensee's evaluation of interest.
Upon receipt of such notice and information, Licensee shall have a

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period of sixty (60) days to deliver to Licensor a written notice of its
interest in distributing, marketing and selling such product in the Licensed
Territory. If Licensee does not deliver such notice to Licensor within such
period, Licensor shall thereafter have no further obligation to Licensee with
respect to such product. If Licensee delivers to Licensor a notice confirming
its interest in such product, for sixty (60) days following Licensor's receipt
of Licensee's notice, the parties shall engage in exclusive, good-faith
negotiations for the terms upon which Licensor would appoint Licensee as the
licensee of such product in the Licensed Territory which shall be consistent,
insofar as reasonably possible, with the terms of this Agreement. If the parties
have failed to reach agreement on such terms by the end of such sixty day
period, Licensor shall thereafter have no further obligations to Licensee with
respect to such product; provided, however, that Licensor will not enter into
any agreement relating to the distribution, marketing and sale of the same
product in the Licensed Territory with a third party on terms which, taken as a
whole, are more favorable to such third party than those last offered in writing
by Licensor to Licensee for such product.

                                    ARTICLE 3

                                   GRANT BACK

         In consideration for Licensor (i) making the Licensed Know-how
(including any improvements thereto) available to Licensee on a continuing basis
for the duration of this Agreement and (ii) procuring, and making available to
Licensee the benefit of, equivalent grants from Licensor's other licensees of
Patent Rights outside the Licensed Territory, Licensee hereby grants to Licensor
and such other licensees a royalty-free, nonexclusive license outside the
Licensed Territory, with the right to grant sublicenses, under any and all
inventions (whether patentable or not) hereafter during the term of this
Agreement, developed, possessed or acquired by Licensee related to the Licensed
Products, Patent Rights, Licensed Know-how or Licensed Methods; provided that
Licensee is not legally restricted or prevented from granting such rights in
connection with the relevant invention. Licensee shall provide Licensor with a
written enabling disclosure of each invention (such as a patent application or
internal docket reference) unambiguously identifying it as an invention governed
by this Article 3 prior to filing a patent application or taking any other
action disclosing or potentially disclosing the same to third parties.

         Licensee shall promptly disclose all Licensee Proprietary Information
to Licensor and, subject to the execution of confidentiality undertakings
comparable to those set forth in Article 6, to Licensor's other licensees of
Patent Rights outside the Licensed Territory on a continuing basis during the
term of this Agreement. Licensee hereby grants to Licensor and such licensees a
royalty-free nonexclusive license, with the right to grant sublicenses, to use
the Licensee Proprietary Information. Licensee shall not disclose any Licensee
Proprietary Information under circumstances that would reasonably be expected to
result in the loss of the protectible status of any Licensee Proprietary
Information without the prior written consent of Licensor, which consent shall
not be unreasonably withheld.

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                                    ARTICLE 4

                                  CONSIDERATION

         Section 4.1. License Fee. (a) Licensee agrees to pay to Licensor a
non-refundable license fee of Three Hundred Seventy Five Thousand Dollars
($375,000.00) within ten (10) business days of receipt of Licensor's invoice
issued on or after the Effective Date, subject to paragraph (b) below.

                  (b) Any and all taxes that are levied on license fees accruing
         under this Agreement in a country in which provision is made in the law
         or by regulation for withholding may be deducted by the payor from such
         royalties and paid to the proper taxing authority and evidence of such
         payment shall be secured and sent to Licensor within 1 month of such
         payment. The parties shall do all such lawful acts and things and sign
         all such lawful deeds and documents as either party may reasonably
         request from the other party to enable Licensee, its Affiliates and/or
         sublicensees to take advantage of any applicable legal provision or any
         double taxation treaties with the object of paying the sums due to
         Licensor hereunder without withholding any tax.

                  (c) The balance of any amounts which remain unpaid more than
         30 days after they are due to Licensor hereunder shall accrue interest
         until paid at an annual rate 2% over the United States Clearing Bank
         Base Lending Rate or the maximum amount allowed under applicable law.
         However, in no event shall this interest provision be construed as a
         grant of permission for any payment delays.

         Section 4.2 Supply Agreement. Concurrently with the execution of this
Agreement, Licensor and Licensee shall enter into a supply agreement for
Licensed Products (the "Supply Agreement").

         Section 4.3 Location of Payment. The amounts provided for by this
Article 4 shall be paid to Licensor by swift transfer to the bank account
designated by Licensor.

                                    ARTICLE 5

               CLINICAL TRIALS, REGULATORY APPROVALS AND MARKETING

         Section 5.1 Submission for Regulatory Approvals (a) Subject to the
completion of requisite clinical investigations, Licensor shall prepare and
submit to the regulatory authorities in the Licensed Territory applications for
Marketing Regulatory

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Approvals as soon as practicable and shall use its diligent efforts to obtain
and maintain all Marketing Regulatory Approvals that are obtained by Licensor
for the term of this Agreement, all at the cost and expense of Licensor. When
filing for Marketing Regulatory Approvals, Licensor shall designate Licensee or
such Licensee's Affiliates or sublicensees designated by Licensee as its
distributors or local representatives for the Licensed Products in the Licensed
Territory. Licensor shall, upon the granting of each Marketing Regulatory
Approval obtained by Licensor, promptly supply Licensee with a copy of such
approval.

                  (b) Subject to receipt of the Marketing Regulatory Approvals,
         Licensee shall prepare and submit to the regulatory authorities in the
         Licensed Territory applications for Pricing Approvals as soon as
         practicable and shall use its diligent efforts to obtain and maintain
         all Pricing Approvals that are obtained by Licensee for the term of
         this Agreement, all at the cost and expense of Licensee. Licensee
         shall, upon the granting of each Pricing Approval obtained by Licensee,
         promptly supply Licensor with a copy of such approval. Licensee shall
         further be responsible for achieving insertion of Licensed Products
         into hospital formularies.

         Section 5.2 Access of Licensee to Marketing Regulatory Approvals.
Licensor shall, in connection with any Marketing Regulatory Approval obtained by
it in the Licensed Territory, grant Licensee an irrevocable right of access and
reference thereto and shall effect such notifications to regulatory authorities
as shall be reasonably necessary to accomplish the foregoing. To the extent
Marketing Regulatory Approvals are transferred to Licensee, Licensee shall
maintain such Marketing Regulatory Approvals at its cost and expense. Licensor
shall assist Licensee in maintaining such Marketing Regulatory Approvals
including supplying to Licensee any information in connection therewith which
Licensor is free to disclose.

         Section 5.3 Conduct of Clinical Investigations (a) Subject to paragraph
(b) below, Licensor shall at its own cost and expense conduct all preclinical
and clinical trials necessary for obtaining the Marketing Regulatory Approvals
in the Licensed Territory.

                  (b) Licensee shall be responsible for conducting the following
         clinical trials with the Surfaxin(R)Product in the Licensed Territory:

                           (i) a Phase 3 Clinical Trial in IRDS [***]; and

                           (ii) a Phase 2 Clinical Trial in ARDS/ALI with [***].

         Such clinical trials shall be conducted at Licensee's cost and expense,
provided that the applicable Licensed Product to be used during all such trials
shall be provided by Licensor to Licensee for an amount equal to Three Hundred
Seventy Five Thousand Dollars ($375,000.00) which amount shall be payable upon
execution and delivery of this Agreement and is inclusive of any custom duties
associated with

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the importation of such Licensed Product in Spain (which shall be reimbursed by
Discovery to Esteve in due course), and provided further, notwithstanding
anything herein to the contrary, the direct and indirect costs incurred by
Licensee under this Section 5.3(b), but not including the costs for the purchase
of the Licensed Product, shall not exceed[***]. Any costs and expenses in excess
of such amount shall be for Licensor's account. The protocols of any clinical
trials conducted by Licensee shall be reviewed and approved by Licensor, who
shall not unreasonably withhold or delay its approval.

                  (c) Licensor warrants that any clinical trials carried out by
         it with respect to the Licensed Products shall be conducted in
         accordance with FDA good clinical practice and Licensee warrants that
         all clinical trials carried out by it with respect to the Licensed
         Products shall be conducted in accordance with the European Union good
         clinical practice. Licensor and Licensee shall keep each other fully
         informed on the progress of all clinical trials and shall promptly
         provide the other with copies of all submissions to regulatory
         authorities in connection therewith, all significant communications
         received from such regulatory authorities and reasonably detailed
         descriptions (in English) of all meetings with and verbal
         communications with such regulatory authorities which are of
         significance. Each of Licensor and Licensee shall use its best efforts
         to complete all clinical trials for which it is responsible within the
         parameters established by the Committee (as such term is defined in
         Section 5.4).

         Section 5.4 Oversight Committee. (a) Licensee and Licensor shall
jointly form an oversight committee (the "Committee") for the purposes of
developing and assisting with the implementation of the clinical trials within
the Licensed Territory.

                  (b) The Committee shall be comprised of four members, two
         members to be executives appointed by, and to be representatives of,
         each of Licensee and Licensor. The Committee shall be chaired by a
         designee of Licensor. In the event of any deadlock or other inability
         of the Committee to reach a determination with respect to any matter
         within the authority of the Committee, the issue shall be referred to
         the respective Chief Executive Officers or General Managers of each
         party who shall use their best endeavours to agree in good faith to a
         resolution of the dispute within thirty (30) days of their receipt of
         notice as to such dispute. If they are unable to resolve the dispute
         within such thirty (30) day period, it shall be referred to the
         decision of an external expert suitably qualified to resolve such
         dispute which is mutually acceptable to both parties, whose decision
         shall be final. In resolving the dispute, the appointed expert shall
         take into account clinical development practices and procedures common
         in the pharmaceutical industry.

                  (c) The initial members of the Committee shall be designated
         by the parties hereto not later than 30 days after the Effective Date.
         Upon resignation

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by or removal of any member of the Committee, Licensee or Licensor, as
appropriate, shall have the sole right to appoint a successor.

                  (d) The Committee shall meet within thirty (30) days after the
         Effective Date and thereafter at least every six months until grant of
         Marketing Regulatory Approvals and Pricing Approvals for Licensed
         Products [***]. The location of such meetings shall alternate between
         Doylestown, Pennsylvania, United States and Barcelona, Spain unless
         otherwise agreed to by Licensor and Licensee. The Committee may also
         meet by means of a telephone or video conference call with the consent
         of each of Licensor and Licensee.

                  (e) Licensee and Licensor shall use reasonable efforts to
         cause their representatives to attend the meetings of the Committee. If
         a representative of either of the parties hereto is unable to attend a
         meeting, such party may designate an alternate to attend such meeting
         in place of the absent representative. In addition, each party may,
         with the consent of the other party, invite consultants or scientific
         advisors to attend meetings of the Committee.

                  (f) The Committee will report to Licensor and Licensee
         annually with a written comprehensive report on the execution of the
         clinical trials.

         Section 5.5 Commencement of Marketing. Licensee shall consummate its
first commercial sale of each Licensed Product in each country of the Licensed
Territory within ninety (90) days after obtaining Pricing Approval (or if
Pricing Approval is not applicable, within ninety (90) days of Marketing
Regulatory Approval in such country); provided, however, that if Licensee has
failed to meet such deadlines in any country because of reasons beyond the
control of Licensee, Licensor and Licensee shall discuss in good faith a new
deadline for such country. In the event Licensee does not consummate a sale
within such period, Licensor may notify Licensee of a default under this Section
5.5 and, in the event such default is not cured within thirty (30) days from
such notice of default, Licensor shall have the right to terminate the license
granted to Licensee hereunder with respect to such Licensed Product in such
country.

         Section 5.6. Commencement of Marketing; Post-Commencement Trials.
Licensee shall be responsible for conducting, at its own cost and expense such
post-marketing clinical trials and research and development activities as
Licensee deems useful or necessary to promote the sale of Licensed Products in
the Licensed Territory provided that the protocol shall be approved in
accordance with Section 5.3(b) in advance of its commencement. Licensor and
Licensee shall monitor and supervise the conduct thereof following commencement.

[***]    Confidential treatment requested.

                                       13
<PAGE>

         Section 5.7. Standard of Diligence. (a) Licensee shall use commercially
reasonable efforts to commercialize the Licensed Products in the Licensed
Territory throughout the term of this Agreement in accordance with all
applicable legal and regulatory requirements, including promoting the Licensed
Products by accepted promotional practices consistent with those used (i) by
Licensee in connection with the promotion of its other products and (ii) in the
critical care pharmaceutical industry generally.

                  (b) From and after the date that an NDA with respect to any
         Licensed Product is filed with the EMEA or the applicable regulatory
         authority in the Licensed Territory, Licensee shall provide Licensor
         regularly with summary reports on its plans for launch of Licensed
         Products in the countries within the Licensed Territory that are member
         countries of the European Union (in the case of the EMEA) or the
         countries in Central and South America and of the anticipated
         commercial potential therefor in such countries.

         Section 5.8. Product Failure. In the case of a Product Failure with
respect to an Indication in any country, the Committee shall seek to identify a
single Replacement Product for development by Licensee and Licensor for such
Indication in the country or countries in which such Product Failure occurred.
In the event a Replacement Product has not been identified for development in
writing by the Committee within one year of such Product Failure, either party
shall have the right to terminate this Agreement with respect to such Indication
in such country or countries within 30 days following expiration of such
one-year period by written notice to the other party. The Committee shall
prepare a written development plan with respect to each Replacement Product that
has been identified for development by the Committee as promptly as practicable
following its identification, which shall include provisions for the funding of
Development Costs with respect to such Replacement Product by Licensor, Licensee
and other Licensor's licensees in countries outside the Licensed Territory where
Licensor or its licensees intend to commercialize such Replacement Product. In
the event the Committee has not reached agreement upon such development plan,
including the funding of Development Costs, within 90 days after identification
of a Replacement Product for development hereunder, then either party shall have
the right to terminate this Agreement with respect to such Indication in such
country or countries by written notice to the other within the 30 days following
expiration of such 90-day period; provided, however, than in such event,
Licensor shall not enter into any agreement relating to the development,
distribution, marketing and sale of the same product in the Licensed Territory
with a third party on terms which, taken as a whole, are more favorable to such
third party than those last offered in writing by Licensor for such product.

         Section 5.9. Medico-Marketing Plan. Licensee shall submit to Licensor a
medico-marketing plan for the Licensed Products (the "Development Plan") as soon
as possible, but in any event no later than ninety (90) days prior to the
planned launch date in each country of the Licensed Territory, such plan to be
updated by Licensee before the end of each calendar year.

                                       14
<PAGE>

         Section 5.10. Reports. Licensee shall, as promptly as practicable,
submit written reports to Licensor as follows:

                  (a) quarterly statements showing the amount of sales of
         Licensed Products in terms of units and currency of the Licensed
         Territory; and

                  (b) annual statements by no later than February 28 of each
         year detailing the medico-marketing activities carried out by Licensee
         during the previous calendar year.

         Section 5.11. Promotional Material. Licensor shall supply Licensee with
samples of all training aids and literature used by Licensor and its Affiliates
and distributors and sublicensees thereof for training their sales
representatives and samples of all promotional and sales material used by
Licensor or its Affiliates and distributors and sublicensees thereof for the
Licensed Products.

         Section 5.12. Promotional Claims. All technical and scientific
information and therapeutic claims referred to by Licensee in promotional
advertisements, promotional literature, sales aids, training aids and literature
and the like with respect to each Licensed Product shall be consistent with any
Marketing Regulatory Approval and the information and claims made by Licensor
with respect thereto insofar as the latter are consistent with Marketing
Regulatory Approvals or permitted practices in the Licensed Territory.

         Section 5.13. Samples of Licensee's Promotional Material. Licensee
shall supply Licensor with samples of product labeling, packages and/or cartons
and the like and of all advertisements, promotional literature, sales aids,
training material for salesmen, used by Licensee in connection with the
promotion and sale of the Licensed Products.

         Section 5.14. Adverse Event Reporting. The Parties shall establish a
procedure for the handling of adverse events as soon as is practicable after the
Effective Date, which procedure shall be in conformance with all applicable
laws, rules and regulations. Each Party shall advise the other, by telephone or
facsimile, within twenty-four (24) hours after it becomes aware of any serious
adverse event arising in connection with the use of any Licensed Products and
shall include the following information: a description of the patient, the
Licensed Product, the reporting source and a description of the event and/or
such other information as may be required by the relevant regulatory authorities
in the Licensed Territory at the time the serious adverse event occurs. No later
than five (5) days after its initial report, the Party informing of a serious
adverse event shall provide the other with a written report delivered by
confirmed facsimile of any reported serious adverse event stating the full facts
known to it, including but not limited to such information as may be required by
the relevant regulatory authorities in the Licensed Territory at the time the
serious adverse event occurs.

                                       15
<PAGE>

                                    ARTICLE 6

           TRANSFER OF LICENSED KNOW-HOW; CONFIDENTIALITY; PUBLICATION

         Section 6.1. Transfer of Licensed Know-How. Promptly after the
Effective Date and from time to time as it becomes available during the term of
this Agreement, Licensor shall provide Licensee with the Licensed Know-How.

         Section 6.2. Confidentiality. Any information disclosed by either
party, its Affiliates or permitted licensees to the other party hereunder shall
be safeguarded by the recipient, shall not be disclosed to third parties and
shall be made available only to recipient's employees, Affiliates, licensees for
the Licensed Products or independent contractors who agree to equivalent
conditions and who have a need to know the information for the purposes
specified under this Agreement. Subject to the license granted under Article 2,
all confidential information shall remain the property of and, subject to
Sections 7.7 and 7.8, shall be returned to the disclosing party within thirty
(30) days of termination of this Agreement. These mutual obligations of
confidentiality shall apply during and for a period of ten years after the term
of this Agreement, but such obligations shall not apply to any information that:

                  (a) is or hereafter becomes generally available to the public
         other than by reason of any default with respect to a confidentiality
         obligation under this Agreement; or

                  (b) was already known to the recipient as evidenced by prior
         written documents in its possession; or

                  (c) is disclosed to the recipient by a third party who is not
         in default of any confidentiality obligation to the disclosing party
         hereunder; or

                  (d) is developed by or on behalf of the receiving party,
         without reliance on confidential information received hereunder; or

                  (e) is provided to third parties under appropriate terms and
         conditions including confidentiality provisions equivalent to those in
         this Agreement for development purposes including, without limitation,
         consulting, manufacturing development, manufacturing, external testing
         and marketing trials with respect to the products covered by this
         Agreement; or

                  (f) is used with the consent of the disclosing party (which
         consent shall not be reasonably withheld) in applications for patents
         or copyrights under the terms of this Agreement; or

                  (g) has been approved in writing for publication by each of

                                       16
<PAGE>

         the parties; or

                  (h) is required to be disclosed in compliance with applicable
         laws or regulations in connection with the manufacture or sale of
         products covered by this Agreement; or

                  (i) is otherwise required to be disclosed in compliance with
         applicable laws or regulations or order by a court or other regulatory
         body having competent jurisdiction; or

                  (j) is product-related information which is reasonably
         required to be disclosed in connection with marketing of products
         covered by this Agreement.

         Section 6.3. Procedures for Obtaining Permission for Disclosure. In the
event that either party (the "Disclosing Party") desires to publish or disclose,
by written, oral or other presentation, any confidential information or other
information regarding the Licensed Rights, the Disclosing Party shall notify the
other party (the "Nondisclosing Party") in accordance with Section 14.2 at least
sixty (60) days before any written or other publication or disclosure. The
Disclosing Party shall include with such notice a description of any proposed
oral presentation or, in any proposed written or other disclosure, a current
draft of such proposed disclosure or abstract. The Nondisclosing Party may, no
later than thirty (30) days following the receipt of such notice, notify the
Disclosing Party that the Nondisclosing Party will not consent to such
disclosure of confidential information. If the Disclosing Party does not receive
any such objection to the proposed disclosure of confidential information or
other information regarding the Licensed Rights within such 30-day period, the
Disclosing Party shall be free to make such disclosure in substantially the
manner and form proposed at the time notice was given to the Nondisclosing
Party.

                                    ARTICLE 7

                                   TERMINATION

         Section 7.1. Term. Unless otherwise terminated by operation of law or
by acts of the parties in accordance with the provisions of this Agreement, this
Agreement shall be in force from the Effective Date and shall remain in effect
with respect to each Licensed Product in each country of the Licensed Territory
for the duration of the Initial Period. Upon expiry of the Initial Period with
respect to any country in the Licensed Territory, the license granted under
Section 2.1 shall become fully paid up in such country, except that Licensee
shall pay Licensor a royalty equal to one percent of Licensed Product sales for
continued use by Licensee of the Trademark and Licensed Know-how. In addition
the parties agree that in such event Licensor shall deliver to Licensee all
know-how necessary or useful to give Licensee the capability of manufacturing
the Licensed Products and such know-how shall be

                                       17
<PAGE>

delivered to Licensee in such a way as to communicate it to Licensee promptly,
effectively and economically.

         Section 7.2. Termination by Licensor for Breach. Upon any material
breach of or default under this Agreement by Licensee, Licensor may terminate
this Agreement upon ninety (90) days written notice to Licensee. Said notice
shall become effective at the end of said period, unless during said period
Licensee shall cure such breach or default or shall take reasonable steps to
cure the same.

         Section 7.3. Termination by Licensee. Licensee may terminate this
Agreement on sixty (60) days advance written notice to Licensor for any reason,
whereupon Licensee shall not be obligated to make any further payments to
Licensor other than those payments accruing prior to such termination or
pursuant to Section 7.9.

         Section 7.4. Termination Upon Bankruptcy Event. If (i) Licensee files a
petition in bankruptcy or for the appointment of a receiver or trustee, (ii)
Licensee proposes a written agreement of composition or extension of its debts
or makes an assignment for the benefit of its creditors, or (iii) an involuntary
petition against Licensee is filed in any insolvency proceeding and such
petition is not dismissed within sixty (60) days after filing, Licensor may
immediately terminate this Agreement.

         Section 7.5. No Automatic Termination upon Licensor's Bankruptcy. If
(i) Licensor files a petition in bankruptcy or for the appointment of a receiver
or trustee; (ii) Licensor proposes a written agreement of composition or
extension of its debts or makes an assignment for the benefit of its creditors;
or (iii) an involuntary petition against Licensor is filed in any insolvency
proceeding and such petition is not dismissed within sixty (60) days after
filing, Licensee shall have the option to either:

                  (a) Immediately terminate this Agreement; or

                  (b) Continue to market the Licensed Products under the
         Licensed Know-How, Patent Rights, Marketing Regulatory Approvals and
         the Trademark, in which case the license granted hereunder to Licensee
         pursuant to Section 2.1 shall become a license to "make, have made,
         import, use, offer to sell and sell Licensed Products", provided that
         such license to make or have made Licensed Products shall be
         nonexclusive and that Licensor shall be entitled to a royalty in an
         amount equal to the sum of (i) [***] and (ii) [***] of such Licensed
         Product sales. Licensee shall be solely responsible for payment of the
         third party royalty obligations under such circumstances; provided,
         however, that any royalties to be paid under this sub-section 7.5 (b)
         shall be due only to the extent that Licensee's cost of the Licensed
         Product in finished, packaged and labelled form, quality controlled and
         ready for resale

[***]    Confidential treatment requested.

                                       18
<PAGE>

         to the ultimate customer plus the royalties hereinabove established
         shall not exceed the Transfer Price established in Section 2.2 of the
         Supply Agreement. In addition the parties agree that in such event the
         intellectual property delivered to Licensee shall include all know-how
         necessary or useful to give Licensee the capability of manufacturing
         the Licensed Products and such know-how shall be delivered to Licensee
         in such a way as to communicate it to Licensee promptly, effectively
         and economically.

         Section 7.6. Termination With Respect to Competitive Activities. During
the term of this Agreement, in the event Licensee acquires a surfactant product
suitable for use in treating any ARDS/ALI Indication or Neonatal Indication
(including through off-label use) (a "Competitive Product"), or in the event
Licensee becomes an Affiliate of a Person whose product line includes a
Competitive Product, Licensee shall notify the other party thereof within thirty
(30) days of such acquisition or Affiliation and of its intention to either (a)
divest such Competitive Product or Affiliation or (b) terminate this Agreement
and the Supply Agreement. Any such termination shall be effective sixty (60)
days after such notice becomes effective in accordance with Section 14.2.
Alternatively, Licensee may notify Licensor that it intends to retain such
Competitive Product in its portfolio but does not wish to terminate this
Agreement, in which event Licensor shall, within ninety (90) days of such
notice, advise Licensee of its intent to terminate this Agreement (which
termination shall be effective thirty (30) days after such notice) or
acquiescence in Licensee's desire to so retain such Competitive Product. Failing
Licensor's notification within such ninety day term, it shall be understood that
Licensor agrees to the marketing by Licensee of such Competitive Product and
Licensor shall not be entitled thereafter to terminate this Agreement for such
reason.

         Section 7.7. Reversion. Upon termination of this Agreement for any
reason, other than expiry of the Initial Period or under Section 7.8, all rights
granted to Licensee hereunder shall revert to Licensor and Licensee undertakes:

                  (a) to deliver to Licensor all copies of any Licensed Know-how
         in its possession,

                  (b) not to use the Licensed Know-how as long as it has to be
         kept confidential under Article 6 hereof;

                  (c) to transfer to Licensor, at Licensor's request, a single
         copy of all Licensee Proprietary Information and, at Licensor's
         expense, all health regulatory approvals and regulatory filings
         relating to Licensed Products in Licensee's possession;

                  (d) to the extent requested by Licensor, to transfer to
         Licensor or its designee responsibility for and control of ongoing
         Licensed Products development work, including control over contracts
         with third parties for such work,

                                       19
<PAGE>

where permissible in accordance with such contracts, in an expeditious and
orderly manner with the costs for such work to be assumed by Licensor or its
designee as of the date of such transfer; and

                  (e) to the extent requested by Licensor, to transfer to
         Licensor or its designee all inventory of Licensed Products and
         materials and equipment for manufacture of Licensed Products at a price
         equal to Licensee's fully amortized standard cost.

         Section 7.8. Effect of Certain Terminations. In the event Licensee
terminates this Agreement or the Supply Agreement by reason of a material
unremedied breach of the same by Licensor [***], Licensee shall have the right
(without prejudice to Licensee's other rights and remedies at law or under this
Agreement, including the right to specific performance hereof by Licensor) to
(a) manufacture or procure the supply of Licensed Products from a third party
supplier acceptable to Licensee and (b) continue to use, the Licensed Know-How,
Patent Rights, Marketing Regulatory Approvals and Trademark on the terms (other
than compensation terms) provided herein in exchange for payment of a royalty in
an amount equal to the sum of (i) [***] and (ii) [***] cost of the Licensed
Products in finished, packaged and labelled form, quality controlled and ready
for resale to the ultimate customer plus the royalties hereinabove established
shall not exceed the Transfer Price established in Section 2.2 of the Supply
Agreement and only during the Initial Period, after which the royalty to be paid
by Licensee shall be reduced to one percent, as established in Section 7.1. In
addition the parties agree that in such event Licensor shall deliver to Licensee
all know-how necessary or useful to give Licensee the capability of
manufacturing the Licensed Products and such know-how shall be delivered to
Licensee in such a way as to communicate it to Licensee promptly, effectively
and economically.

         Section 7.9. Survival. Upon any termination of this Agreement, Articles
3 (except in the event of termination by Licensee under Section 7.8), 6, 9, 10
and 11 and Sections 7.7 through 7.10, shall survive such termination and
continue in force and effect to the extent necessary to effectuate such
provisions.

         Section 7.10. Disposition. Upon termination of this Agreement, other
than by expiration of the Initial Period or by Licensee under Section 7.8,
subject to Sections 7.4 and 7.7, Licensee shall have no right under the Patent
Rights to import, use or sell Licensed Products, except that Licensee shall have
the right for one hundred twenty (120) days following termination to dispose of
Licensed Products on hand and complete any existing contracts requiring rights
under the Patent Rights which can be completed within the one hundred twenty
(120) days.

[***]    Confidential treatment requested.

                                       20
<PAGE>

                                    ARTICLE 8

                                  INFRINGEMENT

         Section 8.1. Notice. (a) In the event that Licensee believes that there
is an infringement of the Licensed Rights by a third party hereto selling
material quantities of products in the Licensed Territory in competition with
Licensee's sale of Licensed Products hereunder, Licensee shall promptly provide
Licensor with written notice that such infringement is occurring. In the event
that Licensee believes that such infringement is to Licensee's substantial
detriment, Licensee shall provide Licensor with reasonable evidence of the
infringement.

                  (b) Licensor shall have the right, at Licensor's sole expense
         (subject to Section 8.5(a)), to bring suit against the infringer for
         infringement of the Licensed Rights. However, if after six (6) months
         from the date of receipt of evidence of infringement from Licensee,
         Licensor has not initiated suit against the infringer, Licensee shall
         have the right, at Licensee's sole expense (subject to Section 8.5(b)),
         to bring such suit provided that the Original Licensor has consented to
         Licensee bringing such suit. Licensor shall make its best efforts to
         obtain the Original Licensor's consent in favor of Licensee.

         Section 8.2. Assistance. In the event either party hereto shall
initiate or carry on legal proceedings to enforce the Licensed Rights against an
alleged infringer, as provided herein, the other party hereto shall render
reasonable assistance to and cooperate with the party initiating or carrying on
such proceedings.

         Section 8.3. Legal Proceedings. In the event that either party shall
institute legal proceedings to enforce the Licensed Rights, it shall have sole
control of such suit and the other party shall be entitled to be represented in
any such suit by counsel of its choosing, at its sole expense.

         Section 8.4. Discontinuance. Neither party hereto shall discontinue or
settle any such proceedings brought by it without obtaining the concurrence of
the other party if such action would impose any obligations on such other party
or affect the exercise of the rights granted hereunder to such other party
(which concurrence shall not be unreasonably withheld).

         Section 8.5. Recoveries. All damages, settlements and awards made or
obtained in connection with any suit or other legal proceeding under
this Article 8 shall be distributed as follows:

                  (a) If Licensor initiated the suit and prosecuted it to its
         conclusion, Licensor shall be entitled to retain the balance of any
         damages, settlements

                                       21
<PAGE>

and awards, provided that Licensee may elect (within thirty (30) days of
initiation of such suit) to fund up to twenty-five percent (25%) of Licensor's
litigation costs and to share in the same proportion of net recoveries.

                  (b) If the Licensee initiated the suit and prosecuted it to
         its conclusion, Licensee shall be entitled to retain the balance of any
         damages, settlements and awards; provided that Licensor may elect
         (within thirty (30) days of initiation of such suit) to fund up to
         twenty-five percent (25%) of Licensee's litigation costs and to share
         in the same proportion of net recoveries received by Licensee.

                                    ARTICLE 9

                                NON-USE OF NAMES

         Section 9.1. Non-Use. Subject to the licenses expressly granted
hereunder with respect to the Trademark, nothing contained in this Agreement
shall be construed as granting to Licensor or Licensee any right to use in
advertising, publicity, or other promotional activities any name, trade name,
trademark, or other designation of the other (including contraction,
abbreviation or simulation of any of the foregoing) without the prior, written
consent of the other.

         Section 9.2. Relationship. Nothing herein shall be deemed to establish
a relationship of principal and agent between Licensor and Licensee, nor any of
their agents or employees for any purpose whatsoever. This Agreement shall not
be construed as constituting Licensor and Licensee as partners, or as creating
any other form of legal association or arrangement which would impose liability
upon one party for the act or failure to act of the other party.

                                   ARTICLE 10

                         REPRESENTATIONS AND WARRANTIES

         Section 10.1 Representations of Licensor. Licensor represents and
warrants to Licensee that:

                  (a) Subject to Section 2.1, it has the right to grant the
         license granted under this Agreement and that it has full power and
         authority to execute, deliver and perform this Agreement, the Supply
         Agreement, the Securities Purchase Agreement and the obligations
         hereunder and thereunder.

                  (b) Subject to Section 2.1, to Licensor's knowledge, there are
         no claims or potential claims by any third parties (other than the
         Original Licensor

                                       22
<PAGE>

and Scripps) to an ownership interest in the Licensed Rights licensed to
Licensee under this Agreement.

                  (c) Licensor has obtained any required third-party consents
         under contracts to which Licensor or any of its Affiliates is a party
         to Licensor's entry into this Agreement, the Supply Agreement and the
         Securities Purchase Agreement and the performance of its obligations
         hereunder and thereunder.

                  (d) To Licensor's knowledge, based solely on a review of the
         records of the United States Patent and Trademark Office and the
         corresponding offices in countries other than the United States, the
         patents listed on Schedule I are subsisting.

                  (e) No third party has served on Licensor or any of its
         Affiliates any claim, lawsuit, charge, complaint or other action
         alleging that the Licensed Rights are invalid or unenforceable or that
         the Licensed Rights infringe any patent or other proprietary or
         property rights of any third parties or advised Licensor or any of its
         Affiliates in writing that it intends to pursue any such claim,
         lawsuit, charge, complaint or other action. Licensor has not, prior to
         the date hereof, entered into any compulsory license with a third party
         with respect to the Patent Rights.

                  (f) The rights of the Original Licensor and of any subsequent
         licensor (excluding the Licensor) of the Scripps Patent Rights do not
         prevent the grant of the license made hereunder nor do such rights
         permit any such person to sell (directly or indirectly) or license for
         sale surfactant pharmaceutical preparations based on or embodying the
         Patent Rights in the Licensed Territory or enable such person to demand
         any indemnity, royalty or compensation of whatever nature from Licensee
         as a result of Licensee's sales of Licensed Products in the Licensed
         Territory in accordance with the terms of this Agreement.

                  (g) Licensor is not in breach of any of its obligations under
         the Original License as of the date hereof.

                  (h) All of Licensor's employees having access to any
         confidential information with respect to the Licensed Rights are
         subject to written confidentiality obligations with respect to the
         disclosure of such information.

                  (i) Prior to the execution of this Agreement it has disclosed
         to Licensee all material information pertaining to the Licensed
         Products and the Patent Rights reasonably relevant to Licensee in order
         to assess its interest in entering into this Agreement, and that no
         material information pertaining to the Licensed Products and the Patent
         Rights actually known to Licensor as of the Effective Date regarding
         the foregoing has been withheld from Licensee by Licensor.

                                       23
<PAGE>

         Section 10.2. Mutual Representation. Each party hereby warrants that
the execution, delivery and performance of this Agreement, the Supply Agreement
and the Securities Purchase Agreement has been duly approved and authorized by
all necessary corporate actions of both parties; does not require any
shareholder approval which has not been obtained or the approval and consent of
any trustee or the holders of any indebtedness of either party; does not
contravene any law, regulation rules or order binding on either party, and does
not contravene the provisions of or constitute a default under any indenture,
mortgage contract or other agreement or instrument to which either party is a
signatory.

         Section 10.3. Validity. Subject to the foregoing provisions of this
Article 10, nothing in this Agreement shall be construed as a representation or
a warranty by Licensor that any process practiced or anything imported, used or
sold under any license granted under this Agreement is or will be free from
infringement of patents of third parties.

         Section 10.4. No Consequential Damages. IN NO EVENT WILL EITHER PARTY
BE LIABLE TO THE OTHER FOR ANY INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES
RESULTING FROM EXERCISE OF THIS LICENSE OR SALE OR USE OF LICENSED PRODUCTS OR
LICENSED KNOW-HOW.

                                   ARTICLE 11

                                 INDEMNIFICATION

         Section 11.1. Indemnification by Licensee. Subject to Section 10.4 and
to the extent not covered by Licensor's indemnity under Section 11.2, Licensee
agrees to indemnify and hold harmless Licensor and its Affiliates and their
respective officers, directors, employees and agents from and against any and
all claims, damages and liabilities, including reasonable attorneys fees and
expenses, asserted by third parties, both government and private (collectively,
"Claims"), arising from Licensee's or its Affiliates' or sublicensees' import,
use, offer to sell or sale of Licensed Products pursuant to this Agreement,
including without limitation any claim for breach of warranty, negligence or
strict liability with respect to any Licensed Product.

         Section 11.2. Indemnification by Licensor. Subject to Section 10.4,
Licensor agrees to indemnify and hold harmless Licensee, its Affiliates and
sublicensees and their respective officers, directors, employees and agents from
and against any and all Claims arising from (a) any infringement of any patent
or other intellectual property interest in the Licensed Territory by any Person
other than the parties to this Agreement relating to the Licensed Products; (b)
any breach by Licensor of its representations and warranties set forth in this
Agreement; (c) any negligent act or omission of Licensor and (d) any intrinsic
or manufacturing defect of the Licensed Products existing when the Licensed
Products are placed by Licensor in the custody of the carrier for transport to
Licensee . This Section shall apply to the Supply Agreement. In the event of any
contradiction between the Supply Agreement

                                       24
<PAGE>

and any of the terms contained in this Sublicense Agreement, the terms of this
Agreement shall prevail.

         Section 11.3. Insurance. Licensor and Licensee shall maintain during
the term of this Agreement insurance policies covering their respective
obligations under this Article 11, issued by reputable insurance companies under
ordinary terms and conditions in the pharmaceutical industry and will prove the
existence thereof to the other party if so requested.

                                   ARTICLE 12

                        TRADEMARK MATTERS; PATENT MARKING

         Section 12.1. Trademarks Used in Connection With Licensed Products. (a)
Licensed Products shall be marketed under the Trademark. Licensee admits the
validity of the Trademark and agrees that it shall not challenge the same in the
Licensed Territory or elsewhere.

                  (b) Licensor shall be responsible, at its own cost and
         expense, to register, maintain and renew registrations of the Trademark
         in the Licensed Territory, to the extent that it is necessary for the
         purposes of obtaining Marketing Regulatory Approval and for the
         marketing of the Licensed Products in the Licensed Territory. Licensee
         agrees not to take any actions (including without limitation effecting
         any trademark registrations) inconsistent with the foregoing and not to
         register anywhere in the world any trademark confusingly similar to
         Surfaxin(R) or any derivative thereof.

                  (c) Licensee agrees to take such actions as may be reasonably
         requested by Licensor to assist Licensor to register, maintain or renew
         any Trademark at the sole cost and expense of Licensor.

         Section 12.2. Patent Marking. Licensee shall mark all Licensed Products
made, used, or sold under the terms of this Agreement, or their containers, in
accordance with the applicable patent marking laws.

                                   ARTICLE 13

                       PATENT PROSECUTION AND MAINTENANCE

         Section 13.1. Maintenance of Patent Rights. Licensor has obtained
certain commitments from the licensor (the "Original Licensor") of the Scripps
Patent Rights and the patent rights listed in Section (b) of Schedule I
(collectively, the "Third Party Patent Rights")

                                       25
<PAGE>

that the Original Licensor will maintain the Third Party Patent Rights or, in
the event that the Original Licensor does not do so, that Licensor shall be
given the right to do so. Licensor undertakes to enforce its rights with respect
to maintenance of the Third Party Patent Rights against the Original Licensor
and, to the extent Licensor succeeds to the maintenance of the Third Party
Patent Rights, to use all commercially reasonable efforts to do so. Licensor
further undertakes to maintain the Patent Rights owned by Licensor. Licensor
shall provide Licensee with copies of all written materials received by Licensor
from the Original Licensor, the Original Licensor's or Licensor's counsel, or
any governmental agency or instrumentality relating to prosecution and/or
maintenance of Patent Rights and shall afford Licensee the opportunity to review
and comment upon any filings to be made with respect to the Patent Rights (in
the case of the Third Party Patent Rights, to the same extent Licensor is
entitled to do so).

         Section 13.2. Cooperation By Parties. Licensor and Licensee agree to
cooperate in order to avoid loss of any rights which may be available to
Licensor or the Original Licensor under the U.S. Drug Price Competition and
Patent Term Restoration Act of 1984, the Supplementary Certificate of Protection
of Member States of the European Community and other similar measures in any
country. Without limiting the foregoing, Licensee agrees to timely supply
Licensor with all information reasonably requested by Licensor to file or have
filed (or to permit the Original Licensor to file or have filed) an application
for patent term extension within the 60-day period following U.S. NDA approval.
The same shall apply with respect to the approval by health regulatory
authorities in a country of the European Community or approval by the
appropriate authorities in any other country in the Licensed Territory.

                                   ARTICLE 14

                                     GENERAL

         Section 14.1. Entire Agreement. This Agreement, including the Schedules
and Exhibits hereto, constitutes the entire agreement and understanding between
the parties as to the subject matter hereof. All prior negotiations,
representations, agreements, contracts, offers and earlier understandings of
whatsoever kind, whether written or oral between Licensor and Licensee in
respect of the subject matter of this Agreement, are superseded by, merged into,
extinguished by and completely expressed by this Agreement. No aspect, part or
wording of this Agreement may be modified except by mutual agreement between the
Licensor and Licensee taking the form of an instrument in writing signed and
dated by duly authorized representatives of both Licensor and Licensee.

         Section 14.2. Notices. Any notice or communication or permitted to be
given by this Agreement shall be given by post-paid, first class, registered or
certified mail or by reputable courier service addressed to:

                                       26
<PAGE>

         In the case of Licensor:  Discovery Laboratories, Inc.
                                   350 South Main Street, Suite 307
                                   Doylestown, Pennsylvania 18901
                                   Attention: Robert J. Capetola, Ph.D.
                                              Chief Executive Officer

                                   With a copy to:

                                   Han-Hsien Tuan, Esq.
                                   Yi Tuan & Brunstein
                                   350 Fifth Avenue, Suite 5411
                                   New York, New York 10118

          In the case of Licensee: Laboratorios del Dr. Esteve, S.A.
                                   Av. Mare de Deu de Montserrat, 221
                                   08041 Barcelona (Spain)
                                   Attention:  Director, International

         Such addresses may be altered by notice so given. If no time limit is
specified for a notice required or permitted to be given by this Agreement, the
time limit therefor shall be 10 full business days, not including the day of
mailing. Notice shall be considered made as of the date of deposit with the
appropriate post office or courier service.

         Section 14.3. Governing Laws and Dispute Resolution. (a) This Agreement
and its effect are subject and shall be construed and enforced in accordance
with the laws of the State of New York, United States, except as to any issue
which depends upon the validity, scope or enforceability of any patent within
the Patent Rights, which issue shall be determined in accordance with the
applicable patent laws of the country of such patent.

                  (b) Any controversy or claim arising out of or relating to
         this Agreement, or the breach, termination or validity thereof which
         cannot be settled within three (3) months of it having arisen shall be
         submitted to the respective President or General Manager of each Party
         and if, within thirty (30) days or such other period as may be agreed
         upon between the Parties following such reference, the dispute remains
         unresolved, it shall be settled on application by either Party by
         arbitration conducted in the English language, in Stockholm (Sweden) in
         accordance with the Rules of Arbitration of the International Chamber
         of Commerce by one or more arbitrators appointed in accordance with the
         said rules. The parties expressly agree to abide the award rendered.
         This provision shall not prevent either party from addressing any
         competent court or tribunal in order to seek for interim measures.

         Section 14.4. Conflicts. Nothing in this Agreement shall be construed
so as to require the commission of any act contrary to law, and whenever there
is any conflict

                                       27
<PAGE>

between any provision of this Agreement or concerning the legal right of the
parties to contract and any statute, law, ordinance or treaty, the latter shall
prevail, but in such event the affected provisions of this Agreement shall be
curtailed and limited only to the extent necessary to bring it within the
applicable legal requirements.

         Section 14.5. Registration. Licensee shall take all reasonable and
necessary steps to register this Agreement in any country where such is required
to permit the transfer of funds and/or payment of royalties to Licensor
hereunder or is otherwise required by the government or law of such country to
effectuate or carry out this Agreement. Notwithstanding anything contained
herein, Licensee shall not be relieved of any of its obligations under this
Agreement by any failure to register this Agreement in any country, and,
specifically, Licensee shall not be relieved of its obligation to make any
payment due to Licensor hereunder at Licensor's address specified in Article
14.2 hereof, where such payment is blocked due to any failure to register this
Agreement.

         Section 14.6. Headings. As used in this Agreement, singular includes
the plural and plural includes the singular, wherever so required by the
context. The headings appearing at the beginning of the numbered Articles and
Sections hereof have been inserted for convenience only and do not constitute a
part of this Agreement.

         Section 14.7. Agency. Nothing herein shall be deemed to create an
agency, joint venture or partnership between the parties hereto.

         Section 14.8. Force Majeure. Notwithstanding any other provisions of
this Agreement, neither of the parties hereto shall be liable in damages for any
delay or default in performing hereunder if such delay or default is caused by
conditions beyond its control including but not limited to acts of God,
governmental restrictions, wars, or insurrections, strikes, floods, work
stoppages and/or lack of materials; provided, however, that the party suffering
such delay or default shall notify the other party in writing of the reasons for
the delay or default. If such reasons for delay or default continuously exist
for six (6) months, this Agreement may be terminated by either party.

         Section 14.9. Assignment. Neither party shall assign this Agreement
without the prior written consent of the other party, provided, however, that
Licensee may assign some or all of its rights and obligations hereunder to the
following Affiliates: Laboratorios P.E.N., S.A. (Spain), Esteve Farma, Lda.
(Portugal), Provesan S.A. (Switzerland) and to any other Affiliate which
Licensee may establish in the Licensed Territory. Licensee hereby warrants and
represents that such Affiliates will comply with all applicable terms of this
Agreement, and guarantees such Affiliates' performance hereunder.

         Section 14.10. Successors and Assigns. Subject to Section 14.9, this
Agreement shall be binding upon and inure to the benefit of the permitted
successors or permitted assigns of Licensor and Licensee respectively.

                                       28
<PAGE>

         Section 14.11. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

         Section 14.12. Announcements. Neither Party shall make any public
announcement or press release regarding the content or signature of this
Agreement without the other Party's prior written consent other than as may be
required by law or any stock exchange rules. If such public announcement or
press release is required by law or any stock exchange rules the Parties shall
use their reasonable endeavours to agree to the text and content thereof prior
to making such public announcement or press release.

              [THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]

                                       29
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and duly executed this Agreement on the date(s) indicated below, to be effective
the day and year first above written.

                                            DISCOVERY LABORATORIES, INC.

                                            By:      /s/ Robert J. Capetola
                                                     ----------------------
                                            Name:    Robert J. Capetola, Ph. D.
                                            Title:   President and CEO
                                            Date:    26th October 1999

                                            LABORATORIOS DEL DR. ESTEVE, S.A.

                                            By:      /s/ Dr. J. Esteve
                                                     ------------------------
                                            Name:    Dr. J. Esteve
                                            Title:   President
                                            Date:    26th October 1999

                                       30
<PAGE>

                                   SCHEDULE I

                                      [***]

[***]    Confidential treatment requested.

<PAGE>

SCHEDULE II
                                      [***]

[***] Confidential treatment requested.

<PAGE>

December 8, 1999
                                                  VIA FACSIMILE & HAND DELIVERED
                                                  ------------------------------

Laboratorios del Dr. Esteve, S.A.
Av. Mare de Deu de Montserrat, 221
08041 Barcelone (Spain)

Attention:  Director, International

                  Re:  Sublicense of Surfaxin from Discovery Laboratories, Inc.
                       to Laboratorios del Dr. Esteve, S.A.
                       --------------------------------------------------------

Dear Director:

         Reference is herein made to the Sublicense Agreement dated October 27,
1999 (the "Agreement") between Discovery Laboratories, Inc. and Laboratorios del
Dr. Esteve, S.A.

         You have requested and we hereby acknowledge that Mexico is included in
the definition of "Licensed Territory" in Article 1, "Definitions," page 4 of
the Agreement.

         Please return one countersigned copy to us and one to our attorneys, Yi
Tuan & Brunstein. Thank you for your attention.

                                      Very truly yours,

                                      DISCOVERY LABORATORIES, INC.

                                      By:      /s/Robert J. Capetola
                                               ---------------------
                                      Name:    Robert J. Capetola, Ph.D.
                                      Title:   President

ACKNOWLEDGED AND AGREED TO:
LABORATORIOS DEL DR. ESTEVE, S.A.

By:      /s/ Dr. J. Esteve
         ---------------------------
Name:    /Dr. J. Esteve
Title:   President

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